Money Talks: The Toughest Investment You'll Make
November 3, 2008
This story begins the same way many an HVAC story does - with a technician choosing the highway rather than their owner’s way.
Often in this industry, a technician makes the decision to leave his employer and start a business of his own. It’s not long before his new business starts looking just like the one he left behind, as he does everything his former boss did, including the type of business practices that lead to being stressed out about how to cover payroll, pay overdue suppliers, and find good employees.
To find the answers he so desperately needs to run his business more effectively, he accepts an invitation to join a success-enhancing best practices organization where he discovers the answers he needs to alleviate his mounting levels of stress.
Armed with the answers, he faces a new challenge - the pain of changing his company. While he’s excited about change, his team isn’t.
Even implementing small changes like having his team wear uniforms or shoe covers in the customer’s home, moving away from time and material pricing, running Saturday calls, and scheduling at the customer’s convenience rather than the company’s convenience becomes a struggle. These are all minor changes on their own, but when they are enacted all at once it can be a mountain of turbulence.
That’s the exact scenario a contractor named Brian found himself in with his HVAC company.
At first, Brian spent eight months trying to change his team with training and motivation meetings. He finally concluded they weren’t going to change. They were who they were, and they weren’t the type of people that would help his company go forward.
When Brian found the answers to changing his company around, he made sweeping changes. He changed the course of his company and put it on track to achieve incredible profitability. But all of these changes took their toll. In fact, 21 of the 23 people on his team had been replaced within a 12-month period.
In hindsight, Brian stated that he probably only needed two weeks to figure out who was and wasn’t going to fit his new business model.
CHANGES CONTINUEBut Brian didn’t stop there. He terminated another 10 employees that were new recruits that didn’t fit his company’s culture for a total of 31 new hires in a year (21 new hires plus an additional 10 new hires to replace 10 of the 21 that didn’t fit his company.) All of that evaluation helped him develop a thorough system for interviewing and recruiting.
All in all, turning over his team was the toughest investment he’s had to make in his success. In fact, today, he interviews approximately 110 people for every one person that he hires, and he’s hired a team that’s embraced his new systems and procedures.
Now, Brian did admit that he wouldn’t want to go through the pain of turning over his whole team again. In the same breath, he also admitted that it was the best thing he had ever done for his company.
Making this type of sweeping change is difficult because you care about the individuals on your team and you want to see them succeed, but they may no longer fit into your business model.
What makes terminating those poor-fit employees so hard?
• You care about them.
• They’re already there and it’s easier to put up with what you have.
• There’s always the fear that you’ll get something worse.
• You don’t want to go through the pain of interviewing.
• You don’t want to make the investment of time or money to recruit.
Those are just a few of the fears that might keep you from making the same investment that Brian did. But at the end of the day, your success is predicated on the quality of the team members you have in place. If you stick with a team that isn’t working, you’re betting your company, your income, and your family’s future on these individuals.
If they aren’t willing to adapt to and implement the plan that you know will lead to success, aren’t they essentially saying that they don’t care about your company and your future? As an owner or manager, you’re responsible for putting the right people on the bus and giving them the training to achieve results.
With his stringent hiring system and criteria, Brian’s company is reaping the benefits of his investment. Not only has he not turned over any employees in the past few months, he’s confident that he has the right team in place for the future. He shared with me that today there isn’t a single team member that he feels should be replaced.
All these new employees are producing for Brian since they’ve bought into the culture and plan for the company. Even though none of his technicians have been with him longer than 8 months, they are all outperforming the previous group sometimes by two to three times the revenue volume.
All of that investment has helped Brian make a 17-point swing in his profitability percentage, dropping over $500,000 of profit to his bottom line. How is that for a return on your termination investment?
It’s always painful to turnover employees, but the joy of going to the bank with an extra $500,000 makes it more palatable. If you don’t do it, you’ll have struggles. If you do, you’ll have short-term pain but long-term profits.
Sometimes termination is the best, and toughest, investment you can make in your company to make sure you make money every day.
Publication date: 11/03/2008