Workers' compensation costs can be a heavy burden for any manufacturing company. At Preferred, a $7.7-million industrial roofing and painting contractor based in Fort Wayne, Ind., they've become of astronomical importance. At $300,000 yearly, workers' comp fees amount to nearly one-sixth of the company's total $1.9-million operating budget.

For CEO Craig Hartman, controlling workers' comp costs is a management priority. One of Preferred's most effective cost-control strategies to date: self-insuring, through which the company pays all claims of $250 or less.

Since in Indiana, state-mandated workers' comp fees are pegged to the number as well as the size of claims, simply decreasing filing frequency should cut Preferred's annual fees by about 10%, chief financial officer Lisa Roberts estimates -- a savings far outweighing the expense of paying minor bills. Of course, there's plenty of room for maneuvering: the $250 cap can be raised or lowered at any point if Roberts and Hartman feel it's either too costly or too low to reduce filings.

With an expensive history of fraudulent claims by some employees, Preferred has also put law firms on retainer in Cleveland, where the company operates one of its contracting facilities, to investigate and possibly litigate every significant workers' comp claim of a suspicious nature.

The company has also begun to investigate the medical and employment backgrounds of potential hires, to screen out fraudulent claims before they happen. "Now that we're taking an aggressive stance," Hartman says, "we believe we'll eventually be able to reduce operating costs by 10% through our workers' comp savings alone." -- Jill Andresky Fraser