Trade Partnering

This month, Paul Winans, CR, will host a breakfast meeting for all of the 40 trade contracting firms with whom his company, Winans Construction Inc. in Oakland, Calif., does business. It will be a relatively short meeting from, 7 to 9 a.m. But that does not diminish the importance of the business at hand. Winans is among a large group of remodelers who place stock in elevating their relationships with the trade contracting firms on which they rely for quality work.

Winans’ breakfast, the second of its kind for the company, is planned as an annual event to create dialogue on process and operational improvements that can help both sides make more money, says Winans. There will be non-monetary awards for companies who achieved various objectives: on-time performance, creating goodwill among customers, etc. And there will be light-hearted awards to build camaraderie. “We try to make it so everybody gets some kind of award,” says Winans, who was recently installed as president of the National Association of the Remodeling Industry (NARI). But the bulk of the meeting is an open forum on a number of pre-determined agenda items. As an example, the topic of helping partners make more money will be on this year’s docket. To this point, Winans says he will use various on-the-job scenarios to generate conversation.

“If an electrician stands on a marble vanity top to install a light fixture, he might be saving some time upfront,” says Winans. “However, we want to point out that a scratched surface throws off the whole job schedule as someone needs to be called in to buff out the scratches. And then there’s the issue of who pays for that work.

“So, in the short term, this behavior made more money for the electrician but nobody else benefited from it. And the electrician should know that he did not benefit in the long run because he just made a lot of work for the general. That is the thrust of this upcoming meeting: what are the behaviors that actually support that mission of making money for everyone. And what are the behaviors that run counter to that mission.”

In the world of quality management practices, vendors and suppliers work closely with a company’s management to achieve mutual goals. Through continual communication, they share information about production schedules. They clarify each others expectations for the working relationship. They make each other stronger in the process. Likewise, a growing number of remodelers, like Winans, realize the advantages of working more closely with trade contractors and raising their stature as full partners in the success of their remodeling company.

Variations on the partnering theme
The idea of working closely with trade contractors to control quality and to ensure the generation of repeat business is not new. But what varies and seems to constantly evolve is the number of creative methods remodelers employ to actually make that closeness and partnership meaningful.

Some remodelers, like Jim Strite of Strite Design and Remodeling in Boisie, Idaho, offer incentives to their subcontractors who buy into a list of performance expectations. In exchange for their buy-in, Strite offers them the ability to get paid twice a month, provided that all work is completed and the invoice is signed by the project coordinator.

“We bring them in and review our trade agreement with them,” says Strite, whose company remodels 40 to 50 homes each year on revenue of more than $2.5 million. “We set these expectations and the compensation for that. If your invoice is in by the 10th and approved by the project manager, it is out to you on the 15th. We feel that for the agreement to be fair that we are going to demand quite a few items. In return, we are going to provide them with payment twice a month.”

Strite also encourages his project managers to reward trade contractors who go out of their way on behalf of a client or the company. Project managers can send trades to dinner, buy movie tickets, give them a car wash certificate, etc. These spiffs are presented in a formal thank you note originated by the office receptionist.

Other remodelers, like Winans, tend to steer away from added incentives beyond the overriding benefit of working with a good business partner.

“There are no incentives. The only incentive is the pride of doing something well,” says Winans. “It is more about what they want from their business, what they want people to think of it as opposed to ‘achieve these three goals and we’ll pay you more.’ That is not the way it is set up.”

Among the variations, however, are a handful of common threads. A thread is respect. Most remodeling contractors actively involved in elevating their relationships with trade contractors require their team members to show respect for their trade contractors if they really want to make them trade partners. The first step is to strike the word “subcontractors” from their vocabularies.

“We always refer to them as trade contractors,” says Dennis Allen, president and founder of Santa Barbara-based Allen Associates. “They are professionals with skills who value craftsmanship. We are all using the term ‘trade contractor’ in house.”

Other common threads among remodelers who actively engage their trade contractors as business partners do so via three methods: clear, regular and scheduled communication; shared educational opportunities; and an agreed-to set of performance guidelines and expectations.

Performance guidelines
A good set of performance guidelines is like a set of standard operating procedures. It can be presented as part of an annual agreement, or it can be attached to each contract for individual jobs. [See “Creating systems for subcontractors” on page 32.] Rick Bainbridge of the Bainbridge Crew, in Charlotte, N.C., keeps his firm’s annual trade contractor agreement simple. It establishes that the trade contractor:

 

  1. is paid in gross amounts and is responsible for their own withholding taxes and any other required state and local deductions;

  2. indemnify the Bainbridge Crew against all claims, suits, liabilities, expenses or damages to people or property arising from the trade contractor’s negligence;

  3. is bound by the contract for one year and requires a 30-day written notice for termination;

  4. certifies that their firm holds insurance for general liability and workman’s compensation;

  5. warranties all workmanship for one year; and agrees to payment terms of 30 days with a 2 percent incentive for payments within 15 days.

 

Attached to this basic agreement is a list of policies and procedures which is updated each year. Among other things, the list of policies stipulates that jobsites are “left broom clean,” that there is no smoking on or near the jobsite, sets jobsite hours of operation as 7:30 a.m. to 5:30 p.m., etc. It also stipulates that customer questions directed to trade contractors be re-directed to the Bainbridge Crew. Throughout the year, when policies change, or new policies are added, each contractor receives updates in the form of memos.

At Winans Construction, trade contractors must adhere to a straightforward “Expectation List” that is attached to a yearly contractor agreement that is very detailed in its requirements. A sampling of these expectations runs from the standard “Do not talk to clients . . . particularly regarding requests for additional work” to rules that might appear on a sign outside a caddy shack. “No radios without Winans approval. No smoking. No weird or potentially offensive T-shirts, including alcohol-related and those using foul language or political views. No foul language.”

Other listed expectations get to the heart of Winans’ current thrust with their trade contractors: how to help each party make more money. Specifically this means ways of “keeping trade contractor prices stable once a deal is signed,” says Paul Winans.

To this point, one expectation is to “Be clear on the scope of work. If in doubt, get clarity on the work,” while another cautions trades “to not proceed with extra work unless a written change order is signed by a Winans employee: clearly define pricing and resolutions of unforeseen problems or accidents.”

“A lot of trade contractors are used to being able to renegotiate their price after a contract is signed with a client,” says Winans. “We don’t do that.”

Educating the larger team
One of the ways that a spirit of partnership is commonly engendered between remodelers and trade contractors is through a series of educational events. At Case Design/Remodeling Inc. in Bethesda, Md., trade contractors that are part of their “preferred alliance” are invited in for special training sessions, says Mark Richardson, CR, president of the firm. “We’ve become an educational arm of their companies,” he says.

At a meeting this month, says Richardson, one of the company’s vice presidents will present a program featuring his list of “Top 10 Marketing Strategies for 2005.” Past seminars have examined topics ranging from time management principles to a primer on Case’s own company culture.

Allen Associates uses its regular meetings with trade contractors to further the company’s significant inroads on the path toward ‘green’ and ‘sustainable’ remodeling activities. In partnership with its principal supplier Hayward Lumber, the company educates Allen Associates’ trade partners on green disposal practices as well as new materials made with renewable resources.

“We are involved it getting our most important trade contractors to be a part of our mission in this regard,” says Dennis Allen, president and founder of the firm. “We want all of our partners on board.”

Regular, open communication
Beyond the expectations set forth in various memorandum and trade contractor agreements, regular open communication is the next best way to begin moving toward a closer, more efficient and productive working relationship with trade contractors. Winans Construction’s annual contractor, (originally conceived by Gary Sannes of S.J. Janis Company) is just one way of developing rapport with your trades. At Strite Design and Remodeling, suppliers, vendors and trade contractors are welcome to attend regular Thursday afternoon meetings where detailed discussions of job budgets take place.

“We have a standing invitation,” says Jim Strite. “We want them to attend those meetings because we want them to give us input on how we can improve.”

Strite’s company also hosts “job parties,” that are pre-construction meetings designed to identify any possible gaps in a project before it gets underway. During such meetings, which are conducted at the client’s home with all relevant trade contractors, each trade is asked to look for additional items that should be included in their work. If an electrician sees that a service panel needs to be swapped out to accommodate the extra load created by new kitchen appliances, then he or she must speak up at this meeting, or be prepared to eat the cost of installing a new panel, says Strite.

Strite’s company has been on a Total Quality Management path of continual improvement for the past 15 years. His commitment to TQM requires that he involve his larger team ? vendors, suppliers and trade contractors ? in this process of improvement. But other remodeling companies need not embark on a TQM path to recognize the value of trade partnering.

“With the labor shortage, which I think will get worse before it gets better, most general contractors will be managers of trade-specific contractors,” says Paul Winans. “Our company basically does the job management, demo on some of our jobs, rough carpentry and finish carpentry. Some day we will not do demo, rough and finish, but we will always be managing the jobs. We need good team players in our trade contractors to work with to get that done. It is the future. I really think it is the future.”

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