Alan Levi chuckles over all the commotion about consolidation in the PHC industry. Been there, done that. Consolidation has been going on for the last couple of decades in the fuel oil business that is the bedrock of his family’s 66–year– old Long Island company. The industry used to be dominated by small family firms just like their OSI (formerly Oil Services, Inc.). Now a large share of market belongs to huge companies doing hundreds of millions of dollars a year in annual volume. Maybe they’ve lost some personal touch with customers, but their prices are right thanks to economies of scale and buying clout. In the fuel oil business, that means almost everything. Alan laughs some more at the notion that consolidation spells doom for independent firms. Independents are still plentiful in the fuel oil business, though many are barely hanging on. OSI might well be among them instead of prospering like never before, had they stayed bolted to the good old days. To compete in the modern marketplace, they had to modernize. Patriarch Irving Levi knew this, as did his sons Alan, Richie and Marty, who managed the nuts and bolts of their modernization drive.

Most crucially, they had to find a way to keep competitive with heating oil prices. This they’ve accomplished thanks to a computer-satellite program set up by Marty to track oil prices and futures instantaneously. This enables OSI to buy oil in stages throughout the year at set prices. In turn, they offer a program to customers of guaranteed pricing throughout the year — no small benefit to homeowners who never know how much to budget for heating bills amid the vagaries of winter and the notoriously unstable fuel oil market.

They have also steadily expanded their hydronic installation and service business, focusing on cutting edge technology. Their facility itself serves as a hydronics showroom with working displays of the latest fuel-efficient products (featured in the July 1993 PM story, “Selling Hydronics”). Even though it contributes about $1 million in annual revenues, hydronic heating is still the cart drawn by their fuel oil horse. But their heating expertise provides a competitive edge against the mega-dealers who are strictly in a commodity business. “Hydronic heating establishes us as an industry leader,” says Alan. “Manufacturers come to us with the newest ideas, and we’re always looking for niche products to sell.”

In addition to keeping up technologically, the Levis also recognized a need to stay abreast of state-of-art marketing and business management techniques. “Years ago I would come into a house to sell a new boiler or equipment, and assumed I had a customer for life,” says Alan. “But our industry was suddenly subjected to a tremendous amount of marketing by the bigger consolidated firms. They were stealing my customers.”

The giants gained an edge by offering different services besides fuel oil, so OSI had to figure out ways to do this too. And they couldn’t afford to have employees operate in the inefficient, seat-of-the-pants manner that is the norm of the small business world.

“We had great people, but lousy systems,” says Alan. “We wanted to develop a system that was equal to our people.”

Unraveling The Myth: A turning point was joining Contractors 2000 and being exposed at their meetings to the management philosophy of Michael Gerber, author of the E-myth. In a nutshell, Gerber preaches that most entrepreneurs are maniacal mismanagers. They make themselves indispensable by doing everything themselves, when what they should be doing is building a business that runs without them. This requires defining step-by-step procedures for all business tasks, like McDonald’s does for its franchises.

That’s what the Levis set out to do. To come up with what Alan calls their “cookbook approach,” he and his brothers spent about a year meeting with employees to develop recipes for everything they do. These weren’t just bull sessions. They hired a moderator to tape the meetings, and then synthesized all the discussion into step-by-step procedures.

It’s interesting to note that OSI’s service technicians are unionized. It was critically important to make them part of the process to ensure that the procedures didn’t conflict with anything in the union agreement. This was no problem. Labor relations are not a contentious issue at OSI.

“Years ago Richie and I would go out and check on jobs, and there always seemed to be confrontations because we were not supposed to do this and that,” recalls Alan. “So we worked out a system where the shop steward checks the job and takes photos. If there’s anything wrong, he and the service manager sit down to discuss it. This approach has reduced a lot of stress. Together we work better than apart.”

After more than a year of painstaking employee input, OSI compiled an operations manual with detailed descriptions for every imaginable field and office task. (See sample on page 77.) They have defined approximately 300 main task items, with spin-offs adding up to more than a thousand. That is, they may have a single procedure for answering the phone, but beyond the first few steps the procedure will change depending on the nature of the call.

“The Military Outfit”: A devil’s advocate might say this makes automatons out of employees. Alan counters with this assessment.

“We’re never going to arrive at a level of detail that completely does away with the human element. What our system does do is prevent us from resolving the same problems over and over. Our ‘cookbook’ solves 80–90 percent of our problems, leaving employees with plenty of energy to fix the exceptions.

“To work hard in a bad system is not rewarding,” Alan continues. “With our system, if an employee follows all the steps and it doesn’t work out, then he or she is off the hook. There is no retribution. It tells us we need to change the system.”

Their “cookbook” enables people to quickly learn basic tasks when new to the company or substituting for someone absent. Think of how much time most of us waste teaching new employees fundamentals such as how to answer the phone or process a work order. At OSI a newcomer can do such things in a matter of minutes by simply following the written procedures.

Competitors of OSI are known to refer to them as “the military outfit.” The Levis wear the description proudly to the extent that it represents standardized ways of doing things. But the military analogy ultimately falls apart. The military has a rigid command structure in which sergeants tell privates what to do and how to do it without caring what the lower ranks think. OSI’s procedures were devised from the bottom up.

For example, Alan recalls one operations manual meeting in which discussion turned on confusing messages left by the night shift crew for the morning dispatcher. A service technician recommended an answering machine.

“Now we have a dedicated phone line so there’s no tape to get fouled up. The message comes in: ‘Was at Mrs. Johnson’s house, expects us there at nine, she leaves for work at 11. It’s the third circulator to the right that needs to be replaced. I left a red tag on it.’

“Now Mrs. Johnson is happy because we’re going to show up on time. And the service tech is happy because we don’t have to wake him up with a call at seven in the morning for the information we need. It was such a perfectly simple solution,” says Alan.

Automating The Automation: Copier sales reps have blissful dreams about companies like OSI. Besides operational necessities, the Levis had a huge paperwork burden to support an elaborate in-house training program for both field and office staff that is worth a story unto itself. Plus, their operations manual continually gets revised and updated as people discover new and better ways to do things. After awhile it became difficult to keep up with all the changes and as the manual thickened, looking things up got to be a chore.

Enter PriMedia, a marketing and communications firm used by OSI, which came up with a plan to computerize it all. “Manual” is no longer the operative word for OSI’s operations guide. The electronic version is known as the “Policy & Procedures Document” (PPD). Updates can now be posted in a few seconds; retrieval is simplified, aided by query searches linked to key words or an index. Another advantage to the electronic format is the ability to scan photos, forms, artwork and even video clips into the pages.

OSI’s oil and service dispatch departments were the first to implement the electronic PPD. Along the way, OSI has confronted a problem common to many small businesses in the electronic age — a computer system built piecemeal over the years and unable to easily accommodate new developments in a technology where a year amounts to geologic time. Too much stuff remained un-integrated. So OSI entered into a partnership with a company called Accounting Software Systems Inc. to create exclusive software for the PHC and fuel oil industry. The system will address all the integration problems and dovetail with the PPD.

“Someone coming into this new has an advantage over those of us who came up in the paper era,” observes Alan, “just as it’s much easier to teach someone metrics if they don’t know our system of weights and measures.”

Several hours into our interview, I ask Alan if there are any measurable results he could show from implementing his “business by the book” management philosophy. “In the old days, I would have been interrupted 10 or 15 times by how,” he replies. “Now our people know how to handle a certain call. They don’t have to keep asking. It’s freed up our staff to do more productive things.

“It also reduced stress, and cut our insurance risk enormously,” he adds. “We’re in an environmentally sensitive business where even one oil spill could amount to $50,000. Now we simply don’t run into as many problems as we used to.”

OSI can be reached at 3555 Hargale Rd., Oceanside, NY 11572. 516/763-1400. Fax: 516/763-1463. E-mail: