3 Reason Why BP's Bonuses for Safety Are Silly

BP is clearly working on its image. This week, it leaked (and later confirmed) an e-mail that told employees fourth quarter bonuses would be based entirely on safety. This should like a publicity stunt. Here are a few reasons why such a plan is silly.

Just One Quarter?

The first red flag here is that the bonus would be based on safety for just this quarter. Then, a full review of its rewards system will be undertaken. Why not simply complete such a review before creating (and leaking word of) a temporary bonus program? Obviously BP wants to use the program to show that it cares about safety.

In reality, of course, you can't judge safety based on one quarter -- or even several years. The consequences of some mistakes are relatively immediate, like if a drunken tanker captain were to drive into an iceberg. But others might take years to manifest themselves. So really, the only way to ensure that safety is taken fully into account is to defer all bonuses for years, until the company can be sure that all risk related to a given project is gone. That doesn't appear to be what BP is doing here, however.

Safety Matters More for Some Employees Than Others

Moreover, these bonuses are said to apply to all employees in its operating business. Surely, however, some employees' jobs should require more attention to safety than others. Indeed, there are some workers who probably have little to zero effect on the safety of BP's drilling operation. It makes no sense to judge all employees based on safety, and it makes even less sense to judge all employees solely based on safety.

Safety Can't Be Only Criterion

On that point, safety might be a good part of the compensation determination for many employees, but it shouldn't be the only one. If every employee's sole focus is safety, then a company won't last very long. Workers must have an incentive to cultivate other aspects of performance as well.

Think about a Wall Street trader. If her only concern was to make sure she didn't lose money, then her attention to safety would result in very, very little profit. Indeed, she might not invest in anything at all. While losses are certainly something she would try to avoid, if you avoid all risk all of the time, you will never make any money.

The same applies to drilling. No matter how careful you are, there's always some risk involved. BP should be very concerned with safety. But if it's too concerned with safety, then its costs will grow too high, it won't be able to compete with other firms, and it will eventually fail.

While it's nice for BP to pay so much attention to safety, basing employee bonuses solely on that end is fundamentally flawed. But then, the tactic pretty clearly isn't meant to be a real, sustainable business decision. Instead, it's more likely meant to create a nice little news blurb that the company hopes will help convince the public that it's trying to make amends.