To solve a problem you must identify its cause

BY RICHARD P. DiTOMA, L.M.P.

contributing writer

Solving problems is easy if done correctly. To solve any problem, you must identify and have a serious in-depth examination of the possible root causes of the problem. Then, and only then, will you have an opportunity to right that which is wrong. Once you list the possible causes, you can examine each and figure out a better way. It’s simple, logical and true.

If you act like the proverbial ostrich and put your head in the sand, you won’t be able to see the root cause of the problem in order to remove it. Self-denial of a problem for any reason only serves to prevent you from realizing that a problem exists. If you realize a problem exists, and you do not take the proper steps to solving the problem, you are only exacerbating the problem. That’s because problems that linger are often categorized as “the way things are done.”

Those of you who read my articles know that I believe that the root cause of all problems in the PHCP industry is caused by contractors who sell their services at, or below, their costs. This practice makes their businesses anemic, and not only makes it difficult to solve problems, it creates more problems. Many contractors don’t take the time to sit down, identify and calculate the real costs they will incur. Nor do they choose the proper profit margin they must blend with those costs to attain their goals.

Instead, they rely on the “going rate” established by other contractors who are equally, or more ignorant than they are about arriving at proper profitable selling prices, which can allow contractors to attain real success. As the “going rate” becomes “the way things are done,” the noble phc industry spirals in a downward direction. And, contractors begin borrowing from Peter to pay Paul as they wonder and/or complain about problems in the industry.

One of the problems about which I often hear contractors complain is the lack of good help. In two separate interviews conducted by Phc News and published in the September and October 2007 issues of Phc News this very problem was again brought to light by two leaders of the Plumbing-Heating-Cooling-Contractors -- National Association, Frank Maddalon, current phcc national secretary and James C. Finley Sr., P.E., incoming phcc president. When asked, “What are some major issues facing contractors today?” They both zeroed in on matters concerning employment.

Mr. Maddalon’s response was “The three most important issues facing contractors is: A) Retention of employees; B) Education of the trades so our employees achieve a high level of skill; and C) Regulations -- We need them to be standardized from one city to another.” As the article goes on, he states, “The recruitment of young people is an absolute nightmare. The school systems preach college, college and more college…”

Mr. Finley similarly stated, “1) Lack of people entering the trades. We as an industry have to be more proactive in marketing the skilled trades as a career path and encouraging resources for education at the high school level. 2) Increasing cost of medical and liability insurance. Continue legislative efforts to gain approval of nationwide Small Business Health Plans as larger industries and associations have and tort reform.”

I agree with both of them. My point in writing this article is to identify the root cause of, and the solution to, those problems. The root cause is the lack of funds for individual contractors to get the job done. It’s that simple, logical and true. The reason for the existence of the lack of funds malady emanates from contractors’ modus operandi. Most contractors [95% in this writer’s estimation] haven’t got a clue as to their true costs.

Many just followed in Dad’s footsteps. Many left their previous employer because they were not compensated in a manner that would allow them to attain their life goals. The overwhelming majority went into business without a modicum of business education. That often results in the use of the “going rate” rather than properly calculated selling prices. For some unknown reason many utilize the same practices of their former employers, which was the cause of their departure from those businesses in the first place. Then, they wonder why problems persist. Not only have former employers lost good employees, but more businesses have been created with new owners who will run their businesses incorrectly. And, the problem gets bigger.

Since an overwhelming number of contractors sell their services at the “going rate,” which is usually at, or below, their cost, the amount of money available to those contractors to attract, retain and educate employees and to address health insurance issues is non-existent or at best extremely limited. The use of selling prices that are kept artificially low through ignorance, erroneous business practices and thick headedness places undue competitive pressure on the prices of all contractors. The end result gives the industry as a whole the problem of attracting, retaining and educating employees, as well as fixing problems related to health insurance, etc.

The reason the industry cannot attract young people of the 21st century is that those young people know they can make more money using their minds and applying their labors to the world’s needs, which require a college education than they can tending the waste created by the human race at selling prices which are at, or below, true costs.

It’s said, “The love of money is the root of all evil.” But without an economically structured measuring system, progress would come to a screeching halt. Money makes the world economies work.

Whenever I ask contractors who left their former employers the following question, the results are always the same: Would you have left your former employer if he/she gave you a raise, doubled, tripled or quadrupled your compensation? The answer is always no except for those who were real entrepreneurs.

I’m not suggesting that you double, triple or quadruple the amount you pay your employees. I am stating that if you want to solve the problem of getting and keeping “good help” you should consider the compensation package you offer and give them. It is the root cause of the problem.

Your employee wants the same things you do. That should make your thought process simple. He/she wants to be content. Most technicians think that on a scale of one to 10 (10 being the best/one the worst) that they are between seven and 11. If, as a technician, you would have stayed with your former employer at a specific level of compensation that would have allowed you to attain your life goals and that was within economic reason for your geographic area, it’s only logical that most of your employees would stay with you. Of course, the technician would have to deliver excellence to consumers and productivity to your business.

Mr. Maddalon and Mr. Finley both use the word skill regarding the work we as an industry provide. After all, we protect the health of the nation while keeping the public warm in winter and cool in summer.

I add to the skill requirement that skilled people want to be paid in a fashion that is commensurate with their skills, and that compensation requires selling prices that allow contractors to recover all their legitimate expenses and earn a profit for the risks they take delivering value to the consumer. Furthermore, pricing policies which are at, or below, cost will never allow contractors to attain their goals of success.

As a contractor, if you identify and calculate your true costs correctly, blend them with a proper profit margin, sell your services profitably rather than buy jobs at any cost, you will have an opportunity to have the money to attract, retain and educate your employees because they would be compensated commensurate with their skill level. And, consumers would receive more value for the dollars they pay to contractors.

I applaud both Mr. Maddalon and Mr. Finley in their acknowledgement of the issue of a shortage of workers. As national leaders they have the opportunity to put the problem on the table so that we as an industry can address the problem and arrive at the solution.

As a person who sees himself as a problem solver with the ability to show contractors how to identify and calculate their costs so they can rid themselves of the root cause of the aforementioned problems, I extend my hand to Mr. Maddalon and Mr. Finley in a hope that they join with me to help contractors solve the problem of employee retention and education.

As I have stated, to solve a problem you must address the root cause. With regards to a shortage of workers, as with 99.99% of all problems contractors face, the problems are caused by contractors implementing the wrong numbers. With wrong numbers, you get problems and wrong results.

I thank Mr. Maddalon and Mr. Finley for bringing this issue to the national spotlight. I urge them to give me a call. Together we can start solving the problem rather than just saying that’s “the way things are done.”

        

Richard P. DiToma is a business consultant and contractor with 36 years of experience in the P-H-C industry. He conducts seminars, evaluates business operations, publishes customized price guides for contractors and offers continuing support.

His book -- “Solutions Management Theories & Methods for the Contracting Business” -- deals with solving pr-oblems contractors face; identifying & calculating costs; developing proper profitable prices; addressing consumer questions; hiring and evaluating technicians; and logical management procedures

It’s also available as a “Workshop On Demand” for individual businesses (from one person to multi-person businesses); contractor groups  (organized or informal); trade associations; and wholesalers to the trade.

Date: Arranged according to your schedule

Location: Wherever you wish. Richard P. DiToma will come to you -- or you can come to him. Contact Richard to find out if there is a workshop coming to your area.

His other book -- “Readily Available Pricing Information Digest 2006” -- for the plumbing-heating-cooling contractor service price reference book is available with plumbing &/or heating &/or cooling section(s). To receive more info about his services, to order his books or to contact Richard at 845-639-5050, by fax at 845-639-6791 or via email at richardditoma@verizon.net