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- EXTRA EDITION
Recent publications indicate that 401(k), medical benefits, vacations, etc. would add as much as $20 an hour to typical wages paid in our industry. As a contractor, are you including such costs in your hourly service charge? If you did, a typical service charge might start at $150 an hour!
Yes, I can hear the grumbling now, “That would price me out of the market.” Well that is the crux of the problem. It has been common for the HVAC contractors to establish their service prices based on the competition, “... call some competitors and see what they charge.” The competition probably does not provide these benefits and regardless of their service prices, your prices should be your prices.
Consider that the typical copier technician charges at least $150 an hour and while I would not belittle his training or expertise, I doubt seriously that the copier technician must have the product knowledge and continued training of all the competitive copiers in the market as does the HVAC technician. Keep in mind that the copier technician may be extremely well trained by Xerox on their products, but may well be at a total loss if asked to service a different brand.
However, the HVAC technician may service a Carrier product at 8 a.m., a Rheem product at 10 a.m., and continue until the day is done. Nor does the copier technician have the depth of knowledge that an HVAC technician must have, i.e., refrigeration and brazing, airflow and duct design, electrical as well as solid-state control troubleshooting procedures. So why shouldn’t an HVAC technician charge and earn as much?
CALLBACKS NOT NECESSARYFurther, no one makes any money on callbacks, and yet it is estimated that three out of five new replacement sales and/or service calls result in at least one callback. That is a 60 percent callback rate! Even if you do somewhat better at 50 percent, it is still totally unacceptable. Manufacturers strive to hold warranty costs at an average of 2 percent or less (which result in callbacks for you), and they have statistical data to prove it.
So why does the HVAC industry have 48-58 percent more callbacks? You may not want to believe this callback rate, but ask yourself why it seems acceptable in our industry to have a 50 percent rate of non-billable labor hours?
Still don’t believe the callback rate? Then follow your own service calls for just one week or check with the Air Conditioning Contractors of America (ACCA) for national figures.
Perhaps some of this is due to the technical nature of new products today. Well, that just emphasizes the greater need for more training. Maybe it is due to the hiring of just anyone who can turn a wrench. Maybe it is due to overworking the technician.
Keep in mind that the best productivity from a technician is estimated to be working them 35 to 45 hours a week. Fatigue sets in beyond that time frame and callbacks will result. Yet many technicians are worked 60 and 75 hours a week during peak demand and laid off in nonpeak times.
Yes, part of this is due to a shortfall of technicians, but this, along with the fact that HVAC technicians must work evenings and weekends (not so with our copier technician), contributes to the lack of technicians entering the HVAC field.
As to callbacks, have you considered the impact on your reputation with your customers? How satisfied with your level of service was the customer when they had to take another day of their time to satisfy your level of incompetence? That is exactly how they see it, incompetence. And just because you generated more revenue with more service calls, did you make more profit?
I provided a client with an analysis of his service cost over a period of one year (this analysis available upon request) and found some very interesting issues. One glaring point made was that the client actually made less income during the peak of the cooling season than he made during off-peaks.
Why? Simply put, callbacks cost him money as well as the additional overtime paid to technicians working 60 or more hours a week. Yes revenue went up, but payroll increased and profit declined, so everyone lost with callbacks.
HIRING CHALLENGESHiring new employees is a daunting challenge. If someone had the magic bullet, they would be wealthy beyond compare. Yet there are some companies who have long waiting lists of potential employees because of the company’s reputation in the industry. There are many reasons that this is true, but paying top dollar and having better benefits are usually not the only reasons. These companies also provide an environment that nurtures the employee with ongoing training, an environment that allows them to reach their full potential and provides an avenue for advancement.
Would you accept a job that requires you to work 10-12 hours a day, three to five months out of the year, and then face potential cutbacks in hours or even layoffs? A job that requires you to crawl under houses in the dark, dirty, and critter-ridden crawl spaces that exist? A job that offered increased income based only on increased hours and little future potential other than tenure? Yet that is the way potential employees see it. And unless we as an industry change that perception, we are doomed to a lifetime of continued employee shortages.
Keep in mind that your employees are no different than you. Yes they want a dependable and reasonable income. They want benefits of a comparable nature. They want to have time to enjoy their life. But they also need recognition, to know the steps to advancement, and to know these before they accept the position.
How and what training do they need to rise to the next level of, say, senior technician, service manager, or maybe installations manager? Are the time frames clearly spelled out? Are the projected incomes made known? What additional benefits might they expect?
Do you provide quarterly personnel reviews for new hires and biannual reviews or at least annual reviews for long-term employees that also demonstrate recognition of the employee? Do you allow them to rate themselves, indicate their areas of weakness, or indicate the areas of training they believe they need? Do you ask them where they would like to advance to within your company and guide them on how to do so?
Sure, much of the advancement depends on additional training, and I have heard many contractors say, “I end up training my employees only to have them go to work for the competitors.” However, I assure you that if you provided recognition, through personnel reviews, and a clear path for advancement within your company, the better employees would stay with you because they know what the future opportunity is for them in your company and they know the path to obtain a better position.
So, again, how much time during the job interview do you spend telling prospective employees (not just prospective technicians) about the future career path in your company? Do you have a company structure that you present to the potential employee during the job interview, one that clearly demonstrates the path to future advancement, to what levels they can advance and in what time frames?
After all, would you consider a job if you did not know these in advance?
GIVE THEM A CAREER PATHWe as an industry must overcome this persistent employee shortage. It starts with increased technician income through increased service charges, and it must include recognition and a visible career path, all of which will require a paradigm shift on the contractor’s part. However, the increased prices are justifiable to the consumer with better service, fewer callbacks, and a better caliber of service technician.
Clearly, failure to provide a viable career path, for employee future advancement is a necessity if we wish to retain the new hire, and it is essential to attracting valuable new employees. I have assisted contractors in identifying such issues and structured them so that they can be clearly presented to potential employees.
Remember Einstein’s definition of insanity, “Continuing to do the same thing over and over again and expecting different results is insanity.” So let us accept the need for these paradigm shifts and climb out of this continued labor shortage.
Publication date: 03/17/2008