Friday, October 22, 2004

So Cal Edison Screws Itself With Safety Incentive Programs

As I mentioned below in the posting about John Henshaw's letter to Newsday objecting to their criticism of his administration at OSHA, there is a problem judging the success of the agency's policies on injury and illness numbers that is generally thought to be inaccurate.

An article in the L.A. Times regarding the deliberate rigging of safety data by Southern California Edison sheds more light on this problem:
Southern California Edison Co. used faulty workplace safety data — and in some cases may have suppressed reports of on-the-job injuries — over the last seven years to win performance-related bonuses from the state, the utility acknowledged Thursday.Edison told the California Public Utilities Commission staff that it would forgo or return to the agency $35 million in payments that the company said were based on flawed safety ratings. Many of the ratings were distorted by inadvertent omissions, others by what Edison called "inappropriate" efforts by managers to hide reportable incidents.In some cases, Edison found evidence that supervisors contacted outside medical personnel to influence treatment, change medical records or downgrade the seriousness of an injury. Other times, Edison said, its managers encouraged employees to dodge safety reporting requirements by undergoing physical therapy or using vacation days during recovery.
What did SCE rig the numbers?

Because they had an incentive to do so. A 1997 Public Utilities Commission (PUC) program rewards or fines utilities for a number of measures, including employee safety. The decision to grant rate increases is also partially dependent on these numbers. Another measure that goes into the rate increase calculation is customer satisfaction. SCE was also found to have rigged those numbers as well, and agreed to return $14.4 million. Edison has now had to agree to return $20 million in safety awards already paid to Edison, plus $15 million pending for 2001 through 2003.

The reporting problem was not just limited to the numbers that Edison reported to the PUC, but also the numbers its own employees were reporting up the line. For those of you who are interested in the effectiveness of corporate "safety incentive" programs, where employees or departments are offered prizes for low injury numbers, Edison's experience should prove instructive.
Edison said it had found evidence that company incentives to reward good safety practices — including financial compensation and recognition lunches — "may have discouraged the reporting of some incidents" and may have produced "pressure to not report injuries." In some instances, employees delayed reporting injuries to keep them out of year-end results, Edison told the PUC.
I have written a number of times about safety incentive programs (here, here, here and here. The main problem with these incentive programs is that the prospect of awards for low injury number puts pressure on workers to reduce reporting of injuries, rather than encouraging them to implement programs that will actually reduce injuries. In other words, the concept of incentives is not necessarily bad, but one must look at what is being rewarded. Instead of rewarding low injury numbers, it would be better to target awards to reports of near misses, safety training attended, etc.

This problem has many dimensions. Incentive programs not only induce companies to lie to themselves, but also encourage them to lie to regulators who use the information to judge their success (as we have seen), as well as to determine their inspecting targetting stratgy. OSHA's entire inspection targetting system is based on determining which industries and companies have high injury and illness rates. All of those numbers are employer-genererated...and, as we have seen, they are highly suspect.

So what's the solution? On a company basis, the answer is easy: get rid of programs that offer incentives to cheat. But how is OSHA to know where to target its resources if it can't trust basic injury and illness data?

That's for a further discussion. (I'm supposed to be on vacation right now), but I'm sure the Kerry administration will welcome your ideas. Use the comments.