Warner knew the company was in jeopardy. He had studied at Harvard's Graduate School of Business Administration, in the Owner/President Management Program. His professors there preached the primacy of the well-guarded niche. "I realized we didn't have a niche anymore," Warner says. "We were doing a little bit of remodeling and building renovation. We worked for some property managers and a small number of homeowners. We weren't focused, and without focus we weren't going to be really good at anything."
* * *
Warner saw that his only option was to engineer a massive shift to the previously shunned residential sector. It wouldn't be easy. The area's yellow pages listed hundreds of plumbing and HVAC companies, mostly mom-and-pop operations. Though Warner Corp. is huge, few homeowners had considered its services, so strong was its commercial image.
But Warner knew that the switch could prove lucrative. Commercial-property managers demand discounted labor rates, and many of them supply their own parts, canceling the contractor's opportunity for margin-fattening markups. And commercial accounts receivable often run to 90 or 120 days. Residential work is more profitable. There is no discount on labor, contractors sell parts at a substantial markup, and customers usually pay immediately. But individual jobs are small. So, to keep revenues up, there's an ongoing need for promotion and advertising.
Still, Tom Warner liked his chances. With 18 branch offices in and around Washington and a fleet of some 200 vans, the company was nicely positioned for residential work. Warner's memorable Superplumber TV ads, which first aired in 1990, were establishing the company as the salvation of troubled household plumbing. Sporting a bizarre getup -- red tights, a red cape, and a big yellow W on his chest -- Warner has carved out an entertaining, congenial, and trademarked identity for himself. Last January, when he launched an electrical division, Warner filmed new ads, this time with an "Electric Man" alter ego. His ensemble: a silver bodysuit and a homemade helmet with cardboard lightning bolts sticking out of it.
Ads alone, though, don't capture customers. Warner needed to mobilize his mechanics as a sales force -- as emissaries promoting the company and selling furnaces, heat pumps, water purifiers, and service contracts.
But many of them balked. "It's an ego thing. Guys told me, 'We're plumbers, not salespeople," recalls Gary Sherrill, a 20-year Warner veteran who manages the branch in Arlington, Va. "That's not just here, it's industrywide. They were uncomfortable selling, especially about talking figures."
Warner's residential base started to grow, but not enough to compensate for the lost commercial work. In the company's fiscal year 1992, which ended in April of that year, revenues totaled $16.3 million, way shy of 1988 levels. Profits were a dismal 4.3%. To make the market switch successful, Warner began to see, he'd need help.
That summer Warner heard consultant Bill Harrison address a convention. His speech about total quality management (TQM) impressed Warner, who hired Harrison to introduce TQM to the troops. Harrison held advanced degrees in both management and behavioral sciences, and his consulting forte was the building industry. Given the stakes, his $100 hourly rate seemed reasonable.
For starters, Harrison brought the 18 branch managers together for seven two-hour sessions spread over 14 weeks. "These blue-collar guys don't mince words," Harrison says. "There's very direct communication, no games. They tell you exactly what they're thinking." Along with TQM, he focused on management skills -- effective hiring, accounting, and dealing with diverse personalities. The branch chiefs, mostly master technicians, were good at technical problems and job estimates but had never been schooled as managers, though they typically had 10 to 20 people under them.
Tom Warner's commitment to the program was complete. He attended every class. And between sessions he visited the branches, where he paid particular attention to the wall charts Harrison had provided for tracking the changing ratio of residential to commercial work. Warner wanted to push the residential side to constitute at least 60% of business. And to keep tabs on trends, he required that each day's sales results be transmitted by computer to him in downtown Washington.
Next Harrison turned his sights on the administrative "inside" managers at each branch. They kept the satellite offices functioning, handling the nitty-gritty of invoices, inventory, phones, and computer work. Their five classes emphasized building corporate conformity.
With its branches geographically dispersed and communication spotty, the organization had a maverick, seat-of-the-pants feel. Each manager ran his branch like a fiefdom. "It was obvious that customers wanted consistency from Warner," Harrison says. "They want to know what to expect -- like going to McDonald's. Part of my role has been to develop 'the Warner way' of doing things."
* * *
The branch chiefs and the inside managers were doing well in their TQM studies, but Warner was still anxious about stagnant sales. As he cast about for a way to stimulate residential sales, he recalled how one of his plumbers had started, by himself, to cover Reston, Va., then an emerging suburb of Washington, in 1968.
"Then I moved to Reston. I'd bring materials he needed to my house every other day, and he'd pick them up," Warner says. "He worked independently for six or seven years. He solved all his complaints and did his own estimates, and if a job was more than he could handle, he'd call for help. Eventually, he was so successful, we put a branch office there.
