Residential construction has been the spawning ground for many of the industry's plumbers and contractors. Most do not remain there throughout their career, however. They tend to find greener pastures in service work or commercial construction. The residential market is thought to be too unstable, too low margin, too crowded with builders of questionable character and low bidders operating from the back of a pickup truck.
Yet, as the fairy tale taught us, an ugly duckling can be nurtured into a beautiful swan. Greg & Gary Kozan, owners of Ridgeway Plumbing in Boynton Beach, Fla., have prospered in residential construction by getting better at it than just about anyone else.
Last year Ridgeway plumbed more than 3,500 units, about 2,300 of them single-family homes, to the tune of some $20 million in revenues. They operate with 101 trucks and 20 backhoes, all completely owned by the company. Plumbing is the only work they do, virtually all of it in new homes, although that volume compels them to operate a fleet of four service vehicles to handle warranty work. "We are one of the country's biggest providers of free plumbing services," Greg joked.
Greg handles the administrative side of the business, including sales and marketing, while identical twin Gary is in charge of operations. "I guess you could say that I'm the nuts and bolts guy, while Greg's the dollars and cents guy," says Gary. The company was started by their grandfather, Jack Ridgeway, back in 1956 and existed as a small shop doing whatever work came its way. The brothers grew up in the business and bought the company in 1980. Except for dabbling in service work and fire protection in the early years, they have been residential construction specialists ever since.
Home building is - or was - a notoriously volatile market. The past tense seems more appropriate for Ridgeway's Broward and Palm Beach County area, which has been among the nation's hot spots throughout most of the 1990s and shows no sign of slowing as of this writing. Still, the company has a lot of eggs in that basket, and I asked the Kozans what they would do if residential construction were to take a steep turn downward.
"Already about a third of our business is in multifamily, including garden apartments, high-rise, and assisted living. That sector has been growing steadily along with the single-family. We also did a lot of commercial work during the 1970s and 1980s, so I think we could pretty easily blend back into that market if we had to," answered Greg. "But what we really would try to do is increase our market share, which we've been doing pretty steadily for the last four or five years."
He estimates that Ridgeway owns 15 percent to 18 percent of its market in the two counties where it works. They have reached a stage of success where they can afford to be choosy about who they work for. The bulk of Ridgeway's workload comes from about a dozen developers. "Every year we do more work for basically the same customers," notes Greg. "Our accounts receivable list fits on a single page.
"The other thing is, we have no debt. We own the building, plus all of our trucks and equipment. So if the market went sour, we wouldn't have to worry about making payments."
The People Business
Ridgeway has solved the universal problem of finding quality workers by "growing" its own. The company currently employs about 230 people, and Gary estimates that 70 percent to 80 percent were hired with little or no experience. Yet, thanks mainly to Ridgeway's training programs, about 60 of them, more than a quarter of the work force, hold journeyman plumbing licenses - even though the state of Florida no longer requires them.Residential plumbing is about as simple as the trade gets, and the Kozans have put in place a neat program called "Quick Tech," designed to turn inexperienced field employees into productive workers in a few months. The program combines on-the-job-training with 10 weekly sessions of two hours apiece. They are held 4 p.m. to 6 p.m. in a classroom at company headquarters. Gary teaches most of the classes with materials derived largely from the PHCC apprenticeship program.
Employees must be recommended for Quick Tech by supervisors. Although not paid directly for attending, those who complete the 10-week session receive a full day's pay as a reward. Moreover, they get a boost in pay from the starting apprentice wage of $8 an hour to $10. According to Gary, the money is a secondary motivator.
"Everyone says they can't attract good people to this trade. That's because most companies bring in a kid for $8 an hour, give him a jackhammer or a shovel, then walk away. After a day or two of grueling work and nothing to look forward to except maybe another buck an hour in a year, the kid leaves. No wonder nobody wants to get into this industry," says Gary.
"Unless we show him the big picture, in a classroom setting, and make him believe he has a future, he won't stick around. I tell our recruits that I can't give them any more money unless they produce more, and I'm going to give them the tools they need to produce."
"Tools," in this case, can be taken literally as well as figuratively. Ridgeway gives each new hire a toolbox filled with $150 worth of basic tools, which the newcomer is expected to pay back at a rate of $10 a week. Its practical advantage is to avoid the grief that arises when novices borrow tools from other plumbers. It also gives a psychological boost to the new employee, claims Gary. "I remember learning to set fixtures as a kid in eighth grade and walking around with a set of pliers in my pocket. I felt like hot stuff just because I had a tool!"
Gary is under no illusion that the people graduating from Quick Tech are full-fledged plumbers. He refers to them as "mini-plumbers," but they are productive enough to earn their keep on the jobsite, where training continues. The Kozans are disciples of PM columnist Paul Ridilla, whom they have brought in on numerous occasions to teach their workers. One of Ridilla's concepts they bought into is that of a "skills inventory" to track worker capabilities. This Ridgeway accomplishes via three checklists kept by foremen for each field technician, covering "ground rough," "top-out" and "final" work skills, i.e., installing fixtures and trim. When complete, the trainer and supervisor attest that "this trainee has received proper instruction in the correct procedures and techniques for all of the tasks listed, and has demonstrated a basic level of competence." Furthermore, about 50 of Ridgeway's plumbers are enrolled in four-year PHCC apprenticeship programs.
Off To See The Wizard
Gary also teaches a class occupying two nights a week and two full Saturdays to help employees prepare for a county journeyman's license exam. The company helps employees prepare the paperwork and fronts them the money for the application fee. It gets paid back when they pass the test, at which time they receive a raise. As noted, the state no longer requires a journeyman license, but it is nonetheless highly valued at Ridgeway."The beauty of the journeyman's license is you really see a transformation in these guys," says Gary. "I always relate it to the 'Wizard of Oz,' where the Wizard tells the Scarecrow that he always had a brain, all he lacked was a diploma. Well, I tell our guys they already know plumbing - after all, they've been getting paid for doing it the past several years. They just didn't have a card. You'd be surprised at the difference it makes to have that card."
The license also serves as a line of demarcation leading to supervisory positions. You can work in the field at Ridgeway without a license, but you won't be eligible for promotion to foreman or supervisor.
Ridgeway also holds classes in foreman training and for specialty programs dealing with backhoe operation and handicap codes. The company's classroom instruction falls under the tongue-in-cheek rubric of "Ridgeway Plumbing University," or PU! All of it ties into the company's Mission Statement, which reads: "Our goal is to be the best subcontractor on every job."
Quality Control
Quality and productivity are almost a contradiction in terms, but exactly what Ridgeway must strive to fulfill if they are to achieve their mission. The Kozans have distilled what their customers want into what they call a "single" word - FASTERBETTERCHEAPER!According to them, homes that used to take six months to build are now being put up in three and a half months. Environmental regulations and other forms of raging bureaucracy are delaying projects to the point where the cost of money is putting inexorable pressure on builders to make up the time on the construction end. But at the same time nobody wants to pay more or compromise quality. Instead of complaining about the pressure cooker atmosphere, the Kozans see it as a competitive edge for their firm.
Several years ago they saw an upsurge in callbacks and rework, and came up with a clever quality control program to put a stop to it. The centerpiece is an incentive program called "Top Gun." It works like this:
After completing each of the three job phases (underground, top out, final), the work crew fills out a quality control checklist tag. The top part remains tied to the work while the bottom part gets turned into the office. For each one returned, the company puts $10 into a pot, or $30 per house. Money gets taken out of that pot for back-charges or rework caused by poor quality. Whatever's left over gets distributed at the end of each quarter to all the licensed journeymen working the jobs. Payouts sometimes amount to several hundred dollars per man.
Besides serving as a quality control mechanism, the program has a couple of added benefits:
- 1. By limiting the payouts to licensed plumbers, Ridgeway provides an added incentive for employees to get licensed.
2. The tag that gets left on the job reads: "DO NOT REMOVE: Ridgeway Plumbing Quality Control." That's great PR when seen by homeowners and inspectors.
FASTER ... CHEAPER
That's how Ridgeway attains the BETTER part. The FASTER ?CHEAPER component has come about from refining operations over the years to lower costs and boost productivity. A prefab station at company headquarters stays busy putting together underground and rough-in assemblies, although it's a challenge at time with custom homes. Ridgeway maintains a well-stocked warehouse of some 30,000 sq. ft. to avoid time-consuming trips to a supply house and job delays from back orders. Productivity also results from a well-trained work force."Time is so compressed nowadays, you have to be ready with material and manpower when you're on the job," says Gary. "That's why we try to control everything possible in-house."
One example: Ridgeway does drug testing on all job applicants. They used to work through a testing clinic, but found it took as much as a week to get results back. This meant having to let people go after they'd be on the job for a week, which is both demoralizing and a drain on efficiency. Ridgeway now handles the urine samples in house, and gets the results on the spot.
Another time-saving element has to do with inspections. "It's so competitive there's no more float time in construction for things like failed inspections," he adds. "We undergo as many as 80 inspections a day, so we have to EXPECT to pass inspections. We can't afford miscommunication."
To stave it off, Gary has become active in his local code bodies and the Plumbing, Gas & Mechanical Inspectors (PGMI) group in his territory. The purpose is to have a voice in writing new codes and - even more important - making sure Ridgeway and the inspectors are on the same wavelength with interpretation. "Sometimes it's just a matter of getting the language to where it's easily interpreted. If you can get the inspectors to read things the same way you do, that solves a lot of problems."
The Kozans are big believers in industry involvement. PGMI is just one of the groups they support and participate in. Greg, for instance, is a former president of the Florida PHCC, and currently active in the Construction Contractor Alliance (CCA) of PHCC. Gary has served in a variety of important code positions, including the advisory committee for the statewide building code. He is one of the few contractors who attends and gives input into the national ICC hearings.
"You can't go to a meeting without seeing one of us there," says Greg. "It's always the meeting you don't attend where you could have learned something useful."
Safety: The biggest smiles beam from the Kozan brothers in bragging about their safety record. On the day of my visit in late June, Ridgeway had gone 1,183 days - more than three years and almost a million-and-a-half manhours - without a lost-time accident. They achieved that enviable record with a combination of financial incentives and relentless training.
The company gives away between $60,000-70,000 a year for incentives such as daily "safety bingo" games, quarterly awards to employees who go injury free, as well as "Tough Guy" awards to those who go accident-free for a year. This gets coupled with jobsite toolbox talks and extensive safety training within the Quick Tech curriculum.
"Ninety-nine percent of accidents are when a guy hurts himself," says Gary. "It's rare when someone drops something on someone else's head. So you have to get inside peoples' heads and get them to thinking safety."
Safety is an integral component of cost control in the modern workplace. The Kozans have never had an experience modification ratio of insurance losses above .7, and most of the time hover below that. So confident are they in their operations, they have chosen a loss-sensitive policy that requires the company to pay the first $400,000 in claims out of pocket. That could get very expensive if a company has a lot of claims, but the tradeoff is when they don't it saves hundreds of thousands of dollars a year in insurance premiums. "Considering our huge payroll, our insurance cost is negligible," says Greg.
Secret To Success
Greg believes the systems in place at Ridgeway would enable the firm to handle much more volume at little added cost. "We could go to as much as $30 million without much change in the way we operate, if the work were there."Greg related how a number of colleagues in CCA and elsewhere tend to ask him the "real secret" to Ridgeway's success. His response is that the real secret is there is no secret. Good ideas can be found anywhere, but they are worthless unless you tend to the nitty-gritty details of implementation. "We've had about 30 years to learn to do things right," says Greg.
