JB from Texas writes: “Richard, I enjoyed your article in the February issue of PHC News. As an owner-operator of a HVAC business for over 30 years, I can agree with your ideas for the most part. The only difference I have is paying techs incentive bonus. Some of my competition offers their techs incentives, and this can lead to them selling the customer more than the customer needs.  

“For an example, a friend has a daughter that lives in Houston who had an A/C problem where the disconnect on the wall next to her condensing unit caught fire. They called a service company out, and they told her she needed a whole new system. The existing unit was only four years old. They quoted a very high price, and that’s when she called me. I found a company in her area that was recommended to me. That company came found out that all that was needed was a new disconnect, and that nothing was wrong with her A/C unit. My guess is that the original tech is on some sort of incentive plan that can and often takes advantage of customers that trust the tech.

“The other problem we have in this area is that there are not enough people going to trade schools. All the trades I talk to are having the same problem.    

“I saw an episode of ‘This Old House’ with Mike Rowe from ‘Dirty Jobs,’ and Mike has a foundation that encourages the trades. We all need to find ways to do the same and promote trade schools in lieu of college for many young people. Thank you for letting me vent a little, and keep up the good work.”

The only way to eat an elephant is one bite at a time. With regards to JB’s correspondence, I offer the following thoughts.

When two people view an issue differently, there are two different views — yours and mine. Add a third person, and yet another opinion enters the discussion. Looking at the issue through a broad panorama that encompasses all views is always better than a pigeon hole view. It allows us to take all matters into consideration. I understand JB’s concern regarding the potential for fraudulent business practices. However, viewing incentive bonuses through a pigeon hole might cause you to see the potential for a fraudulent practice while missing the benefits for the consumer, contractor and tech.

JB states, “My guess is that the original tech is on some sort of incentive plan that can and often takes advantage of customers that trust the tech.” Guesses are not facts. Those of you who read my articles are aware of my thoughts on the detrimental effects guesstimates have on the profitability of PHC contracting businesses. Guesstimates, almost always, do not allow contractors to achieve their desired business results.

JB doesn’t know if the contracting firm that first told his friend’s daughter she needed a new system had an incentive program in place or just compensated techs with an hourly wage. JB assumed rather than checked out the facts. And more often than not, just like guesstimating leads to wrong selling prices, assumptions lead to wrong conclusions.

JB claims, “Some of my competition offer their techs incentives, and this can lead to them selling the customer more than the customer needs.” JB’s predisposition of the incentive issue keeps him from realizing a very important fact that all business owners should embrace. That is, you should not only sell that which a consumer needs, but also, that which they want.

Businesses rely on revenue. Revenue relies on sales. Sales rely on sales people who have the ability to sell. Consumers consume. Without consumption, there are no sales. Without sales, there is no need for businesses.

Our capitalistic society is based on selling services and products. It is the impetus that fuels the engine of our economy and makes the U.S. great while affording us the ability to enjoy our lives, liberties and pursuits of happiness.

The method by which we compensate sales people varies from one business to another. But, integrity in sales is a must-have constant regardless of the method of compensation. Consumers may not know that you provide a certain product or service. Incentivizing techs with bonuses to inform consumers of those products and/or services, and the benefits they offer, is no different from any sales person offering to sell or provide any service or product.

Consumers, techs and businesses benefit. Consumers can get information that is valuable to their decision-making. Techs can receive monetary appreciation for the delivery of information and excellence to consumers. Businesses can gain the benefit of consumers becoming satisfied clients who will continue to avail themselves of its services and allow the business to reap the reward it deserves for the risks it takes in the delivery of excellence.

Your technicians will be content and want to stay employed by your business because they are properly rewarded. Maintaining a content tech pool that possesses integrity and loyalty can also help the staffing problem JB speaks of. Content techs can tell young people about the benefits of working for a business that takes care of its employees and offers them a future.

Assuming that offering incentives definitely leads to fraudulent practices is inane. Using that barometer, you could assume that just paying techs an hourly wage could lead to the same potential for fraudulent practices since keeping their employment with the contractor relies on the need the contractor has for the services techs provide.

Let’s say you have two techs — Tom and Dick — in your employ who are paid solely by an hourly wage. They both possess integrity, loyalty, mechanical aptitude, great mental attitude and are self-motivated to deliver excellence to your clientele. But, the amount of work you have for them to perform has dropped off dramatically. Although all businesses go through slow times, you can only weather the storm of slowness for a finite period of time before you reach the point of having to let one of these fine techs go. Which one?

They both sell to the client that which they need and want in an honest fashion. But, Tom brings in more revenue than Dick because he is a better salesman. This puts you in the position of having to let Dick go. If Dick senses that his position is untenable, Dick might actually, in desperation, be tempted to disregard integrity and start telling consumers they need services they really don’t need. A tech on an incentive program could also fall into this trap. That’s why assuming that incentive programs are the only cause of fraudulent selling procedures is absurd.

To assure that techs properly sell that which consumers want and need, it is imperative that contractors train techs properly, including an emphasis on integrity, and follow up on all aspects of relations between techs and consumers.    

I’m not saying that an incentive program would necessarily make Dick a better salesman, but, it certainly would provide the impetus for him to strive to become more proficient in his sales techniques.

Regarding JBs friend’s daughter, I, and probably JB since he’s 150 miles from her, don’t know the condition of her four-year old system. It is possible that the system was in poor condition, whether due to neglect, abuse, questionable installation etc. If so, the tech from the first company could have told her she needed a disconnect box, however, she might want to consider changing her system due to any legitimate reasons pertinent to the existing circumstances.

Then, by giving prices for those options the decision would be up to the consumer.

Regardless of whether techs are paid solely an hourly wage, or, an hourly wage plus incentives, techs, being human, can make mistakes. That doesn’t make them fraudulent. It just makes them wrong in their assessment of the needs of consumers.

We don’t really know the circumstances revolving around the conversation between his friend’s daughter and the tech who offered to replace her system. He could have been fraudulent, and then he could just have been mistaken. But either does not make the practice of offering incentives evil. If incentive bonuses were an intrinsically bad business practice, then so is paying an hourly wage.

However, if you don’t pay techs compensation that will allow them to enjoy their lives, liberties and pursuits of happiness, the trade schools of which JB speaks would have no students. In turn, the trade school teachers would have no jobs.

The reason there are not enough people going to trade schools is that young people have the pigeon hole view that the only way to succeed is to go to college and get a degree. The error in this view is that when you over saturate any area of expertise applicants for jobs or careers far outweigh the needs of consumers. College graduates then take jobs that do not require college degrees in order to provide for themselves.

Exacerbating the problem is the fact that an overwhelming number of contractors do not know how to properly identify and calculate their true cost of operation, and choose a properly profitable margin to apply to their costs. They sell their services at or below their true cost. In turn, their selling prices do not afford to them the ability to entice young people into the trades by offering compensation that will give them the opportunity to enjoy their lives, liberties and pursuits of happiness. Properly managed incentive programs that are monitored in a way that basically eliminates fraud are just another way to compensate techs properly. It’s the old carrot and stick theory — give your techs a reason to help your business succeed. Think about it. Would you take the risks you take being in business if there wasn’t an opportunity for success? Contractors who need help looking at their business practices from a broad view rather than a pigeon hole can always contact me for assistance.

Thank you, JB, for your kind words and input. I hope I cleared up the issue. But, if you would like to talk about it further, give me a call.