January 24, 2009

It’s Cool to be Cool or HVAC Business Survival Skills (Issue I)

Posted in Uncategorized tagged , , , , , at 3:52 am by qedinfosys

Now that the larger economy is experiencing difficulties, many small to medium sized companies are battening down the hatches and adopting survival techniques.

Some of the tactics include cutting staff, monitoring technicians travel, reevaluating long term fixed-price maintenance contracts, curtailing advertisement and suspending all spending plans.

This is the natural reaction to a business model that is based on tight cash flow amid the  “unpredictable” nature of the installation and repair business. The notion is, “Maintenance contracts save our butt, every month”

On the surface these tactics may appear to be reasonable, but do they make sense from a strategic point of view?

Let’s look at this reactive business model and see if it holds water.

Cutting Staff

The urge to go this route is the modus-operand of amny companies. Technicians are usually a major expenditure on the budget. It appears to be  justifiable because the savings would be direct and kick in fast. Unlike a rent or mortgage, there is usually no complicated third party contract to renegotiate. One or two weeks pay and it is goodbye.

Below is the investment/divestment analysis and impact of drastic staff reductions.

Intangibles of Existing employees                Impact of Reactive Staff Reduction

1

Customer Bonding

Customers like the familiarity of existing staff, even if the tech is not the best. Familiar beats New most of the time. When a new tech comes on board there is usually a spike in complaints and requests from the customer, both to test the new tech and to surface issues that have been overlooked or swept under the rug by the prior tech. In both instances, the employer will be saddled with higher costs as the new tech grapples with more requests than expected, and especially if the contract is a fixed-price maintenance deal.

2

Repair History Intelligence

The ghosts of of past repairs rise from the dead when a new tech takes over. Units that previously appear to function suddenly fail and the first attempt at repair causes what is known as “parts jealously” as all other parts begin to fail in a macabre campaign to be replaced also.

3

Peer Bonding

Jeff and Bill got along fine and there were never any complaints. But now that Jeff has been laid off, two things could happen. Firstly, Bill may begin to complain that he is being overworked  and that it is unfair to one man to be saddled with the work of two men. Secondly, if Bill’s complaints are not addressed, the employer may soon have two vacancies instead of one.

Productivity may initially drop, as Bill grapples with the work of two persons.

But the decision to dismiss Jeff may expose the fact that Bill actually worked better with his partner in tow and felt secure that he could always call on an expert associate to resolve issues. Therefore the decision to separate the two workers may result in greater assignment costs.

4

Continuing Education

From time to time employees are sent to remedial training or direct supplier conferences. These continuing education outings are an important part of a field tech’s bag of tools and tricks. As techs learn of new material and advanced tools and operations they become more efficient in their jobs and oftentimes more profitable.

5

Brand Name Familiarity

Although the basic functions of a unit may be fundamentally the same, some brands offer a variety of methods of delivering the service in order to differentiate themselves from the other competitors. Techs develop favorites and dislike others. When a new tech is brought in to work on a unit he dislikes, chances are there will be more grumbling and maybe a poorer repair task.

6

Knowledge of Internal Processes

A system functions best with the spit and tape of internal personnel who create the important missing links of any business process. Take a system or process and try to transplant it to a different location with a new team or even members of the same company and the flaws of as a fully functioning system become exposed.

Conclusion

The decision to layoff the staff may not be strategically sound. A better method would have been to reduce the working hours of the employees, because it is more difficult and expensive to hire a new person when business picks up. Institutional memory has more value than most of us believe or understand.

Had the appropriate tools been in place, then the impact of a lay off would have been less severe.

For more process improvement ideas go to TaskCaddy

The follow up story…

The Futility of monitoring Travel.. Coming soon..

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