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Blueprint for Suicide Prevention

On Sept. 3, 2015, a press release was issued by the Carson J Spencer Foundation; RK, a construction company in Denver; and the National Action Alliance for Suicide Prevention. This press release was timed to coincide with Suicide Prevention Month in September and World Suicide Prevention Day on Sept. 10 . This press release announced the distribution of A Blueprint for the Construction Industry: Suicide Prevention in the Workplace (aka The Blueprint). One year later, we believe  that this document was a catalyst in developing a national movement in suicide prevention in construction. This articles tracks the milestones of this movement and future directions.

In 2010, the National Action Alliance for Suicide Prevention and its Workplace Task Force were launched in conjunction with World Suicide Prevention Day. The co-authors served as inaugural members of the Workplace Force. The Blueprint was intended to create awareness, generate advocacy and spur action in the construction industry around suicide prevention. In addition, The Blueprint provided a toolkit for how to discuss mental health and suicide prevention in the construction industry.

Equipped with The Blueprint, the co-authors began an initiative to break the silence and create a culture of caring. The co-authors sought to gain the attention of the construction industry through a media saturation campaign. The intent was to build a reproducible model within the construction industry that could subsequently be used as a reproducible model by other industries. In short, the coauthors sought to integrate mental health and suicide prevention in safety, health, wellness and employee benefit programs by framing the topics as the “next frontier in safety.”

The Centers for Disease Control and Prevention (CDC) published a report that placed the construction and extraction industry as second-highest in the nation for suicide rates.

But, a year later, The Blueprint has exceeded expectations. It spawned an outpouring of targeted action that is rippling throughout the construction industry. The impact has been felt in: publications, presentations, projects and partnerships.

Publications

The publishing of The Blueprint created demand for articles by major independent construction industry publications and those published by trade associations. There have been at least 28 unique articles published since the first one was posted online by the Construction Financial Management Association (CFMA) on Nov. 1, 2015.

See also: Union Pacific Leads on Suicide Prevention

These articles have included both in-print and online versions. The articles have begun to cross over from construction into architecture and engineering, to make this an issue that is being discussed in the integrated AEC industry. The articles have penetrated major industry brands, including Engineering News-Record (ENR); the Associated General Contractors of America’s Constructor; CFMA’s Building Profits; Associated Builders and Contractor’s Construction Executive; Construction Business Owner; and the National Association of Women in Construction’s Image.

Presentations

Once articles were appearing in industry publications, it was easier to solicit presentations. The first presentation that Cal Beyer gave regarding suicide prevention was the September 2015 CFMA Southwest Regional Conference, where he included suicide prevention as part of his company’s commitment to Safety 24/7: safety at work, home and play. The second presentation he delivered was to the South Sound Chapter of the National Association of Women in Construction in November 2015 near Seattle. These two early successes made it easier to “sell” the concept of presentations.

Sally Spencer-Thomas presented at the January 2016 Men’s Health Conversation at the White House in January 2016, while Beyer presented at the pre-meeting at the Department of Health and Human Services. The next two presentations were led by Spencer-Thomas in February 2016 at an executive roundtable sponsored by Lendlease in Chicago and to the Associated General Contractors of Washington. More than 100 attendees heard Beyer’s presentation at the Pacific Northwest Forum of the National Association of Women in Construction in April 2016. Two sessions were facilitated at the CFMA Annual Conference in June 2016. Similar sessions were offered in Portland, OR, in June to the AGC of Oregon and in Boise, ID, in July for the Idaho Chapter of CFMA .

The marquee event was held in Phoenix on April 7, 2016, when more than 100 attendees participated in the CFMA’s Regional Suicide Prevention Summit. Similar summits are scheduled by CFMA chapters for Charlotte on Nov. 9, 2016, in Portland, on Nov. 16 and Chicago on Feb. 17, 2017. A series of summits have been proposed by numerous CFMA chapters in 2017, including: Denver; Washington, DC.; Indianapolis; Houston; and Las Vegas.

Projects and Partnerships

The first partnership was established with CFMA through publications — including the first article as well as two custom PDF publications highlighting both the “why” and “how” to address suicide prevention in construction companies. Moreover, CFMA launched the aforementioned Construction Industry Alliance for Suicide Prevention and created an executive committee task force.

Clare Miller, the Executive Director of the Partnership for Workplace Mental Health, has been distributing periodic updates on the construction industry to her organization’s members. A partnership was formed with the JP Griffin Group, an employee benefits consultancy in Scottsdale, AZ. The Griffin Group created artwork for four custom poster templates that has been provided to the construction industry at no charge. Hoop 5 Networks, an IT system consulting company from San Diego, provided web development services for the Construction Working Minds website maintained by the Carson J Spencer Foundation.

Union Pacific invited Spencer-Thomas and Beyer to present in Omaha at the Railroad Suicide Prevention Summit on Aug. 24, 2016, so that rail industry leaders could transfer the lessons learned from construction to their own industry. Likewise, the U.S. Department of Veterans Affairs requested the construction industry be represented at its roundtable on suicide prevention on Aug. 30, 2016. While Beyer was not able to attend, he invited representatives from the CFMA and ABC associations to attend.

See also: A Manager’s Response to Workplace Suicide  

Finally, the best example of the growing partnership is the creation of a construction subcommittee on the workplace task force of the National Action Alliance for Suicide Prevention. There are now nine members on this subcommittee, and it is the largest subcommittee of the workplace task force. These subcommittee members represent a broad cross-section of the construction industry. The nine subcommittee members are:

  1. Cal Beyer; Risk Management Director; Lakeside Industries, Inc. (Issaquah, WA)
  2. Dr. Morgan Hembree; Leadership Consultant; Integrated Leadership System (Columbus, OH)
  3. David James; CFO; FNF, Inc. (Tempe, AZ)
  4. Tricia Kagerer; Risk Management Executive; American Contractors Insurance Group (ACIG); Dallas.
  5. Joe Patti; Vice President & CFO; Welsbach Electric Corporation (College Point, NY)
  6. Christian Moreno; Vice President; Health Risk Solutions; Lockton Dunning (Dallas)
  7. Bob Swanson; Retired President; Swanson & Youngdale, Inc. (Minneapolis)
  8. Sally Spencer-Thomas, CEO, Carson J Spencer Foundation (Denver)
  9. Bob VandePol; Executive Director, Employee Assistance program; Pine Rest Christian Mental Health Services (Grand Rapids, MI)
  10. Michelle Walker; Vice President Finance & Administration; Spec ialized Services Company (Phoenix)

Conclusion

Thus, in less than one year, the construction industry has moved from not thinking about suicide prevention to being a leading industry in the effort. In fact, in May 2015, Forbes published an article called, “What Construction Workers Could Teach Other Industries About Mental Health Awareness.” This demonstrated how broadly this awakening and action has been felt.

This first phase of garnering awareness and political will is critical in starting this national movement. The next phase is to institutionalize these efforts by bringing best practices in suicide prevention to companies, researching outcomes to better understand what works and developing policy and procedures that support mentally healthy, resilient and psychologically safe workplaces.

Zero Injury: A Cultural Imperative for the Construction Industry

If there is a silver lining in the protracted downturn and delayed recovery in the construction economy, it is that “fatal construction injuries are down nearly 42% since 2006,” according to the BLS National Census of Fatal Occupational Injuries in 2011.

That same report observed that “fatal work injuries in the private construction sector declined to 721 in 2011 from 774 in 2010, a decline of 7% and the fifth consecutive year of lower fatality counts.”

However, as the general economy stabilizes and construction spending and project volumes increase, it will not be long before hiring pressures mount throughout the industry.

With an increase in hiring comes an opportunity to institute increased emphasis on safety through employee selection standards, substance abuse testing, new employee orientation and training processes, as well as job safety analyses and daily “huddles” to address project safety requirements.

There is no better time than now for construction company owners and construction financial managers to focus on systematic injury prevention by adopting a zero injury vision and strategy and begin a transformation into a zero injury culture.

Reality Check: Stop Rationalizing Construction Injuries & Fatalities As A Cost Of Doing Business

Stop for a moment and reflect on the hard fact that many construction workers are injured, disabled, and killed at work each year. It is widely recognized (or rationalized) that construction is a hazardous industry, accidents happen, and jobsite conditions are constantly changing and difficult to control.

The reality is that the overwhelming majority of injuries and fatalities are preventable. A common trait we’ve observed among companies that have adopted a zero injury culture is an underlying philosophy and belief that all injuries and fatalities can be eliminated.

What is required to make this philosophy a reality? Leadership resolve to change the prevailing attitude that rationalizes fatalities and injuries as an unfortunate aspect of the construction industry and a cost of doing business and a culture shift that changes the attitudes, beliefs, and behaviors of all industry stakeholders.

This shift to a zero injury culture instills a true belief that injuries and fatalities are not acceptable, should not be condoned, and cannot only be reduced, but actually prevented. This culture shift is necessary at the project, company, and industry levels, as well as in the thoughts and actions of each construction employee.

Zero Injury Culture Is For All Companies

Culture shapes the performance expectations of such key workplace attitudes as the importance of punctuality, wearing proper attire, and how hard to work (or not to work). It directly influences safety attitudes and behaviors, including whether employees wear protective equipment, ignore training instructions, and/or take safety shortcuts to finish work faster.

Therefore, culture determines if a company or work crew will act with a safety-conscious and risk-averse set of values or accept “at-risk” attitudes and behaviors as the prevailing norm.

With the emphasis on zero injury or zero incident culture by large contractors, many small- and medium-sized contractors are wondering if this is a suitable strategy for them as well. We believe all companies can benefit from adopting a zero injury vision and strategy.

The success of a company’s drive to attain a zero injury culture hinges on a company’s owners and senior leaders who must instill, reinforce, and sustain the core building blocks of a zero injury safety culture shown in Exhibit 1 below.

Exhibit 1: Zero Injury Safety Culture Building Blocks
Representative Examples
Attitudes

Zero Injury is attainable on every shift and every project.

Zero injury culture needs to permeate all company activities and not be viewed as a separate process.

Beliefs

All levels of the organization believe that zero injury is achievable — from company executives to all craft/trade employees.

 

All employees accept personal responsibility and accountability for zero injury.

 

Values

The company values the health and safety of all employees.

The company is committed to employees going home safe at the end of every work day.

Assumptions

Employees are not taking unnecessary risk.

New employees accept safe work practices as the expectation.

Norms

Employee behavior on projects rejects shortcuts and recognizes that unnecessary risk-taking is not acceptable.

Zero injury is ingrained in the way the company builds every construction project — regardless of size, location, company division, manager/supervisor, and/or schedule.

How To Institute A Zero Injury Culture

Companies that have adopted a zero injury culture generally have instituted the measurement of leading indicators in addition to traditional lagging indicators (which are discussed in Risk Performance Metrics). Leading indicators focus on the prevention-based activities that drive improved safety expectations and performance outcomes.

Exhibit 2 outlines a life cycle process for the development of a zero injury safety culture. We have high-lighted five distinct phases and delineated key steps and milestones for each phase. The five-phase model is presented to provide a useful framework for monitoring the progress of the evolving process.

For simplicity, Exhibit 2 summarizes key challenges, major milestones, and process outcomes in each of the five phases of the zero injury culture development life cycle. Similar to safety culture development, rarely is a one-size-fits-all approach appropriate for any organizational process or practice. Company culture is unique and will grow and change in its own way.

Building an organizational safety culture can be a slow and messy process, and it does not necessarily follow a linear progression. Sometimes the adage of “one step backward to go two steps forward” is necessary advice.

A model of organizational transformation that we found relevant and realistic to instituting zero injury culture is “Journey of Transformation: The CFO’s Perspective” (by Renee Beaulieu, Skip Perley, Dr. Perry Daneshgari, and Heather Moore in the May/June 2012 issue of CFMA Building Profits), which describes the Strategic Breakthrough Process Improvement.

Many of the companies adopting a zero incident or zero injury culture often describe their process of doing so as a journey.

Safety Culture Development Challenges

The 10-question Safety Culture Health Check in Exhibit 3 can provide your company’s leadership with an assessment of their personal and organizational readiness for instituting a zero injury culture.

Exhibit 3: Safety Culture Health Check

The following 10 questions are designed to provide a quick assessment of your company’s current safety culture. Even though this health check cannot provide insight as deep as a comprehensive, systematic safety perception survey, it is a useful tool for gauging the need to expand safety awareness and accountability.

  1. Does your company’s senior management team operationalize safety commitment and show demonstrable involvement in managing the process by addressing safety as a core strategic discipline that positively impacts the execution of company and project performance?
  2. Do your company’s supervisors and employees fundamentally believe that all accidents and injuries are preventable, or do they believe that accidents and injuries are part of working in the hazardous construction industry?
  3. Is your company known for having a robust safety program with rigorous attention to safety, or is safety known to take a backseat to production pressures?
  4. Does your company’s prevailing attitude toward safety regard it as a necessary evil that decreases productivity or as a vital process that positively impacts productivity and profitability by maintaining a healthy workforce?
  5. Is safety performance viewed as the responsibility of a corporate safety officer, or is adhering to safe work practices the responsibility of every employee?
  6. Does your company have a culture that condones or eliminates safety shortcuts?
  7. Does your company engage all employees in safety processes, including conducting safety observations to identify and correct unsafe conditions and “at-risk” behaviors?
  8. What is your company’s reputation for safety among peer group companies and among the recognized industry leaders?
  9. Is safety an important aspect of your company’s brand image and reputation?
  10. Is your senior management team willing to go “all-in” for the safety and welfare of its employees by making it a core value of the company?

It is crucial that the zero injury culture process be well conceived with thoughtful consideration of how to communicate the company’s commitment, secure employee engagement, and implement functional support structures to reinforce and sustain the process.

It is important to recognize that employees will intuitively know if the company leadership sincerely wants to adopt a zero injury culture. Employee skepticism will run high if the company has a history of initiating and quickly abandoning “fad of the month” safety programs.

A final “gut-check” question is necessary to determine your company’s readiness and resolve for adopting a zero injury culture: Is your company ready and willing to commit to adopting, instituting, and sustaining a zero injury culture? In honestly evaluating this question and its implications, it is natural to consider the challenges in doing so and identify the obstacles to overcome for your company to be successful.

Benefits & Outcomes

Once implemented, the benefits of a zero injury safety culture will be realized through reduced claim severity and frequency, increased productivity, and improved profitability. Once a zero injury safety culture is achieved, your company will:

  • Become an employer of choice, reduce voluntary attrition, and improve morale among existing employees
  • Increase productivity by decreasing time spent investigating employee injuries and reducing idle equipment, thereby increasing potential for improved margins
  • Decrease direct and indirect costs associated with employee injuries, thereby reducing your company’s total cost of risk
  • Demonstrate improvement in project owners’ prequalification metrics (e.g., total recordable cases (TRC); days away from work, job restriction, or transfer (DART); Workers’ Compensation Experience Modification Rate (EMR), etc.), thereby remaining on eligible bidder lists and increasing opportunities to bid desirable projects
  • Align zero injury culture with other strategic zerobased risk management objectives: zero defects, zero crashes, zero equipment breakdowns, zero defaults, zero IT downtime, and zero disruptions (For more information, read “Zero Disruptions: Preparing for Unexpected Business Interruptions & Protecting Your Assets” by Calvin E. Beyer and Brian J. Cooney in the May/June 2011 issue.)
  • Attain respect among peer competitors and establish a positive reputation in the industry

Management Safety Culture Assessment

Various survey instruments have been developed to measure perceptions of safety management culture. The Management of Safety Culture Assessment is based on the Determinants of Safety Culture Model, which assesses the measurable capacity and performance ability of companies to minimize accidents, injuries, and related costs.

According to Dr. Christopher Garrabrant, the Management Safety Culture Assessment and Determinants of Safety Culture model are founded on Charles Perrow’s 1994 discussion of Normal Accident Theory and High Reliability Theory, both of which correlate to reducing losses.

Garrabrant asserts this Management Safety Culture Assessment identifies and measures 15 factors within five broad categories that contribute to the success of a company’s safety culture, as shown in Exhibit 4.

Exhibit 4: Management Safety Culture Assessment
  Assessment Category Assessment Factors
1. Organizational Leaders Operationalize Commitment

Demonstrable senior leadership participation and involvement

Resource allocation

Core processes and results measured

Accountability system for safety at all levels of the organization

2. Identify Safety and Reliability as Goals

Safety as a goal is consistently and clearly articulated

Multiple and independent channels of communication

Decentralized decision-making authority

3. High Levels of Redundancy in Personnel and Technical Safety Measures

Continuous operations and training

Job hazard analyses are owned, continuously reviewed, and updated

4. Organization Strives for a “High Reliability Culture”

Presents optimism toward a desired future state

Consistent communications

Adaptability to change

5. Sophisticated Forms of Trial and Error Organizational Learning

Capacity to learn and act

Accident investigations are blame-free and pursue systemic improvements

Hazard analysis occurs before accidents

A company demonstrates the necessary values within its culture to promote the health and well-being of its employees. The culture demonstrates behaviors that can be expected to result in fewer workplace accidents and achieve a more rapid return to work should an accident occur. The assessment is intended to validate a company’s ability to exceed industry expectations of safety performance.

Importance Of A Zero Injury Mind Shift In The Construction Industry

We recognize that for a true zero injury culture to occur, the mindset of zero injury needs to reach beyond the individual company culture and become the norm for the construction industry as a whole, since many contractors use the same subcontractors, vendors, and workforce. Therefore, until the industry – including all owners, contractors, and employees – takes a unified stance against unsafe behaviors and acts, each individual company will obtain limited success as a zero injury culture.

We envision a construction industry with the shared culture where workers have the same positive experience at every project where they are asked to put in an honest day’s work without taking any unnecessary risk and where they safely complete their work each day.

In order to do that, we are encouraged to see general contractors and subcontractors band together with insurers to start working as an industry to change the norm for all workers to complete each work day safely.

Please take a moment to think about whether you are willing to do what is necessary to help make zero incidents, injuries, and fatalities a reality in your company and the construction industry.

Challenge the conventional thinking about the construction industry being hazardous and help make the vision of a zero injury culture within this industry a reality.

We appeal to every stakeholder of the construction industry to join the cause of making zero injuries a reality. There really is no higher calling for the construction industry – the time is now for zero injuries to be the expectation, the norm, and reality.

Web Resources

1. BLS Economic News Release: Census of Fatal Occupational Injuries Summary, 2011.

2. Zero Injury Techniques, University of Texas at Austin, Construction Industry Institute.

3. Safety Plus: Making Zero Accidents a Reality. University of Texas at Austin, Construction Industry Institute.

A Brief History of Zero Injury Culture in Construction

The concept of zero injury in construction has existed at least since 1993 with the publication of the Construction Industry Institute’s (CII) Zero Injury Techniques. The 1993 study highlighted 170 techniques that construction companies used for injury prevention. The CII’s follow-up study in 2003, Safety Plus: Making Zero Accidents a Reality, further popularized the term and increased awareness of the benefits of a zero injury culture.

The 2003 study quantified a significant demonstrable improvement in safety performance of companies adopting nine high-impact, zero injury techniques:

  1. Demonstrated management commitment
  2. Staffing for safety
  3. Planning (pre-project and pre-task)
  4. Safety education: orientation and specialized training
  5. Worker involvement
  6. Evaluation and recognition/reward
  7. Subcontractor management
  8. Accident/incident investigations
  9. Drug and alcohol testing

Since the two CII studies, a growing number of construction companies, many of which have more than $250 million in annual revenues, have adopted the vision of creating a zero injury culture. In the past couple of years, a cadre of such companies (known as The Incident & Injury Free CEO Forum) emerged to provide leadership by example on the benefits of zero injury culture.

Members of this group include American Infrastructure; Baker Concrete Construction; BMW Constructors, Inc.; Cal Dive International; Gilbane Company; Great Lakes Dredge & Dock; Hunter Roberts Construction Group; Jacobs; JMJ Associates; Lend Lease; Limbach Facility Services, LLC; Manson Construction Co.; Nicholson Construction Company; Skanska; Terracon; and Weeks Marine.

These companies are collaborating to expand awareness of zero injury techniques and have been engaging with representatives from major construction insurance carriers and brokers to foster greater adoption of zero injury culture throughout the construction industry.

Zero Incident
Many large companies have adopted programs with a more stringent focus of attaining zero incidents instead of merely zero accidents. The rationale is that incidents are “near hits” that could have resulted in injuries or fatalities and near hits are early warning signals of an underlying hazard that warrants attention and correction.

One of these companies distributed Safety 24/7: Building an Incident Free Culture to all its subcontractors. This book is recommended for any owner or strategic leader seriously interested in instituting a safety cultural change.

Authors
Cal Beyer collaborated with Eric Lambert in the writing of this article. Eric Lambert, CRIS, ARM, CHST, is National Director of Construction Quality and Safety for Zurich North America Commercial in its Boston, MA office. Eric has worked in the construction industry for the past 20 years to save lives, reduce loss, and make companies better. For the past 11 years, Eric has worked to make a zero injury culture a reality. Eric has participated in many construction industry roundtables and committees to learn from and provide input to improve the industry’s safety culture and practices.

© 2013 by the Construction Financial Management Association. All right reserved. This article first appeared in CFMA Building Profits. Used with permission.

Internal Vs. External Benchmarking Of Insurance Claim Data

Data-driven analysis is a critical decision-making tool for Construction Financial Managers and other industry leaders.

Decision-making is arguably the most important responsibility of company leadership.

Companies that make better decisions make fewer mistakes, and achieve a distinct competitive advantage in the marketplace.

The underlying purpose of benchmarking is to continually improve the quality of organizational decision-making.

Overview
As construction risk management consultants, we help contractors prevent accidents, mitigate claims, and reduce the total cost of risk through a continuous improvement process.

We believe companies must instill management accountability for continuous improvement by linking performance measurement to both prevention activities (leading indicators) and operational results (lagging indicators). As the adage goes:

“What gets measured is what gets done.”

In our consulting roles, we frequently help companies establish realistic performance measures by conducting various types of claim and loss analysis.

This type of data analysis is usually the starting point in a performance improvement process — and a common practice among insurance agencies, brokerages, carriers, and risk management consulting firms.

In addition, we are often asked to conduct a benchmarking analysis that compares one company's claim and loss data against peer companies or to the construction industry as a whole.

Benchmarking
The term “benchmarking” refers to the comparison of a company's performance results against those of similar peer companies. Benchmarking evolved out of the quality improvement movement in the late 1980s and early 1990s.

Its initial intent was to identify leading companies regardless of industry sector, and apply their best practices to improve one's own company. Over time, benchmarking has become synonymous with process improvement.

The traditional view of benchmarking required two separate disciplines focused on performance improvement: measures and methods. Identifying and capturing performance indicators (the measures) is only the first step; developing and implementing performance improvement (the methods) is the second and most important step for the benchmarking process to be truly effective.

The Health Club Analogy
There is limited value in benchmarking without applying new methods to address continuous performance improvement. Performance improvement requires more than the measurement of performance indicators; it requires the implementation of changes in management disciplines to attain improved operational results.

Using only performance indicators without implementing new methods to improve operations is akin to joining a health club and expecting the benefits without actually using the equipment or committing to an exercise program.

Merely jumping on the scale and gauging your weight relative to others doesn't help you achieve your own weight loss goals anymore than comparing your pulse and respiration rate to others helps you attain your aerobic or cardiovascular fitness goals. What matters most is that a person embarking on a weight loss or fitness program stays committed to the process and monitors his or her own progress.

Similarly, we believe the ongoing monitoring of claim and loss data specific to an individual company is even more important than the initial measurement of insurance claim and loss data relative to other companies.

Baselining As Benchmarking
The term “baselining” refers to the internal benchmarking process that occurs when a company compares its performance against its own results year after year. Ongoing, internal monitoring allows a contractor to determine if the company's claim and loss trends are improving or deteriorating, and to make the critical performance improvement decisions necessary to facilitate a change in results.

Referring back to the health club analogy, baselining does not compare an individual's weight and aerobic fitness to that of the other health club members. Instead, individual fitness goals and measures are established, monitored, and tracked to verify continuous personal improvement.

Similarly, a construction company can develop a baseline analysis of its loss cost performance by reviewing loss and claim data for a minimum of 3-5 years. Company results are compared from year to year, and ideally are broken down by operating entity, division, project, manager, or even crew levels.

Exhibit 1 provides a sample of a baseline analysis that compares one company's relative claim and loss performance within all of its operating divisions.

2001-2006 Total Claim Cost per Man-Hours Worked by Division

 

This analysis reviews the historical loss cost data for the entire company and breaks it down into meaningful data relative to each operating division. The total workers' comp, Comprehensive General Liability, and auto liability incurred claim costs (sum of paid and reserves) for each company division over a five-year period were compared to the total man-hours for each division, producing a cost per man-hour figure.

The results illustrate dramatic differences in total claim costs per man-hour for each division. This baseline analysis was the first step in raising awareness of the predominant loss leaders within the company. This increased awareness led to a detailed analysis that established plans of action and realistic cost targets by company division for the upcoming year.

External Benchmarking
We acknowledge that there are numerous benefits to measuring the frequency, type, and cost of insurance claims compared to peer groups and/or the entire construction industry. Such analyses provide the ability to:

  • Identify leading types and sources of claims
  • Establish strategic objectives to prevent the occurrence of common industry claims
  • Increase knowledge of industry best practices
  • Determine operational performance improvement priorities
  • Create awareness among managers and employees about the costs of claims and the impact on profitability
  • Post positive results on company websites and for use in other marketing materials

The Bureau of Labor Statistics provides safety-related data so that companies can externally benchmark injury and illness data against specific industry groups. (Check out the Web Resources section at the end of this article for more information.)

In addition, Bureau of Labor Statistics data is used to calculate and compare OSHA Recordable Incident Rates and Lost Workday Incident Rates, both of which are common construction industry benchmarks. This data is useful when making high-level comparisons within construction industry segments relative to injury and illness rates.

We also use external benchmarking analyses to establish risk reduction, loss prevention, or cost containment goals. In “Risk Performance Metrics” by Calvin E. Beyer in the September/October 2007 issue of Building Profits, a sample benchmarking comparison shows a representative contractor's duration of lost workdays workers' comp cases in median number of days compared against the median duration for the industry. Results such as these can highlight the importance of an increased focus on injury management and return-to-work programs.

The benchmarking analysis in Exhibits 2A and 2B compares a contractor's workers' comp claim and loss performance to an established group of peer contractors in the same specialty trade. (These companies engaged in similar work, and performed in states with similar insurance laws and legal climates.)

WC Claims Per $1 Million WC Payroll by Company

The analysis was based on total incurred workers' comp costs and total number of workers' comp claims as compared to payroll for each entity. Overall, Company D had worse results than the other three companies.

This prompted an in-depth review of Company D's workers' comp losses by division and occupation. As shown in Exhibit 3, the company experienced significant claim frequency and severity issues within the first six months of employment.

WC Claim Count & Cost by Length of Service

These findings triggered the development and implementation of specific activities designed for Company D's new employees.

Below are some of the activities that were incorporated into the formal improvement plan:

  • hiring processes
  • new hire skills assessments
  • orientations
  • daily planning meetings
  • formal training

Other Sources Of Benchmarking Data
Professional associations and industry trade/peer groups also provide comparative data for benchmarking purposes.

The Construction Financial Management Association's Construction Industry Annual Financial Survey is an excellent source for understanding the key drivers of contractor profitability. We use the survey data to determine comparative profit margins for different types and classes of contractors when we calculate a revenue replacement analysis to show the additional sales volume needed to offset the cost of insurance claims. (This technique was highlighted in the “Risk Performance Metrics” article previously mentioned.)

Similarly, the Risk and Insurance Management Society (RIMS) conducts an annual benchmarking survey that reviews insurance rates, program coverages, and measures of total cost of risk.

An example of a peer group data source for benchmarking is the Construction Industry Institute (CII). The Construction Industry Institute is a voluntary “consortium of more than 100 leading owner, engineering-contractor, and supplier firms from both the public and private arenas” (www.construction-institute.org). It develops industry best practices and maintains a benchmarking and metrics database for its participating members.

Another peer group example involves members of captive insurance companies sharing and comparing claim and loss data for the group as a whole. There is a major advantage when a true peer group shares benchmarking data: Such data sharing often leads to peer pressure in the form of increased ownership and accountability for improvement by the companies shown to be the poorest performing members.

We continue to search for more new sources of industry best practices and comparator data. A possible emerging source for the construction industry is the National Business Group on Health. This organization has developed standardized metrics known as Employer Measures of Productivity, Absence and Quality™ (EMPAQ®).

EMPAQ® helps member companies gauge the effectiveness of their injury and absence management and return-to-work programs. The founder and principal of HDM Solutions, Maria Henderson, served as a project sponsor for EMPAQ® from 2003-2007, and co-presented with Calvin E. Beyer on “Return to Work as a Workforce Development Strategy” at CFMA's 2008 Annual Conference & Exhibition in Orlando, Florida.

Limitations Of External Benchmarking
We fear that the increasing popularity of external benchmarking analyses may indicate that it has become a “quick fix” solution or a management fad. When asked to conduct an external benchmarking analysis, we always ask the following questions:

  • What is your purpose in seeking these comparisons with other companies?
  • Who are you trying to convince and what are you trying to convince them to do?
  • What specific peer companies should be used for comparative purposes?
  • Are these companies (and their operations and exposures) truly similar enough for a fair comparison?

Beware Of Pitfalls
There are many hurdles to surmount in locating suitable companies for external benchmarking comparisons. Generally, when benchmarking comparisons can be made, more often than not the greatest value lies in the workers' comp line of insurance coverage.

Here are some key factors to consider when choosing contractors for external benchmarking comparisons:

  • Percent of self-performed work vs. subcontracted work
  • Payroll class codes and hazard groupings of selfperformed work
  • Differential geographic labor wage rates
  • Payroll rate variances between union and merit shop operations
  • Size of insurance deductibles
  • Claim reporting practices

For example, claim reporting practices must be similar in order to minimize distorting the frequency or average cost of a claim. If one or more comparison companies self-administers minor claims or does not report all claims to their carrier, using carrier loss reports for the comparison is an invalid method.

We also find that comparing the frequency of claims and total loss dollars divided by thousands or millions of dollars of payroll (exposure basis) is a helpful workers' comp benchmark between companies of similar operations in similar states.

Likewise, a suitable benchmark for auto liability performance compares the frequency of claims and total loss dollars per one hundred vehicles.

When benchmarking fleet-related claims, ensure that the number and size of fleet vehicles — as well as the type of driving (urban vs. rural) and the total number of miles driven annually — are similar among the contractors whose claims are being compared.

Benchmarking comparisons of Comprehensive General Liability insurance results are especially challenging due to delays in reporting third-party bodily injury and property damage claims, in addition to the expected long tail of loss development for these claims.

All of these factors are compounded by vastly different litigation trends and liability settlements in various states and regions of the country.

Common Limitations Of Data Sources
Whether or not you intend to develop a baseline of your company's claim data or to benchmark your company's performance against a peer company, there are several issues that must be successfully resolved regarding the data's quality and integrity.

Based on our experience, we classify the key challenges associated with exposure and claim/loss data into the categories shown in Exhibit 4: availability, accuracy, accessibility, standardization, reliability, comparability, and date-related problems.

Seven Data Challenges

Value Of Multiple Measures
Evaluating data from various sources and different angles is also valuable. Why? Because it's possible to gain a better understanding of the whole by dissecting the parts. This practice illustrates the principle of multiple measures.

This approach is substantiated by 2006 research, which concluded that the “simultaneous consideration” of frequency and severity provides a more comprehensive result than performing analysis based solely on one factor.1

This is similar to our approach when we conduct a “Claim to Exposure Analysis” and review historical frequency and severity vs. the relative bases of exposure for each line of casualty insurance coverage.

Returning to the health club analogy, when starting a formal exercise program, you often begin with such general baseline measurements as height and weight; this is usually followed by additional measurements, such as BMI, body fat content, and the girth of arms, legs, and chest (the baseline).

As we all know, weight alone is not always the best indicator of success in fitness efforts. In fact, since muscle weighs more than fat, an increase in total body weight may actually occur after beginning and maintaining a fitness program.

Although you might not experience a dramatic weight drop, you could see a reduction in waist size and BMI — positive changes that would not be evident unless multiple measures were being used and reviewed.

Benchmarking insurance claim and loss data performance is like comparing one person's height and weight against the ideal height and weight charts based on the entire population.

Wouldn't it be more effective to establish your baseline weight and other multiple measures initially so you can see the progress you are making?

This is similar to the baseline measurements that a company should take (as well as the multiple measures) that are necessary to meet your company's performance improvement goals for financial success, operational excellence, or risk reduction.

Web Resources:

  1. U.S. Department of Labor BLS Incidence Rate Calculator and Comparison Tool
  2. National Institute for Occupational Safety and Health Work-Related Injury Statistics Query System
  3. Risk and Insurance Management Society, Inc. Benchmark Survey
  4. Construction Industry Institute Benchmarking & Metrics
  5. National Council on Compensation Insurance, Inc. (NCCI Holdings, Inc.) Benchmarking Tools
  6. Employer Measures of Productivity, Absence and Quality EMPAQ
  7. CFMA's Construction Industry Annual Financial Survey with Benchmarking Builder CD

Authors
Cal Beyer collaborated with Greg Stefan in writing this article. Greg is Assistant Vice President, Construction Risk Control Solutions, at Arch Insurance Group. As a member of the Southeast Regional team in Atlanta, GA, Greg supports underwriting and claims in risk selection, claim mitigation, and risk improvement activities. He is also responsible for high-risk liability risk reduction initiatives including contractual risk transfer, construction defect prevention, and work zone liability management.

1 Baradan, Selim, and Usmen, Mumtaz A., “Comparative Injury and Fatality Risk Analysis of Building Trades,” Journal of Construction Engineering and Management, May 2006, pp. 533-539.