Outsourcing: More than Meets the eye
|By Igin Staff|
by Alan Ruskin and Mary Elizabeth Williams-Villano
To outsource or not to outsource? That is the question for many landscape contractors. By “outsourcing,” we’re not talking about India-based call centers, but about subcontracting, farming out certain tasks to other contractors.
It’s more common than you might suspect. For many green industry professionals, outsourcing certain jobs or parts of jobs is a way to assure quality work, good client relationships and maintain healthy profit margins.
The decision to outsource involves a lot of factors, from the size of your operation, to you and your staff’s expertise and preferences. Maybe you’re a Michelangelo of design and build, but you know little about irrigation, or don’t enjoy that part of the business. Every contractor needs to go through his own process to determine what works best for him and his company.
However, most clients—particularly residential homeowners—prefer to deal with one contractor who has control of the entire operation, from design/build all the way through to maintenance. They feel comfortable knowing that one contractor is on top of it all. If you do use subcontractors, you need to be the point person with clients at all times. All contact should come through you.
Jeff Korhan, now a green industry social media consultant and author, is the former 20-year owner of a successful landscape company in Plainfield, Illinois. As such, he’s seen both sides of the in-house/outsource question. His company, started in 1988, originally outsourced all of its irrigation work because, as Korhan explains, “We simply did not have the experience in it, and wanted to remain focused on the overall design and construction of projects.”
As the company grew, he gradually brought everything in-house to have more quality control. “Irrigation was getting very competitive. As a result, both pricing and quality were going down. So we brought it back in-house to get better results.”
However, Korhan couldn’t ultimately make in-house irrigation work for him. “Irrigation may seem like a ‘project’ but it’s really not. It’s a ‘process,’ more like maintenance than design/build, having its own rhythms and need for consistency. The problem was efficiency. We just didn’t have enough volume of irrigation work to be efficient and profitable at it.”
So Korhan turned once again to outsourcing, this time with excellent results. He says that applying his acquired experience to choosing new subcontractors proved to be the winning formula. These relationships felt more like partnerships. “It’s almost like they were invisible,” he says. “The client didn’t have any sense of separation between the contractor and the subcontractor.”
One of his early jobs with an irrigation subcontractor involved some difficult challenges with water pressure on a housing development. “We needed to balance the pressure front and back,” said Korhan. “These were large homes on relatively small properties, so there were huge distances between the front and back lawns with almost no side yards, and significant differences in sunlight exposure,” said Korhan. “It took a combination of drip and small-spray irrigation to get the job done.”
Korhan cautions that there can be some problems with outsourcing, such as crews not showing up when you need them, and more importantly, when customers are expecting them. A problem he experienced had to do with an irrigation system one of his subcontractors installed that didn’t accurately deliver the correct amount of water where it was needed.
Educating his clients was a fundamental part of the process for Korhan. “Half of what we did (and what the customer was investing in) was underground, including well-designed irrigation systems, quality plantings in well-drained soils, and the foundations for patios, walls and other structures, so it was important to educate customers about the things they couldn’t see. When they felt well-informed about what was going on underground, they had more confidence in us, and were therefore more willing to pay the price for quality work.”
Now let’s look at a successful subcontractor, Michael Cook, who achieved success by finding a niche and filling it. The company he owned, Land Escapes, focused on landscape design plans. (Land Escapes was so successful that it was bought out by another company. Cook is now director of global business development at Callison, LLC, an international architectural firm based in Seattle, Washington.)
“Many contractors have good design ideas of their own,” says Cook, “but have no way of communicating the visuals to their customers. That’s where we came in.”
Cook’s team would come up with a plan based on the property survey. The contractor would fax or e- mail him a copy of the survey, and within 45 minutes Cook would send him a sketch. The contractor would look it over and send it back in a postage-paid packaging tube provided by Land Escapes. Within five days, Cook would complete the entire project.
“First,” said Cook, “we’d scan the drawing with a large-format scanner. Our design team would review the drawing. Sometimes the client would ask us to embellish the design, or we would ask them to send photos to communicate their ideas. Next, the design team would sit down with the drafting team to discuss the intricacies of the particular project. Then a separate supervising designer would review the plans. We’d send the preliminary plans for approval, if necessary (only about 15 percent of our clients requested this step).”
“All the work was performed in a CAD (Computer Aided Design) environment, but we would embellish the plan by having our artists add hand-drawn details,” said Cook. “This brought a nice flair to our work. We then would print the project out on presentation-quality paper. Our illustrators would handcolor it and add further artistic touches, and finally we would wrap it all up in an attractive cellophane package, complete with a beautiful rose.”
When the contractor would present the plans to a client, he had no idea that they had been created by a subcontractor. “And that’s the way we liked it,” said Cook. “Contractors like customers to feel that they are handling all phases of the operation in-house, so confidentiality is important.”
“Contractors are also concerned about guarding their plans, so we didn’t divulge names of other companies we worked for, and if we drew up plans by more than one company for the same project, we did each one in a different fashion,” said Cook. As a result of measures like these, Cook’s company was the best kept secret in the industry.”
Cook credits author Michael Gerber for much of his success. Gerber’s book, The E-Myth, helped Cook to understand that a business owner needs to focus more strongly on running the company, rather than getting too involved in the actual work of the business in a hands-on sense. “The idea is to run the firm, not do the work personally,” This idea fits in well with the concept of outsourcing.
Cook feels that a strong advantage of outsourcing is the consistent quality and uniformity that a dedicated subcontractor can provide. The tradeoff is that the contractor has to learn to give up a little bit of control. Cook’s answer was to get the contractors “to look at us as their own design studio, absolutely committed to their success and confidentiality.” That credo worked well for him at Land Escapes, and word-of-mouth referrals forestalled the need to advertise.
Another company that outsources to its advantage is Yardmaster, Inc., in Painesville, Ohio.
The company founder, president and CEO Kurt Kluznik runs its multiple branches. Kluznik is also a former president of ALCA (the Associated Landscape Contractors of America, the predecessor to PLANET, the Professional Landcare Network). Yardmaster’s main branch focuses on maintenance and construction and outsources irrigation, as do two of its other branches. The remaining branches keep irrigation in-house.
Kluznik feels that “irrigation is one of those items that often seem to be a last-minute thing—the window of opportunity is limited, so it’s useful to have subcontractors who can throw a bunch of people at it.” He feels that the problematic part of irrigation is peak demand and fluctuating schedules, so “it’s a challenge to find competent people to do the work.” Kluznik uses half a dozen irrigation subcontractors, one of whom gets about 50 percent of the work.
“It makes a lot of sense to outsource irrigation,” says Kluznik. “It’s a fairly complex operation, and you need to be careful in selecting your irrigation partner. You want someone who can come through in a pinch.”
Kluznik has changed irrigation partners as time has gone by. “While it may not be the largest part of the overall operation, irrigation is very key. The irrigation people can make or break a job; you want somebody who’s not going to let you down when you’re under pressure.”
He also feels that it can be risky to bring irrigation in-house, “because you need dedicated and reliable people that possess the right skills. It requires a lot of technical ability, and it’s challenging to find good people. That’s why the safest bet is to find a good subcontractor, and even pay a premium if necessary.”
Being selective about whom you work with can go both ways. Jerry Grossi, of Spartan Irrigation in Lansing, Michigan, is careful about the contractors he provides irrigation services for. About 20 percent of his business is subcontracting, usually involving installing the entire irrigation system for the contractor. “We’re discreet,” he says, “we pick and choose who we work for. One thing that it’s prudent to be aware of is the lien laws. If you’re not working directly for the customer, you need to know the state regulations and you also want to know that the contractor you’re working for knows them as well. You don’t want to have payment problems down the line.”
Outsourcing, while perhaps infrequently discussed, is alive and well in the green industry. Whether or not you use subcontractors or become a subcontractor yourself will depend upon you and the needs of your business. Either way, it can be the subway to success.