Haphazard management practices tend to come back and bite us in the behind.

Question: I have a great young guy that works for me. He really has been able to ensure my company gets the jobs done on time and right. He works hard and I am paying him very well. I have several concerns about how things are going to work out long term, however. He makes $70,000 now and wants more (that’s about $20,000 above local wages for the same position). He also does a lot of work on the side. Any thoughts on what I should do?

Answer: This is a complicated question. The situation took time to create and will take time to fix. As owners, we sometimes take the easy way out. Key people are helping us make things happen, we are busy and it is easy to just throw money at the problem. Most of us are also fair and we want to help the people who are helping us. The problem is such haphazard management practices tend to come back and bite us in the behind.

Let’s start with a discussion on side jobs. Employees must understand that they are strictly forbidden to compete with the company. Many companies go so far as to strictly forbid side jobs altogether. In principle I agree with this position, but I think it is important to clarify your policy. Remember, the tradesman’s position is that this is his craft and livelihood. Make sure employees understand that anyone who does side work for a customer or anyone else who approaches them on a job will result in termination. Also, make it clear that if they use any tools or materials on outside work, they will be terminated.

Another creative approach is to give a slight finders fee to employees for any winning job leads they bring in. It can be something as simple as $50 per lead, and then when they bring in five leads, give them a $50 gift certificate to a restaurant. The goal is not the money but to acknowledge their contribution.

The reality of side jobs is that your employees are probably going to do work for their friends, neighbors, family and folks from church and there is little you can do about it. It also may not be a big deal. Most of these people do not have enough money to hire you anyway. What becomes a big deal is when these side jobs get in the way of your day-to-day success. Have rules and communicate them clearly.

As for the long-term issues, poorly thought out raises never take the place of good management and the development of a career path. Few contractors take time to have a good management development program and most are poorly skilled in these areas. In our PROSULT Networking Groups, I find it easier to teach people the basics of making money than the basics of building an organization. Building an organization takes time, recruiting, communication, accountability and the sharing of the company vision. It sounds like you have the recruiting and accountability part down and need to work on communication and vision.

Start with a simple discussion about where the company is going, where this person sees himself in five years, etc. Next begin to build a job description and path that matches this growth. Start with clear expectations and goals. As the employee reaches those goals, compensation and other benefits can change. Part of this education process is also to ensure that your middle managers understand that the company will pay competitive wages but must remain competitive in the market place as well.

If the employee is management, this path should include the signing of a non-compete agreement. Frankly, a non-compete is easier when agreed to upon hiring or promotion. It can be difficult legally to enforce non-competes and laws vary from state to state. Consult a good labor attorney, it is worth the investment. Remember, you cannot keep people from practicing their trades, but you can more easily enforce the stealing of customers and employees. The communication and psychological benefit of signing an agreement is really more important that the actual paper it is written on.

What about them becoming your competitor and going into business for themselves? Well this is America and there’s nothing you can do about it. Ironically, the more you tell employees about the cost of running a business, the more they realize that your company is a good place to work. The better you communicate with them, the more likely they are going to stay. Most employees leave because of poor communication and feeling unappreciated. If you have that superstar that will own his own business some day, you are lucky enough to have him while you do. My advice is to make the best of the situation while you can but don’t assume everyone is destined to be your competitor.

Question: Our business is seasonal and it can be very frustrating. Are there any simple solutions I can use to help combat winter issues?

Answer: Winter can be a frustrating time. One simple solution is to be more strategic about the kinds of jobs you take for the winter. In most areas of the country you can do some work in the winter. The last kind of job you want for the winter is a complicated job that will run multiple days. For a roofer, this might be a complicated tear off with numerous dormers and cuts in the roof. For a painter, it might be a big outside Victorian house with a lot of scraping. For a landscaper, it might be job with lots of dirt work and complicated grades. All trades have jobs with varying degrees of difficulty and timelines.

Try offering a winter discount for jobs that are one- or two-day quickies that you sneak in during the winter. Even if you are bidding these jobs in summer, you might offer the winter deal, particularly if you have a big backlog and the customer seems price conscious. Explain to the customer that you may be able to do the job sooner but that schedule is totally at your discretion. With summer rainy spells, you can also use these jobs for summer fillers. Try some creative pricing and job strategies, what do you have to lose?

Question: I am a small contractor and took a large commercial job. It is the biggest job I have ever done and it has been a nightmare. I thought I was going to make a lot of money on it. In reality, all my other work suffered and now I am not getting paid. They still owe me $100,000, including $50,000 in change orders. The legal barbs are flying. They claim I have slowed the job and have issued back-charges against our contract. They say they will pay me $30,000 if I accept the $30,000 as final payment. I really need the rest of the money, what can I do?

Answer: Well you can get a good lawyer but I doubt you have the money to pay for it and you may be throwing more money at a losing situation. Try to do the best you can to get good legal advice but you are in real trouble and need to go into survival mode. You may not make it and this job may do you in.

Through the years I have gotten hundreds of calls from subs that have chased the big job carrot. Their ego and entrepreneurial spirit got the best of them. I wish I had some magic advice for you but I don’t. I really am answering this question to help others that may be tempted by this issue. Before taking that home run job, ask yourself these questions:

  • How much of your production capacity will this job take and what will it do to your reputation and status with other customers?

  • Do you have the cash to survive the payment cycle? And do you have the cash to survive if payment terms are behind and not met?

  • If the job comes in 20 percent less than you bid it, what will that do to your numbers and overall business?

  • What do you know about the customer, how they work with subs and their credit rating?

  • What are the terms of the contract and do you understand all the legal mumbo jumbo in it?

  • What would happen if you were never paid for this job? Can you take the hit?

At times something can tempt all of us but is it worth the risk? The job you didn’t take never put you out of business.