Tempo Mechanical Services: Where service techs get equity

May 2, 2000
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CARROLLTON, TX — What’s it like to work at Tempo Mechanical Services, Inc.? It’s simple, answers Joey Brown, who, on this day, is half of a two-man crew doing new house installations for the contractor.

“You get your assigned job, and then you just go out and do it,” he says. “You go home when you are finished, not before. And if you want to go back and get extra work, there’s plenty of that, too.”

Ahhh, full-time employment — and more. For hvacr service technicians, this means s-e-c-u-r-i-t-y.

“We get our 40 hours a week here,” says Wayne Watson, Brown’s partner on this day. “I didn’t get that before.”

Even this city’s red-hot air conditioning business doesn’t guarantee 12-month work, because the winter season here, especially a warm winter, can dilute business. It takes a smart marketer like Tempo ceo Steve Saunders, who can create cash flow, to generate sales for the offseason and guarantee a steady workload for his techs and employees. Tempo accomplishes this through service contracts, focused marketing, and being linked to the construction business, which is less cyclical.

However, a bigger morale booster is the fact Tempo is an ESOP — employee stock ownership plan — business. This gives its employees equity in the business. The only limits for Tempo are those imposed by its own employees.

“At Tempo, our corporate purpose is to provide for outstanding careers,” says Saunders. “This is fundamentally different than publicly traded companies who (by charter) should be focused on maximizing the return to their shareholders. Tempo is a traditional business with a fundamental profit imperative, but because the Tempo partners are both owners and workers, we can have a purpose that provides for different structural decisions that better meet the needs of the stakeholders.”

With all of its innovations and smiling employees, Tempo was voted one of the winners in The News’ first-ever “Best Contractor to Work For” contest.

All-for-one atmosphere

In the eyes of Saunders, Tempo is a good place to work because of its efforts to “capture the three gifts of our heritage.”

“The gifts are ‘employee ownership’ from the 1950s, ‘servant leadership’ from the 1970s, and ‘process improvement’ from the 1990s,” he says. “All are central to our identity and help explain how Tempo strives to be a great place to work. These three pillars are the philosophy that builds the foundation for a great company. Everything else flows from the foundation.”

Regarding employee ownership, the people who work in the company own 100% of Tempo. There are 52 owners-partners, and that includes 80% of the partners who are eligible to participate in the company’s ESOP. Because they collectively own and operate the company, the Tempo partners can share in the success of what they as individuals and team members create.

“We have a long-term commitment to each other and to building value in the organization,” says Saunders.

This “all-for-one” atmosphere affects the techs, meaning that the work is apportioned evenly. If one installation or service job runs into trouble, that could cascade into the next job on the tech’s schedule. But help is at hand, thanks to a sophisticated dispatch system that can get another tech close by to pick up the slack.

Given Dallas’s near traffic gridlock, getting the techs and trucks to the jobsite promptly is crucial, which is the responsibility of Abiel Gonazaga, who logs up to 150 miles a day (sometimes more). A city map shows Tempo reaches all corners of the Metroplex, from the eastern fringes to the western part of Fort Worth.

“I’m the delivery guy, the middleman,” Abiel says, who gets the stock to the jobsite in his “ice cream truck,” a box van. This means that no tech’s time is lost looking for stock or handling paperwork. Their time is used where it should be: installing or servicing equipment.

It’s not a 9-to-5 job, at least not in the summer.

“If one guy is working into the evening, we’re probably all working into the evening. Nobody has to stay longer than anybody else does. If one guy is miserable, we’re all miserable,” quips Gonazaga.

Materials delivery

Time consumed in materials handling is telescoped, thanks to a unique arrangement between Tempo and Comfort Supply, which rents one-third of Tempo’s warehouse.

This “in-house” deal means trucks can load up right at home instead of having to brave traffic to outlying wholesalers. A coordination center with a wall-sized chart keeps track of each installation, right down to the home address.

Service tech John Pope, another two-year veteran, started out with another service firm working on household refrigerators, then “lucked out” when he joined Tempo. Right now, he’s servicing equipment under the full one-year warranty for parts and labor.

“Since then, I’ve seen several techs quit, thinking the grass is greener on the other side,” says Pope. “Now they’d love to come back. We as techs are empowered. You’re not just a tool, you’re a human being.”

He adds, “As an ESOP participant, I got my 1% of the company. It’s written down in my statement. I don’t know of any other contractor in the state that can say that.”

Saunders points out that the company is now a stand-alone contractor, having done a buyout from its parent, TD Industries. Thus, while it’s less than two years old, it draws from the nationally renowned parent, which is identified by Fortune magazine as one of the 100 best companies to work for.

During the transition, Tempo tapped into staff from three TD business units to begin creating a company culture. This involved brainstorming “to develop a company like the one we were leaving.”

It’s a young company in other ways, too. Its 60-plus “partners” have an average tenure of 3.5 years, and their average age is 34 years old. Over half of the partners migrated from TD Industries. There was a built-in component that didn’t need instruction in the company culture.

As a measurement tool, the company surveys its “partners” on 36 items annually. The checklist is specific, probing such topics as tech retention, training, avoiding “tech burnout,” pay increase policies, and empowerment practices.

The servant as leader

The philosophy of TD Industries originates in a pamphlet, The Servant as Leader, by Bob Greenleaf. In the eyes of Saunders, its message is paradoxical but effective: The best leader leads by serving others.

“The best test is ‘do those served grow as persons; do they while being served, become healthier, wiser, freer, more autonomous, more likely themselves to become servants,’ quotes Saunders. “Properly applied, this is a very stringent leadership concept. It blends well with employee ownership and process improvement and the goal is to develop leaders throughout the company so that each can contribute and make this a better company to work for and do business with.”

Sidebar: Booming Dallas economy gives contractor profits a boost

DALLAS — For those contractors attending the International Air Conditioning, Heating, Refrigerating Expo, take note of the following: Dallas is a great place to be these days.

Whether it is new construction or retrofit, residential or commercial, all market segments are growing at a record pace. As a result, Dallas contractors are experiencing some exceptional workloads.

That additional workload can be great for the bottom line; however, contractors here struggle with the same problems as the rest of the country: finding and retaining enough properly qualified people in order to keep levels of service high. With unemployment rates in Dallas — and across the country — at historic lows, contractors are finding fewer and fewer candidates to fill their openings.

To combat that problem, some contractors are focusing on how to make their businesses more attractive to existing, and potential, employees. Bigger paychecks, better training options, and more benefits are just some of the devices being used to attract and retain employees.

Contractor devises strategy

One of the contractors here who is tackling the employment problem head-on is Tempo Mechanical. The 18-month-old employee-owned company specializes in only residential service and installation, both in the retrofit and new construction markets and has annual revenues in the neighborhood of $13 million.

Ceo Steve Saunders’ goal is to make his company the employer of choice.

“That includes doing a number of things,” he says, “including employee ownership. You can come and own and share a part of this business, and if it’s successful, you can share in the growth and the success and have an impact in it yourself.”

Saunders has also changed the pay structure for his people, so instead of the traditional method of paying for hours, he’s going to something called performance-based pay. In the areas of the company in which that model has been adopted, he’s found he can do more work with fewer people, and those people are earning 30% to 40% more than they were prior to the adoption of the system.

“Interestingly, the work is better and overall company outlay is less,” he says.

Training is another huge issue for Tempo. Saunders says the company conducts in-house classroom training, and he also sends his people to a plethora of seminars and industry events.

“I think it’s important to find ways to take the people you’ve got and develop their skills, and then having developed those skills, retaining those employees is a big issue.”

Saunders is also looking for ways to improve the work environment at Tempo. That includes conducting regular breakfast sessions with individual groups of employees, minus their supervisors. The sessions involve discussing company values, strategies, and philosophies, as well as getting employees involved in devising ways to meet goals.

“We want everyone to know where we’re going, how we’re doing. In these sessions we encourage people to bring up problems or discuss what they don’t like. It becomes a very good communication tool for the front-line employees,” says Saunders.

These sessions also involve Saunders teaching his employees to understand the customer’s expectations and requirements. He says their job is to establish systems that work to meet the customer’s requirements and exceed their expectations.

“Then the systems themselves are subject to continuous sets of improvements because truly there’s so much change in the world, you have to have systems that live and breathe and adjust with new problems, new situations, new data to achieve the end result, which is meeting the customer requirements and beating your expectations.”

Sharing the wealth

Saunders doesn’t just keep his ideas within his company; he willingly spreads them to any other contractor willing to listen. His company participates with a number of other companies that have created an environment called the “Servant-Leadership Learning Community.” Saunders says the group wants to provide quality leadership training for themselves and also make that available to other companies in the community.

Elvis Johnson, project manager, TD Industries, North Dallas, TX, current president of the North Texas Chapter of Air Conditioning Contractors of America (ACCA), says Saunders is typical of the type of contractor that can be found in Dallas.

“Our contractor members share ideas. Some contractor members hold training exercises to teach other contractor members their own personally developed methods of increasing profits. We share ideas, we share suppliers, and we share all that information. It’s a very comfortable industry in Dallas,” says Johnson.

While contractors still compete with one another for jobs, it’s seldom adversarial, says Johnson. And those contractors who simply have too much work to do are passing that work on to other contractors. Or else they simply choose not to bid on less-profitable jobs, which also helps other contractors obtain work.

Other concerns

Consolidation and fair competition with utilities are two other concerns that ACCA members regularly discuss with Johnson.

“There’s concern as to how the independent contractor is going to defend himself against what, in some cases, they consider an attack from the larger companies,” says Johnson.

When contractor members bring these concerns to him, Johnson says the best advice he can give is to make the most of their businesses. If they continue to improve, continue to offer the best quality, continue to increase profits, he says there’s no question that at some point they will be faced with a decision as to whether they should maintain their status as an independent contractor or join a consolidator or a manufacturer.

While some are worried about these decisions, Johnson stresses that these are exciting times, which he finds quite invigorating. He believes that we won’t even recognize the industry in five years, as it’s going to be completely different.

“I think it’s going to be primarily large contracting companies, as well as consolidators, utilities, and manufacturers. The smaller contractor will actually be owned by the larger companies.”

Saunders agrees that things are changing rapidly, keeping him on his toes all the time. “The fact is that the world is getting much harder, and that’s good for us, because we’re already doing a lot of the things it takes to perform in a changed world. No matter how hard it is, it’s probably going to be harder on our competitors than it is on us.”

As for those contractors who are stressing out about all the changes in the marketplace, Saunders says they have three choices.

“They can stand up to the market and say ‘stop,’ they can get out of the way, or they can get on board.”

Sidebar: Just the facts - Tempo Mechanical Services

Winning contractor: Tempo Mechanical Services, Inc.

Owner: Employee-owned

Location: Carrollton, TX

Years in business: 18 months (formerly a long-time unit of TD Industries)

Total revenue 1999: $13 million

Total employees: 68

Total service and installation techs: 41

Benefits other than medical/dental: Life insurance; long-term disability; training; uniforms; paid time off vacation; flu shots; ESOP (company ownership) plus matching company contributions; and 401K plus matching company contributions

The News selected this contractor because: Tempo uniquely transcends the benefits by even the most progressive contractors. Central to this is its ESOP status that grants all eligible staffers equity in the company. This is unique, and a proven morale-booster and retention tool. Its effectiveness is demonstrated by the fact that when Tempo spun off from TD Industries, the staffers chose to risk their own money to bid on the for-sale subsidiary.

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