| Teaching resources prepared by Soochen Low and Suzanne Benn |
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| Learning Objective/Requirement: | Whose responsibility is it to ensure the sustainability of the workforce? Are large companies who promote their human sustainability programs addressing all forms of human sustainability? | |
| Summary of Resources: | IAG case excerpts Compilation of newspaper articles about the Preferred Smash Repairers dilemma List of suggested questions for class critique and discussions | |
| Attachments: | Complete version of IAG case | |
SUSTAINABILITY AT IAG[1]
Suzanne Benn and Louise Wilson
March 2006
Overview of IAG
IAG is currently
The organisation has been through significant change and growth since 2000. Mike Hawker became CEO of NRMA Insurance Group Ltd (NIGL) in September 2001. In November 2001, shareholders of NIGL approved a change in name (to Insurance Australia Group Limited) to better reflect its size, diversity, geographical distribution and its aspirations. In January 2003 IAG acquired CGU and NZI. IAG has grown from 6,500 staff in 2002 to 12,000 in 2005 and over this period the share price has risen from $2.80 to $5.40.
Sustainability at IAG is defined as being about ensuring the organisation is around in the future for its customers, employees, community and shareholders. That involves:
- economic sustainability (building value for shareholders),
- human sustainability (safety, work-life balance, diversity),
- environmental sustainability (advocating climate change, reducing impact on environment),
- social sustainability (reducing risk in the community such as crime, fires, car accidents etc).
The IAG Sustainability Report (2005) states that the company has made significant achievements towards becoming a sustainable organization. These achievements include:
- Significant advancement in the firm’s risk reduction community initiatives, in the areas of road and home safety, crime prevention, workplace safety and climate change.
- Dramatically improving the firm’s Occupational Health and Safety (OH&S) performance.
- Employees feeling positive about working at IAG, with 73 percent of respondents to the annual survey saying they value IAG’s focus on balancing social, environmental and financial responsibilities.
The firm is very prominent in the corporate sustainability discourse in
However IAG faces challenges in the following areas:
- Although IAG has implemented strong initiatives to improve its own environmental performance, it did not meet all of its environmental targets for the 2005 financial year.
- Uncertainty and debate with some smash repairer groups about reform in the smash repair industry in
Changing the supply chain
The sustainability of the smash repair industry is essential to IAG’s business. This industry is currently at a crossroads with more than twice as many repair shops per vehicle in
As part of the broader industry reform agenda, IAG established a network of Preferred Smash Repairers (PSRs) and although it encountered some criticism, the PSR strategy does enable management and control of environmental sustainability performance along the supply chain. The PSRs are selected based on factors such as operational performance and IAG’s business needs, and are assisted by IAG to improve their operating efficiency, including their environmental and safety performance. The PSRs are also being assisted to develop a waste strategy which will reduce both operating costs and environmental damage.
Another tool designed to align IAG’s environmental and economic goals through supply chain management is the Risk Radar tool. This online training tool aimed at building safe, environmentally sound workplaces is the first sustainability product for the IAG Group. Members of the PSRs network can obtain a discount on commercial insurance if the training plan is implemented and safety and environmental standards are met. The key idea is to offer financial incentives for behavioral changes which will reduce insurance risk. The tool is targeted at smash repairers, but it is currently being modified for use by farms and other businesses and has recently won the United Nations Association of Australia Triple Bottom Line Award.
Reducing Risk in the Community - Community Programs
A shared understanding of the central importance of safety is crucial to achieving IAG’s aim of adding stakeholder value through enabling a safer community, roads and workplace. To further this aim IAG has developed partnerships with community groups at a local, state and national level. One such partnership is with St John Ambulance. This is the first time St John Ambulance, initially reluctant to partner with a corporate, has taken part in such an initiative. The partnership involves
IAG also funds community grants with the aim of increasing staff involvement with the community. Over $10 million per year is spent on community programs. In one example, a community grant supported a young crime offenders’ program in
Another program has entailed the purchase of a crime prevention van for the NSW Police Service, staffed by an IAG employee and a police education officer. The van is fitted out with demonstrated ways of reducing risk in the home and is being piloted in three regional areas. The value added to the community is being assessed through reported number of burglaries. Moving forward, the NRMA Insurance data bank will be used to identify priority areas for this vehicle.
The role of the Flexibility and Diversity Team
The role of the Flexibility and Diversity team is to raise the sustainability profile, seen through the lens of work-life balance and diversity. The team is charged with lifting the awareness levels of management about diversity. One result has been a doubling in the number of indigenous employees. A key step in raising awareness is consideration and support of the initiatives at the local level.
Rather than the corporate view on sustainability, this IAG team has the responsibility to interpret sustainability through frameworks that establish a flexible working environment for the individual employee. The goal is to create a flexible workplace to enable work-life balance and a diverse workforce to facilitate equality. Primary drivers are higher rates of attraction and retention.
While the IAG Enterprise Agreement has a suite of flexibility options such as career breaks, work from home, flexi-time, childcare, emergency personal leave, childcare leave on top of parental leave, the issue for the team has been implementing these goals in a smaller department. A current initiative aims to develop a more flexible work-pool focus in the highly structured work environment of Customer Service. There is strong commitment across the organization to improve the representation of women in senior management. In 2005 women occupied 15 percent of executive and 30 percent of senior management positions. A mentoring program has been established involving four senior women in a Chief Executive Senior Women Mentoring Program. The focus is on raising awareness rather than structural change. At an operational level, all managers are required to attend Equal Employment Opportunity training (with a focus on legislative and practical implications). The underpinning message is that workplace equality is essential.
Monitoring Occupational Health and Safety (OHS)
The first internal annual OHS report (2002) showed IAG’s OHS performance was considerably poorer than the average insurance company. It stated:
· Number of claims per 1000 employees is around five times the industry average
· Average claim cost is 44 percent of the industry average
· Total claims cost per employee is around 2.2 times the industry average (Workplace Health and Safety IAG 2002)
This indicates that IAG experienced a greater number of smaller claims than similar organisations with the total cost per employee being slightly above double the industry average.
The report also stated that IAG systems may encourage a greater rate of reporting than other organisations (although still under-reporting of actual occurrence) and may reflect more pro-active management of claims. This revelation shocked the organisation into instigating governance measures designed to monitor and measure safety. The OHS Management system was structured to align with AS/NZS 4801 capturing the elements of policy, planning, implementation, measurement and evaluation, management review and continued improvement; with a focus on a number of underpinning key priority areas:
· Leadership
· Communication
· Use of technology
· Decentralizing management of risk
In implementing the safety management program, IAG made the link between cultural change and safety, as well as using results and data to continue to drive motivation forward.
The safety program at IAG is led by an organisation-wide Steering Committee composed of the CEO and ten executive/senior managers from across the organisation. To support the Steering Committee is a specialist OHS team. This team includes psychologists, nurses, and business risk managers, who are provided with data analysis support. Under a consultation framework developed with the Finance Sector Union, agreement has been reached to have at least one representative, trained in OHS consultation, at each site as point of contact and as a technical resource. This has resulted in a network of more than 300 OHS Representatives and 20 building OHS Committees consulting on local and corporate OHS issues.
As a large workers compensation insurer, IAG recognises that it must practice what it preaches to maintain credibility of its sustainability profile. The besafe program was instigated to work right throughout the organisation to reduce workplace harm and foster a safety culture. The besafe initiative was complemented by a range of other OHS process-based initiatives including the development of online OHS training for all employees (currently completed by 84 percent of all employees), compulsory manager training, the introduction of an electronic accident and incident reporting process, and Risk Radar (an online OHS self-assessment process for all worksites). These technical improvements assisted in generating awareness, promoting leadership and decentralising risk.
The initiatives resulted in a 20 percent reduction of workplace accidents in the 2003-2004 period, with a further 22 percent reduction in LTIFR (Lost Time Injury Frequency Rate) in 2004-2005. IAG has also realised a 57 percent reduction in workers compensation claims costs in the 2004-2005 year. Outstanding improvements in the annual culture survey confirmed the clear link back to employee engagement.
Further internal processes such as a timely reporting rate, timely follow up, OHS training rates, quality of managers’ comments as well as types and costs of incidents, are collated and reported internally on a monthly basis. This information helps to maintain and drive the commitment to cultural change, as well as highlighting potential issues that may arise. The main injuries are slips, trips and falls which involve smaller cost claims. However, the big causes of concern are the increase in stress and over-use injuries. The safety program is currently targeting ergonomics, stress and driver safety, where the potential for injury is very high. Local health and wellbeing initiatives are also helping to address the main causes of concern. Safety and community work are linked through the IAG relationship with St John Ambulance, a relationship which is unique to the insurance sector, with corporate leadership now being demonstrated through success in a number of awards (including the NSW WorkCover 2005 Safe Work Award for Best OHS Management System).
REFERENCES
Carruthers, F. and Cornell, A. (2005) ‘End of the Dry Argument’, Australian Financial Review, 9 December.
IAG Pty Ltd, (2004) We’re Listening …, Summary of results – Community Issues and Priorities Survey 2004, IAG. Available HTTP:
IAG Sustainability Report (2004) The Fewer the Risks the Better for Everyone, IAG. Available HTTP:
IAG Sustainability Report (2005) Its Just Good Business, IAG. Available HTTP: <http://www.iag.com.au/pub/iag/sustainability/publications/report/2005/index.shtml> (accessed
IAG Stakeholder Relations (2004) Improving the community’s understanding of insurance, IAG Community Education Strategy Discussion Paper.
Jaques, E. (1986) The Requisite Organization,
Workplace Health and Safety IAG (2002) 2001-2002 Workplace Incidents and Occupational Compensation Claims Report.
Compilation of Newspaper articles documenting the situation with the Preferred Smash Repairers
You can access these stories directly from the publisher’s websites, or through your libraries, or databases that your institution may subscribe to. You might also try running the titles through a search engine. Unfortunately we can’t provide them to you here because they’re copyrighted.
Danks, Katherine. 10 August 2005. Insurer gets approval for web system. p.3. The Age. www.theage.com.au.
Lampe, Anne.
Moullakis, Joyce.
CLASS DISCUSSION
Review the IAG case study and the series of newspaper articles documenting IAG’s challenges with the Preferred Smash Repairers.
- After reading the IAG case study, what are your impressions of the company with regards to its HR policies?
- After reading the newspaper articles about the Preferred Smash Repairers, has that changed your initial impressions of the company? Why/why not?
- Do you think that IAG’s policies or actions where it concerns the Preferred Smash Repairers are consistent with its sustainability policies? Why or why not?
- Whose responsibility is it to ensure the sustainability of the workforce? Discuss.
- Should an organization include in its policies to look after its external work force? How would you monitor this (what measures) to ensure that this is sustainable?
- What kinds of conflict does IAG face in trying to put their human sustainability policies into practice?
- Reflect on the challenges facing companies regarding internal and external HR issues- are the external HR issues part of their corporate social responsibility or does it end at a certain point?
[1] Please note that this case version has been modified for the purpose of this exercise. For the complete version, please see your lecturer for a copy. All information has been supplied and approved by IAG.
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