HVACR Business April 2018 by HVACR Business

What Makes You Memorable? By Pete Grasso 5

‘I Made a Profit — Where’s the Cash?’ By Ruth King 8

Add Value to Your Customer Relationships By Jim Baston 20

Scale Up Through Acquisition By Ken Goodrich 22

Set Goals When Planning Your Exit Strategy By Bob O’Hara 24

APRIL 2018 / VOL.13 / NO.4

PREPARE FOR WHEN DISASTER STRIKES Page 10

The Nature of Value in Selling

Page 13 Protect Your Company with an Employee Handbook

Page 16

ALSO INSIDE » Featured Entrepreneur: Angie Snow of Western Heating & Air Conditioning ..............6 Product Focus: Residential Cooling; Commercial Air Distribution................................26 Business Insights ....................................................28 20 Questions with Mike Schwartz CEO of Daikin Applied Americas............................30

CONTENTS

APRIL 2018 / VOL.13 / NO.4

F E AT U R E S

Prepare Your Company, Team for When Disaster Strikes

D E PA R T M E N T S

The only way to provide any help in your community is to have a solid disaster plan in place. By Tom Merriott

The Nature of Value

Protect Your Company

Understand the difference between value and price — and its impact on the sales experience. By Roger McCoy Five reasons every small business needs an employee handbook. By Mark Sinatra

Editor’s Notebook

Featured Entrepreneur

C O LU M N S

‘I Made a Profit — Where’s the Cash?’ There are times your company shows a profit, yet you have problems scraping enough cash together for payroll. By Ruth King

Add Value to Your Customer Relationships

You should view your technicians’ proactive efforts as a service rather than a selling activity. By Jim Baston

Scale Up Through Acquisition

Set Goals When Planning Your Exit Strategy

To be successful, there’s a refined, proven approach that can propel your brand to the promised land. By Ken Goodrich The ultimate goal of exit planning is for the owner to thrive without the business, and for the business to continue to be operational and financially sound. By Bob O’Hara

28 30

Differentiate yourself from competitors and give your customers something to remember. By Pete Grasso

Angie Snow, co-owner of Western Heating & Air Conditioning in Orem, Utah

Product Focus Residential Cooling; Commercial Air Distribution

Business Insights Franchising

20 Questions with Mike Schwartz CEO of Daikin Applied Americas

M A R K E T WAT C H Stock Index: For the latest HVACR Business Stock Index and to read this month’s analysis, visit hvacrbusiness.com/stock-index.

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EDITOR’S NOTEBOOK

BY PETE GRASSO THE HVACR MANAGEMENT MAGAZINE TERRY Tanker Publisher ttanker@hvacrbusiness.com PETE Grasso Editor pgrasso@hvacrbusiness.com JIM McDermott Editorial Advisor jmcdermott@hvacrbusiness.com MEGAN LaSalla Art Director mlasalla@hvacrbusiness.com BRUCE Sprague Circulation Manager bs200264@sbcglobal.net BARBARA Kerr Executive Assistant bkerr@hvacrbusiness.com

ADVERTISING STAFF EAST COAST/SOUTHEAST JIM Clifford Regional Sales Manager Tel 201-362-5561 Fax 201-334-9186 jclifford@hvacrbusiness.com MIDWEST ERIC Hagerman Regional Sales Manager Tel 216-409-3246 Fax 440-731-8750 ehagerman@hvacrbusiness.com WEST COAST TERRY Tanker Publisher Tel 440-731-8600 Fax 440-731-8750 ttanker@hvacrbusiness.com

HVACR Business, founded January 1981, is a monthly national trade magazine serving contractors, mechanical engineers, manufacturers, manufacturer representatives, wholesalers, distributors, trade associations, and others in the heating, ventilating, air conditioning and refrigeration (HVACR) industry primarily in the U.S. The editorial focus and mission of HVACR Business is to provide business owners and managers with the very best business management concepts available. Critical topics covered include leadership, management, strategy, finance, sales, marketing, training, education, staffing, operations, human resources, legal issues, customer service and more. We are dedicated to helping contractors master these key management skills and provide them with the resources necessary to build strong, profitable companies. Every effort is made to provide accurate information, however, the publisher assumes no responsibility for accuracy of submitted advertising and editorial information. Copyright©2018 by JFT Properties LLC. No part of this publication may be reproduced in any form or by any means, electronic or mechanical, or by recording, or by any information storage or retrieval system, without written permission from the publisher. Subscription Rates: Free and controlled circulation to qualified subscribers. Non-qualified persons may subscribe at the following rates: U.S. and possessions: 1 year $48; 2 years $75; 3 years $96; Canadian and foreign, 1-year $108 U.S. funds only. Single copies $8. Subscriptions are prepaid, and check or money orders only. Subscriber Services: To order a subscription or change your address, write to HVACR Business, 31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039 or call (440) 731-8600; or visit our Web site at www.hvacrbusiness.com. For questions regarding your subscription, please contact bkerr@hvacrbusiness.com. HVACR Business (ISSN 2153-2877) Published monthly by JFT Properties LLC., 31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039. POSTMASTER: Send address changes to HVACR Business, 31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039. Periodicals postage paid at Cleveland, OH and additional mailing offices. (USPS 025-431)

31674 Center Ridge Road, Suite 104 North Ridgeville, OH 44039 Tel: (440) 731-8600 Fax: (440) 731-8750 Web site: www.hvacrbusiness.com (ISSN: 2153-2877)

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What Makes You Memorable?

attend many conferences and seminars throughout the year (it’s one of the perks of this job). Of course, my favorite part of these industry events is the opportunity it affords me to meet and interact with contractors, distributors and manufacturers. It also allows me to be among the first to see latest products and technologies available to this industry. Many of these events also host a variety of keynote speakers and breakout sessions. Throughout the years, I’ve noticed a great deal of these have taken on a business management focus. We pride ourselves at HVACR Business on being the first (and only) industry publication with an editorial direction focused solely on this type of content — it’s our mission to provide you with real ideas to help you grow your business and be profitable. So, it’s reassuring to see such as increase in demand for business management information everywhere.

The question is: What can you do to differentiate yourself from your competitors and give your customers something to remember and talk about? “When you offer a differentiated, talkable customer experience, it compels conversation,” Jay says. “And when customers talk, they recruit new customers ... for free.” Jay uses the example, among others, of Holiday World theme park in Santa Claus, Ind. It’s not a Six Flags or a Cedar Point or even a Disney World, but Holiday World is the No. 1 rated theme park online because they give their visitors something so unique that they can’t help but spread the word and heap praise upon them. Three things Holiday World does differently is they provide a FREE sunscreen station for every visitor, FREE soft drinks and FREE parking. That’s it!

Differentiate yourself from competitors and give your customers something to remember and talk about.

I recently attended the IE3 Expo, the annual conference put on by the Air Conditioning Contractors of America (ACCA), in Washington, D.C. As in past years, the IE3 Expo included a terrific slate of breakout sessions devoted to helping contractors improve business operations in many of the same categories we cover each month. One that really stood out was the keynote address given by Jay Baer, a marketing authority with whom I am wholly familiar. I’ve followed Jay on social media for a while now and have always found his advice and insight to be extremely valuable and on point. We also share quite a few common friend/ associates, so I was excited to finally meet him and see him speak in person. In his keynote address, Jay spoke about Talk Triggers — a concept that states that your best marketing opportunities are operational rather than traditional marketing campaigns or advertising movements. A Talk Trigger is, simply put, something you or your company does that is so exceptional and out of the ordinary, that your customer can’t help but talk about it. Essentially, you’re giving your customers a reason to give you referrals. As Jay says, “Word of mouth is responsible for as much as 50 percent of all purchases, yet almost nobody has an actual plan to generate it.” You already provide exceptional service, you offer quality products and you do your best to make your company memorable. But, maybe your competitors do as well.

Sure, people love free stuff, but these unexpected perks are something you will see in every single one of Holiday World’s online reviews.

These are Talk Triggers — something so different and so special, people can’t help but talk about them. I’ve heard this example used before in a similar keynote at last year’s Service World Expo given by Daniel Lemin. As a former Google employee, Daniel is an expert in online reviews and how to cultivate them (full disclosure, I am good friends with Daniel, having had many classes together at Ohio Northern University where we were in the same public relations program). This whole idea of developing Talk Triggers and cultivating positive online reviews to help grow your business is fascinating. Your customers basically live online and chances are they research your company and read reviews about you well before they pick up the phone. Jay and Daniel have actually teamed up to write a book on this topic, due out this October. The new book — Talk Triggers — includes a complete system for word of mouth marketing and how to use operational differences to create customer conversations. I encourage you to visit talktriggers.com for updates and information on this new resource coming soon. I know I’m excited to read what these two marketing gurus have to say, and you’d better believe more on this topic will be covered in HVACR Business — the industry’s management magazine. u HVACR BUSINESS APRIL 2018

Featured

ENTREPRENEUR

Balance and Teamwork BY PETE GRASSO

ngie Snow had a rewarding career as a teacher when her husband Ryan was presented with an opportunity to purchase an HVACR company after having spent 10 years in the industry as a technician and a general manger.

ANGIE SNOW Title: Co-owner & Vice President Company: Western Heating & Air Conditioning Website: timeforcomfort.com Year Founded: 1995 Headquarters: Orem, Utah

As expected, the Snows were apprehensive about venturing into unfamiliar territory — but then Ryan suggested Angie join him in this opportunity and run the business together. “When we started in with four employees, I took a supportive, clerical role,” Angie remembers. “As our business began to grow, I embraced my position as vice president and began to build an office team.” Today, Ryan and Angie are co-owners of Western Heating & Air Conditioning in Orem, Utah, a company which now has 30 employees and continues to grow. As vice president, Angie manages the office staff, human resources, marketing and accounting — with a keen focus on business development, always looking for ways to best serve her customers and employees.

Work Performed: Residential & Commercial Service, Maintenance and Installation

Since they purchased the company in October 2007, it has quadrupled in revenue. Angie credits this growth to her and Ryan’s ability to keep a steady focus on developing people, processes and a strong culture.

No. of Employees: 30

“My management experience really came from developing this business,” Angie says. “I enjoy creating systems and processes to help my team become more efficient, more effective and more successful. I love developing leaders and teams!”

Annual Revenue: $4 million Vendor-Partners: Bryant, Trane, Daikin, Mitsubishi, Frigidaire, AO Smith, American Standard, Aprilaire, Honeywell Affiliations: Service Nation Alliance, Rocky Mountain Gas Association, Women in HVACR, Service Roundtable, Home Comfort Advisor Certifications: NATE, RMGA, EPA

Husband and wife teams in this industry aren’t all that uncommon, but the Snows have taken it to a new level. They have a strong partnership with clearly defined roles, each using his or her strengths to create a successful company. In fact, Ryan and Angie shared their thoughts on creating a prosperous partnership to a packed room this past fall at Service World Expo. Beyond her busy schedule helping her husband grow their business, Angie is a mother of four children who are actively involved in sports and dance. She is also currently serving on the Board of Directors for Home Comfort Advisor as well as on the Executive Board of Directors for Women in HVACR.

have to learn from other contractors, consultants and experts, and then implement them into my business and see successful results.” Something else that makes Western unique is the company’s commitment to recruiting and hiring female technicians and sales staff — something Angie has spearheaded almost from the beginning. “We’re also strong supporters of the Emily Effect, a non-profit foundation that supports new mothers suffering with peri-natal mood disorders and post partum depression,” Angie says. “We’ve wrapped several of our vehicles to support the Emily Effect and donate a portion of our revenue to their foundation.” Throughout the years, as Western has grown and Angie’s responsibilities within the company have grown, she has had to face the same difficult challenge many owners face: letting go. “There are so many aspects of the business that I’m fascinated with, and I want to be involved in a lot of it,” Angie says. “But I’ve learned that in order to grow, I must be willing to delegate, train and empower my team to do these tasks.” Perhaps it’s her roots as a teacher that has allowed her to excel at training and developing leaders within the company. Certainly, that teaching background combined with her entrepreneurial spirit and desire to give back has led to her latest business venture. As a coach, presenter and mentor through her consulting company, Snow Business Coaching, Angie enjoys helping her clients — both in and out of the HVACR industry — find a balance between home and business, all while reaching their business goals. “We want all business owners everywhere to learn the unique strategy we’ve developed to identify individual values, set the right kind of goals, take action at the right time, and easily track progress with strong accountability,” she says. u

Pete Grasso is the editor of HVACR Business magazine. Email him at pgrasso@hvacrbusiness.com.

“I have a strong desire to improve and give back to the industry and open the doors for women in this industry,” she says. “I also love the opportunity I

HVACR BUSINESS APRIL 2018

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FINANCE

BY RUTH KING

‘I Made a Profit — Where’s the Cash?’

reader posed the question in the headline to me — and many of you may have the same question: Where’s the cash?

You look at the bottom line of your profit and loss statement (P&L) every month and see that your company has a profit. You see profits month after month yet you run up against a cash crunch — payroll, or at this time of year, having to pay your taxes, can be a struggle. You just don’t understand how your company can be profitable and you don’t have cash. Here’s the answer: Profits are just that

There are times where your company shows a profit and you are having problems scraping enough cash together to pay payroll. — profits. It means your revenues were greater than your expenses. A loss is where expenses are greater than revenue. Neither means you have cash. Profits are a P&L item; cash is a balance sheet item. The two are very different. So, how do you get cash? Here is the detailed explanation: A revenue/sale (P&L) turns into an accounts receivable (balance sheet) when

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you bill for the work you did. Then you must collect for the work you did (balance sheet). If you are COD, your accounts receivable instantly turns into cash (balance sheet). When you get your vendor invoices you enter them as an expense (P&L) and create an accounts payable (balance sheet). Then you must pay your accounts payable (balance sheet) and hopefully you have cash left (balance sheet).

Most contractors experience months where your company showed a loss yet there is still cash in the bank. The opposite is also true: There are times where your company shows a profit and you are having problems scraping enough cash together to pay payroll. Warning: Even though your P&L shows a profit month after month, you can grow your company out of business. This happens when you run out of cash and don’t have a line of credit or maintenance agreement savings to cover temporary cash shortages. Here are five specific ways to go broke.

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LATE COLLECTIONS

You do profitable work but collect for it months later or never collect for it … after you paid your employees and your suppliers.

UNTIMELINESS OR INACCURACIES You don’t have timely, accurate financial statements to ensure your service, replacement and new construction jobs are sold at a profitable price.

CASH INSTEAD OF ACCRUAL

You use the cash method instead of the accrual method of accounting. Cash method means that you record a sale when you get paid. You record an expense when you pay the bill. There are no accounts receivable or accounts payable.

The cash is used for increased inventory, increased accounts receivable (if your company is not a COD company), increased overhead expenses, and potentially a vehicle or other fixed asset purchase.

Profits don’t pay the bills, however, profitable jobs are necessary to pay the bills. Collect for your profitable work quickly, pay your bills associated with that job, and stay solvent. u

Easy Up.

Ruth King is president of HVAC Channel TV and holds a Class II (unrestricted) contractors license in Georgia. She has more than 25 years of experience in the HVACR industry, helping grow companies. Contact her at ruthking@hvacchannel.tv

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You’re betting your hard earned cash that you can sell what you’ve bought. What does your warehouse look like? Accrual method means you record a sale when you send the customer a bill even if the customer has not paid yet. You record an expense when you receive an invoice from a vendor, even if you haven’t paid the bill. You have accounts receivable and accounts payable. Cash method of accounting almost always shows a profit, whether or not your service work or replacement jobs are profitable since you generally don’t pay bills until you have cash to pay them.

CUSTOMER BANKRUPTCY

You perform profitable work but the customer files bankruptcy during the middle of a project leaving your company with hundreds of thousands of dollars in receivables that are uncollectable.

TOO MUCH INVENTORY

You purchase too much inventory, giving your employees total access to your warehouse and allowing them to keep too much on their trucks. You’re betting your hard earned cash that you can sell what you’ve bought. What does your warehouse look like? Here’s a growth rule of thumb: You need 10 percent of your projected growth in cash to fund the growth. If your plan is to grow by $250,000 in a year, you need $25,000 in cash to fund that growth. www.hvacrbusiness.com

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HVACR BUSINESS APRIL 2018

PREPARE FOR WHEN DISASTER STRIKES

BY TOM MERRIOTT

ast year was quite a year for natural disasters and it really showed the lack of disaster planning in our businesses. Even those not directly impacted by the major events in their area suffered unforeseen side effects related to the extreme conditions. Hurricanes, floods and fires knocked out power grids and communication in a wide area. Traffic problems occurred as people evacuated and returned, and roads were completely closed in some areas. When people are struggling to secure basic needs such as food, water and shelter, what is happening at work tends to take a low spot on the priority list.

“Failure to plan is planning to fail.” –Sir Winston Churchill

You and your people are going through the same problems, but the community is looking to you for help. hurricanes, tornados and earthquakes are the easy targets, but don’t all happen in all areas of the country. The best plans begin with listing out all of the extreme events that could disrupt business in your particular market. Use any of the big disasters that have historically plagued your area as a starting point.

to go through so you can be as prepared as possible.

DISASTER LIST

Then, expand that list to include things that could potentially go wrong. Think about man-made places where something could go wrong and completely disrupt your business — train yards, airports, military bases, mining operations, factories and power plants.

To start, list as many potential disasters as you can think of. Fires, floods,

This exercise isn’t meant to scare you or your employees; rather, it’s a good exercise

• Flooding • Loss of power • No clean drinking water • Home evacuations • Impassable streets • No way to communicate • Lack of supplies

But what if you work in an industry people count on to help them restore their lives back to normal? You and your people are going through the same problems, but the community is looking to you for help. The only way you will be able to provide any help is to have a solid disaster plan in place.

HVACR BUSINESS APRIL 2018

Now that you have your list of natural disasters and man-made locations, list out any potential problems that might be attached to each one. For example, if a hurricane makes landfall in your city, a list of potential problems might include:

It’s important to identify potential

problems before we can come up with possible solutions. Check with your local municipalities, as most of them have existing lists like this and plans that the city will put into action. Knowing what they will do can help you in your efforts. It’s also a good idea as you’re asking your local government for their plans to see if there is anywhere you might be able to help. We’re more vital than we tend to give ourselves credit for, especially during an event where expertise is in short supply.

REMEMBER YOUR EMPLOYEES Now that you’ve come up with a list of things that could possibly disrupt your business, it’s time to start thinking about your employees. Remember, these events will impact all of you and your first priority should be making sure all employees and their families are safely out of harm’s way. Put together an emergency communication plan. During an event, everyone should call, text or email their status to a single receptacle that can be checked in multiple ways. This might be a phone www.hvacrbusiness.com

number with remote forwarding capabilities or a Google Voice number specifically set up for this purpose that can be monitored by anyone with the log in information from any browser, anywhere. There should be guidelines established for what should be included as well, such as name, status (are you and your family okay), availability (are you able to work), best contact method and anything else you might want to know in a brief message.

but this article should get you thinking. The companies that do the best have a plan in place before disaster strikes. u

Your customers and the community are important, but your employees are family and should be treated accordingly. Include something about taking care of the company family as part of your plan. A working phone and a laptop are an essential part of any plan when the office in inaccessible.

every potential eventuality. Instead, write one good plan that could be applied to almost any event.

Someone should be in charge of collecting and reporting this information to management (this might even be a management function depending on the size of your operation). The point is to make sure everyone is okay and to see who is available to help.

CALL PRIORITY

Every situation calls for a different plan,

You should assist our own people first. Your customers and your community are very important, but your employees are family and should be treated accordingly. Be sure to include something about taking care of the company family as part of your plan.

Have scripting ready to explain your complete situation and the types of calls you will consider.

Perhaps your shop is listed as a safe place where families can gather. There are a lot of factors that could make that not work, but the general idea is to help your people as much as possible.

ACCESSIBLE ALTERNATIVES Now that you know everyone is safe and you know who can and can’t work, is the office available? A list on a laptop or a whiteboard of employees and their status is an invaluable planning tool, but it needs to be somewhere accessible. This might seem obvious, but many companies find themselves forced out of their buildings during a disaster, so part of your plan should include alternative work spaces. A large home, someone with property away from the stricken area, a business in a neighboring community … wherever it is, the address should be included in your plan. This also helps if communication goes down. Everyone in the organization needs to know where to meet if they’re able. And while you’re at it, don’t forget access to computers and phones. Most telephone providers should be able to help. If you have a VOIP system, they can assist you in using phones from remote locations as well as in setting up overflow messages if the call volume gets too high. www.hvacrbusiness.com

Next, consider what calls you’re willing to run. If your company is facing something big and you only have the capacity to assist with true emergencies, then everyone needs to know that, including your customers.

Tom Merriott, a business coach at Nexstar who focuses on call-center, dispatch and contractor communication process excellence, brings years of call center and management experience from independent HVAC, plumbing and electrical contractors. For additional information, visit nexstarnetwork.com.

Here is an example of a script to use during an emergency: “Due to the current event we are asking all of our regular customers to please understand as we continue to help with emergency calls only. This means any customer without service will be taken care of as soon as possible and all others will be asked to wait until the emergency is no longer a factor in our area.” Make sure to mention the event in both the script and on voicemail for anyone calling who is not currently experiencing the event you’re going through. We tend to think if we’re experiencing something then everyone else must be too, but that’s not reality. Scripting will help your clients understanding and will also remove any gray area for your employees. Remember, they’re going through some of the same stressors as well, so a good script will make it easier to deliver a professional presentation. Here are a few more tips to help with your planning: • Get your entire company involved. Have everyone figure out what would help the most for their individual jobs. • Some events, such as natural disasters, only strike during certain times of year. Get those events on a calendar and review your plan every year before that season begins. • Don’t try to write a different plan for HVACR BUSINESS APRIL 2018

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THE NATURE OF VALUE Understand the difference between value and price — and its impact on the sales experience Your Offering

The Marketplace Offerings

What The Customer Needs

YOUR VALUE PROPOSITION BY ROGER MCCOY

ustomer value is commonly discussed, universally seen as important, yet is difficult to define. Value is comprised of two key elements, the benefit the item or service brings to the consumer, and the cost of acquiring and using the item. Value and price are not the same thing. Value is the benefit the product or service brings at a cost. Benefit and Cost are components of value. A critical factor is that benefit level is unique for each consumer. Their situation determines how highly they benefit.

BENEFIT VS. COST The relationship between benefit and cost determines the value to the customer. The relationship isn’t only linear since customers spend more than cash. They may also consider time, effort, convenience and energy in the value equation. www.hvacrbusiness.com

A key component in this process is communicating with the customer and listening actively to identify their needs. Your goal is to solve their problem, interest or need. You must be viewed as experts in their areas. The “benefits” might include: quality, ownership advantages, brand, experience, knowledge and image. The darkened area in the graphic above represents the intersection of the customer’s needs, the marketplace offerings and your offering. A key component in this process is communicating with the customer and listening actively to identify their needs. Your goal is to solve their problem, interest or need. You must be viewed as experts in their areas. You’re successful when you can use your product in the solution.

Another way of viewing value is it’s “the perception of what a product or service is worth to a customer versus the possible alternative.” It’s composed of unique “pieces” having meaning to the potential consumer. These are not necessarily readily identified by the seller. Three Bain & Company consultants (Almquist, Senior and Block) have constructed a value pyramid, like Maslow’s Hierarchy, identifying and prioritizing the 30 values consumers use when considering their purchases. The researchers determined that companies that performed

well on multiple value elements have more loyal customers and grow faster. Also, digital retailers can explain their explosive success to their use of multiple elements. The research also analyzed these 30 value elements by industry and identified those elements most important for success within each industry. Most interestingly, Quality was the highest-level element in each industry. Underlying this value hierarchy are three hypotheses: 1. Companies that performed well on multiple elements of value would have more loyal customers. 2. Similarly, those multiple element companies would grow at a faster rate. continued on page 14

HVACR BUSINESS APRIL 2018

continued from page 13

3. The astonishing market expansion of digital retailers could be explained, in part, by their multiple elements success. Each of these hypotheses were confirmed empirically. In each case, a company’s satisfaction of multiple value elements led to their success. They found that some value elements matter more than others. Perceived quality affects customer advocacy more than any other element. They determined which elements influence customer loyalty to a greater extent by type of business. They found that no other elements can make up for a significant shortfall on quality.

THE VARIOUS VALUE EQUATIONS Many researchers have attempted to quantify value by creating value equations. Despite the complexity of some, they can be grouped into one of two types. The equations are: “Value = Benefit – Cost”

A common failure of sales people is their focus on the product or service they’re offering rather than listening to the problems and needs of the customer. The goal of every sales person is to create value for customers by understanding their problems and confronting them. and “Value = Benefit / Cost.” Note that each includes the same components. Put simply, Value increases as Benefits increase or Costs decrease, and conversely. One model expands “benefits” in detail and offers methods for increasing value perception in a variety of sophisticated ways. The challenge in all models is the difficulty in quantifying Benefit. Because of that difficulty, many companies focus on the simpler comparison of Value and Price (or cost). Commonly the discussion is a

comparison of perceived value versus cost. “More value for your dollar” is a frequently used phrased. It’s linking value and cost directly. Although imperfect, these models readily identify the nature of value and its components. The underused, and perhaps more meaningful, term is consumer Benefit. What good does the product or service bring to them? The relationship with the greater meaning is benefit and cost. “Get more for your money?” The “more” in this phrase is benefit. Identifying benefit to the customer is the key to the transaction. Value is the result of properly understanding the relationship between benefit and cost. And it’s not static. How the customer perceives the benefit provided will determine whether it make sense to invest at the established price. Or whether it’s appropriate to give a discount to the customer to enhance the value.

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An interesting concept is that of the buyer and seller “sharing” the value of a product. The link is the “price” of the item. As the price increases, greater value is generated for the seller. Conversely, as the price decreases, the value is shifted to the buyer.

USING VALUE IN SALES A common failure of sales people is their focus on the product or service they’re offering rather than listening to the problems and needs of the customer. The goal of every sales person is to create value for customers by understanding their problems and confronting them. Failing to focus on value and the related benefits will commonly result in customer objections. The goal of any sales situation is to overcome the potential objections, before they’re vocalized by the customer.

answer the objections without hitting them “head on.” Recognize that price objections, though common, may be merely a smoke screen for the real objection. Avoid giving pricing until you’ve adequately built benefit for the customer. Once a number is out, it stifles communication. Make sure you’ve completely described the benefits offered to the customer, and confirm they’ve understood them, and they recognize their value to themselves, before offering pricing. It is not what the salesperson says but what the customer perceives that generates the interest. Focus on quality and value. “Most people look for three things when making an investment: 1) the finest quality, 2) the best service, and 3) the lowest price. I’m curious, of the three, which are you most willing to give up?” Note that Quality is the number one value element in every industry. With the expansion of digital communication and social marketing, and with the additional increase of millennial consumers, the in-home sales presentation is falling out of favor. Producers and suppliers are using technology to provide perceived benefit to consumers while effectively differentiating their product and companies on-line. Frequently, sales decisions are made without anyone visiting the home of the consumer or having any face-to-face contact. Whether over a counter, in a home or through sophisticated media; the focus is on communicating with the customer, asking questions, determining need, and presenting relevant information that demonstrates how the product or service benefits them. u

Roger McCoy is a certified franchise executive (CFE) and a senior franchise business consultant for Direct Energy. He has been involved in HVACR contracting since 1994, franchising since 2004 and is a U.S. Army Veteran. For additional information, visit clockworkhomeservices.com.

When objections do occur, relax and ask questions. The proper questions may www.hvacrbusiness.com

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PROTECT YOUR COMPANY Five reasons every small business needs an employee handbook EXTRA INFORMATION

JOB RESPONSIBILITIES

FAIR TREATMENT

FEEDBACK

COMPANY EVOLUTION

BY MARK SINATRA

n the corporate world, employee handbooks are pretty ubiquitous. Nearly everyone who starts a position at a large company is given a booklet (or at least a thick packet) to peruse on their first day at the office. When it comes to small businesses, however, employee handbooks may be completely absent — job parameters and company policies are simply conveyed through word-of-mouth. And that can lead to problems for both employees and employers down the road. If your business is currently lacking a handbook, here are five reasons you should seriously consider putting one together.

EXTRA INFORMATION A handbook will cover things not mentioned during training. An employee handbook is NOT a viable substitute for a thorough, engaging orientation program. You should not simply hand new hires an employee handbook, tell them to read it and then hope that they commit the whole thing to memory. That said, the handbook can catch

HVACR BUSINESS APRIL 2018

The handbook should also clearly state what the penalty is for breaking these rules, whether it be as minor as a verbal/written warning or as severe as termination of employment. details that may fall through the cracks, and compensate for different trainers inadvertently emphasizing one area or another. The handbook can also cover topics in far more detail than a training program might have time for, as well as empower new hires to seek out answers themselves instead of asking coworkers or supervisors every time they have a question.

JOB RESPONSIBILITIES Handbooks (should) describe job responsibilities in a clear, concise manner. If you’ve ever had to reprimand an employee for not fulfilling one of his/her duties and received a reply of, “I didn’t know I was responsible for that. Nobody told me that was my job, too,” then you can relate. While you should always outline

specific job expectations during a prospective hire’s interview(s) to avoid their being caught off-guard during their first few months of work, the handbook can reinforce your company’s rules and expectations for all new (and existing) employees. If an employee claims that something is not “part of their job description,” you’ll be able to clarify and point to something in writing. It may also give your employees a way to stand up for themselves against overbearing supervisors or coworkers who would take advantage of their generosity or naiveté.

FAIR TREATMENT Handbooks can help facilitate fair treatment for everyone. Perhaps your company’s handbook clearly states that

employees are not allowed to do certain things: access social media websites on work computers, take/make social calls while they’re on the clock, dress in an overly casual manner, mosey into work 30 minutes late, etc. The handbook should also clearly state what the penalty is for breaking these rules, whether it be as minor as a verbal/ written warning or as severe as termination of employment. This helps ensure all employees are held to the same standards of behavior and that company policies are applied evenly across the board. It can also help defend higher-ups against claims of favoritism or discrimination.

FEEDBACK One of the keys to fostering a great work environment is to keep an ear open for employee comments or suggestions. If your employees know their feedback is taken seriously, they’re far more likely to feel like valued members of the business. continued on page 19

www.hvacrbusiness.com

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Writing an employee manual can be a bit tricky if you’re starting from scratch, but a certified PEO can help immensely in this regard.

continued from page 16

The handbook can be a great jumping-off point for feedback conversations; don’t be afraid to ask an employee, “What do you think about the handbook? Are there any revisions to the text or formatting that you’d suggest?” Make it clear that, while you’re not looking for comments on company policies at this moment in time, you want their opinion on how the handbook could better convey information (“Let’s put a map of the building in the disaster preparedness section so that evacuation routes are easier to visualize!”) or offer more detailed explanations (“Could the section on dress code actually define what we consider ‘business casual?’”). You may be surprised by the answers you receive.

COMPANY EVOLUTION Handbooks are a living history of your company’s growth and evolution. In case the previous section didn’t make this obvious: employee handbooks should not be

Handbooks are great tools for bridging the gap between employees and employers, and they’re a way to ensure that everyone is on the same page when it comes to policies and expectations. considered sacred, irrefutable documents that must remain constant and unchanging for as long as the company exists. In fact, you should really review (and, if necessary, revise) the handbook at least once a year in order to keep up with current labor and tax laws, your company’s shifting role and/or focus in your industry, and any unforeseen issues that will (inevitably) crop up as your company expands and your employees change. The handbook and its previous editions can essentially serve as a reminder of what kind of business your company was when it started out and how it has evolved since then. It may even encourage you to “stick to your guns” in a fast-paced — often

cutthroat — world. Lastly, some employees may take pride — or at least see the humor — in pointing to a line of the handbook and saying to a new team member, “Yeah, I’m the reason we’re not allowed to download Spotify on to our work computers.” That’s a unique way to facilitate camaraderie and a sense of togetherness for employees. Handbooks are great tools for bridging the gap between employees and employers, and they’re a way to ensure that everyone is on the same page when it comes to policies and expectations. They’re also a living record of your company and how it has changed since its inception.

The bottom line: an employee handbook is a bit like a compass. You — and your employees — probably won’t need one on a daily basis, but they can provide much-needed guidance in certain situations … and possibly save your bacon when you’re in a really tough spot. u

Mark Sinatra is CEO of Staff One HR. Before joining Staff One HR, Mark co-founded Gordian Capital, a private investment company that focuses on making long-term investments in lower middle market companies. For additional information, visit staffone.com.

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Inside

HVACR BUSINESS APRIL 2018

CUSTOMER SERVICE

BY JIM BASTON

Add Value to Your Customer Relationships

erhaps one of the greatest opportunities for field service organizations is to engage their field teams in business development activities. What better way to increase revenues without adding to overheads?

You should view your technicians’ proactive efforts as a service rather than a selling activity.

If proactive business promotion by your technicians is perceived as a selling activity, you may be reluctant to tell your customers what your technicians are up to. That is because promoting products and services for the purpose of increasing revenues is not a very compelling story.

It is just a matter of encouraging those technicians to make recommendations to your customers and providing them with the skills to help them engage your customer in conversation. How you view the role of the technician when they engage in proactive business development is important. You may regard the promotion of products and services by your technicians as a selling activity that is conducted in addition to the service work that the technician is there to perform. If you do, then I encourage you to reconsider this perspective. I suggest that you view the technician’s proactive efforts as a service rather than a selling activity. As a service activity, it is an integral part of the overall service that the technician provides. It is as important as the technician’s ability to troubleshoot, repair and maintain the equipment. Here’s why a service perspective to product and service promotions is important.

PRODUCT, SERVICE PROMOTION PROVIDES VALUE If product and service promotion by technicians is a service, then the underlying reason behind making recommendations must be focused on improving service levels. The logic of this strategy becomes, “How can we leverage the expertise and proximity of our field service personnel in a manner that profitably serves the customer so well that they would never think of going anywhere else?”

HVACR BUSINESS APRIL 2018

knowledge and expertise to identify opportunities that will benefit the customer, we can use this strategy as a significant business differentiator.

If you recognize that the proactive efforts of your field service team is a service activity, however, then you can position this as a positive for the customer and use it to differentiate your business from your competitors.

When you approach promotion from this perspective, we avoid making recommendations for the sake of “selling” and focus entirely on promoting only those products and services that we think provide a measurable benefit for the customer. Business promotion as a service is consistent with the technicians’ view of their role. If you see business promotion by your technicians as a selling activity, then it can be perceived as an added activity that is required in addition to their role of servicing the equipment. Unfortunately, when this happens, technicians may be reluctant to embrace this initiative. They see themselves as service people, not sales people. If you position business promotion as an integral part of the service provided, however, all of this changes. Technicians provide great value when they use their knowledge and expertise, along with their understanding of the goals of the customer to identify steps that the customer can take to help them achieve their business goals.

This is a service and, by helping your technicians recognize this fact you can position this activity as integral to the work that they do.

BUSINESS PROMOTION AS A SERVICE When a customer is confronted by a service technician who is perceived as selling, then they get confused because the technician is supposed to be there to serve and not sell. The bond of trust between the customer and the technician starts to erode. When the technician only makes recommendations that they personally feel is in the customers’ best interest and can demonstrate how their recommendation can help the customer achieve their goals, however, the customer will appreciate their efforts and recognize those recommendations as part of the service that they are receiving.

Developing a strategy to engage your field service technicians in proactive business development activities is not only a good strategy to increase revenues without adding to overheads, but also an excellent approach to develop a higher level of service that differentiates your company from your competitors. Help your technicians see the value of their efforts as a service, provide them the guidance and the skill set to be successful and let your customers know how their proactive efforts will help them achieve their goals. u

Jim is president of BBA Consulting Group Inc., a management consulting and training firm dedicated to helping technical service firms leverage the untapped potential in their business-development efforts. For additional information, visit bbaconsulting.ca.

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STRATEGY

BY KEN GOODRICH

Scale Up Through Acquisition

rowing your business via acquisition can be among the most rewarding ways to scale swiftly. Conversely, it can be the biggest business mistake you make. To be successful, there’s a refined, proven approach that can propel your brand to the promise land.

There are two main buckets to finding, choosing and closing a successful acquisition:

Most times with customer acquisitions, unfortunately it doesn’t make sense to keep most of the employees. The business is underperforming for a reason. Whether it’s poor leadership, morale or a lack of employee motivation — or all of these — the basic elements of a successful operation aren’t working.

• Customer acquisition — where you are interested in the company’s lead list and existing customer case. This is probably also an organization that is struggling to remain relevant and competitive.

Companies to look at for a strictly “consumer acquisition” include those that are underperforming or en route to bankruptcy. Sometimes, the owner is simply ready to throw in the towel and have few appealing assets other than the phone number, website and lead list with a database of customers. With this type of acquisition, you can add to your customer base at a quarter of what you would with conventional, cold leads.

IT’S A SMALL WORLD One of the most common questions that arises is, “How do I find potential HVACR acquisition targets?” If you’re plugged in and connected to your network of industry influencers, such

HVACR BUSINESS APRIL 2018

Often, it’s called “the law of magnetism.” Like people tend to end up near like people. People who are driven to play the ‘A game,’ people who are driven to success try to make sure that they find their way to success. That’s the pathway to successful integration.

WHO STAYS, WHO GOES?

• Strategic acquisition — when you buy an organization with solid management, growth prospects and a history of profitable revenue generation.

A company that make sense for strategic acquisitions could be larger or smaller than your business, but are typically profitable, has sound management and tenured employees who will stay on post-acquisition. In the end, this helps grow your investment into one that makes sense over the long-term.

people, both sides of the equation to do what’s best for the good of the whole.

as trade associations and industry events, these types of opportunities are probably right under your nose. When you know the players in your industry, and this includes those rising and falling, your targets become pretty clear, pretty fast. Once you start buying businesses and getting a reputation for it, they’ll start coming to you.

TO PAY, WHAT TO PAY When evaluating potential additions to your business, rarely does it make sense to look at whether the company owns their own building, how many fleet vehicles they have and other hard assets. Generally, these are in poor condition and have little value. Since, in most cases, you’re buying the customer base, you want to evaluate how many successful touch points — booked appointments, revenue in the bank — the company has had in the past year or two.

Knowing you’re likely going to lose a certain amount of customers in the transition, a safe tactic is to take their stated customer list and halve that for a realistic, post buy book of business. From there, it’s basic business math to understand the revenue generated from a typical customer. Rarely does it make sense to look at revenue, because in most cases these companies are underperforming — hence the attractiveness to acquire them.

THE STRATEGIC ACQUISITION While the approach to customer acquisitions is straightforward, the strategic acquisition is different altogether. Central to the puzzle: how can you integrate two management teams together? This is where clear, respected leadership is critical. You need leadership to influence, so you have to be able to influence these

Underperforming HVACR businesses have underperforming people and to be successful you need a prolific environment. It’s important to think about having an environment of award and achievement. When you have a high level of accountability, most people who have worked in an underperforming business don’t want that.

POST-ACQUISITION INTEGRATION Sharing the fact that the new direction of the company will include opportunities for everyone will motivate employees to put their best foot forward. It’s a good idea to let the world know about your acquisition — internally and externally. Employ public relations and social media tools and expertise to share the news. It’s critical that current vendors, partners and others know about your move. It is also a good opportunity to make the competition sweat a little. u Ken Goodrich is owner and CEO of Las Vegas-based Goettl Air Conditioning. For additional information, visit goettl.com.

www.hvacrbusiness.com

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PLANNING

BY BOB O’HARA

Set Goals When Planning Your Exit Strategy

or an owner, leaving a business behind after years of dedication can be an emotionally charged and financially challenging transition. Exiting a business requires as much care and planning as starting one, so it’s wise to set realistic goals for the process.

The ultimate goal of exit planning is for the owner to thrive without the business, and for the business to continue to be operational and financially sound.

The vision should make you, the owner, excited about the future so much so that it drives you to take the necessary steps to begin planning for the exit. Remember that the ultimate goal of exit planning is for you to thrive without the business, and for the business to continue to be operational and financially sound. The vision should not only be for “what happens after I leave my business,” but you should have a vision for how you leave your business. This “how vision” should include your transition team as well as a team of advisors who have your best interest at heart. Your team of advisors should have the knowledge and expertise to manage the technical and professional tasks necessary to properly and smoothly exit your business. You should continually ask your advisors “how do your planning strategies achieve my end vision?” Realistically there are five ways you can leave your business:

HVACR BUSINESS APRIL 2018

• Do I build the business to increase its value, thereby eventually increasing its selling price?

WHAT WILL I DO WITH MY LIFE AFTER BUSINESS OWNERSHIP?

Understanding how you’ll leave the business is important to achieving business independence. You are in control, and as the CEO — the Chief Exit Officer — you will lead your team through the transition. You must have complete confidence in this team, as they will ultimately help you succeed in reaching your personal and professional goals. You define the vision for how the process will happen and where the business will go from there. Once you’ve identified your vision, you must clearly relay the details of the vision to anyone and everyone involved in the development of the transition.

• Do I postpone the sale or exit, and focus on saving more of the profits while building assets outside the business?

Have you made a plan for your post-ownership life? This is probably a drastic change to your personal and family life, and should not be taken lightly. How will you fill your time? Will you still feel fulfilled and useful?

1. Sell to a third party 2. Sell to a family member or co-owner 3. Sell to key employee(s) 4. Die owning your business 5. Liquidate the company You likely won’t choose No. 4, but you can still plan for it — or any one of the options. Here are four important questions to ask yourself when considering your business independence.

HOW MUCH LONGER DO I WANT TO WORK IN THE BUSINESS? As the business owner, think about what is motivating you to leave the business, and what is the timeframe that works for the business, you, your family and the employees. Consideration should also be given to the clients or patrons, in order to leave it healthy and functional.

for a while, and it has become like family, albeit at times extremely needy and time-consuming family! Reflect on who would carry on your business values, who would be most likely to make the business continue to thrive, and who would be best for your employees.

WHAT IS THE ANNUAL AFTER TAX INCOME I WILL NEED? Take into account how much you will need to maintain the lifestyle you’ve enjoyed. Have a professional appraise the value of the company to determine the selling price. A financial professional can also help you determine how the sale of your business will affect your personal financial well-being. If the selling price and net after tax amount is not enough to sustain your lifestyle, you may have to weigh your options.

TO WHOM WOULD I LIKE TO SELL/TRANSFER MY BUSINESS?

• Do I stay and continue working in the business, but with a plan for when the day comes that I can afford to leave/ sell?

Think seriously about who would be the best new owner of your business. Chances are you’ve owned the business

• Do I take what I can get for the business, and adjust my post-ownership lifestyle to live within those means?

You should have a plan in place — give yourself some well-earned downtime, but have some alternative activities lined up to occupy your time, keep your mind and body active, and make sure you feel like you still have purpose. In addition, think about what relationships you’ve built over the years of business ownership that you’ll want to maintain. How may those relationships change if you are no longer a business owner? What steps do you need to take to continue them? Spend time developing a plan to invest in transitioning those relationships into your post ownership life. Identifying your goals and working toward achieving them will give you focus through a process that can otherwise lead you in several different directions. Don’t lose sight of your definitive goal — to live the meaningful and financially sound life that you have envisioned for yourself. u

Bob O’Hara is president/CEO of O’Hara & Company, founded in 1995 to address the growing need for entrepreneurs to create a comprehensive exit strategy for their businesses. For additional information, visit exitplanning-edu.com.

www.hvacrbusiness.com

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HVACR BUSINESS APRIL 2018

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fter spending several years consulting with a local HVACR franchise in Lake Havasu, Ariz., Larry Thornton formed a partnership with the owners and moved there in 2000 with a plan to take over the business. “The promise was to follow my planning and in five years, they’d retire,” Thornton remembers. “I started doing training and acquisitions and opened our second location within six months.” When the opportunity to join Clockwork, Inc., a Direct Energy® company, as a One Hour® franchisee, Thornton jumped at the chance. “Everything was going great; we were doing wonderful,” he says. “By 2004 we had left our previous franchisor and were totally committed to One Hour with three locations.” Thornton’s biggest success came when he eventually bought his partners out and fully embraced the One Hour franchise model. Today, Thornton is a franchisee-owner of seven One Hour and Benjamin Franklin Plumbing® stores, 21 franchise territories, 80-trucks on the road (with 20 more trucks coming this year). “The company is growing super fast and is profitable,” Thornton says. “And it grows without too much involvement from me.” HVACR Business spoke with Thornton about growing his business as a One Hour franchisee.

How important is it to have the right management team? I’ve been working to get to this point since I bought the company. It’s always been a plan, but we had to get a management team in place and I’ve gone through a few people who were not a fit with the culture or the other members of the team. Now we’ve got a team that’s solid and they work together really well.

HVACR BUSINESS APRIL 2018

LARRY THORNTON Franchisee, One Hour Heating & Air Conditioning Lake Havasu, Ariz.

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BUSINESS INSIGHTS: Franchising is brought to you by Clockwork, Inc. — A Direct Energy company

I really only communicate with the two general managers because I don’t want to interrupt that chain of command. They have management meetings every Tuesday and I get a report from them about what happened in the meeting. I also get all the daily management reports every morning before 9 a.m. I think they do better without me (laughs) … based on our growth last year and the first two months of this year… and I wasn’t there!

What is the biggest benefit as a franchisee? The number one thing One Hour gives me is support and training. Their affiliate, Success Academy™, also has an online component, which features a general education bundle as well as safety videos and videos on other topics. Once every single person goes through this set of classes, they actually send trainers to our office for additional, inperson education. We’ve been taking advantage of that and building relationships with the leadership of Success Academy to the point where they’ve helped us conduct management retreats. They really helped me get my people trained. I also get visits a couple times a year from a consultant who specifically works with my management team.

it simply didn’t work and we weren’t as profitable as we should have been. After I bought them out, I said, ‘We’re going to do whatever One Hour says and we’re going to do it without question.’ We follow the system.

Do you have plans to continue expansion? Yes. There are territories adjoining mine that I’d like to add. There are 4.8 million people in Phoenix and another two million in Las Vegas, so I’ve got enough territory to expand. My goal was to grow more than two-thirds of where we are today and I believe at the rate we’re going, we’ll probably get there sooner.

How do you recruit the right people?

Even though you’re a One Hour franchisee, do you still run the company your way?

In rural Arizona it’s a lot more difficult than it is in the big cities. We’re starting to get a lot of younger kids in and we’re putting them through the apprentice program. But this is another thing Success Academy through its relationship with Pearson Learning Solutions has helped us with. It enables us to test our applicants, find out where they’re at and put them through this online technical training to increase their technical skills. In the rural towns, we do a lot of recruiting over the Internet and we do lots and lots of phone interviews. We hire people sight unseen.

Yes, but the secret to success is consistency and following the franchise system. One Hour allows anybody to be successful if they simply follow the system. When I had business partners, they wanted to tweak everything, but

It’s always about employees first here. The first rule of management is to create a happy work environment, happy employees. Then, the customer is the second person. We have a very employee-focused culture. u

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LARRY THORNTON LAKE HAVASU, AZ Franchisee

When I considered a better bottom line... I realized that making positive changes to the ‘bottom line’ was a lot harder than I thought. I’m good at what I manage, but I’m not the master of it all—I needed some help. It was after talking with One Hour that I saw real options—solid solutions that applied to me. And it all started with just a conversation...Shouldn’t you be talking? 866.370.8302

The information presented in this advertisement is not intended as an offer to sell, or the solicitation of an offer to buy, a franchise. It is for general information purposes only. An offer is made only through delivery of a Franchise Disclosure Document that has been registered with and approved by the appropriate agency in your state, if your state requires such registration (unless an exemption applies). If you are a resident of, or wish to acquire a franchise to be located in a state requiring registration, we will not offer you a franchise unless and until we have complied with applicable pre-sale registration and disclosure requirements in your state. One Hour Air Conditioning Franchising, L.L.C., 12 Greenway Plaza, Suite 250, Houston, TX 77046. Call 1-866-370-8302. ©2017 Clockwork IP, LLC. All Rights Reserved.

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10/16/17 2:54 PM

20QUESTIONS

>> with MIKE SCHWARTZ

We sat down with Mike Schwartz, CEO of Daikin Applied Americas, at the AHR Expo in Chicago. Schwartz discussed refrigeration and the environment, leading a large, diverse company and how contractors can differentiate themselves. 1. Where are you from? I’m from the Midwest originally. I went to Iowa State University on a football scholarship and earned my engineering degree there. 2. Where was your first job? It was a company named BOHN, a commercial refrigeration and air conditioning company. I was offered a position in their management trainee program in their international department. My goal was to make it through that program and possibly get into international business, which intrigued me. 3. Can we assume you made it through? Yes, I was there for nine years, and then the business was bought by Lennox and I was with them for the next 15 years. I had great opportunities and with each move helped manage larger and larger businesses. 4. How did you come to work for Daikin? When I left Lennox, I decided to try something different, and was recruited into the private equity sector managing a portfolio company. I did that for five years and got a call from an executive recruiter. The position sounded interesting and something at which I thought I could excel. 5. What was attractive about the opportunity? What interested me most about Daikin and the opportunity was the company’s complete dedication to technology. They’re committed to making significant investments not only in the technical elements of R&D, but also in the people who really drive those activities. They also had a clear goal and objective. There was no debate. It was simply to be number one in the world in HVAC. Those two things cemented it for me. 6. Trane and Mitsubishi recently announced a joint venture — do you expect trends like that to continue? It’s clear the Japanese, South Korean and Chinese companies have put a tremendous amount of focus, energy and resources behind VRV and mini-split technology, primarily because it’s the technology of choice outside the United States. I’m sure they looked at us, and the success that we are having, marrying conventional split system products with VRV and they likely thought ‘we need to more effectively compete in that arena.’ 7. Why is the topic of refrigerants so polarizing? Refrigerants are a political lightning rod. The prior administration had an objective to lower the environmental impact with GWP refrigerants through the SNAP process, in some cases using a hammer to try to drive the strategy through. The current administration has a different perspective on government intervention as it relates to environmental legislation.

HVACR BUSINESS APRIL 2018

8. What is Daikin’s position? We have a strong belief in the importance of being a good environmental steward. We understand the impact we have relative to our carbon footprint — with our manufacturing and in the products we produce and how those impact the environment. We’ve set a goal for our business to achieve a 90 percent reduction in our CO2 footprint by 2050. 9. What’s your leadership philosophy? I’ve been asked before and it’s never a simple onedimensional answer. Number one is having great character and a strong moral compass. People need to know who you are and what you stand for. Another part is fundamental: lead by example. One of my favorite parts of leadership is coaching. 10. What attracts people to some companies and not others? People want to join an environment where they can succeed. They have to understand the organization has a compelling proposition in the market and that others who surround them are dedicated to the cause and a unified team. They also want to see the company has the resources to do what needs to be done. 11. Executives are demand-rich, time-poor — where would you like to spend more time? I would enjoy more time with product-creation people. They’re the ones who truly look at doing things differently to create new services, new technologies, new products. They are the lifeblood of our business. 12. What is your greatest responsibility to the company? Providing clear direction and leadership for the organization. People want confidence in where the business is going, how we’re going to get there and how they fit into our strategy. If they can’t see how they support the strategy, then their hearts and souls are on the sidelines and that’s a huge waste. 13. How do you hold people accountable? We developed a management system by which we set individual objectives for all of our salaried employees. We evaluate those formally twice a year. We follow up on these KPIs formally and informally throughout the year.

14. What’s the best business advice that you have received? When I was young I worked for a guy who had an interesting management style. You’ll understand when I share the quote: ‘You’re going to have opportunities for leadership, just don’t screw up and you’ll be fine.’ (Laughs) 15. What do you look for in the next generation of leaders? Character, integrity and a willingness to take risks when opportunities present themselves. You have to be willing to step in and take a calculated gamble, make an investment, possibly make a risky decision. Personally, it’s having the confidence in the people who I’ve surrounded myself with to carry the ball. 16. How did you assemble your management team? It’s a bit of an art form. Many candidates can check all the boxes — experience, education, etc. The intangibles, however, are really important and that’s where the art is from an interviewing perspective. Chemistry is vital. 17. When do you get involved with the candidates? If it’s a direct report I’m involved from the start. Positions that a level or two removed from my reports, I don’t get involved with until we have final candidates. I want to be involved in these decisions because these are the individuals who will ultimately move into our executive positions. 18. Do you have any favorite interview questions? No, but I tend to ask people to tell a story about a disappointment and what they learned or a success and what made them proud of the accomplishment. Those types of questions tell me some things about how they are wired and what drives them and what doesn’t. 19. What is your favorite internal communication tool? As hard as it is, sometimes my favorite is a face-to-face meeting. In my group, we have 3,500 people and regularly I have an all-hands-on-deck teleconference to share the state of affairs and how we’re doing. Additionally, I spend 70 percent of my time going into our plants, going to our sales offices, and just talking to people, listening to what issues and concerns they have. They appreciate the leadership out in the field. 20. Do you have management advice for contractors? I think it’s important for contractors to differentiate themselves through technology, service, dependability or something else. Give yourself the ability to step above the fray and explain why you’re better than the other guys.

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3/19/2018 9:36:25 AM