Risk Insider: Jack Hampton

Least Risk or Most Opportunity?

By: | March 12, 2018 • 3 min read
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.

For the second year in a row, the Academy Award for Best Picture went to a movie that was a controversial choice. In 2017, Moonlight prevailed over La La Land, the overwhelming favorite. In 2018, it was The Shape of Water, probably a narrower winner, over Three Billboards Outside Ebbing, Missouri.

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The winners of Oscars were chosen by a vote of the 7,000 or so members of the Academy of Motion Picture Arts and Sciences.

In 23 of the categories, the Oscar is awarded based on the most first-place votes. For best picture, a preferential voting system reallocates votes to reflect both the most and least preferred. Such a system rewards pictures that do not offend. La La Land annoyed people with its portrayal of Jazz. The harsh portrayal of police brutality had the same impact in Three Billboards.

The Oscar results remind us of a parallel situation with respect to the selection of chief executive officers of corporations. The CEO is chosen by a board of directors, partly based on past achievements and partly on their likely ability to advance the value of the company common stock. But yet another factor is involved; risk appetite.

The upside of risk is the pursuit of opportunity.

Few CEOs are directly responsible for whether companies succeed or fail. We focus on Apple, Google, and Amazon where CEOs made all the difference in the world. In the meantime, the vast majority of organizations have lackluster CEOs who have little if any impact on the success or failure of the company.

This situation may exist because of the perceived or actual risk appetites of the board and the candidates.

Board members are often satisfied with the status quo. Absent some real crisis, all of the top prospects will have suitable but similar credentials. Board discussions may mitigate promising strategies and focus on a continuation of current practices. That is, the board may make a final selection on an Oscar-like preferential voting process. The board members who are risk adverse may knock out the strongest aspirants for the top job.

The upside of risk is the pursuit of opportunity. This, too, may take a preferential hit after the CEO gets on the job.

Once in place, the chosen CEO often foresees only five to seven years until retirement. Is this a time to stir the pot or continue the course?

During the job interview, all the talk was about the future. Once in the chair, the negative consequences of bold changes impair the value of success. The CEO does not choose strategies based on their merit. Instead, a preferential decision-making behavior may choose lower-ranked courses of action with fewer risks.

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Why did VisiCalc invent the electronic spreadsheet and then hand it to Lotus 123 and MS Excel? Why did Nokia and Blackberry fail to respond to the threat from the iPhone? Why did Blockbuster cling to a flawed business model as it watched Netflix eat its lunch?

Can these behaviors be explained by a simple risk-return reality?

Thus, we have two lessons from the Oscars.

First, nobody likes physical abuse in Moonlight or romance with a fish in The Shape of Water, but these may be less bothersome to voters than the features of other films.

Second, preferential voting endangers our organizations if risk management does not accept the risks that go with bold strategies.

More from Risk & Insurance

More from Risk & Insurance

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]