By CYRIL TUOHY, managing editor of Risk & Insurance®
For Daniel H. Kugler there was no midnight epiphany, no visitation from the guardian angels of factory workers, no overpriced consulting talent delivering the final word on safety and prevention, no revelation at industry seminars on best practices to show him the way to lower claims and a better disability program.
No, for Kugler, assistant treasurer, risk management, at Snap-on Inc., and his team, the beacon came from a simpler source: setting one overarching goal for every one of Snap-on's 5,430 U.S.-based employees, and then sticking to it like a laser.
"We believe in non-negotiable product and workplace safety as a core belief that aligns with our values and vision," Kugler said, echoing a corporate mission statement about as clear as they come. "If you can't get safety right, what else can you get right?"
Probably not much, particularly if your employer is a top-tier supplier of hand tools, precision equipment and software diagnostics doing business in 130 countries like Kenosha, Wis.-based Snap-on.
All of which helps explain why CEO Nicholas T. Pinchuk spends so much time stressing safety and prevention in annual reports, memos and official communiqués to shareholders and employees.
Executing that vision of workplace safety is left to Kugler, Joanne M. Tesch, manager of Snap-on's workers' compensation management system, Sandra L. Cole, manager of health and welfare plans, and Anne Blair, coordinator of the workers' compensation management system, who oversees the third-party administrator's handling of Snap-on's less complex claims.
It's a responsibility Kugler and the rest of the risk management team take seriously, and it's why Snap-on is being honored with a Certificate of Merit for the Theodore Roosevelt Workers' Compensation and Disability Management Award in the for-profit sector.
The award is bestowed annually by Risk & Insurance®to workers' comp and disability managers, and Kugler and his team will be recognized at the 19th Annual National Workers' Compensation and Disability Conference® & Expo in Las Vegas Nov. 10 to 12.
"While it was very much of a top-down exercise in the past, now we managed to turn it around to a bottom-up approach," Kugler said. "Safety is a performance metric, don't forget, and nobody at Snap-on is exempt from it, from the CEO on down to all our associates."
Inculcating workers and managers about the importance of safety didn't start with Kugler, of course. It began at the top, back in 2005, with former CEO Jack Michaels, who insisted the company pay attention to safety and prevention.
Michaels, who before joining Snap-on, headed an office furniture manufacturer in Muscatine, Iowa, was familiar with the effectiveness of injury prevention.
He'd witnessed first-hand how even the simplest of injuries could keep a worker off the production line, and he'd seen how deeply absenteeism could cut into productivity averages, and eventually into an employer's bottom line.
The claims manager preventing the dollar from being booked to the expense side of the ledger is just as valuable as the sales manager boosting the income side of the ledger.
So when Michaels' successor and current CEO Nicholas T. Pinchuk, announced the safety initiatives of his predecessor would continue, it was relatively easy for Kugler and his team to rally the operating units in the United States and abroad to the cause when it came time in 2005 to integrate the company's safety and prevention programs.
From the factory floor all the way to senior management, Tesch said, there was a "huge acceptance factor" of safety and prevention programs.
DRILLING INTO THE NUMBERS
The workers' comp numbers at Snap-on over the past five years tell an encouraging story, and they reinforce Michaels' and Pinchuk's vision that one fewer workers' compensation claims dollar is also the equivalent in workers "tooling away" on the production line.
Frequency of injuries, or the number of workers' comp injuries per year, dropped from 406 claims in 2005 to 197 claims in 2007 and 137 claims in 2009, the company reported.
The average undeveloped total incurred claim cost dropped from $6,650 in 2005, to $6,091 in 2007 to $4,471 in 2009, the company also reported in the application materials.
Snap-on's medical costs per indemnity claim, meanwhile, went from $24,704 in 2005 to $25,850 in 2007, and then down again to $23,837 in 2009.
"They are very aggressive in their cost cutting efforts and so the expectations are passed on to us to drive down costs," said David S. Wied, senior account manager with GAB Robins North America Inc. in St. Louis, Snap-on's third-party administrator.
In fact, Snap-on's TPA costs went from $216,321 in 1999, to $137,000 in 2005 to $59,287 at the end of last year, a decline of 73 percent over the 10-year period.
Similarly, the average number of days lost per claim went from 153 in 2005, to 140 in 2007, and down again to 107 in 2009, the company reported.
Litigated workers' comp cases from 1999 to 2009 dropped by 85 percent, lost-time claims were cut by 69 percent, and total workers' comp claims were slashed by 75 percent; and the 35 lost-time claims facing the company are going to undergo a "root cause" analysis, Tesch said.
"We're certainly proud of our results," Kugler said, speaking to Risk & Insurance® in an interview in September.
"We've gotten better, to be sure, but we've got to keep it going," he also said. "You can look at the past, and the 'bad old days,' and be content at just how far we've come, but I want to build on our success."
There's always incentive for Kugler and other Snap-on insurance and safety managers when their employer, like most Fortune 500 companies, operates with a high-deductible plan.
The insured has more skin in the game. More so, even, when a company chooses to be self-insured, as Snap-on has opted to do in three of its core operating states, Illinois, Iowa and Wisconsin.
Snap-on turns to Chartis for its workers' comp program, and to Safety National for its excess workers' comp program, and relies on its Bermuda-based captive to finance the self-insured retentions for the high-deductible plans and self-insured programs.
Kugler and his team, therefore, need to be vigilant, "dialed in" to the numbers, attack the injury plague holistically.
"We really wanted to put our own imprint and stamp on how to address workers' comp," Kugler said. "It's our money and our responsibility, after all."
The drop in the number of workers' comp and disability claims is the result of years of work, the reward for a finely tuned comp and disability operation designed to mitigate risks at one of the nation's most respected manufacturing companies.
"We've seen clear trends of fewer losses," Wied said, "and I see a lot of benefits in what we can resolve claims quicker." GAB Robins handles Snap-on's U.S. workers' comp program and assignments related to the auto program.
Risks at Snap-on range from working with machinery, handing materials, forging and assembly operations, loud work environments and potential of coming into contact with chemicals in the company's plating operations, according to company documents.
In the distribution centers employees are exposed to material handling risks, and forklift operations, and in sales and service employee risks are related to driving, working alone and entering environments that neither Snap-on nor the associate can control.
"They are pretty dynamic in terms of their drive to continue to improve the program," said Wied. "I don't know too many as aggressive and dialed in with their program and following up of objectives."
It was not always so.
There was a time, Kugler and his team recalled, when Snap-on's workers' comp and disability management program wasn't quite buttoned into place as smoothly as it is today.
That was back in 1999, a time when the competition from China wasn't so fierce, a time when companies spent more freely, when Internet companies with no revenue were valued in the millions of dollars, a time long before the Great Recession of 2008.
It was also an era when workers' comp and disability management programs perhaps weren't expected to carry as much of their own weight, when programs didn't have to work quite as hard, when injury-reduction strategies weren't required to operate as efficiently as they do today.
It wasn't that Snap-on had ignored the safety programs, on the contrary. Snap-on had plenty of highly targeted safety programs, the behavioral safety program known internally as Building Everyday Safety Together, and the fleet safety initiative known as Striving for Everyday Excellence on the Road, for example.
While these programs had followed in the wake of 1999's successful workers' compensation management system and its associated return-to-work component known internally as temporary alternative duty or TAD, the safety and prevention programs were by and large compliance based and audit driven, Kugler said.
By 2005, Snap-on had hit a frequency plateau in workers' comp, and the company's metrics had begun to flat-line. The time had come for Snap-on's team to take action, literally.
Enter the era of Project Action. An integrated program implemented with the help of a cross-function team, Kugler, Tesch and Cole describe Project Action as a framework of 29 action items related to best practices in the field of safety and claims management.
"It's not a siloed approach that you see in many other organizations," said Debbie Goldstine, the Chicago-based account manager with Snap-on's insurance broker Lockton & Co., which handles domestic casualty, aviation products liability, worldwide excess coverage and professional liability programs. "From a philosophical point of view, they look at prevention, performance and management as one."
Taking portions of other safety programs that already existed within the company, Project Action raised the expectation of Snap-on's managers in factories and distribution centers in the United States or abroad, Kugler said.
Project Action offered Snap-on a new template to help the company face new risks. In 2005, when Project Action was launched, the world had moved on from 1999, when the company's workers' compensation management system was launched.
"Where do we go from here?" Tesch said. "We want to continue with the ongoing reduction in claims and we want to prove the sustainability of the program."
Moving away from a compliance and audit-based model of previous safety and prevention projects, Project Action allowed Kugler and his team to fit the needs of manufacturing plants in different parts of the country.
"When we discuss Snap-on's risk management program with the markets, we present it as a forward-thinking program, and as an achieving-the-next-level kind of program," Goldstine said.
Since 2005, of course, the world and Snap-on have changed again, and the company's action template is helping it meet today's challenges.
New risks facing Snap-on and Kugler, for example, include the exposures related to a new distribution channel in the form of independent franchisees.
The franchisees operate 3,400 trucks around the country and distribute products and services to Snap-on's core market of professional tool users.
In addition, the company has launched more than 150 smaller mobile stores in the form of vans operated by Snap-on associates.
The new distribution channels mean a host of loading and unloading issues, Kugler said, "and now you're facing issues with regard to commercial fleet vehicles that we didn't have in the past."
November 1, 2010
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