Monday, August 30, 2010
A Labor Day Missive
When I started this blog, my intended audience was NECA-member electrical contractors. But as the readership grew and the posting were reprinted on my Facebook page, I’ve found that quite a few IBEW local unions and members are regular readers. So with Labor Day approaching, I thought I would write this posting with them in mind. And while most Labor Day messages are usually a salute to the workforce, this one is about a challenge.It’s not news that the construction industry is struggling. And even considering the loss of work due to economic conditions, the union portion of the electrical contracting industry continues to lose market share. So, we know instinctively that we have to change what we’re doing in order to survive. But change is hard, and we often hope that if we close our eyes and wait long enough, when we reopen them things will be back to the way they were.
IBEW members think about how hard they worked to gain the wage rates, benefits, and working conditions they enjoy. And NECA contractors think about all the money they invested in building their business and the expertise they developed in going after certain types of work. But as much as we’d like to hold our ground, we can’t when that very ground has moved out from under us.
The thing is, there’s plenty of opportunity for work. It’s the electrical work that’s being done by other electrical contractors and electrical workers.
So why aren’t NECA electrical contractors going after that work aggressively?
It takes time and money to prepare a bid or sales proposal. While a contractor doesn’t expect to get every job he goes after, he wants to have a reasonable chance of success. If there’s little or no chance of submitting a competitive price, it makes sense to not even bid the work.
So what’s needed to be competitive?
Good management in terms of scheduling, purchasing, material handling, and all the things a contractor is responsible for is a big part of it. But as one of the most significant costs, labor has a part as well. On a typical job, the cost of direct labor makes up over a third of the price, often more than the cost of the materials installed. The employer’s profit is around 3%
Pure labor cost (wages and benefits) isn’t really the issue. It’s how that labor cost is applied to the job. Some types of electrical work or parts of an electrical project require highly skilled, technically competent electrical workers. Other parts require less skill. If the technical portions of the job are performed by high-skilled workers and non-technical by low-skilled workers, and each is paid accordingly, labor costs will be competitive.
But won’t a contractor just use the lowest-paid workers?
Not if he wants to stay in business! Asking someone without the proper knowledge to do a highly skilled job is a sure recipe for disaster. But as we’ve discovered by our market share numbers, it’s just as competitively disastrous to have a highly paid worker doing a low-skilled job.
Besides pay and skills, the other big component of labor competitiveness is productivity. You know, getting eight hours work for eight hours pay. But another aspect of productivity is developing expertise on certain types of jobs.
For instance a contractor may do a lot of data center jobs. He’s learned how to do them quickly and well. His management staff and work crews are better than anyone else at getting the job done on time and under budget.
That’s great, but what if the next job is in the jurisdiction of another local union? Can he bring his expert crews in to do the work, or is he prohibited from doing so under portability restrictions? Many jobs end up in non-union hands for just that reason.
Meeting customer’s needs is another competitive issue. Can the contractor perform work after hours at straight-time pay? Can makeup work be done on a Saturday? The more times we tell a customer “no,” the more often that customer will look for someone else who says, “yes.” And we know there are lots of people who will say yes.
I’ve had many union leaders say that if they only knew about the customer requirements they would bend the rules for that customer on that job. That can work for big jobs with big lead times. But for smaller jobs that need quick decisions, it doesn’t. You can’t build a business or go after new markets and customers if you have to ask permission every time you bid a job.
These aren’t the only impediments to competitiveness and market growth, but they are the ones most often noted by NECA members.
Most electrical contractors are in business to make a profit and to grow their business. It’s what gets them fired up every morning when they go to work. They want to have a shot at all the work that the non-union contractors are getting. It pains them to walk away from bidding a job. And it’s frustrating for them to know that with a few changes or a bit of flexibility they could get those jobs. And by getting those jobs they would hire more people and make everyone’s life in our industry better.
Just some of my Labor Day thoughts. I would appreciate comments or thoughts from IBEW members or others on what changes they think are needed to grow our industry once again.
Wednesday, July 28, 2010
Keeping America Safe from Pickled Dead Frogs
A few weeks ago, a bill sailed through the House and the Senate with little fanfare. The President signed it into law on July 7. It creates a national standard for formaldehyde use based on an existing California standard. It was supported by industries that are subject to its regulations.
So what? Why do I bring this to your attention?
The reason is that it highlights some interesting trends going on in our country.
One is that California and Europe set our national standards for consumer protection and environmental issues. The European Union loves these kinds of regulations and is the leader in creating them. It’s said that California would join the European Union if it could. The next best step is to adopt their regulations. Soon the East Coast states fall in line and, the next thing you know, they apply in Iowa and Oklahoma as well.
The second point is that Congress is now into setting national standards, and businesses are supporting and encouraging it. Not long ago, states rights advocates and most industries fought the adoption of national standards. They thought they were better off with the states. But state laws starting getting crazy, and it made it difficult to produce products for a national market. So businesses would rather have one standard than 50 different ones. And if you sell internationally, a global standard makes sense, too.
The third point is that the public appears to be in favor of national regulation as well. While many people think Congress over-reached in some of its current legislation, they did want some kind of health care reform, financial regulation, and environmental oversight. The fall elections may change the leadership of Congress next year, but you can bet that national regulations will keep coming.
So while most of us haven’t messed with formaldehyde since high school biology class, the new national standard for its use gives us some insight into the way of regulation in the future.
Friday, July 9, 2010
Public Perception Percentages
I like to read the results of opinion polls and surveys, but I also have a love/hate attitude toward them. If the results agree with my own opinions, I think the poll is great and will use it to justify my point of view. If the poll tells me something I don't agree with, I question its methods and validity.
So I was really conflicted when I saw the results of a recent Harris Interactive survey about public attitudes toward groups that influence government policy.
The poll found that 57% of Americans believe that trade associations unduly influence government policy and politicians. (I guess they feel that’s a bad thing). Unions had the same percentage rating.
The top influence groups, according to the survey, are big business (87%), followed by banks, financial institutions, political action committees and lobbyists (all tied at 83%).
Other groups cited as having undue influence are the news media, entertainment and sports celebrities, and trial lawyers. (These would top my list).
On the other side of the equation, a whopping 93% say small businesses have too little power, and 67% say nonprofit organizations are not powerful enough.
So I started to wonder what the public would think of a lobbying, non-profit trade association of small union businesses that funds a political action committee.
I’d put it right at 50% – whether that’s too much or too little influence – you pick.
Thursday, June 17, 2010
Crises of Historic Proportions
The environmental disaster in the Gulf is on the top of the news, and the reports try to outdo each other in describing the magnitude of this crisis. It is hard to grasp how big this is, and we all wonder what the long-term impact will be. But I also wonder, how many big crises can we absorb?
The War on Terror, Iraq, Afghanistan, the mortgage bubble bursting, financial meltdown, the worst economic decline since the Great Depression, huge Ponzi schemes, auto company bankruptcies, high unemployment, exponential deficit increases, massive federal debt, illegal immigration, 100-year floods, 100-year snowstorms, and now an unstoppable oil leak. There’s no end to these crises of historic proportions.
Even more frustrating is what we’re doing about these problems. It seems that each crises of historic proportion is being matched by a proposed massive government action. Wall Street bailouts, mortgage bailouts, auto industry bailouts, troop surges, stimulus packages (four? I’ve lost count), comprehensive health care reform, comprehensive energy reform, comprehensive financial reform, comprehensive immigration reform. At least they’re leaving the weather alone (unless you consider comprehensive climate change legislation).
Tongue in cheek, the LA Times recently suggested that if you have a leak in your roof, don’t call anyone from the Obama administration. Their solution will be to design a whole new house, or neighborhood, or city from scratch.
Who do we trust to solve these problems? Not financial institutions, or insurance companies, or big oil companies, or auto companies, or lobbyists, or unions, or the federal government. Polling data shows that many Americans have lost faith in our basic institutions. We don’t trust any of them anymore. That’s why groups like the Tea Party are having such success. They are organizing and voicing the average Americans’ anger and frustration.
I don’t mean to dismiss the big problems we’re facing, but I sometimes wonder if some of these crises are being exaggerated to historic proportions, just to justify spending on a massive response. At any rate, I’ve had enough of these big crises. I wish they’d just stop, so we can go back to worrying about if we’re getting too much rain — or too little.
