Chicagoland conference probes economics, labor issues and more.

The future of the plumbing industry is still filled with ?????, but at least a few question marks were erased at last October's Plumbing Industry Working Conference 2000. Sponsored by the Chicagoland Plumbing Council, an industry fund supported by UA Plumbers Local 130, its signatory contractors, and the Chicago Labor Education Program of the University of Illinois-Chicago (UIC), the conference aimed to gain a peek into the future by examining issues of concern to the participants.

In 10 sessions held over a two-day period on the UIC campus, a host of speakers addressed cutting edge topics pertinent to the future of union plumbing contractors and their labor partners. More than 130 persons attended all or some of the program. Following up, a series of working committees are being formed to address the changes occurring within the plumbing industry.

Heading that effort is UA Local 130 Business Manager Gerald Sullivan, one of Chicago's most influential labor leaders. Keynote speakers at the Conference included Gov. George Ryan and state controller Dan Hynes.

The tone of this conference was set in the opening invocation by Rabbi Ida S. Youdavin, who referred to the assemblage of contractors, union officials and other industry citizens as "doing God's work, keeping people alive and well. Thank God for your hard work and dedication."

Here are snapshot summaries of the programs at the Plumbing Industry Working Conference 2000.'

Industry Consolidation

PM's Editorial Director Jim Olsztynski gave an hour-long summary of PHC industry consolidation dynamics to date, including a review of the players and their strategies. Key points included:

- The PHC industry in all of its components totals an estimated $100 billion in annual revenues. No consolidator is ever going to own a lion's share of that market. There will be plenty of business available for independent contractors.

- Consolidation started out in the residential market, but the commercial-industrial sector is now its focal point. Consolidators are more interested in HVAC than plumbing, and service business more than construction.

- Commerce Department data counts around 85,000 PHC contracting firms reporting a payroll, an estimated 55,000 of which do plumbing. About 80 percent of them have fewer than 10 employees, which generally makes them unrealistic consolidation prospects. That leaves about 11,000 plumbing firms that are theoretical acquisition targets, although many wouldn't pass muster because of poor financial performance, and many other owners would never sell.

- Despite fiascos with the roll-up consolidation strategy, consolidation is not a spent force. PHC consolidation is a long-term process that will span several decades. Even so, it's unlikely that more than a quarter to a third of those 11,000 target firms will ever merge.

- Although most industry attention has focused on the activities of the roll-up consolidators, utility subsidiaries represent the bigger threat to independent contractors.

- Consolidators such as Emcor, U.S. Filter, Lennox, ServiceMaster and Roto-Rooter, as well as the utilities, want to be in the PHC business and therefore differ in a fundamental way from the roll-up consolidators, such as Service Experts, American Residential Services (ARS), GroupMAC, and Comfort Systems, whose founders viewed the roll-up as a business opportunity unto itself. Wall Street has soured on roll-ups, which appear to be in a deep coma, if not dead. Nonetheless, the roll-up firms are attractive purchases at the right price and will survive under some name.

- Affinity groups will grow in strength because they provide a way for independent contractors to compete on equal footing in many areas with the consolidators.

- The basic premise of consolidation is that the whole will be greater than the sum of the parts through economies of scale, best practices, training and advancement opportunities, national/regional account capabilities and brand name awareness. Management has been lacking to date, but that premise is still valid, and eventually one or more of the companies will figure out how to do it right.

e-Business In The
Plumbing Industry

This was a panel presentation with contributions by PM Editorial Director Jim Olsztynski, Business News Publishing Co. Online Editorial Manager Joe Ursitti and's Marcia Hollatz. Highlights:

- The Internet is mainly a communications and research medium at present for PHC contractors, but is rapidly developing procurement opportunities, with marketing further down the road.

- There's no good reason not to have a Web site, even if it's only an electronic brochure. Cost is cheap and it tells customers you are in tune with the modern world.

- Contractors shouldn't link Web site visitors to trade associations or manufacturers. You risk turning your captive audience over to competitors.

- Don't forget to promote your Web site everywhere you can (i.e., trucks, newspaper and Yellow Pages ads, stickers, brochures, business cards, letterheads and other company literature).

- More than half of the adult population in the United States now uses the Internet. However, they include 77 percent of people in the 18-35 age group. This is your target audience of the near future.

- By the year 2004, there will be an estimated $4 trillion worth of transactions conducted online.

- Internet opportunities include buying and selling online, acquiring technical specifications and product information, and recruiting employees. Major service companies such as Sears are moving into online service scheduling.

Labor Trends & Mistakes

Robert Bruno, assistant professor at the University of Illinois' Institute of Labor and Industrial Relations, detailed how past mistakes have caused industry powerhouses to topple and explained how these type of errors relate to the construction industry's current status. Key points considered during the presentation

- Three conditions facilitating what Bruno dubbed a "march to folly":

  • Policies viewed at the time as counterproductive to the industry;
  • Refusal to implement viable alternatives to industry problems;
  • Bad policies that linger despite dissenting voices.
- Certain leadership skills can circumvent these destructive trends, such as staying well-informed, heeding information and keeping an open mind.

- Bruno urged audience members to scrutinize their industry while times are booming. "In the middle of prosperity, you have to look for signs," he prodded. Some ideas he tipped off:

- Study the union and nonunion wage gap and general trends.

- Discern internal and external fluctuations, such as dissenting voices and forces forming within and outside of your industry.

- Acknowledge flaws, despite the industry's current prosperity, including the fragmentation of the profession, resistance to apprentice programs and an increase in specialty trades, which "de-skill" the worker pool and leave employees feeling like parts in an assembly line.

Labor-Management Relations

The second day's keynote speaker was Barry Bluestone, professor of political economy and director of the Center for Urban and Regional Policy at Northeastern University. Bluestone addressed issues of labor-management relations and offered an idea known as the "Enterprise Compact" to help increase productivity and job security in the industry. Seven case studies ranging from Ford to Quaker Oats highlighted this model and its key concepts:

- The "Enterprise Compact" is structured to have the union play a larger role, working with management to set joint productivity targets that satisfy labor's and management's goals.

- Dissension between labor and management often results from failure to recognize the other's work objectives. For example, management's purpose usually is to maximize profits, while labor usually wants to maximize sales. This results in conflict when setting prices.

- Management must pay attention to the changing face of unions. Now, about one in seven workers belongs to unions. The union image has changed from what was once glorified in movie classics and public opinion, at a time when unions carried more clout and won competitive benefits. Now, according to Bluestone, working-class students view unions as part of the industry's problems rather than a solution to them.

- Each case study emphasized Bluestone's point that labor and management have "more in common than conflict," and by collaborating to implement programs, both sides can see remarkable gains. One caveat: The "Enterprise Compact" must not replace collective bargaining between the two groups; it should be used as a supplement.

Temporary Workers

Think about temporary workers and secretarial office workers might come to mind. But that perception is outdated, according to Will Collette, strategic researcher for the AFL-CIO's Building and Construction Trades Department (BCTD).

While union ranks have been declining, temporary work has been growing by leaps and bounds. BCTD's research has turned up no fewer than 450 temp agencies actively supplying an army of temporary construction workers:

- Between 1991 and 1998, Collette said that average daily employment within the construction industry grew from 4.7 million workers to 6.2 million. However, the fastest-growing segment of that total comes from temporary agencies.

- Within the same time frame, Collette said that revenues from temporary employment in the construction industry grew from $4 billion to $15 billion.

- Because the ranks of temporary workers don't, by and large, include highly skilled plumbers and pipefitters, low pay undermines standards and makes the union's job to win work all that more difficult. Union officials pay their members working as laborers, for example, $15 an hour, plus benefits. One temporary agency, Labor Ready, on the other hand, supplies laborers for $11 an hour to employers and pays the workers under $7 an hour, which includes no provisions for health care or a pension fund.

- The BCTD is an umbrella organization of 15 international building and construction trades unions in the United States and Canada, representing 3 million members. Earlier this year, the BCTD launched a "Temp Workers Deserve A Permanent Voice @ Work" campaign to shed light on the abuses of temporary agencies in the construction industry.

- While the BCTD's campaign is focused on all such temporary agencies, Collette talked particularly about the activities of Labor Ready, a Tacoma, Wash.-based publicly traded firm with 852 offices that reported $719 million in sales through its last fiscal third quarter of 2000.

- The BCTD, which owns more than 500 shares of Labor Ready stock, recently organized a rally outside the company's annual meeting last October. AFL-CIO President John Sweeney led 1,000 members of 20 unions on a march.

- During the meeting, Sweeney and other union officials presented management with an "alternative annual report," which outlined a number of unsound business practices and worker mistreatment.

- The most serious charge accuses Labor Ready of classifying a disproportionate number of its workers as white collar to avoid higher workers' compensation insurance premiums.

- So far audits in Washington and Ohio have not turned up any wrongdoing. In a New York Times article published after the annual meeting, Labor Ready CEO Dick King said that if there had been any shortfalls in the company's workers' compensation payments, they were unintentional. "We have no intention of being dishonest," he said.

Other allegations ranged from charging unfair fees, including charges to cash paychecks, transportation to and from jobsites and supplying nonunion labor to companies involved in union strikes. Labor Ready calls the charges "factually distorted."

Diversity In The Workplace

Workforce demographics have been changing over the past few years, and the plumbing and construction industries are not immune to it. The once-predominantly-male skilled occupations have had to undergo dramatic alterations as an ever-increasing number of women and people of color and different ethnicity enter the labor market.

In her presentation to the Plumbing Council, Lisa Jordan, Director of Gender and Diversity Programming, Labor Education Service at the University of Minnesota, explored the effects of this change on the trades, and the necessity of a dedicated diversity program within a company. Her session, titled "Not Just Your Father's Workforce," used various oral histories of women and minorities to showcase struggles and triumphs of their adaptation to the industry:

- Jordan drove home the idea that your company "can't have the expectation that diverse workers will automatically assimilate."

- She says there is no "one-size-fits-all" answer; a diversity program is more than just getting increasing numbers of women and people of color into apprenticeship programs or adhering to the letter of the law.

- You must respect and empower all forms of diversity on a jobsite, and build stronger organizations in the process.

- Jordan says affirmative action law is reactive and problem-focused. It can often lead to a "veneer" or a workforce that "appears" to be diverse, but the environment is uninclusive.

- Create a mission statement of diversity, and commit to an ongoing process of inclusion.

- Evaluate your company's current role in diversity, and fix the things that need to be changed. Jordan admits it's an uphill battle because many discriminated individuals on the workforce don't have a clear chain of command to complain to, and sometimes feel like the system is against them.

Codes To Materials
Building In The Future

The Plumbing Council welcomed a panel of industry code and building material specialists to discuss with the group how construction rules, materials and methods have changed over the past 10 years, and how they will continue to change and affect the industry.

Sitting on the panel were Julius Ballanco, P.E., president of JB Engineering and Code Consulting, P.C.; Pat Higgins, president of P.J. Higgins and Associates; Dave Viola, technical director of the Plumbing Manufacturer's Institute (PMI); and Brian Heinemann, P.E., project manager of Ross and Baruzzini. Their goal was to enable participants to consider how they can be proactive in responding to anticipated changes. Some of their observations included the following:

- Emerging new technologies are appearing daily. All must go through an approval process. How do we present these new ideas to the consumer?

- Water quality and water conservation, gray water reuse, and the decrease in groundwater will continue to be influences on modern codes and regulations. Questions regarding the control of bacterial growth in domestic water, ULF fixtures and their effect on drainage systems, and problems with storm water have all become hot topics in the past decade.

- The ever-increasing use of plastic and recycled material was addressed, as were new codes requiring residential sprinkler systems.

- The government's role in ergonomics in the workforce puts pressure on the "bigger is better" argument. Less labor and more effective use of time and activity seem to be winning out.

- The panel also touched on myths taught in the industry that seem unfounded, such as the air admittance valve's usefulness in Europe, but lack of acceptance in the United Sates.

- Finally, the increasing role of insurance companies in the industry will have an effect on the way companies conduct business and handle rework and lawsuits. Some insurance companies now are basing premiums on how well the codes and inspectors perform on a given jobsite.

It's The Economy

Two economic points of view (local and national) were discussed at the Plumbing Council.

First, Nik Theodore, Director of Research, Center for Urban Economic Development at the University of Illinois at Chicago, commented on "The Economy of Metropolitan Chicago," where he noted to attendees the transformation from heavy manufacturing to information and service:

- An article by Business Week titles Chicago as a "Silicone Prairie." It says in the post industrial city manufacturing is out and service is in.

- Chicago's heyday of manufacturing peaked in 1947; that has all but passed.

- About one-fifth of Chicago's labor force is manufacturing today.

- This closer look at the Chicagoland area mimics other urban environments. The product market shift has stimulated an "exodus" of workers, businesses and residents out of the central city and into the suburbs.

- Theodore acknowledge the recent market boom, which appears rosy on the surface, but underneath is "turbulent" to say the least. It is a boom, but not the same "quality" as decades passed.

-The area is currently too focused on high-tech, retail and service. Theodore warned the attendees not to lose sight of the core of the economy, which is manufacturing and new construction.

Later in the conference, Jeff Faux, writer, economist and president of the Economic Policy Institute in Washington, D.C., offered his views on current and future national economic trends:

- He says the "dismal science" of economics involves the risky prediction of market and economic trends.

- Predicting future behavior is almost always related to past performance.

- Taking a look at the recent boom of the past five years, Faux showed in charts, graphs and figures that compensation hasn't risen with productivity.

- Along with the lack of worker compensation, nonmortgage debt across the country has risen with an ever-increasing use of credit.

- More and more "laymen" individuals are getting involved with the market and finance. Faux wondered aloud how this would impact the economy in years to come.

- Also, it's "Wall Street vs. Main Street" in this boom.

- Faux discussed the impacts of globalization, including the U.S. current trade deficit, and its NAFTA and WTO woes.

- Each economist hinted that a recession is just around the corner, Faux pointed to recent stock market and dollar fluctuations as troublesome signs.

- He also said to watch the Fed's decision to lower or raise interest rates for clues to economic busts.