Recently, I had a chance to spend a few days with NTCA member, Barry Kemna. While visiting a project in northern Pennsylvania, and on our way through Ohio, we stopped for dinner to meet with Vince Casey of Youngstown Tile & Terrazzo, Norm Barron of Barron Tile, and Charlie Renner from TEC.  Competing against cheap labor was the main topic of the night, but the discussion quickly turned to the glory days when quality labor and business ethics were abundant. We found ourselves asking, “What happened?” But what we were really asking was, “Why do we allow price to dictate our business practices?”

We’ve all had the opportunity to offer our services with “shades of gray.” Although each of us had a story to tell, we all agreed that the tile industry is being eroded by contractors who think they need to cut corners because if they don’t, they think others will. We all agreed that striving for “black and white” bids, proposals, and contracts is something our industry must take seriously.

Through conversations with other people, I’ve come to realize that when you choose to play in the gray because you think others will, it becomes much more difficult to return to the black and white. Over time, you find yourself unable to differentiate. You find yourself changed as a person.

The NTCA has invested in many quality labor programs: partnering with CTEF, creating CTI, ACT, and Five Star, to name a few.  Manufacturers and distributors have spent millions of dollars to provide solutions to difficult problems, funding countless programs promoting innovation and educating industry partners. And yet, many tile contractors focus on the easy solution: cut corners and sell on price.

I feel that quality will sell, and in the past, it did. Today however, we are in a battle of ethics with an attitude of “Buyer Beware.” I see undefined specs, unproven methods, and unethical labor practices that do not provide buyer protection or a fair playing field for tile contractors who provide “black and white” VALUE propositions.

How can we as NTCA tile contractor members resolve this issue?
Ask RFI (request for information) questions. Tile contractors need to point out undefined bid documents at the start of the bidding process.

Provide budgets that have specialty items listed as a checklist. Owners must see a defined budget number upfront. If they don’t budget for necessary specialty items, they have a hard time adding costs during construction.

Provide price breakdowns for unforeseen items like crack isolation, floor prep, specialty grouts and sealers, soft joints and pattern layouts.

Provide a proposal that speaks of quality and identify value investments with pay back.
Sell your company’s accomplishments (CTI, ACT, Five Star Contractor, and Trowel of Excellence).

This is the high road to success. I challenge you to work with your prime contractors to define challenges and provide value to consumers. The fact is, general contractors and construction managers have several scopes to analyze, and if you don’t discuss value, they can only make decisions based on price. Those who are successful – and who will continue to be successful – promote and provide value.

Sincerely,
Daniel Jay Welch, President NTCA,
Welch Tile & Marble Inc.

For 10 years the cost of an installed piece of tile has remained stagnant. The rising costs of fuel, health insurance, and education have accelerated dramatically. Workers are forced into longer hours for the same pay. As an industry we have done many things to help you with training, education, marketing, and business development. We have not given much attention to the issue of hiring labor. This topic may be controversial, but I believe it to be one of the major educational issues NTCA must tackle.

The old way

When I started in the trade as a helper, labor was purchased through an hourly method. You would be expected to be on the site at 7:00 am – 3:30 pm, Monday through Friday. Overtime, night premium, and holiday pay were all identified in an employee handbook. The work seemed to just appear and the company would operate without major issues.

Evolution of sub-sub

Many in the flooring trade have moved to sub-subcontracting labor. An individual or partnership operates only as an installer and provides that service for a predetermined price to a business that either specified the job, sold it, or was low bidder. The installer is paid as a separate company and issued a 1099 tax form at year’s end. This is a way many businesses can manage the costs of having traditional employees due to the fluctuation of labor over a period of time. It has become appealing to owners and employees alike. The business owners have more time to sell, while the tradespeople can work for other companies, decide which jobs they want to do, and concentrate on working and honing their skills. Both then can make money. The business owner may benefit from not having to pay as much in payroll taxes, unemployment taxes, health insurance, and other benefits that they offer to their office staff. If the tradesperson gets busy, he or she may hire a helper, for whom he or she will assume the burden of employment taxes and related insurance.

Today

Today, labor pricing has not adjusted for inflation. Estimators have current pricing for materials, tools, and equipment, but are using labor rates from 1997. Today’s workforce – in a down market – has no way of forcing more pay when they need to feed their families. The majority of commercial work in our area is earned through a low-bidder strategy – those who estimate labor at early-2000 prices get the job. But who’s ensuring that 1099 subs are covered for worker’s comp, unemployment, or social security? Who is responsible for their payroll taxes? Should they really be employees rather than independent contractors? Do you hire the same subs week in and week out, and does the majority of their income come from you?  Could you be at risk of tax penalties?

Legislation

As many of you have experienced, the federal government has cracked down on the practice of employee misclassification (1099 v. W2). Here in Michigan, the state is focused on eliminating employee misclassification in the construction trade. And with the Patient Protection and Affordable Care Act, who will be responsible for health care costs?

As an industry, we need to start the discussion.

Thank you,

Daniel Jay Welch
President, NTCA,
Welch Tile & Marble.

Thank you for the opportunity to serve the tile industry for the next two years!

My name is Daniel J. Welch of Welch Tile & Marble Inc. (www.welchtile.com). It has been my pleasure to work with many of you, either through the NTCA Board of Directors, or on the Technical Committee. Wow, have we made great progress in the past few years! For those whom I have not met, I look forward to serving you as the first NTCA president from the great state of Michigan!

I am a second-generation tile contractor who learned the trade from my father, Richard Welch. During long days at his side with bucket and trowel in hand, he taught me the value of strong ethics, family-first leadership, and time-tested hard work. My father  provided me with the knowledge and leadership I need to survive and prosper in today’s tile industry, along with my family at Welch Tile: Aaron (field supervisor), Rick (estimator), Jennell and Marnie (office). I owe my success to their support.

Welch Tile & Marble is a specialty tile, terrazzo and stone contractor, installing both commercial and residential projects guided by our mission statement “People, Creating Change.” To me, our People are the most valuable resource we have. I believe we must Create relationships of trust, and embrace Change throughout all aspects of our daily lives, professionally and personally.

Over the next 25 issues I hope to provide common-sense articles focused on the relevant issues tile contractors face today. Welch Tile has been in business for 25 years and I assure you we have made our fair share of mistakes. Although this may not be the cheapest way to learn, mistakes are lessons you don’t forget. Along with our success stories, I will offer experience from the many business decisions that we have made – good and bad – to form what I think is a clear vision of the tile industry today. I believe that if we understand our past, and stay aware of our business climate, we can work together to provide a better future.

I want to thank our past president and my friend, Nyle Wadford for his past term and new responsibility as our Chairman of the Board. Nyle has provided strength in turmoil as this industry has adapted to great change. I also want to thank John Cox as he steps down as our Chairman of the Board. John, you have been a great resource and a beacon of leadership for our great organization.

Sincerely,
Daniel J. Welch
President NTCA,
Welch Tile & Marble Inc.