A large part of business success is seeing into the future and getting ready for it. Another component is successfully changing your organization to effectively meet the new conditions. Contractors who are successful at transition usually take a managed approach to change. Let's take at two obvious changes coming in the marketplace; Increased school construction and higher (much higher) worker's compensation rates, and look at managed change plans for those areas.

Entering a new market
School construction: California recently passed a 13 billion dollar bond authorization. Within two years these projects will start to hit the market - while residential, commercial, and much of public works will be in the doldrums. But how do you prepare for that market? First, what are the differences?

Slower pay - contractors are used to slow pay but school districts are notorious for it.

Different inspection - The ORS is a lot tougher and requires much more paperwork than any building department and schools are built under a modified code - which has enough differences to get you in real trouble if you aren't familiar with it.

Tight Schedules - Schools always get the plans out late and then expect to make up the difference (including committee generated changes) during construction. Project completion is often the day before hundreds of kids show up to occupy the rooms. Scheduling, and some added costs to meet deadlines are an important part of success.

Formal Bidding - Similar to public works with some notable exceptions, school projects are bid or sold as a management project. If you work in the private sector there will be some big changes here.

How would a company manage a transition into school construction? The worst way is to run out and low bid a job. Start by looking at the special requirements and developing a plan to meet those requirements. The following is a basic management plan for a sub contractor who wants to expand

1. Visit general contractors and school district construction managers and discuss your plans to enter the market. This will give you both good information and future contacts.

2. Review your pricing strategy and cash flow requirements for 30 to 60 days additional float on accounts receivable

3. Scheduling requirements are tight. Mess up a schedule and that general or district will not want you back. What do you need to do to your organization to be able to meet, and often accelerate, completion dates.

4. Formal bidding - Are you bondable? What do you need to meet bidding requirements

5. Code and construction differences - review the code differences and the inspection requirements. What additional experience do you need on your staff to meet these requirements? How do you get that experience? By hiring? Or by developing existing staff? - Keep in mind that people with school experience will be in high demand when you need to hire them.

6. Staged execution - Don't jump into the market with both feet. Start small to get your organization familiar with the changes and plan to take about a year to do this. Bid small jobs to get experience with the new system and new requirements. Rotate employees so that this experience is spread throughout your organization.

7. Hold periodic meetings to review what you have learned and how you can better adapt to the new conditions.

8. Go get a good piece of the 13 Billion dollars.

Changing Business Conditions
Worker's Compensation Insurance Rates
Worker's Compensation rates rose 20 to 30 percent this year for most trades. This is only the beginning. Expect that your rate will be almost double by 2008. If a large percentage of your cost is payroll, worker's comp. is about to become a major cost center. May contractors do not realize that comp rates vary based upon your safety history. Comp. rates are also discounted on larger premiums based upon dedicated safety managers and training programs. A company with a good loss history (i.e. safety) record and with a dedicated safety manager will pay about half of what a company with a bad loss history and no safety management will. The bottom line is competitiveness and profitability.

Since worker's compensation costs are in part based upon losses, managing open claims can reduce costs which in turn reduces rates. Companies that manage open claims pay less in comp. insurance than those which do not.

First, let's look at the problem. Worker's compensation is based upon convoluted formulas. These formulas are derived by the state and control your rates based upon three year historical averages of frequency and cost. There are two ways to affect these calculations. One, lower your rate of job related injury and illness and two, reduce the amount that claims cost. This means you must have a two part program of change. The first is prevention and avoidance and the second is damage control.

Prevention:
On the job safety is fewer and less severe injuries. Injury is based upon behavior and any program to change the rate of injury must modify behavior. Behavior is modified through training and supervision. It's really a pretty simple formula. The actual work of doing this is made somewhat complex by the maze of state and federal regulation. Here is a plan to change behaviors in your company.

1. Find out what you need to do - Hire outside help to review your company for compliance and recommend training and procedures.
2. Identify a person to be responsible and give them authority.
3. Develop a training schedule and begin training
4. Supervise, and discipline, based upon behavior in safety
5. Attach rewards to safe behavior and penalties to unsafe behavior and enforce these on the field level.
6. Make all employees responsible for safety
7. Terminate employees who do not work safely

Damage Control:
Most people do not realize that insurance companies often mishandle claims resulting in additional costs. You need to work with the insurer to limit costs once an injury has occurred. Here is a plan:

1. Designate a person to manage insurance claims and have them educated in managing worker's comp.
2. Contact your insurance carrier and find out who the adjuster is on each open claim.
3. Track and review all open claims
4. Contact all off-work injured employees and make sure the insurance carrier is responsive.
5. Send all minor injuries (no medication) to first aid center and pay for it out of company funds.
6. Establish a return to work program and try to get all injured employees back to work as soon as possible doing anything.
7. Check the reserves on open claims prior to the State filing deadline for your insurance company. Strongly challenge excessive reserves.
8. Watch your compensation rates fall over the next three years