Unless you are very new to the kitchen and bath industry, you’ve probably had at least one project go sideways. When that happens it can be extremely painful, both in terms of time consumed and/or financial pain for your business. This month, we will look at ways to resolve these disputes and, more importantly, how best to avoid them in the first place.
The first step in avoiding disputes is to educate your client as to what to expect. The key to managing your customers’ expectations is to have a clear, concise contract with detailed plans and specifications. With the correct level of detail in your contract, there should not be confusion about what is or is not included in the work you are doing for the client.
It’s important, however, that these plans and specifications be reviewed in detail with the client, preferably with the client initialing each page of all documents. It is also important to include a clause in your contract that makes it clear that the contract is limited to only those things included in the written agreement and does not include anything that might have been discussed but not included.
While a good set of specs and contract will deal with the objective issues surrounding a project, they usually are not as useful when it comes to the more subjective ones. These can include such things as variation in tile color, graining in wood, sheen of paint, etc. Most of these are predictable and a good way to deal with them is to develop a “client handbook” that can be utilized to explain what the client can expect. This handbook can also be used to cover what the remodeling experience will be like. In the handbook, you can cover such issues as what the client needs to do to get ready for the project, what your normal work hours will be, what clean-up issues your firm will – and will not – be responsible for, etc.
The National Association of Home Builders publishes a set of performance standards for residential construction, found at – http://secure.builderbooks.com/cgi-bin/builderbooks/934?id=qvCcvP5f&mv_pc=25 – that is useful in resolving questions concerning fit, finish and tolerance issues that often arise on a kitchen or bath remodeling project. It’s a good idea for your firm to have a copy of this publication and to make sure your project managers are familiar with its provisions. You should provide language in your contract that this publication will be referred to when resolving any misunderstandings involving the issues that are addressed there.
There are times, however, when a client focuses on an issue and it just cannot seem to be resolved. When you reach this point, you will have to decide whether to dispute the issue or give the customer what they are after. Occasionally you will encounter people who simply do not want to reach a settlement and will continue to string together reasons that they do not want to make a final payment.
There are a few things that you should get in place before any dispute arises. If your company has a law firm that you work with, discuss with them whether they have experience with construction contracts and dispute resolution. If you are not already working with a law firm, try to find one with this experience. Doing this in advance allows you to interview several firms in order to find one with which you are comfortable. Once you have settled on one, have them look over your contract to make sure it addresses all relevant issues and that you are not setting a trap for yourself down the road.
Try to keep a pulse on all of the projects you have in process. This is easy enough to do if you are the one directly managing the field work, but becomes more difficult if you have project managers handling the interaction with your clients. Make sure to discuss each project with your project managers each week to get a status report and feedback on any problems they may be having either with the project or the client.
As soon as you sense that a serious dispute is brewing, you should step in and meet, face to face, with your client to attempt to come to a reasonable compromise. The first step in trying to resolve any dispute is to evaluate your position and the consequences of the various courses of action you have open to you. Sometimes a little attention from the “owner of the business” is all it takes to smooth things over.
We all have a tendency to be certain that our point of view is the correct and fair position and that our client is wrong and unreasonable. Clinging to this position will lead to statements such as, “It’s not about the money, it’s the principle of the thing.” I would argue that it is about the money – and it can add up to a substantial sum if you do not handle dispute resolution reasonably and rationally.
If all of your best efforts to settle things amicably fail, you will have to resort to whatever procedures you have incorporated into your contract.
Your contract should spell out what happens if disputes cannot be resolved by the parties. It is a good idea to require the following step-by-step process: 1) mandatory mediation and, if a resolution cannot be reached, then 2) binding arbitration. Your contract should spell out what agency or organization will handle these procedures. One such agency is the American Arbitration Association. It is also a good idea to require both parties to share equally in the cost of the mediator and/or arbitrator to discourage either party from rushing into this process.
Once it becomes clear that the issues involved cannot be settled between yourself and your client, you should immediately open the process for mediation and push for as early a mediation date as possible. This keeps the pressure on any other resolution process you might wish to try and, if that fails, the mediation is in place. Having the mediation and its attendant costs bearing down will help add a sense of urgency for both parties.
Again, the best way to approach dispute resolution is to avoid it in the first place through use of a good, well-documented contract and good communication lines with your clients. Once formal dispute resolution procedures seem inevitable, take an aggressive approach to resolving the issues by meeting with your client. Remember, hoping that the problem will go away never works.