Volume 38, Issue 7, July 2003
How Contract Glaziers Are Surviving the
Slow Commercial Construction Period
by David Jenkins
Just three short years ago, USGlass published an article titled “Runaway Train”
(see June 2000’s USGlass, page 42), detailing how contract glaziers were “boarding the train to a booming market.”
How things have changed.
In the three years since such hopeful headlines, the train of limitless opportunity has crashed in a heap with the souring U.S. economy, leaving a narrowing number of available glazing projects.
Andy Schiller, sales estimator for Los Angeles-based Giroux Glass, summed up the situation bluntly.
“On a scale of 1 to 10, with 1 being the worst and 10 being the best, right now the industry is at about a 1.5.”
In a sluggish construction market, one thing is set in stone—zealous jockeying for jobs. “The competition in a slow market is always fierce,” said Bruce Bornhurst, West Coast vice president of operations for Enclos Corp. of Eagan, Minn.
When work is scarce, irresponsible bidding practices can place additional strain on the industry by pushing qualified contractors out of the marketplace, resulting in shoddy work and headaches for everyone.
“A major problem is that the majority of the available projects are institutional jobs—schools, hospitals, government work—that are open to everyone,” said Schiller. “Often, these projects are given to the lowest bidder, whether that bidder is qualified are not.
“A lot of the smaller glazing contractors don’t grasp the financial realities of this business,” Schiller continued. “For example, it may cost $25 an hour to pay a worker, so when the contractor bids $40 for a project, he thinks that he’s making a profit of $15 per hour. Yet, the contractor is not taking into account other expenses such as workers comp, liability insurance and the time it takes to get material to the site. Consequently, the job winds up costing $50 an hour, and since the contractor is taking a loss on the project, low quality work is the result.”
Exacerbating the inevitable tensions is the threat by foreign competitors that siphon jobs from domestic companies. Even during the economic boom of the late 1990s when there was an abundance of work, foreign competition was a creeping concern for the industry.
“Right now foreign competition is on everyone’s mind,” said Bornhurst. “With that said, I can recall many domestic competitors (most no longer in business) that created equally fierce bidding competition. This scenario is usually created by irresponsible bidding practices, which do not seem to differentiate between foreign and domestic companies.”
The biggest competition then might not be between companies of different nationalities, but rather companies of different sizes. With the drought in available work, larger companies have been tempted to reach down for smaller projects, consequently crowding smaller companies out of the market.
Margaret Smith, president of Glass Concepts of Fredericksburg, Va., has observed such a trend.
“Larger companies are definitely accepting smaller projects than they might have in the past,” she said.
Yet the bigger companies make no apologies, pointing out that in a slow economy, turf claims become subordinate to survival.
“Competition is what it’s about,” said Bob Trainor, president of Trainor Glass of Alsip, Ill. “With construction cycles being what they are, it’s probably wise to stay diversified in what you do and have a ready backup plan should certain typical work slow down.”
Under these conditions, the smaller companies must adapt, and often such adaptations involve sacrifices.
“As other bidders lower their prices to compete for projects, our profit margins have been reduced significantly in order to come in with a more competitive bid amount,” said Smith.
However, Smith is quick to add that economic sacrifices are not the only way to remain competitive.
“Cultivating our relationships with long-time and new general contractors, along with repeat work from contractors who know and depend on our quality work, has played a key role in not only retaining standing clients, but also in forging new relationships with first-time clients.”
Mike Swanberg, corporate executive officer of Chicago-based MTH Indus-tries, agreed that nurturing relationships with long-time contractors is key. However, MTH operates on a much larger scale than Glass Concepts—during the late 1990s, the company completed at least four or five jobs a year averaging upwards of $3 million each. Since high-price projects are the first to disappear in a recession, a company of MTH’s size would be wise to have contacts with smaller contractors already in place.
“MTH is a flexile company that goes where the work is—we’ll accept a project whether it’s worth $100 or $100,000,” said Swanberg. “Even when the economy was surging, we kept our hands in the smaller markets, supplementing larger projects with lesser ones. Now, all we have to do is redirect our efforts into these markets.”
In other words, companies that subsisted solely on big, glamorous jobs during the economic boom may have nothing left to fall back on now.
While recession-sensitive work such as retail has shriveled up, Swanberg said that more recession-resistant projects such as security and renovations have allowed MTH to remain profitable.
“Diversity is critical in a tough market,” said Swanberg. “We can’t be pigeon-holed into one specific type of job, and I believe that it is this flexibility that has allowed us to experience continued success.”
In some instances, the slow period has had the silver lining of improving industry performance—with fewer available projects, contractors no longer have the luxury of spreading themselves too thin.
“Contractors are taking advantage of new technologies, better people and systems, and as a result, projects have tended to run better,” said Trainor. “The slower economy can benefit a proactive company to be better and more productive with a quality trained workforce.”
Trainor also noted that competition is an industry mainstay, regardless of the country’s economic condition.
“Foreign competitors or domestic competitors, the competition is strong,” said Trainor. “The pressure to be a highly productive organization with good cost controls and profitable revenues will always be there. Competition is fine—we must find ways continually to be competitive and profitable.”
With fewer jobs, cutthroat competition and slumping potential margins, companies have tried to reduce overhead while boosting productivity. Not surprisingly, something has to give, and all too often, pay freezes and layoffs are the unfortunate result.
“Morale is down right now,” said Schiller. “Workers are more scared than they’ve been in 20 years. Many are living paycheck to paycheck. And it’s not just blue-collar workers either—many mid-level executives and project managers are in the same boat.”
During a recession, slumping stock prices can be another source of aggravation.
“Everybody is looking at the stock market—not just white-collar guys, but blue-collar workers as well,” said Swanberg. “Everyone is worried about their personal investments—in that regard, people in the glass industry are no different from the rest of the population.”
With workers fretting about tenuous job security and dwindling investments, how can companies maintain high morale? According to Trainor, solid work ethics and project dedication often boils down to the interaction between management and workers.
“Two-way communication is key,” said Trainor. “Involving people in situations will steady the morale and then rebuild it. In addition, providing people with information and having systems that provide quick and direct performance feedback will keep people dedicated and moving forward.”
On a similar note, Bornhurst said mutual faith between employees and the company is critical. In Bornhurst’s opinion, workers must believe the company will accomplish its long-term goals, even if the going is sometimes slow and difficult. Likewise, companies must believe workers will have the loyalty and dedication to stick around for the long haul.
“I think most of our team possesses a core belief that we are on a steady course and hold this as a benefit to be part of our team,” said Bornhurst. “We have seen many of our competitors and suppliers make tremendous business assaults on our industry, only to crash very soon after. During this scenario, the associated employees turn over and move onto the next short-term ride. We look for employees who desire long-term relationships.”
However, while Dale Sherry, who serves as Smith’s senior estimator at Glass Concepts, agreed it is important to hire dedicated professionals, he has also found that “offering incentives and steady full-time benefits to keep up employee morale is essential in maintaining a quality workforce.”
For a smaller company such as Glass Concepts, finding the right workers is a critical ingredient. “Glass Concepts’ home state of Virginia is experiencing an unemployment rate lower than the rest of the country, and our top challenge remains securing a quality, experienced workforce,” said Smith.
Mirroring Smith’s sentiments, Trainor stressed the importance of developing a quality workforce.
“The slower economy has made you focus on getting and keeping a versatile and cross-trained group more than ever,” said Trainor. “Having a safety-oriented, loyal, trained and productive work force is crucial. They should be involved in the quality processes of a job from day one.”
With shriveling projects and profits, how can companies make the necessary expansions and improvements to align themselves for a first-rate future?
“We think it’s a slower economy that is starting to pick up—not a poor economy,” Trainor said. “We have held back on some growth plans, but it also allows us to get better and stronger so as to be ready when the market kicks up.”
No matter how bad things are in the present, contract glaziers take heart in the knowledge that they have survived rougher times in the past.
“A period from the late 1980s to mid 1990s was an extremely tough time for contractors,” said Sherry. “During this period, even the larger general contractors were taking on much smaller projects. Work was extremely scarce for smaller companies and subcontractors.”
Yet, the industry managed to make it through this period, eventually enjoying the fruitfulness of the late 1990s. Thus, good and bad times occur in cycles, and glaziers must always be looking forward toward the fertile fields of the future, instead of dwelling on the drought of the present.
So what does the contract glazing industry need to do in order to survive?
“I believe that a key role in our survival will be to draw the line at dropping prices to levels that lower profits and effectiveness for our industry as a whole,” said Smith. Bornhurst echoed Smith’s financial concerns.
“Individual companies should exercise responsible bidding and execution practices all of the time. If more companies practiced this, the industry could sustain many more long-term thriving businesses,” he said.
On a similar theme, Schiller suggested the creation of an industry-wide organization to ensure such responsible practices.
“In order to survive, the industry needs to adopt acceptable, uniform quality standards. Right now, the Glass Association of North America is probably the best model of what I’m talking about—it looks into companies and personnel and can withhold certification if acceptable standards aren’t met. Unfortunately, unqualified, uncertified contractors can still get work—that’s why the industry needs to create a central body that would hold every company responsible.”
Above all else, companies must maintain their determination. Like a football coach delivering a halftime pep talk, Trainor stressed the industry will not only survive, but also use the hardships it faces now to improve in the long run.
“The contract glazing industry will continue to innovate and adjust to changing markets. We should not focus on the old days or last year or yesteryear. We need to be more efficient and more productive daily and moving forward. We have exciting products and a lot of value to sell.”
He continued, “Creating better margins by promoting and selling our strong repertoire of products is important. Maintaining cash flow in these times is critical. Hopefully the economy is now improving and the lessons learned now will always help.”
David Jenkins is an editorial assistant for USGlass magazine.
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