Friday, March 19, 2010

Do You Believe in Safety?

Elaine Taylor recalls back in the mid 1990’s when one of her employees – a young carpenter – was wrapping up work at the end of the day. He and another carpenter were replacing the roof on a fire-damaged home. They were working in wintertime, but not just any old winter. This was winter in Alaska, and the crew had just finished spreading plastic sheets to cover the roof openings. One feature of plastic is its low coefficient of friction, especially when icy and laying at a 23⁰ angle. One feature of young carpenters is an attitude of haste; another, of invincibility. Naturally, he lost his footing; and of course, he wasn’t wearing his fall protection equipment. In less than two seconds, he had fallen 2½ stories – over 30 feet – hitting the frozen ground at around 32 mph.

Fortunately his landing was cushioned by snow; otherwise he might have died. Nonetheless, he broke his lower back and never again returned to work as a carpenter. He was off work for a year and had to get training to work in another industry. “It changed his life forever,” Taylor said wistfully.

The company Taylor owns with her husband Larry and their children Trent and Lisa – Taylored Restoration, in Anchorage – had been technically compliant with AKOSH regulations. They had their safety meetings, they had a safety program; but they didn’t follow up in a systematic fashion to ensure that employees were implementing the procedures. “We talked the talk, but didn’t walk the walk,” Elaine Taylor says. “It wasn’t really key to our beliefs.” Before the accident, AKOSH would inspect their commercial work, but after the accident they became a larger dot on AKOSH’s radar. It didn’t help when they filed the accident report late (the federal OSHA standard is less strict, requiring notification at three hospitalizations). The job site was a long way from the hospital, and they arrived so late they decided to wait until the next day to file; not realizing that their delay placed them in violation of AKOSH’s 24-hr. notice rule. That highlighted the need for better education in the applicable OSHA regulations.

Fortunately, they didn’t incur any legal liability. But they paid a fine to AKOSH, and of course their EMR went up – causing their worker’s compensation premiums to increase significantly. While the economic consequences were meaningful, the greater impact on the Taylors was the sobering human cost paid by their carpenter. At a subsequent meeting of the company leadership team, Taylor interrupted the discussion and declared “We’re approaching this the wrong way. We need to look at safety as the first thing we think about.” That initiated a fundamental change in the company’s operating procedures and culture.

Now, every employee has the authority to stop any activity they think is unsafe. If a worker has an accident, it’s addressed at the next company meeting and the employees discuss how it could have been avoided. Safety policy is enforced rigorously in the field – the Taylors actually fired some employees that had refused to tie off. The company also works closely with their worker’s compensation carrier to ensure that their safety program is up to date.

Their subcontractors have to walk the line right along with them. On one project, a Taylored Restoration employee stopped some employees working for a sub and kicked them off the job. At another project, an apartment complex, an employee spoke up during a job site meeting and insisted that a sub working for the apartment manager be tied off or Taylored would stop work. The apartment manager agreed and required the worker to wear his fall protection equipment. It happens that a sub actually did fall off the roof, and when he reached the limit of the line he swung back under the eave into a tempered glass window. The impact left an imprint of his body on the glass, most likely damaging his pride but not his health.

Every new Taylored Restoration employee now must go through a formal safety orientation, and is not allowed on a job until he’s seen a few key videos. There’s a company safety committee with oversight responsibility for the various departments – cleaning, office staff, large jobs, small jobs, and so on. They are charged with continuous revisions to the safety manual and MSDSs, and with keeping employees’ safety awareness at top of mind. Safety presentations are run by different departments in rotation at the company-wide monthly meetings. Creativity is encouraged, if not required – departmental employees produce skits, videos, and exercises to convey their lessons in new and memorable ways. One exercise pits workers in a relay race to help get them more familiar with tying off their fall protection equipment.

There’s no central database for residential construction, like Dodge Reports, from which OSHA can develop programmed inspection lists, leaving it to the off chance of a drive-by to initiate any scrutiny. This means that compliance in residential restoration isn’t driven by being closely watched, but instead is driven by company culture. So if a contractor’s owners don’t have a genuine commitment to safety, like Elaine and Larry Taylor do, the risk of serious injury or death is probably too high.

Friday, March 5, 2010

Still Dead, But With Some Qualifications

The column I wrote last month was published in Remodeling magazine online under the title The World As You Know It, and appears on this blog as Dead on Arrival. It generated some pushback from contractors who thought it focused on the negative; that it seemed to endorse the bankrupt idea of competing on price; that the opinions weren’t valid because they didn’t cite empirical research.

So I asked Les Cunningham to expand on his thoughts:

“Having been an airline pilot, I know humans can’t fly–I’m a realist. Positive affirmations are good, but they need to be salted liberally with realism,” Cunningham says. Thirty-nine years in the industry, and working with thousands of remodelers over those years has given Cunningham a deep reservoir of realism. He suggests that remodelers ask themselves “What’s my company worth today? Is it worth more than it was a year ago?”

“Yes, there’s work out there, but at reduced volume. One good operator I’m working with told me recently that he’s working ten times as hard; it takes two to three proposals to get a contract.” And price? It’s hardball negotiations. The client analyzes whether or not there’s sufficient value in doing the project, and then how much he can afford. Even though he likes you as a professional, can he get the same quality done at a lower price? Cunningham continues, “When someone’s checking your price, they can check the cost of materials and labor and calculate what percent over the cheapest alternative price you are. They make a value judgment for the money spent and quality received. There are more competitors than ever out there that are giving customers a cheaper price.”

Was Cunningham advocating that remodelers drop their prices at the first customer objection? No, he stresses. “Let me tell you a story. Two clients of mine were going after the same job. The [25%] higher-priced contractor was convinced that he was doing the right thing. The one with the lower bid actually had changed the specs and was able to charge a higher margin than he would’ve had he priced the project based on the original specs.” The difference was in understanding the customer’s wishes and his costs well enough to engineer a win-win solution for him and his customer.

But not all remodelers have command of their numbers, especially with complex design/build work. In a more competitive environment, they might find it increasingly difficult to differentiate themselves based on workmanship and service alone. Therefore, those contractors should avoid design-based variables that erode margins, and might benefit from selling products that minimize slippage–what Cunningham refers to as “bolt-on” products.

Cunningham’s company, Business Networks, collects financial statements and marketing and advertising data from its members around the country, who represent a good cross-section of the remodeling industry. The data they track is placed on a common comparison form with standardized definitions. This enables Business Networks to rank its members and generate averages based on real sales and margin targets. The peer format allows members to review and analyze the data eyeball-to-eyeball. Empirically, volumes and margins are down as much as 90%. Seventy percent of projects are now being financed from savings. Customers are increasingly concentrated among those who have the most stable employment–doctors and other health professionals, lawyers, entrepreneurs, and government employees.

There are successes, but not nearly on the scale as before. Certainly, there are pockets of stability–think Washington, DC and Austin, Texas–but in general, Cunningham says “if there’s a lot less success there must be a lot more failure. To continue in the same direction is the wrong answer. This is the first downturn where everyone’s been affected–nobody’s been untouched. But the market will return sometime…when it has disposable money available.”

Cunningham goes on to say that “until then, what a [struggling] remodeler needs to do is become a general contractor – not a specialist. You take whatever you can to break even or make money. Right now, what people seem to be buying are exterior products: windows, doors, siding, decks, and green-related items. In the boom years, the mantra was ‘if you do quality work, you’ll make a profit.’ Now, that’s a lie.”