ACHRNEWS

My Two Cents: Facing Difficult, but Necessary, Decisions

March 9, 2009
Butch Welsch

The temperature outside as I write this is 72°F. And today is Feb. 10 in St. Louis.

Huh?

While this may sound like a report from the Weather Channel, this is just a heating contractor in St. Louis who just had two “no air conditioning” calls on Feb. 10. Yes, February!

That’s pretty much been the story of our weather this winter. We had a couple of really cold days the latter part of January. For the most part, though, the norm has been highs in the 40s to 50s.

To say the least, this is not exactly good for the heating business. On those few days when it did get cold the last two months, if they had a failure, customers were much more inclined to repair than replace that old piece of equipment.

It’s been that kind of year.

In the past, the good news has been that when winter weather was this mild, at least the homebuilders could continue to build. Since our business is about 50 percent new residential and 50 percent service/replacement, it seemed to work out. Unfortunately, new residential permits are down 70 percent from their peak in 2005 and there is just not very much building happening - weather or not.

DRASTIC MEASURES

With these obstacles in front of us, we had to take a long look at everything in our budget. It was necessary for us to make some of the most difficult decisions we have ever had to make in my career in the business.

Sure, we did some of the relatively easy things to reduce costs, but most of the easy things we had done last year. Our field installation and shop personnel had been asked to work two weeks on and two weeks off. We felt that this was the best way to man our jobs. Service technicians were rotated on an as-needed basis and averaged working about half of each week. Those steps were helpful but didn’t reduce that all-important overhead.

So then came the difficult part.

We asked our supervisory personnel to work a 20 to 40 percent reduced workweek, with applicable pay and fringes. Further, we asked all of our salaried personnel to work for a reduced rate for a six-week period with no change in hours.

In my years in the business, I didn’t feel that we would ever have to take measures like this. I have to tell you that it hurt me deeply to have to make these cuts. Our company is much like a family with most employees having been with us from 10 to 30 years - or more. So this was like punishing my own family members.

Since the measures were so drastic, I wanted to show the employees the further commitment we were making. We negotiated two rebate changes with our Local 36 sheet metal workers, who were very cooperative. We doubled the rebate on maintenance agreements, as always trying to increase our ability to obtain new customers through our maintenance agreement program. (For details on our program, please e-mail me at the address below.)

With the local, we put in a rebate program for replacement installations. To this, our company added our own rebate program. And we gave our sales engineers the authority to “do what it takes to get the job.”

THEY MIGHT SURPRISE YOU

In order to make our customers and the public aware of these steps, we did some additional advertising and did a direct mail campaign to some of our important neighborhoods. The idea was to make it clear to the employees that by asking for the reductions we did, it wasn’t so the company could pocket more money. We wanted to show that the company was doing everything it could to improve the market for our business.

I was extremely concerned about the effects of these changes on our personnel. I cannot tell you how excited I was to receive, not one, but three calls from employees the evening after I announced these cuts. All three were calling to tell me that they understood the position we were in; how difficult it must have been for us to make those decisions; how they supported our position 100 percent, and were happy to have a job given the economic conditions.

I offer this as testimony to you, to do what you have to do to make sure your company survives. Your employees’ reaction will likely surprise you, as mine did me.

Publication date: 03/09/2009