A few years back I got a call from the manager of the local dump to let me know that a subcontractor installing a job for my company had disposed of several squares of shingles, still wrapped, at that location.
I was glad, actually, to have an excuse to get rid of that sub. I guess I shouldn't have been too surprised. Not long before that, one of the supply houses I use informed me that in one particular month some $7,000 of incidental expenses — extra pieces of drip edge, two or three extra squares per job, etc. — had been charged to our account. At the time they contacted me, this had been going on for a few months.
I started looking at every invoice, but the additional paperwork was a bigger annoyance than anything. You get so busy that you can't police everything. Other business owners told me that it was just something I had to live with.
ACCOUNTABILITY AND ATTENTION
Nevertheless, the message from the dump was a wake-up call. The first thing I thought when I put down the phone was: What's going on? It seemed that the problem was either the salespeople or my installers.
It turned out to be both. The estimates submitted by salespeople were inexact, even vague, opening the door to theft and waste. If you don't know exactly what materials are required to complete a job, you're leaving it to the installer to fill in the blanks. And some installers aren't honest. Like the guy I encountered one night as I pulled up to a jobsite. He was loading shingles into the back of his truck — my shingles.
So I implemented some new policies and procedures. The most important: I began holding 10% of each sub's invoice until the job has been inspected and the materials returned to inventory or to the supply house for credit. This wasn't an original idea. About 75% of the work my company does is roofing, which includes commercial jobs. When we do commercial work, the client typically holds back 10% until the job is verified as satisfactory and complete. I figured that if commercial clients could do this, I could do it to subcontractors.
I informed subs orally and in writing of our new policy. Many weren't happy. But the better companies keep a prudent reserve and didn't feel threatened. It was the installers, who live from paycheck to paycheck, who really howled.
Not only do I withhold 10%, I will also use it when warranted. I've spent that money buying new bushes or new trash cans when installers damaged the customer's property. You'd be amazed at how much more professionally they treat the jobsite after they've had to pay for their carelessness.
TRUCK ON THE WAY
Those weren't the only changes I made. We now have weekly sales meetings. I require salespeople to go on the roof and measure the job as well as to provide complete, exact scope-of-work and materials specifications. And I go over every estimate for every job. For instance, recently I looked at a proposal that specified 65 squares. I realized — since I was the one who wrote the proposal — that a math mistake had changed the original order from 55 squares to 65. Those 10 squares would have cost $666.12. I got a credit from the supply house and gave the client a $1,000 rebate, informing her I'd made a mistake. You can bet I get another $20,000 worth of business for that.
I also bought a one-ton dump truck and hired a guy whose job is to clean up jobsites. He keeps the (typically) eight jobs we have going at any given time supplied with whatever's needed, so installer runs to the supply house are unnecessary. I figure I save myself about $5,000 a month that would have been stolen or wasted.
—Jeff Head is the owner of Head Construction Inc., in Evansville, Ind.