Maintaining Good Tradespeople

Whether your craftsmen are employees or trade partners, it's always a challenge to find and keep talented, reliable people. Tom: One of the top challenges we have today is how to maintain good craftsmen. Mostly we're going to talk about production people and today's challenges of labor, whether or not they're employees or subcontractors.

August 31, 2006


Whether your craftsmen are employees or trade partners, it's always a challenge to find and keep talented, reliable people.

Tom: One of the top challenges we have today is how to maintain good craftsmen. Mostly we're going to talk about production people and today's challenges of labor, whether or not they're employees or subcontractors. Greg, I'm going to start with you. You have four employees out in field. Do you sub out other work?

Greg: Absolutely. First off, we don't use the word subcontractor. We consider them a trade partner because they're not subs to us; they're on the same plane as we are. We trade out anything that's not carpenter related, so electrical, plumbing, heating, even siding and roofing.

Tom: Same with painting?

Greg: Yes, and we come back and trim again and organize the flooring.

Tom: Lucy, we learned something new this morning. We have a trade contractor agreement, and Greg even takes it a step further and calls them trade partners. Do you use subcontractors?

Lucy: It's a very challenging term. We call them our trades and our tradespeople but interestingly enough...the legal term is subcontractor; it is not trade contractor. As often as I beat on the attorneys to try have it changed, it is a legal term that also goes back to our state laws. It's been a very challenging term to use. In-house and out of the house when we talk to each other or when we talk to the clients, we use the term trades because, just like with Greg, we feel the same way. These our are partners, they are our customers; they are what we call our "out of the house customers." We try to treat them with equality.

Tom: Lucy, what trade is the easiest to work with?

Lucy Katz
Katz Builders Inc.
Photo by Liz Garza Williams

Lucy: It's an interesting thing. We have trades that we've worked with for 17 years. Most of them or a very large amount have been with us for many years. I think one of the biggest challenges in our industry, from what I hear from locals, competitors and friends is that plumbers seem to be ones who are the most challenging. We have been very fortunate to have some very good plumbers, both in our new home construction as well as remodeling, but plumbers are not an easy-to-find group who are really good and stand behind their work and stay on the cutting edge.

Tom: Greg, how is it in St. Cloud, Minn.; what's the most challenging trade contractor or trade partner you deal with?

Greg: Definitely my drywallers. For one, it's really difficult to get them to understand that they're in a home that's being lived in and to clean up after themselves, because they probably do have the messiest job. We have used the same one for about 15 years, but he has also had people that work under him who might come in and get partially taped and have to clean up and texture. The easiest is my electrician and my plumber. My plumber's been there since day one, 21-plus years. We trained him.

Tom: He obviously works for other people since he's a subcontractor.

Greg: Absolutely. He has an employee base of 15 or so because he has a plumbing and heating company. I just saw him in the yellow pages one day when I needed a plumber, and we've been together since.

Tom: Interesting. I agree with Lucy. I believe both of those are very challenging for us. Twenty-five years ago we put a plumber on staff, and he's been with us ever since. If we get slow on plumbing, fortunately he's a good craftsman. The drywallers — we're not sure who's going to show up sometimes, so it's a problem. Greg, you were talking about keeping the guys there and keeping the turnover down and maintaining a good staff so you know what level of quality you have. What's the most important benefit in keeping good carpenters and craftsmen who are on the payroll? What are the most important benefits that you see to keep carpenters and maintain them as a good employee?

Greg E. Theis
Greg E. Theis Remodeling
Photo by Steve Woit

Greg: I take very good care of them. I give them a lot of vacation.

Tom: What's a lot?

Greg: The top guy gets 23 days, which is three weeks paid vacation, and eight holidays. That's a lot. A lot of companies don't give anything to their employees. I'm fully invested in my employees. We do quarterly bonuses.

Tom: Based on what?

Greg: I don't really register it on any job. If the company is doing great, I'll give them a quarterly bonus.

Tom: Does everybody participate in that?

Greg: Yes, you have to be with us for one year.

Tom: Do any trade partners participate in that?

Greg: No.

Tom: What else do you do for employees?

Greg: Like I said, bonuses, vacations, and treat them with respect. I give them a gas allowance every month. We have a place called "first fuel bank;" you pre-pay for gas here and they have a gas card they use to get gas every month. I let them run their jobs, and I let them be who they are.

Tom: The interesting thing is you haven't mentioned anything about pay.

Greg: No. Pay, I think is secondary.

Tom: You're competitive, but that's secondary compared to what it is.

Greg: Absolutely. I let them run their jobs. I let them do their jobs; I'm not out there ripping on them every day. I want them to be here because they're happy and enjoy it, but yet they don't have to deal with stuff after hours.

Tom: Lucy, you just said you had some trade contractors with you for over 17 years — you had to do something right. What is the most important benefit you have to maintain good quality trade contractors?

Lucy: Making sure we have good communication between each other.

Tom: How do you that? Do you supply a phone?

Lucy: Well, back in the old days, trades didn't have fax machines so we would give them fax machines. Not too long ago, we would give them cell phones as a gift but those days are long gone. Today that's a given. Now we just want them to do e-mails; use their cell phone to do e-mail. Good communication is absolutely paramount with the trades. Making sure that our jobs are ready for them, starting with specifications. Making sure the plans are clearly identifying what they are responsible for. Checking their proposals to make sure there aren't any mistakes and they haven't forgotten something, and to get to them if they have forgotten something. But if there is a mistake there, saying "You need to recalculate this." Watching out for them. We call that partnering with our trades.

Tom: I would tell you in a lot of cases that there is the possibility that they would not take that good care. You go through their specifications, so they've got to have it pretty clear.

Lucy: We create the specification ourselves and we go back to them. We provide the plans and specifications to them and say, "Bid this accordingly." Then we will review their proposal to make sure that, if something looks out of line, we'll go back and say, " You need to check this one more time. Maybe this is correct or maybe you have missed something."

Tom: Do you sometimes get more than one from different trade contractors?

Lucy: Yes. We will periodically. We won't bid them against each other, but we have a pretty good sense of what's going on in the market. If we feel someone is out of line, you bet, we will re-bid with someone else. But we're very careful about not using cheap trades and people who have not been in the industry. Before we use a new trade we will go out and view their product, look at their jobs, and check their references to make sure they can and will stand behind their work if we run into a challenge. We're not looking for the cheapest guy out there — that's not how we built our reputation and our business.

Tom: Greg, do you do that? How well do you qualify a new trade contractor and where does low price come into play on that?

Greg: It's something that I really haven't done because I have had a team together for so long. The newest person is a second electrician I took on staff who I met and who just started his business. I actually got him into our local association and starting using him. I really never qualify anybody because I haven't switched for so long.

Tom: Lucy, I applaud that. A new drywaller comes to mind: he just recently came in and said, "I'm looking for work and I'll give you a bid." They give you a bid but I'm not so sure if we did due diligence. The price was OK, it was under what we were used to doing. We met them, they were nice guys, they had insurance. There were a number of things that we did, but we didn't call references and we didn't go out and see the job. I think that's more important than we gave it.

Lucy: Some of the jobs that we do are rather complex. In our market we can't turn the electricity on until the city says you can turn it on. So when they're taping and floating and putting up the sheet rock, they can't see everything over the flaws, and when you turn on the electricity and shine that light down, you go, "Oh! My God what do we have here? we have a mess on our hands." Making sure that the drywall gets done right the first time is absolutely critical.

Tom: The benefits you mentioned, Lucy — good communication, going back to the olden days, giving them cell phones, let them pay the monthly fee I presume, and check on the proposals — is there anything else you would give the trades to keep them happy?

Lucy: Clean, safe jobs. That's very important for the trades and also for the homeowners.

Tom: Yes. Who keeps it clean?

Lucy: We use it as a budget item. We get the trades to be responsible for cleaning up after themselves at the end of each day. We also hire a third party to come in and clean up as well.

Tom: Greg, who cleans up after the painter, plumber, drywallers, etc?

Greg: Pretty much they do — they are expected to do that. We have a dumpster on every site, and we have a trailer there. We still come in and make sure it's homeowner friendly when they're coming home from work at night. We'll make sure that it's safe for the homeowner to come home.

Tom: It seems like on an addition, below every receptacle were the plastic things, some drywall plaster they had to cut out of the box and some ends of the wires. You'd think they would have put a box there so we wouldn't have any problem. What happens when they don't do it?

Greg: They are told about it and they will do it the next time! I let them know this is what I expect from them. I'm not there to babysit.

Tom: Lucy, what about you?

Lucy: We also take pictures. We e-mail pictures to our trades and the lead people so they can see their guys left the job unsightly, and they need to keep the place clean. We have two types of remodel: those in which the clients are currently living and those where nobody is in the house. We have a couple right now who have chosen remodeling the entire house. We started with the master bedroom. We've done the master bedroom first for them with a bath. They have literally moved into their master bedroom. In the rest of house, there is something going on in every bit of that house. My hat is off to them. We're trying to be very sensitive to them at all times. Having said that, they're gone during the day. By the time they get back in the evening there is some semblance of order so they're not completely destroyed when they walk into the home. So far so good. They're really happy!

Tom: It's amazing what we put people through. We would have asked them to move out. We have in the past. The people say, "No, this is my home. Just give me my little cubby hole, and I'll be fine." It could be four or five months!

Lucy: They have four or five cats also that are living with them. It's locked with a key so no one can go into the room. Another thing you had asked me in terms of the good communications — I think what's really critical is making sure, when we tell the trades a job is ready, that the job is really ready for them to go out. We have an online Web-based scheduling program that our trades can go to on the job which is password protected. They can go and see how the date of their schedule changes, whether it's a little bit earlier or a little bit later. They can continue to watch the job and see how it progresses.

Tom: Do you ever hold retainage on the sub and do you ever back-charge them dollars for areas that had to be done by someone else?

Lucy: We do not do retainage if they have done the work. We sign off on it and they get their money. And, we pay on a weekly basis.

Tom: Greg didn't talk about how much he paid what he did for them beyond their pay. I wonder where pay for trade contractors enters into that.

Lucy: We pay them weekly. They know they have to get their draws into us by a certain time and we will process them. If it's a hardship and they've missed the deadline, we will work with them to accommodate that. The last thing we want to do is hold their money. Remember, we're using trades who we have worked with for a long time. We have checked references; we trust they're not fly-by-night. They stand behind their work. As far as back charges are concerned, there are times when that happens, but it's very rare. We will eat it before we back charge unless we really know its negligence on their part. If it's something like stuff happens, then we really think twice before we do that.

Tom: Greg, what is your feeling on retainage and back charges?

Greg: Again, I have never held a retainage and also on back charges. Once in a while, we'd work things out, I would say that we would back-charge them. Once in a while we would discount a bill. Some of my tradespeople have been with me since day one, and we have a good relationship.

Tom: That's good. I have talked to some people who do not have a team approach, and they do it by the whip. And they are not as nice as you two people, I can tell you that.

Greg: You can only whip so long.

Lucy: That's right. It's a team, and it's a partnership.

Greg: We pay on a 30-day calendar basis. We have a payroll every two weeks in our office. Whatever is in at a certain point gets paid. Sometimes, in the spring a concrete man will ask to get paid ahead of time; and he wants the job completed before the 30-days. We'll pay him because we understand they've been starving all winter up here. It's probably different there where Lucy's at in Texas; we get 40 inches of frost in the ground. These guys are looking for some revenue early in the spring, so we take care of them because it's a hardship for them to get back on their feet.

Tom: I'm going to switch gears a little bit. I'm leading up to this team effect and how they might be the same or how they might be different. Greg, how important is it that craftsmen working for you are dressed properly? I guess I would ask if you use uniforms and do you have company logos on your uniforms?

Greg: Absolutely. All my guys, I'd say about 90 percent of the time, wear T-shirts and polo shirts. We give them a pile of clothes every so often. One of my guys I had to pester because he had hole-y blue jeans. I had to ask him to clean that up because it was our reputation. They all have the shirts that they wear with logos.

Tom: It's very important, we would agree. We have the same logo uniforms for everyone who is employed here and on certain trade contractors on certain jobs. Do you have a dress code for your trade contractors?

Greg: Yes, I do. Last summer I had to ask a gentlemen who worked for my roofing contractor to change his shirt because it had some obscenities on it. I don't care if he was 20 feet in the air. He was polite and left and got a different shirt. I probably would have went and bought him several because of that. I also watch the music and that stuff on my job site in the same way that it's family friendly.

Tom: Do you have a written guideline, falling short of an agreement, so that they know what you're expecting?

Greg: No.

Tom: Lucy, how important is it that the craftsmen look professional? Do you have logo'd uniforms that you use from the office, and do you extend that to the trade partners?

Lucy: Most of the trades in terms of how they dress are pretty professional. The framers are out in that heat. Once in a while a few of the guys may strip down to the waist but that's a very rare occasion. We do not provide them shirts. We want to make sure they're identified by their own company and their own trade. We do have written codes that we give them in terms of behavior, language, music, job cleanliness, job safety, etc., with each job as they are awarded. Even though a trade has worked for us for 10–15 years, they still get that as a standard policy with each job.

Tom: That would lead to the next question to follow up with this, and that is: how do you get the trade contractor to be part of your team?

Lucy: People call us because we have an excellent reputation. They know we treat them fairly, we pay them fairly and we are respectful of them. It's a team effort. We are a company that has built a reputation where we are respected in the community, both by the people who use our services as well as the trades who work with us. So, it's not the challenge. But in the beginning it was. It was a matter of good communication, paying on time, not retaining their money and just not messing with them — having the best people that our dollars and our client's dollars could pay for the services they provided and treating them fairly and respectfully. That's what all of us want.

The discussion continues:

Tom: Greg, what are the benefits to you of using your own people instead of trade contractors?

Greg: I only have my carpenters; they can't do any of the other trades. I can schedule them better. I feel that remodeling is so tough, we don't have any trade partner framers that I know of locally. They could put on an addition, but they don't know how to gut a kitchen or do things like that; they don't really have the experience with it. That's why I choose to have the guys on staff. We do a lot of in-house stuff. I'm sure that, as in Lucy's case, you learn. You have those people who are great remodelers and great this and that but they don't want to manage a business. So, they're great people to have to come in and do the work for you, but they're not having to deal with the homeowners and all that stuff. I enjoy having my guys on staff. To me, it's much more convenient that I can do that right here.

Tom: You can control the quality perhaps a little better. You have a culture of the company that can watch the quality, be convenient and have a little bit more control of the job.

Greg: If I need another man, I can transfer him across to another job to help get some rafters up on a roof or something. Pull him from a certain spot. Sometimes, that may be difficult to do when your framer needs an extra guy.

Lucy: That's definitely a benefit of having your own employees. When you run into a challenge and you need to pull somebody off of one job onto another, you have better flexibility. When I think about quality, there are trades who we have who are all about quality. The reason we continue to use their services is because they have the craftsman skills. Years ago, Joel was going to do a Sheetrock patch and went out and got the stuff. We couldn't go pull somebody off of another job and delay the project. So, Joel stood there and patched this job, and when he was finished with the patch finally, he threw everything away. He put it all in a trash can so he would never ever be tempted again. True story. It wasn't the quality; we actually had to have somebody else come in and fix it. So, Joel's a great orchestra leader, he's our team leader and our coach. It's always about making sure that we do have the best quality for the dollars. Having said that, you're absolutely right. If you're going to pull somebody off one job and onto another you certainly have more flexibility from that perspective.

Tom: Let's talk about pricing. Each job has the specs and plans, if it's an addition or if it's a kitchen and you can go and see the product. How do you handle pricing changes with the trade contractors? How do you control the costs, and do you keep standard pricing? Or, in fact, do they have to go out and see each job? The question centers around pricing: how to keep control of pricing. Do you get a set price form for every job, or do you do some of the pricing yourself?

Lucy: Our jobs are so one-of-a-kind. In the East Coast, I grew up in Philadelphia, it was row houses. Now some areas call them brownstones or townhouses. These were row houses that I know have been remodeled upteen gazillion times by now. Mary's kitchen, Suzie's kitchen next door and Joan's kitchen down the block are all the "same" kitchen, so that's very easy to do. Here in Austin, even with the volume builders, depending on which model the volume builder had, they still have a variety of remodels. But, we're really not a remodeler who does much work in a volume builder home, except for the homes that are now in more pricey neighborhoods or where the neighborhoods have really appreciated in value. Most of our projects are custom, and so the homes are very site-specific and the remodels are the same way. We literally bring up trades. Someone may call us and says, "I'd like to talk to you about remodeling my kitchen." I'll go in and take a look at it. Then I'll decide which trades I'll bring back to take a look at what they're thinking: this is the scope of work as I see it, and what do you think? Then we'll have someone come out and draw up exactly what the plan is going to be. We prefer going from an actual plans — having something in writing that we can hand to our trades and hand to our clients so they know exactly what they're getting, and the trades know exactly what is expected of them. Then we price it out based on the figures they give us and the selections that the clients make.

Tom: Is it fair to say that you do a lot of design/build?

Lucy: Yes, although we don't have someone in-house that does the design. We have what we call an out-of-the-house design/build and remodel, where we will have a third party do the design and we will refer the client to those individuals. We prefer sitting in on those meetings to make sure that we embrace the client and the designer to stay within the budget that they are setting so that we don't wind up being completely off target. We have the client pay the designer directly. We do not put a markup on that, but we do charge them for our services and that is deducted from the bottom line of the remodel, versus in addition to. That way, if they don't use us, for example, at the end, here is the budget, here is what it's going to cost, and if you don't use me, at least we're not completely out for my time.

Tom: Do you ever pay your trade contractors for their time putting together a price for you for that job?

Lucy: Not typically, but we do lots of nice things for them.

Tom: You don't pay them, but you take care of them. You don't bid against them so they don't have to worry about you selling their price.

Lucy: That's right. If we get awarded the job, they will be the ones who get it.

Tom: Greg, how do you handle price changes with subs? Do you do estimating for them and they have to come in on your price, or how do you take care of the pricing issues with subcontractors?

Greg: What I look at are some of the things Lucy touched on, what I call a $15,000 bathroom where we're going to tear the bathroom apart and put it right back the way it was. Pretty much my plumber is going to be at the same price every time if we use the same type of fixtures. If my client wants a Whirlpool tub, I get on the phone and just call the gal at my plumber's office and ask her to change this and I'll tweak the estimates on the small stuff like that. On any other jobs, when they're not "cookie-cutter", like in a bathroom or something, absolutely. I always get my plumbers and electricians in there, and my excavator, because 90 percent of the time they're in the backyard, so she's got to figure out how to get the product in and out. My concrete and stuff like that I pretty much do that by the foot because every so often they send me a new price sheet of what footings are per foot and stuff like that. And I also have an item on my bid sheet I call a "hard to get to fee," so I know they might spend a couple extra hours getting block back there or something.

Tom: I've got to go to a place that's going to be interesting: the labor force, both employees and subcontractors. Lucy, where do you see the Hispanic labor force? Do you see it increasing, and what role do you see it playing in the future?

Lucy: Oh, my. I wish I had a crystal ball so I could tell you what it's going to be in the future. Our trade contractors do have Hispanic employees. We require that they have someone on the job site who speaks English. Not all of them have Hispanic employees. Having said that, I don't know what the home building industry would be like here in Texas without them. They are hard working, conscientious, loyal employees. They know their skills. We hope that we can continue to have them as resources, that they're all legal and that this immigration issue is not going to be a challenge.

Tom: When you say they're all legal, do you make sure they're all legal?

Lucy: No. We require that our trade contractors, their employers, make sure they are legal. We're not employing them.

Tom: Greg, talk to me about St. Cloud, Minn., and the Hispanic population.

Greg: Right now we don't see it really in the construction industry. We see it in the other industries in our plants; there's a lot of Hipanics up here. I did get a call the other day from my roofer asking me if I would continue to use him if he had a Hispanic crew. My answer to him was "absoutely" because I've seen him around, and I said it's the workmanship I'm concerned about. He said he's tired of the people that he gets to work on a roofing crew because it's not easy work and he's constantly training, and they quit after a while. We're going to see more if it here also. I'm very much open to it, again, as long as they're legal and a citizen of the states and taking care of their tax liabilities and things like that. I'm all for it.

Lucy: You know they don't have to be citizens of the United States. All they need is a green card to be here legally.

Greg: Right. Absolutely.

Tom: Lucy, I appreciate the fact you wish you had a crystal ball, I wish I did, too. Here in central Illinois it's much like Minnesota. We do not see it in the construction industry here too much yet. We just did a job where a designer, actually from Houston, Texas, sent her people up here to distress a set of cabinets for a big client of ours. It's a residential house. There's no one around here who could do that. They sent three Hispanic people up here and they did it in our shop. One did speak a little bit of English. I've never seen people work harder in my life. Our guys couldn't believe the hours that they worked and how hard they worked.

Lucy: I resent when people say they're not good laborers and they "take too many siestas" and all that stuff. We have people our at our job sites who work long, hard hours in this heat. They are just good, solid people.

Tom: I have a couple more topics. One is insurance. How often do you review the insurance certificates of trade contractors to make sure you're still in compliance with everything?

Lucy: Each trade has to supply us with the information. We get that directly from their insurance company. It goes into a file and is posted into the accounting system. When they are coming up for renewal, it is flagged. We won't use them if their insurance has lapsed. If it gets to the point where it's close to the end of the job and their insurance is flagged, we can't pay them; it stops in our accounting program. We cannot pay them if they don't have insurance.

Tom: Greg, how do you handle this and how often do you review your trade contractors? Obviously, your employees and carpenters and things like that are paid on your payroll and they fall under your general insurance and liability. What about your other trade contractors?

Greg: We have a self-insurance program here in Minnesota that I'm involved in from the beginning. When their audit comes up once a year, we require that all our trade people hand their insurance certificates to us. So usually, once a year in February or March, we go through that. They are always updated also to make sure that they have insurance and let us know when something lapsed. Also when we hire a new trade partner we tell them that we will not issue the first payment to them until they show proof of insurance to us.

Lucy: We won't even have a man on the job site until we have it.

Greg: That's what we tell them when we hire them — that we won't pay them until they show us proof. They get it sent to us from their insurance agent.

Lucy: Right, exactly. We also require that they have us listed as additional insured.

Greg: OK. We don't do that.

Tom: We did that precaution just recently. Our insurance company asked us to do it. We haven't had any problem. I think it's much to your benefit being additionally insured than not being additionally insured.

Lucy: Exactly.

Tom: OK. The last thought before we summarize and have you give some final thoughts: I want to talk about warranty policies. Greg, what is your warranty policy? We talked about an agreement with the trade contractor. What is your understanding of who is responsible for that warranty work? How does the warranty work specifically? We had an interesting thing. We give a two-year warranty but some of our people give a one-year warranty, which is pretty normal. My question is, how do you handle warranty work with your guys and your company and your carpenters and, how do you do it with your trade contractors and partners?

Greg: Basically, with my clients, I have an open-door contract with them and I tell them I will take care of something if there is an issue with it. As long as I've been in business, I've really stuck to that. I just had a faucet replaced that was five years old that was tarnishing. The plumber covered the faucet but sent me a bill for the labor. I just paid it; to me it's just a job cost and an advertisement. I'll do another big project for the same client; to me it was just cheap advertising. A while back I ran into a lady who had a mantle on her fireplace — 13 years old. She said, "My mantle is loose." I sent my guy over there for two hours. Two weeks later I was over there putting a new patio door in her house. I've always used warranty work as advertising for me. Most of the time, my trade people know what I expect of them. I'll pay them an hour labor here and there, but to me it's cheap advertising.

Tom: So, it's really not an issue. In your case, you really don't require the plumber who's been with you a long time, he took care of the faucet, which he got from the manufacturer or distributor, but...

Greg: He billed me...

Tom: Billed you for the labor...

Greg: Yes.

Tom: Because it's your choice to do it at five years, and he's saying it's your choice, not my choice.

Greg: Correct. And usually, for like two years they'll come in and take care of it with no problem. But after that... again, I do it because I want to keep that customer in my database and not someone else's.

Tom: And your guys, for your labor, let's say you have a carpenter workmanship issue, or maybe your mantle. You said the lady had a loose mantle. Did you install the mantle 13 years ago?

Greg: Yes.

Tom: And now she says I was putting a picture there and "it's loose," and you sent your guys over there and it cost.

Greg: Cost me a couple hours labor to go back there. Again, it opened another door. I hadn't seen the lady in a while and bumped into her in a grocery store. She said the mantle's loose. I said we'll check it out. I opened the door by sending one of my people there. I had two hours on the time card. Yet, two or three weeks later, she had me over there putting a new patio door in her house.

Tom: Lucy, talk to me about your warranty policies and how you handle a trade contractor who has a problem.

Lucy: When the trade contractor has messed up — is that what you mean?

Tom: In other words, when a warranty item comes up — a loose faucet, a switch that doesn't work — anything that would happen that would be a warranty workmanship item that comes up six months or a year and a half after you're done.

Lucy: We fix it. We fix it. We fix it. There's nothing about not fixing it that we don't understand.

Tom: But, who fixes it?

Lucy: There's such a fine line. We always say we use the better contractors because we want to make sure someone is standing behind the work, etc., but we never get into a battle between the trade charging us or us paying for it. The bottom line is we take care of it. Sometimes, we'll charge the trade or we pay them for their time. We don't have it come up that often.

Tom: It's not in the written code that the trade gets before every job.

Lucy: I'll have to take a look at that; I don't think so. Our policy has always been to fix it.

Tom: I love your policy. The problem, I guess, is for the small one, the loose mantle and the faucet that tarnished.

Lucy: You're not talking about that much money.

Tom: That's right. But what happens when you are talking about a lot of money?

Lucy: When you're talking about a lot of money, structural, framing, a serious leak or what have you — often times, it's people pointing at each other: "No, it was the framer who nailed something into a pipe." In the end, often times we end up eating it ourselves. But, one of the things we do, and I think it's an important thing to do, is whatever we fix, whether it's on warranty or no warranty, we invoice the client for the amount that it would have cost them, and we put "no charge" on there. That now gives them a value of the work that we've done. It also limits the warranty, I understand, of how long we have to continue to warranty. It becomes a matter of choice. It's also a legal issue. I think it's important that the client knows that you just spent $150 or $300 to replace the faucet. It didn't come from the sky.

Tom: Do you agree with the open door warranty that Greg has? I'm going to take some liberties and say it's a discretionary open door warranty because we have some people who would take advantage of that.

Greg: Absolutely.

Tom: And they're not very good customers, really. But they know they can work the system. We do that same thing. Do you have an extended warranty beyond one year, Lucy?

Lucy: Yes. In Texas, different items have different levels of warranty. We have the Texas Residential Construction Commission.

Tom: So you follow that particular warranty guideline?

Lucy: Yes. That is our minimal. There are certain things — you just build a relationship with a client. You're in their home. You have a relationship. They are your best marketing people. You just make sure that you take care of them. If it's absolute abuse, you take a baseball bat an use that on the client! Delete that comment!!

Greg: It's a lot of petty stuff that we take care of, that I eat on my end. I really like Lucy's idea about sending an invoice for "no charge." I have a client who lives if Florida. We have a lot of lakes here in Minnesota. We do a lot of work for clients who live out of state. She picked out a bamboo floor. We put the bamboo floor in, put the cabinets in, and did all this. She shows up in the spring to enjoy her lake home for the summer, and the bamboo is nothing like the salesmen sold her. I stepped in and discussed it with my lumber yard because that's who does the vast majority of my flooring. We were promised from our lumber yard that we could go back in there this fall when the lake season is over and tear all that bamboo out of there and put in the product that she ordered. I think that all has to do with relationships, again.

Tom: And, who is going to pay for that?

Greg: It won't be me. It will be the lumberyard.

Tom: The lumber yard. Because, they offered you one thing and did the old "bait and switch."

Greg: Correct. And the thing is, I'm their top lumber buyer on the remodeling side of their business. Do they want my business, or are they going to argue over my business about a floor? I don't think so.

Tom: Right.

Lucy: But, to protect yourself. It's an important thing to have a client sign off on these things. If you were doing a lot of things long distance, sending her the sample along with...

Greg: Yes. She looked at the sample. They also sent me a selection form that I have in the file that they filled out with model number.

Lucy: So, they actually made the mistake.

Greg: The lumber yard made the mistake.

Lucy: Yes. We had that with a tile roof that was already sitting ready to be installed. We kept asking the client to show up at the job. The tile got there early and it was sitting on the ground. It was placed up on the roof and she was the only one who had the sample. We didn't have a sample. She finally showed up on the job two days before they were going to start laying the tile on this roof. She looked at it and said, "It's the wrong color!" Fortunately, she caught it beforehand. But that's important.

Tom: That's my point. We painfully had that happen and, unfortunately, it was at my own house. We had ceramic tile put in the master bathroom. When I picked it out, the guy ordered it, the manufacturer had discontinued it. We found the same name of everything, the same finish and the same name on the tile. So they went ahead and ordered it. When we got back, Al looked at it and, fortunately, we kept a sample, and they weren't even close. It was an issue that you really know who your dealing with — just like your bamboo, Greg. They were just wrong.

Lets summarize. Greg, if you had to give remodeling contractors who are going to take a look at this, some advice on how to maintain good craftsmen for your company, what would you do?

Greg: The craftsman side of it, you've caught me off guard. I have this list all compiled for my trade partners.

Tom: The trade partners, then. Think about how it would differ from your craftsmen. We talked about your craftsmen already earlier in this conversation, so I'm OK with those.

Greg: What I've got written down here was going to cover for both! The first one is that we pay our trade contractors on time and treat them with respect — keep an open communication so they understand what's going on. We really let them know what Greg E. Theis Remodeling expects from them. We also work with their schedule so we don't just say, "You need to be here tomorrow morning at X time." We work with their schedules, and we check in and if they say we can be there Thursday, we work with them. We require that they be committed to our projects when they are there and make sure that they get it done. Some of the key issues that I talked about with my lead carpenter this morning, and he told me that he wants to be sure that he's ready and organized when they get there so their time is used in an efficient manner and not wasted while they are waiting for something. And we also work with them on the job. If an electrician wants to cut a wire behind a cabinet, we might pull the cabinet off the wall, make the hole behind the cabinet and put it back up. We work with them to make their jobs easier. And last is really to know their trades! Don't put the joist down the center where the toilet's going to go. Plan for all that. Get that ready for them so we're not backtracking in remodeling a new addition. So that's really my summary. A lot of the stuff, the communication, is the same for my employees.

Tom: Good! Lucy, what would you say to summarize? How can I maintain, in a world that's changing every day, a good labor force for all my trades? What advice would you give a remodeling contractor to do that?

Lucy: Always do business in writing! That would be at the top of my list. Don't take advantage of them. Treat them fairly and professionally. Help them to be successful, as we call "partnering with our trades." Pay them quickly and according to their agreement with you. Those are pretty much at the top of my list.


Lucy Katz, Katz Builders Inc.

Located in Austin, Texas, Katz Builders has been building custom homes and remodeling for 22 years and is heavily involved in local, state and national associations. There are five employees: three in and out of the office in terms of wearing dual hats, a field superintendent and a project manager. Being such a small office, both Lucy and Joel Katz handle sales. Anticipated volume this year should be between $3 million and $4 million.

Greg E. Theis, Greg E. Theis Remodeling

The firm is located in St. Cloud, Minn., and has been in business for 21-plus years as a full-time remodeling contractor. Theis is heavily involved in the NAHB Remodelors Council. The business has four employees in the field (one acts as project manager), one part-time in the field, Greg, who does all of the sales, and his wife, Tama, in the office. Volume of business ranges from $1.2 million to $1.5 million per year.

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