Strategies for dealing with adversity: Contractor's Corner

By Dave Stafford

When you’re in management for a flooring company, you’ll be confronted with a myriad of problems on a daily basis. Some involve complaints that allege product or service defects and, if left to fester, may lead to loss of reputation, tens of thousands of dollars in damages or outright bankruptcy. If there is a sign that should be posted, it should read, “Treat every complaint as a priority and as an opportunity to demonstrate effective, efficient customer service.”

I recently had an issue with a national insurance company that will illustrate what not to do. I had to go through three levels of telephone prompts—“Press 1, 2, 3 or 0 for an agent”—and after being assured that “your call is very important to us” 15 times over 20 minutes, I was disconnected. Fuming, I then used a service called Fast Customer (there’s an app for that), which maintains “back office” customer service contacts. I got a call back from the insurance company in four minutes. I explained what I needed, and they said, “I need to transfer you to customer service.” Please don’t do that, I said, I just spent 20 minutes on hold. “Well, you could contact us online at our website.” I was transferred to customer service and gave up after waiting on hold for another 17 minutes. I then tracked down the website and sent a blistering note outlining the problem. It took another 24 hours for a response, and by then I had vowed to never do business with them again and to tell everyone I knew about my experience.

So, how do you know when to handle a problem yourself or when you need to call your lawyer or a third-party expert? Here are some examples of challenges I’ve experienced over the years. See if you agree with my course of action.

• In the Monday morning mail: A certified letter from an attorney I’d never heard of who had filed suit on behalf of our retail customer for $3 million, alleging lost wages and continuing health issues from an open can of contact cement. I invited the woman bringing the suit to come and talk; after her explanation, I told her I would contact our attorney. I found out, back-channel, that she was out for a big payday, had refused to return to work because of the incident, and was considered a “flake” by her supervisor. Our attorney advised that we should make no offer to settle until or unless a move was made to take us in the courtroom. The suit filing expired with no further contact.

• The facility manager for Dewey, Cheatham & Howe (a pseudonym) informed me that, “all the carpet you guys installed last year is coming up and we expect you to replace it, or the partners will sue. And just remember, it doesn’t cost us anything to sue you.” We met with the facility manager and found the issue to be poorly stretched carpet in a main hallway and two conference rooms. Power-stretching was done and it was the end of the problem. The over-exaggeration was coming from the site manager and one partner. He was apparently having a bad day.

• “I will sue your a**! I had my carpet cleaned and the whole area looks like the waves of the ocean! You have to replace it all. You screwed up this time, buddy!” So nice to hear from Joe, and at such a volume! We had carpeted five floors of corridors for him several years ago. After a cursory inspection, we decided, due to the amount of carpet installed, to have a third-party inspector do a thorough examination of all the areas. His finding was that our installer had used the wrong notch trowel and applied insufficient adhesive to allow the carpet to withstand a typical cleaning cycle. We pulled up and re-glued the carpet and replaced cove base. To mollify Joe, we also replaced carpet in one small area; there was no evidence of premature wear or other damage in any other areas. We also gave Joe a new service warranty.

• We began receiving complaints about the large hospitality carpet project right after project completion. It seems the cut-pile carpet began losing some of its pile after vacuuming, well beyond what is typical for new carpet. In fact, the maintenance supervisor said, “The vacuum bag just filled right up with carpet fuzz and yarn. Do you want me to save it?” Yes, please save it, I told him. Our first thought was some defect with the beater-bar of the power vacuums being used, but those were okay. We had a local inspector take a look and he felt that the carpet tuft-bind was the culprit. To their credit, the mill sent in their most experienced technical expert. He did a site inspection and took samples for testing. The verdict: inadequate yarn bundle encapsulation in the manufacturing process, i.e., a manufacturing defect that resulted in a very low tuft-bind. All the carpet was replaced and reinstalled at mill expense.

• A large office building project featured carpet tile. After delivery and installation, but before being exposed to traffic, the tile began to curl. What was supposed to be a monolithic appearance turned into a surface mimicking taco chips. The designer was having heart palpitations and the contractor a total meltdown. After the shrieking died down, we called the mill involved. “What was the batch number of the shipment?” they asked. We gave it to them and they readily admitted some “anomalies” with that run, but agreed to fix it on location. Their team arrived with the equipment and reprocessed all of the several thousand yards. Problem solved.

• A government agency, in spite of issuing a purchase order and a subsequent change order, found that they just didn’t have the money to pay for the extra work. They were willing to pay the original amount, but not the extras that totaled some $10,000. We were at an impasse; we could not collect the original amount without an agreement to accept that as “payment in full.” Our local attorney was not used to dealing with the intricate details of government procurement regulations and referred us to an expert. After several phone calls, our new attorney arranged for us to collect the original amount, the change order, and half of his fee from the agency—and we happily paid the other half. When asked how he managed it, he smiled and said, “They found the money! I just pointed out that they had violated the FAR (Federal Acquisition Regulations) in at least four areas and unless they were willing to pay up, our next call was to the GAO (Government Accountability Office).”

• For the second month in a row, the general contractor had not paid our requisition. When we asked, again, about payment, the project manager said, “Maybe next month things will loosen up; we’re having some problems with the owner.” Now we were worried, so we contacted their main office. No luck there either. We were owed over $75,000 so we contacted our attorney. He agreed to do some checking around, and within 48 hours called back with the news that the owner was running low on funds. He advised that we allow him to negotiate a settlement on our behalf with the contractor. “It will be better to get something now than wait for a year and get nothing.” We agreed and finally settled for about 35 cents on the dollar. And the lawyer was correct in that other subcontractors came away with nothing.

As you work toward a solution of those aggravating challenges, here are some factors to consider:
1) Do you have a team of people in place and a method of handling problems? Even though you may have an “unwritten guideline” to follow, it will save you money if you meet with key personnel and establish a written set of procedures for handling potentially explosive issues. For instance, how will an “ambush interview” from the local TV station be handled? Who will be your on-camera person? Who will handle written comments or responses?

2) Do you and your personnel have the documentation and expertise to back up your position? What company personnel can you count on for help in dealing with the dilemma? Will you have to call in someone else to remediate the problem, and if so, at what cost?

3) How time sensitive is a solution? If left to simmer, will the problem grow worse from a physical (mold/traffic accidents) or psychological (frustration, anger, escalation of damages) perspective? Frequently, a claim that could be settled for pennies on the dollar escalates to significant punitive damages because the problem is allowed to fester.

4) Have you ascertained the range of cost of settling the issue? Have you included the potential cost of litigation? You just might win the battle but lose the war after paying legal fees and for your time and company personnel.

5) Have you considered the damage to your reputation within your market area if the problem or lack of a solution becomes widely known or front page news? Is there any chance or threat of widespread publicity, picketing or groups that will use your problem to enhance their own reputation?

6) Do you have a third-party expert who will trump their expert? Is your expert someone who is capable and willing to appear as an expert witness for you? Does your expert have the right credentials? You may wish to consider some type of retainer agreement on an “if or when” basis.

7) Do you have a business lawyer that you use on a regular basis, and is he or she the type to handle nuisance problems for you? Once you explain the type of potential problem and the parties involved, he may require a retainer. He should be able to estimate the fee and the likely best and worst case scenarios.

8) Have you considered an “overhead factor” for problems and negotiated solutions? If not, you should. Look at your legal bills and write-offs, plus any free work that was done. Consider setting up a specific line item in your financial records for problem resolution so as to capture the details. Once you start keeping track, you’ll likely find the amount always a little higher than you expected.

“It’s not that you had a problem; it’s how you handled it.” That should be your motto emblazoned at the top of your customer service procedures. Handled promptly, most problems will not require inspectors or lawyers, only caring employees.

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