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Mixed messages

Mixed messages

Sep, 13, 2018
by admin

The impact of incentives, targets, and/or punitive measures on the management of risk

When we go to work, we expect to come home. But tragically that’s not always the case. I rarely refer to cases that involve a fatality or fatalities out of respect for families but I’m compelled in this blog to go to an uncomfortable place and share with you a situation that unfortunately resulted in the death of a worker. This particular incident has highlighted to me an extremely important challenge for the effective management of risk and that is the impact on control conformance that comes with incentives, targets and/or punitive measures In this case – I think it was a lethal combination.

The accident happened at a manufacturing plant.  The machinery the worker was operating was susceptible, on occasion, to items getting lodged in the workings which stopped its operation.  There was a very clear policy in the organisation that, on occasions when the machine stopped due to a blockage that the machine was to be turned off before the blockage was removed.  It seems very clear to an observer – machine blockage – turn off machine.  So why was it then that when an obstruction occurred that the worker sought to remove the blockage, without turning off the machine?

Was it inexperience? No. The worker in question had significant experience in the operation of the machinery.

Was it a lack of awareness of the policy? No. The worker in question was completely aware of the policy.

Was it fatigue? No. The worker was only part way through his shift.

So, if it wasn’t inexperience or lack of awareness of the policy or fatigue, what would make a worker with significant experience take the risk of attempting to dislodge the blockage without disabling it first?

The answer, I think lies, in the disturbing blend of the control environment and the incentives/disincentives associated with production targets.

Imagine you have set production targets for operators to achieve during their shifts.  And imagine that attached to these targets are bonuses for achieving or exceeding those targets or, there are punitive penalties for not reaching them. Are you starting to feel disturbed? I am.

So, we have a worker who knows that if he stops the machine, it will take time to clear the blockage and it is 15-20 minutes before the machine is able to be used again.  At best, he will not meet the targets for one hour, but if the blockage happens at the end of one hour and into the next – he may miss the bonus for two hours.  So, we have now created a dilemma.  The worker must make a choice – follow a policy that will almost certainly cost him money, or, ignore the policy, take the risk but still meet his quota.

It’s this choice, mixed with an incentive and a penalty that I believe led to this tragedy. Time is money and a quick decision needed to be made.

So, what is the alternative?

What would be the change in behaviour if the policy also included a component that stated:

if there is a blockage in the machine that requires a shut down, the production number for that hour (or two hours) would be based on the average production achieved in the other hours on the shift.

The worker then knows they are not going to lose a bonus or be subject to punitive measures and, therefore, will be far more likely to conform to the policy.

There have certainly been other examples where targets and incentives have been culprits in risk management.

Although it has significantly improved, the trucking industry used to be one of those where there were policies around the duration that drivers could be on the road in a 24-hour period, but also incentives/disincentives for missing delivery schedules.  Many drivers, particularly those who were self-employed and contracting to larger companies, pushed themselves to meet (sometimes) unrealistic schedules.

With your livelihood being directly related to the amount of time you are on the road, what incentive is there to abide by the regulations and take the legislated amount of rest? The answer? There is none – only a disincentive.  What incentive is there to service the truck when it may be off the road for two or more days? The answer? There is none – only a disincentive.

But it is not just an issue that needs to be considered in relation to safety.  In a similar vain, the ongoing Royal Commission into the banking sector has exposed dodgy practices by brokers working on behalf of the major banks and financial institutions.  Of course there are policies that regulate the behaviours of the brokers, however, at the same time, there are targets and quotas relating to the products they are selling on behalf of these companies.  If they are unable to meet these quotas then they may be “cut off”.

The point of all of this is that no amount of legislation, regulation or policy is going to achieve the required behaviours if there is an incentive or disincentive that encourages a different set of actions.

The message here…When creating a policy in your workplace, ensure that there are not mixed messages related to performance that may render the policy ineffective and, in the case described at the outset of this blog, may lead to tragedy.

Written by admin