A PHC extreme make over.

So what does a makeover look like a year after the "after"? Back in 2003, PM columnist and business consultant Al Levi held a Business Makeover Contest, sponsored by Slant-Fin Corp. and this magazine.

Winners Timothy Flynn and Gene Cataldo, owners of Winters Co., a residential service and repair business in Belmont, Mass., and both all-around Red Sox fans, found themselves under the tutelage of Al, a former New Yorker and still gung-ho Yankees fan.

As you can imagine, the catcher's glove was thrown down: Al took a picture of Tim and Gene with actual Yankees caps on their heads. After quickly washing their hair, Tim and Gene agreed that if they didn't follow through on Al's suggestions to make over their business, PM would be forced to publish the offensive sight and hold the contractors up to public contempt.

We summed up Al's initial work with a feature, "The Winners Before," July 2003, in which he quickly identified troublesome areas such as out-of-control inventory and high accounts receivable. Tim summed up the state of affairs best when he mentioned that he and Gene always had plenty of questions, but never answers.

We followed that up with "The Winners After," November 2003, in which we found our winners with some big improvements and looking ahead to new challenges.

"I will not go back to my old ways that were outdated," Tim said at the time. "I now need to stay ahead of the curve."

So what does Winters Co. look like a year after the after? Well, to do that we have start before the "before."

The Beginning

To be fair to Bostonians Tim and Gene, even a Yankees fan had to agree that they weren't in such bad shape right from the get-go.

"They had grown the company from just Tim and Gene to 10 techs," Al says. "They had a good reputation and were well-liked by their customers, as attested to by good feedback on consumer surveys. They were well-read and understood their breakeven pricing and had a pretty solid financial understanding of the business."

Tim and Gene got into business for themselves not by starting a new business, but by buying P.R. Winters Co. in 1995. Gross sales at the time were $400,000. Over the next three years sales grew steadily, and eventually Tim left the field and started managing daily operations in 1999.

They bought another contracting business, E.J. Donahue, Cambridge, Mass., in 2000. By the time Winters Co. won the Business Makeover Contest in 2003, company sales were $2.3 million.

Before winning, Tim and Gene weren't strangers to improving their business. They had read books or attended seminars that stressed the importance of setting standards. But the reality was it was easier to let things slide.

"You know how hard it is to get techs?" Tim asks. "If we actually enforced what few rules and standards we had, we were afraid they'd quit and we'd be back in the trucks doing the work again like the old days."

One of the first things Al asks to see - well before he even holds his first face-to-face meeting - are copies of every single memo in the previous six months.

"Typically, I can learn a lot from what passes as a memo or employee handbook or any other written correspondence before I ever arrive," Al explains. "I can tell by the 'tone' what's bugging them and what big issues they are wrestling with."

While he may not have known at the time, Tim certainly agreed later on after going through what Al calls the "Planning Power!" phase of his work. "We learned that we were leading by memo," he adds. "In other words, we wrote a memo and browbeat our employees every time we got mad at something."

Al's two-day meeting took place in May 2003, and consisted, in large part, of Al asking about 250 questions based on his "Power Suite" concept. (See sidebar "The Power Suite" for more information.) Eventually that visit generated a 40-page "needs assessment" report that forms the basis for Winters' business plan.

Action Steps

Herein lies the reason that Winters Co. continues to be in good shape well after the after - and clearly much better than before.

While it starts out as a lot of talk, Al's work turns into much more action. Al breaks the needs assessment report into 100-150 doable projects, some to do right away and others to do in a three- to five-year period. It's up to Al and Gene to boil the list down to the Top 30, which then goes on a priority project planner. Together, consultant and clients select the Top Five No. 1 projects - items that either solve the greatest challenges or provide the greatest opportunity to grow and be profitable.

"I actually can't say enough about the priority project planner," Tim says. "In simple words, it keeps you and the company focused. Beforehand, I never knew how many different areas we needed to work on. I used to go from one fire to the next, and never really looked at what was causing the problem."

For example, one of the first items Tim and Gene needed to attack was accounts receivable. At the time Al ended his initial visit, accounts receivable were $300,000 on $2.6 million in sales. Today, sales are $3.4 million with $70,000 in accounts receivable.

"The difference was it got done because it became a priority, " Tim says. A priority in two ways:

  • The outstanding accounts receivable amount was whittled down by offering a one-time discount to get the money in. "Customers feel like they're getting a bargain and many will feel they're helping you once you explain why you're taking this action," Al says.

  • So no more money was added to the amount, Winters Co. needed to show that they expected to get paid at the time of service. That idea begins with how CSRs answer the phone and why techs should ask for payment.

    "The whole company needs to adopt the attitude that this is how we do business at Winters," Al explains. "If we go to a restaurant, we expect to be served first and then pay at the end of the meal. Nothing is different with Winters."

    It's also easy to see how Winters Co. cleaned up its warehouse - literally and figuratively.

    "This place used to be flooded with material we bought for jobs, didn't really need and just dumped back here," Tim said as he gave us a tour of the warehouse. "As the pile grew, we just felt we had to maintain it."

    Tim and Gene started tracking and analyzing the company's buying habits to determine the proper amount of inventory the company really needed.

    "Either too many people were ordering material or no one was," Tim says. "The warehouse business is overhead that the average plumber doesn't account for."

    In the end, Winters Co. established minimum and maximum levels for all parts in the warehouse. Bar code scanning in the warehouse and a computer program using purchase orders tied to job-sites helped the flow of material moving in and out of the warehouse.

    "As a result of the tracking," Tim adds, "we were able to reduce our material purchases from 28 percent to 15 percent over 12 months. Keeping that figure below 18 percent has become our benchmark. Once again, what we thought was 'right' wasn't even close."

    Behind The Scenes

    While the results of the business makeover are obvious when you scrutinize real functions of the company that affect dollars coming into the business and dollars going out, the real benefit of Al's makeover is behind the scenes.

    Al believes contractors need to understand all the actions that happen from the time a CSR answers the phone until a tech arrives at the door, plus all the action that happens from the time the tech leaves the customer until all the paperwork is processed back at the office. PM wrote a cover story in 1997 on how Al, along with his brothers, used this approach to run OSI, a family-owned oil heat dealer in Long Island, N.Y. (See sidebar "Recipes For A Successful Business" for more information.)

    As a result, the creation of an operations manual, dubbed "The Winters Way," offers a systemized approach to how things get done. Within The Winters Way are job descriptions, diagnostics checklists, company procedures, statistics such as callbacks that are measured, plus rewards and consequences of doing things either the Winters Way or not the Winters Way. Basically, most everything that sounds like common sense, but that isn't necessarily commonly applied.

    "Everyone in every job position already knows what the Winters Way of doing things is, what they can expect from management and what's expected of them," Tim says.

    You can see how the approach helps the techs not just in their daily work, but in their career paths, too. Winters Co. built a training center out of unused space, complete with heating and plumbing equipment for hands-on troubleshooting training. All the techs have gone through sales training to help present themselves more professionally. In addition, Winters also has sequential training such as "Apprentice to Junior Tech," and "Junior Tech to Senior Tech" to reinforce the idea that more formal training offers more opportunity.

    Beyond improving their technical and sales skills, techs also understand that they each have a daily sales goal of $1,500-$2,000 per truck. They also understand a new "reward and consequence" system with sales and callback rates among the objective statistics that ensures Winters does quality work and earns profitable sales. A ride-along program also helps techs gain additional confidence outside the classroom.

    And beyond current techs, management has a system in place to hire new talent. First interviews are done at 7 a.m. to see how prompt the candidate is and how well they present themselves early in the morning. After the interview, Tim or Gene walk the candidate out to his car to see how they treat their own vehicles. Second interviews are always scheduled in the late afternoon to double-check how well the candidate presents himself at the end of the day.

    Eventually, all candidates are brought to the training facility and asked to diagnose and repair problems rigged beforehand to the plumbing and heating equipment.

    "Everyone always complains they can't find any good techs," Tim says. "I say with the programs we have in place, we can make techs."

    A month after our visit last year, Winters Co. bought another company, Munson Plumbing & Heating, Munson, Mass., with sales of $5 million. Integration and training of all new employees was made significantly easier thanks to the Winters Way systems. In just seven weeks, Winters was able to increase Munson's revenues by 40 percent.


    Go back to the "before"? Hardly, not when there is so much momentum built into the Winters Way. We've just analyzed the role of the tech in the same way we analyzed reducing accounts receivable. But the Winters Way twists and turns through the parts everybody plays and addresses the paradox of work: That we all have our own separate jobs to do, but still need to work with others to get our own jobs done.

    So while the techs are out there selling, there is a marketing plan put in place to make the phones ring. And once the phones ring, the CSRs know what to say and also help track the success of the marketing plan so that techs are out there selling ...

    What's next on the list? Here in Tim's own words were the current Top Five when we visited him last August:

    • Tech sales compensation system: This system is currently being rolled out to reward employees that get the job done, and to compensate the techs who do a better job than expected. The technician monitors his own progress during the day through a form that reminds him what the goal is. The technician can also monitor spiffs paid on products or services that have been sold.

    • Move the company: The company needs to be moved to a space that better fits the amount of service vehicles and support staff that we employ. The new space is strategically located within walking distance to our main supply house. This will also help us reduce our inventory because of our new location.

    • Train new employees from Munson Plumbing & Heating: Our Service Manager Michael Ray is delivering the necessary training.

    • Negotiate a better savings from our supplier: Basically we want to be able to negotiate our discounts based on our monthly volume.

    • Cleaner, better uniforms: This project was also assigned to the service manager, and is near completion.
    "It's like the movie, 'The Matrix,' where Neo chooses which pill to take," Tim says. "I took the blue pill and can't go back."

    Recipes For A Successful Business

    Al Levi knows the approach he teaches others works since he saw its success firsthand in the real world of business.

    Prior to becoming a consultant in 2002, Al, along with brothers, Richie and Marty, ran OSI, a Long Island, N.Y., oil heat business started by their father in 1936.

    Like many other small family businesses, OSI started feeling the effects of competition and consolidation more than ever before in the 1990s.

    The company diversified into radiant sales and service, but the brothers also knew that they couldn't afford to have employees operate in the inefficient, seat-of-the-pants manner that is the norm in the small-business world.

    "We had great people, but lousy systems," Al said at the time PM wrote a cover story on OSI's own business makeover, "Business By The Cookbook," October 1997. "We wanted to develop a system that was equal to our people."

    To do that, Al and his brothers adopted a "cookbook" approach to develop "recipes" for everything that made OSI work. After more than a year of employee input, orchestrated by a trained moderator who taped and distilled the minutes of a litany of meetings, OSI complied an operations manual with detailed descriptions for every imaginable field and office task.

    The manual described about 300 main task items, with related details that added up to more than 1,000 standardized "to-do" lists that would ensure proper procedures from answering phones to processing work orders to handling customer objections to fixing boilers.

    Gone was the lost time and confusion of bringing new people up to speed, ensuring that others could fill in for an absentee, and all the while knowing that everyone up and down the ranks knew what was expected.

    The cookbook still helps Al's brothers run the show.

    The Power Suite

    Here's what Al Levi calls the "Power Suite," eight attributes of a successful contracting business. One of the first tasks Al asks his clients to do is to consider how well they rank themselves on the attributes. The self-critique, in turn, helps Al prioritize what the company needs to act on right away.

    How well would you rate yourself and your company's operations on the following?

    Also, underneath each attribute, we've summarized the action that Winters Co. has taken on each:

    Operating Power: Create the policies and procedures for every task in every department of the company. Implement the systems to run the company systematically and automatically without you from day-to-day.

    • Winters Co. already has created The Winters Way manuals and continues to train from them.
    Financial Power: Generate the selling price and define how each person affects the financial success of the company. Sell people on the pricing using open book management. Decide what numbers need to be collected and trained on. Address accounts receivable, accounts payable and the credit department.
    • Winters Co. knows what its key financial numbers are. Annual sales and budget goals are set.
    Selling Power: Establish how each department plays a role in the pricing and profitability in order to focus on how the CSR/DSR and techs affect the selling process. Develop the selling scripts and guidelines for sales meetings.
    • Winters Co. has completed a series of tech sales training programs with an outside consultant, and continues its weekly staff meetings. A ride-along program has helped techs sell better, and apprentices are taught right away the importance of selling. CSRs also use effective scripts when answering calls.
    Marketing Power: Once the price is established and the tools to sell have been given, we need to market effectively to reach the target audience that most likely desires what we're selling. Wearing the uniforms, joining organizations and networking in the community are a part of marketing.
    • Winters Co. now has a written marketing plan and a marketing budget based on percent of sales rather than arbitrary dollar amounts. A marketing calendar includes automatic trigger dates for 2005. Above all, the company has identified its core market - residential service and repair.
    Staffing Power: Add the people with the right attitude and develop the rest in the in-house training center. An apprentice-to-tech training program is the backbone. This will make all the existing staff better or make them go away if they don't want to play a better game. When you want to hire from other companies, be able to identify what they know and train them your way. Knowing how to train is the key.
    • Training checklists from The Winters Way training manual has helped current and new staff know what to do and what the company expects from them.
    Leadership Power: The manager and owner need to be effectively working on the business, coaching those who need it and congratulating those who are achieving on their own.
    • Essentially, Al Levi's business makeover and continuing services has helped Tim and Gene better understand their roles as motivators and to focus on immediate concerns and know what other matters need to be addressed.
    Sales Coaching Power: Have a system for coaching sales.
    • Much of the training mentioned above in "Selling Power" also helped. Winters Co. continues to work on this area.
    Training Power: Become excellent at training and running effective meetings.
    • Winters Co. has built a training center and established a training curriculum.