Here’s the Biggest Risk Management Lesson From the Failed Amazon-New York Deal

By: | March 6, 2019

John (Jack) Hampton is a Professor of Business at St. Peter’s University, a core faculty member at the International School of Management (Paris), and a Risk Insider at Risk and Insurance magazine where he was named a 2018 All Star. He was Executive Director of the Risk and Insurance Management Society (RIMS), dean of the schools of business at Seton Hall and Connecticut State universities, and provost of the College of Insurance and SUNY Maritime College in New York City.

A parable from ancient India tells the story of a group of blind men who never previously came across an elephant. Each blind man feels a different part of the body and then describes the elephant based on his limited experience. Because their descriptions are different, they suspect the others are dishonest and they come to blows.

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We may have just witnessed a similar situation. In 2017, Amazon’s national headquarters was in Seattle. For some reason, the company felt it needed a second headquarters. It solicited bids from governments and economic development organizations hoping to bring some 50,000 jobs to their areas.

Amazon’s request had mandatory requirements. These included: the location must be in an area with a large population, and it must have interstate highway access, extensive mass transit, major universities, and an international airport with direct flights to Seattle, New York City, San Francisco, and Washington, D.C.

Governments in 42 states, Canada and Mexico submitted 238 bids. Based on specifications, it’s likely that submitters like Anchorage, Alaska; Brunswick, Maine; Edmonton, Canada; Santa Teresa, New Mexico; and Hidalgo, Mexico were eliminated early.

Bidding grew intense.

Georgia held out the opportunity to create a new city named Amazon. Tucson sent Amazon the compelling gift of a 21-foot saguaro cactus. New York offered to light up its major landmarks in orange. Primanti’s, a chain of sandwich shops in Pittsburgh, offered free sandwiches to Amazon employees.

After receiving the initial bids, Amazon narrowed the field to 20 finalists that offered incentives such as tax breaks, infrastructure improvements, speeding up of construction approvals and elimination of red tape.

After intense negotiations, the company decided that three national headquarters would be better than two. They awarded a second headquarters to metropolitan Washington, D.C., and a third to an area of Queens, a borough of New York City.

Then, it really got interesting.

Local activists objected to the project and began a fight against it. Politicians objected to the generous tax packages that might deprive New York City of funds needed for other projects. Unions objected to Amazon’s reluctance to allow its workers to unionize. Citizen’s groups disliked the “gentrification” of the areas that might accompany the headquarters.

Three months after announcing the selection, Amazon abruptly cancelled its plans to set up in New York City.

Now that the deal has been killed (or at least paralyzed, as Barron’s points out), a discussion about the importance of at least trying to assess opportunity costs in making any decision is in order.

Both supporters and opponents of the Amazon project had viewpoints that deserved consideration during the process of selection:

  • Tax Impact. Loss to the city of some $3 billion in property taxes, while the gain from other tax benefits could be as high as $30 billion in the first 10 years.
  • Unionizing Impact. 30,000 Amazon employees who might not unionize with an offset of new union jobs for thousands of others in construction and support of the new facilities.
  • Gentrification Impact. The section of Queens selected is not exactly “blighted,” as was claimed by New York state as a reason to exclude the New York City Council from oversight. It is not exactly Manhattan either. The facility, to be located on land being discussed as suitable for 1,500 affordable housing units, had pluses and minuses to be considered.

Who was right? Was it the supporters or the opponents? An ancillary question.

Who was wrong? Does it really matter?

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From a risk management perspective, a different question arises. How do we resolve differing viewpoints if all parties are blind to the big picture? The question takes on additional impact in the framework of social media and a national atmosphere of confrontation.

New York’s Governor Andrew Cuomo wants to reopen the discussion. He should remember the limited vision of blind men describing an elephant as he encourages feuding parties to talk to each other.

What did you feel? This is what I felt.

What is the big picture?

These are questions that need to be on the table if opportunity costs are going to be analyzed adequately.

If the adversaries realize that the elephant is bigger than a tusk or tail, the beneficiary may be a slightly blighted section of New York City.

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]