Adjusting KPIs in Work Comp

Scorecards are frequently used in worker's compensation metrics as performance management systems. This process encourages claims leaders and adjusters to perceive performance in an unduly limited, short-term manner that hinders collaboration; however, it is objective and a simple concept for people to use to establish measurements. When focusing on this limited perspective, people and organizations must understand more significant objectives. The emphasis focuses on racing to meet targets and compete for resources or credit. In scrambling to hit numbers, such as closed claims for the week, month, quarter, or year, larger goals can be diminished as numbers become the focal point rather than a mission, vision, or the values of the greater collective or impact needed to drive effective, meaningful change. This impact can be human lives and overall organizational culture in workers' compensation.
Organizations may utilize scorecards as a beneficial tool for performance appraisals as this produces uniform, objective measurements for claims departments. Still, there are certain drawbacks one must consider when operating in this manner. Scorecards appear to be arbitrary and are prone to individual bias.
In their Harvard Business Review article, Heidi Gardner and Ivan Matviak point out that scorecards can be challenging to comprehend and overly straightforward to measure an employee's performance. The evidence for a challenge can easily be valid when focusing on the scorecards used for claims adjusters. Simply focusing on the amount of new, open, pending, and closed cases may provide objective metrics but does not dig deeper into how the adjudication process progresses. The measurement of caseloads needs a significant factor: emotional intelligence. Emotional intelligence accounts for 80% of success in people. In contrast, technical aptitude only accounts for 20%, showcased at present with the current state of the claims administration problem facing the United States, especially in workers' compensation. Our focus needs to shift to new key performance indicators and, at a minimum, add additional components to account for human elements within this unique space.
Scorecards can be challenging to maintain, be overly reliant on quantitative indicators, and fail to adequately reflect the qualitative parts of an employee's success, such as customer satisfaction. Gardner and Matviak also point out scorecards may take a lot of time to construct. The need to shift key performance indicator focus is especially true in the workers' compensation arena when there is a heavy relational component on the claims management side. Yet, we continue to operate with a checkbox mentality around the scorecard metrics and audit specifications utilized to determine if a claims adjuster is performing well.
While scorecards can be effective in their use, such as for sales tools, a drastic switch is needed when focusing on the goals surrounding claims organizations to shift the landscape from a process-oriented delivery system into a dynamic industry where people can focus on changing lives and making good things happen for people. If you do not think the workers' compensation industry needs this shift in focus, please consider why there is such a talent crisis in effect if we have done so well operating in the way we always have. "We have always done it this way" does not work for the workers' compensation industry. Shifting our focus to a more significant impact through greater purpose is an excellent way for organizations to look at rebranding to provide a more substantial impact. To do this, we need to change how we look at the key performance indicators of our current talent.
While not specific to the workers' compensation industry, on the financial side, an organization named TechCo switched to a four-part performance scorecard establishing shared goals across the company. As customer service is a non-linear key performance indicator, this metric encouraged managers from other branches and departments of the organization to communicate more efficiently and to share strategies. The four-part performance scorecard allowed TechCo to set dynamic goals of increasing customer service company-wide.
Another global bank improved collaboration among specialists and branches to increase customer service. This bank successfully increased customer service scores by 8%, which allowed the branch's financial performance to increase by 17% as well. If the workers' compensation industry chose to follow suit, could operating with increased empathy and emotional intelligence help medical outcomes and reduce costs? (Doing the right thing has been shown to reduce medical costs and indemnity payments as injured workers feel cared for by their employer and the claims administrator.) Food for thought.
How do claims leaders and organizations motivate claims adjusters through the scope of corporate goals? Here are some “Dos and Don’ts” to consider with revising key performance indicators of your claim operations:
Do: Tie rewards to output rather than input.
Input-driven metrics encourage employees to manipulate the system rather than inspire them to achieve a strategic goal, such as increasing marketing effectiveness. People do not put in the effort necessary for genuine collaboration and instead use quick methods to get the bonus.
From a claims landscape, focus on the outcomes of injured workers. The customer service elements of how quickly payments release for those injured workers' losing time once needed information is received, if a claims adjuster provided options in how the injured worker would like their payments issued (check, direct deposit, debit card), and if any lost -time payments were late or missed changes the landscape to focus on the outcomes by the negative impact of failing to accomplish the indemnity transfer appropriately. There is a much more significant impact on the aggregate whole we fail to discuss, acknowledge, and explain when a payment to an injured worker is not delivered timely. Missing a payment or an unnecessary delay in the hands of the adjuster can cause unnecessary angst and stress for an injured worker. As a result, this can increase inflammation in the injured worker's body by increasing heart rate, higher blood pressure, and additional secretion of cortisol…all impacting the medical outcome of recovery.
We should focus on being the best claims operation at providing timely, effective, and efficient payments to injured humans so their lives experience minimal impact. In that case, we should focus on using those components for marketing as to why one insurance company or TPA handles their claims better than other groups. Timeliness becomes a differentiator organizations should pay attention to because when an employer's employee misses a check or payment delay occurs, the backfire comes to the employer and that organizational culture, a landscape far too many employers fail to acknowledge as awareness seldomly happens the insurance company/third-party administrator is acting as an extension of the employer. In an injured worker's mind, it is the same.
Have an adjuster who never misses a timely payment? Reward them. This metric can easily be overlooked and casts a tremendous ripple effect when there is a negative outcome.
Don't: Rewards for visionary goals get lumped together with those for short-term objectives.
We must encourage outside-the-box thinking, especially when the ripple effect can be immense. The workers' compensation adjudication system has operated behind the times in technology and innovation. The reward to further these initiatives falls to the wayside when rewarding compensation of claims adjusters. Claims leaders frequently provide bonuses and raise for more tangible accomplishments, whereas incentive decisions can be exclusive on tangible victories with immediate consequences.
The long-term impact of what happens through the workers' compensation process should not be taken lightly. While specific metrics such as closed claims versus open claims for an annual aggregate may showcase the influx and processing on a claims desk, what about reopening claims because the adjuster did not meet the additional needs of the injured worker? What does this look like? Is this the primary focus of an organization, or should other evaluations be considered? Could we start looking at ways to work smarter and invest in the human capital components of long-term innovation?
Do: Use creative rewards.
The workers' compensation industry should take a page from NASA. As Gardner & Matviak shared in their Harvard Business Review article, NASA uses personalized incentives for motivational tools, practices, and rewards. These rewards can be tailored to an employee's interests, making the bonus more meaningful and motivating. Some personal incentives used by NASA include an astronaut autograph and a shout-out on NASA's Twitter. Using personalized tips shows the employer is taking time to recognize and appreciate an individual employee's efforts.
Let's start by highlighting the greatness some claims adjusters have when establishing a connection with their injured workers' resulting in fantastic outcomes. Highlighting excellence is a dire need for the entire workers' compensation industry to help with our rebranding efforts, and this is a fabulous space to be in. Showcasing the intrinsic rewards of the adjusting space can help with marketing efforts for claims operation sales from a third-party administration landscape and a talent crisis as we showcase the amazing people doing incredible things to make good things happen for injured workers. The perpetual doom and gloom are outdated, and it is beyond time we showcase the great people currently in the space to help attract others.
Don’t: Assign numerical ratings.
Rather than comparing claim adjusters with their peers, claim leaders should focus monthly, quarterly, and year-end development discussions on individual performance trajectories. Where to begin? Start by asking questions one-on-one, such as: Are you growing in your position? Are you working effectively across silos/company departments/strategic partners? Remember, ask yourself: How am I increasing my impact individually and as a contributor to the broader organization? And to the more significant industry as a whole? BE. THE. CHANGE. We are impacting human lives on a grand scale regularly. We affect countless lives daily. This impact is not small, and what we do matters. Shift the focus and the dialogue.
Encouraging claims adjusters and claims leadership to contribute to organizational objectives is crucial as it ensures everyone is pulling in the same direction. Additionally, it aids in instilling a feeling of purpose, meaning, and belonging to the claim professional showcasing the importance of their position and the more significant affiliation their job has beyond the scope of a numerical metric which may boost engagement and productivity. Additionally, the cohesive and collective contribution can encourage a sense of devotion and loyalty to the business, resulting in better customer support and greater customer satisfaction – the customer being the injured worker and the employer. Encouraging all claims professionals to contribute to meaningful organizational objectives can assist in fostering a healthy work environment, which can enhance morale and job satisfaction, something everyone in this space can benefit from immediately and as we move towards the future of what could be the dawn of a new era in workers’ compensation.
Dr. Claire Muselman is a workers' compensation thought leader and professor at Drake University, focused on driving meaningful outcomes for claims professionals and injured workers everywhere.
Grant Vanderlaan is a marketing and data analytics enthusiast with experience developing insights and driving business growth. He recently graduated from Drake University in December of 2022.
Source Referenced:
Gardner, H. K., & Matviak, I. (2022). Performance management shouldn’t kill collaboration. Harvard Business Review. Retrieved from https://hbr.org/2022/09/performance-management-shouldnt-kill-collaboration

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