Installation standards, WFCA and CFI, Mullican's 30th: Strategic Exchange - Oct 2015
By Kemp Harr
Right before this issue went to press, the feds decided to defer on raising short-term interest rates, citing “recent global developments” as the primary reason. The rate has been in the 0% to 0.25% range since December 2008, when the committee cut it to help the U.S. economy pull out of the steep recession caused by the housing crash.
On the one hand, this means the feds think the economy is still unstable, but on the other hand, it means reaction to a hike has been postponed and tomorrow will probably be much like today. Apparently, this news was expected. Fed-fund futures, used by investors to place bets on central bank policy, showed a 25% likelihood of a rate increase for the October 2015 policy meeting. The odds of a rate increase in the December meeting are now at 54%.
So what does that mean to us in the flooring business? The dollar will be weaker, bond prices will rise and the rate of inflation should remain low. This news means that longer-term mortgage rates will continue to remain at historically low levels. Would a rate hike have forced procrastinating homebuyers to jump back into the market? I guess we’ll just have to wait and see.
ADDRESSING THE INSTALLATION ISSUE
When Floor Focus surveyed the nation’s retailers back in June and asked them to tell us their top problems, installation rose from fourth place in last year’s survey to first place this year. We’ve been doing this research for a long time, and prior to the recession installation was the perennial top problem—from 1997 to 2008. So now that the financial concerns have subsided somewhat, we’re back to the norm. One might conclude that the installation issues never went away, but in a fight for survival during the downturn other issues became more important.
Unfortunately, however, the truth is that the issues surrounding floorcovering installation has worsened and could get even worse. The key issues can be grouped into four buckets: availability of willing and able labor, training, level of compensation and relationship.
The availability of craftsman willing to do this type of work has been impacted by three factors. When the last recession hit and the industry shrank a third from $24.5 billion to $16 billion in wholesale volume, many of the trained flooring installers moved on and found other jobs. In addition, many of the core installers who have been installing floors for decades are getting older and can no longer do the work. And lastly, many of the high school graduates who might have chosen this field in the past either don’t see it as an attractive career pursuit or are being incentivized to stay in vocational schools, which don’t offer flooring installation programs.
Training is a huge hurdle and for one simple reason—it’s not required by the manufacturer. That’s a broad statement, and I should point out that the ceramic tile industry is ahead of the other flooring categories because they’ve been successful in getting the requirement to use a certified installer written into the A&D specification. In addition there is a movement afoot with Crossville to offer an extended warranty on certain difficult to install products when a trained installer is used. Training installers is an expensive undertaking and both the Tile Council of North America and the World Floor Covering Association (WFCA) offer some form of scholarship to offset some of these costs. Requiring certification is an area where the flooring industry should take a page out of the HVAC industry’s playbook. With companies like Trane and Carrier, if you want a warranty, a trained dealer must install the equipment. If a consumer buys a forced air system on Ebay and puts it in themselves, there is no warranty.
Level of compensation is another key issue. The flooring industry will continue to struggle in its efforts to attract young craftsmen into this sector if this type of work is not competitive with the other building trades. As Peter Drucker would attest, paying someone $2 a yard to install carpet is incentivizing the installers to take short cuts, plus it’s hard to make a living at that rate. Carpet is not a floor until it’s installed and installers must be adequately compensated for taking the time to become proficient at doing it right. In a free market economy, no one can mandate what the right rate should be, but if a dealer isn’t getting the job done right, there is a good chance his compensation rate is not high enough to attract the right level of talent.
Earlier, I mentioned that the installation issue might get worse before it gets better, and I was alluding to the issue of relationships. Is your installer an employee or a subcontractor? We’ve got a whole article on this topic in this issue of Floor Focus, so I don’t want to cover it again here. Suffice as to say, if you’re a retailer and you’ve been dressing up your “subcontractor” installers in uniforms that carry your brand, and telling them where to be, and how much you intend to pay them, you’d better make some quick adjustments. Last January, Lowe’s got caught doing a similar thing, and now it has to pay $6.5 million in penalties. Pay close attention to our article on page 68 to hear more about the Department of Labor’s Misclassification Initiative.
REVISED CARPET INSTALLATION STANDARD
While we’re on the topic of installation, last month the Carpet and Rug Institute announced it had just revised the standards for carpet installation and is continuing to call them CRI 104 and CRI 105, as they have for decades. The standard is divided into two concise documents—both of which can be accessed on the CRI website—with 104 focused on commercial installations and 105 focused on the residential sector. According to Joe Yarbrough, the president of CRI, these recent revisions were necessary to address a few innovations in carpet construction as well as adding more information on site preparation and project planning. In pulling this revision together, the CRI solicited input not only from the carpet manufacturers but also from installers, retailers and testing labs.
You may recall that back in 2009, the WFCA under Chris Davis’ leadership and the CRI under Werner Braun’s leadership each committed $150,000 to write an ANSI certified carpet installation standard using the IICRC as the certifying body. For the last five-plus years, this working document has been called the S600. After much debate and well into the process, the original $300,000 investment was exhausted and the WFCA had to ante up with more funds. Finally, this past April, the American National Standards Institute approved the S600 document.
I’ve never seen a copy of the S600 but I understand it’s broken out into 12 chapters. To adequately cover this topic, my intention was to buy a copy and review it. But while it’s described on the IICRC website, it’s not available for purchase on its web store like all its other standards.
My guess is now that the CRI 104 and 105 standards have been revised, they will continue to be the go-to documents that guide installers on the proper method for installing carpet. As you see in the ad on page 71, the leadership of all of the leading carpet producers heavily endorses these revised standards. In addition, both Jim Walker, the founder of CFI, and John McGrath with INSTALL are in favor of continuing to use the CRI standards.
Given the current lack of certified carpet installers we face today, it’s a shame that the roughly $400,000 spent on developing the S600 wasn’t invested in more useful scholarships that might have expanded the number of trained installers.
WFCA TAKES CONTROL OF CFI
Before we leave this installation topic, there is another news item that deserves mention. In late August the WFCA announced that the CFI (Certified Floorcovering Installers) has now become a division of the WFCA.
Almost everyone in the business knows that the CFI is the non-profit installer training organization that for well over 20 years has been issuing jackets and patches to those installers who took the time to become certified in their trade. The organization’s founder, Jim Walker, has been such an outspoken advocate for the industry’s installers that he earned a rare spot in the Floorcovering Industry’s Hall of Fame. In addition to teaching installation techniques, Jim’s organization was also focused on raising the level of professionalism within the trade and teaching them how to work well as a service agent to the retailer.
Now, as the CFI becomes part of the WFCA, Jim and Jane Walker are leaving the organization. Robert Varden, who has served as vice president for years, and who just three weeks earlier was named CEO, now becomes the vice president of the CFI division at the WFCA.
As the WFCA takes over, it is moving quick to open a new CFI office in Lenexa, Kansas, as well as a 10,000 square foot training center in Forney, Texas. In addition, this year’s CFI Convention will be held in Dallas on November 12 to 14, one week after the Surfaces East show in Orlando. I mention this proximity to Surfaces because the WFCA remains the official sponsor of that trade show as well, so this will be a busy time for the organization.
It’s too soon to tell whether this is a good or bad move for the long-term health of the CFI. Prior to this takeover, the organization often had its hand out asking for free carpet, tools and supplies to train with. Some prior contributors may be more reluctant to continue this practice knowing how well endowed the WFCA is, thanks to the proceeds from selling the Surfaces tradeshow back in 2000.
One also has to wonder what’s next for Jim and Jane Walker. Is Jim ready to retire at 74?
CELEBRATING MULLICAN’S 30TH
Last month, a few hundred dear friends of Mullican Flooring met in White Sulfur Springs, West Virginia at the Greenbrier Resort to celebrate Mullican’s 30-year anniversary. Just as a quick reminder, we estimated in our May annual report issue that Mullican is the fourth largest producer of hardwood flooring in the U.S. Mullican is also the largest hardwood-only supplier in the U.S.
Although it was difficult to travel to, the Greenbrier was a fitting venue for this event for several reasons. It was ten miles up the Greenbrier River in Ronceverte, West Virginia, back in 1985, when Bill Mullican, Sr. converted a wood strip truck floor plant into an unfinished residential wood flooring business. In addition, the Greenbrier is a first class resort that Mullican selected to pamper its core suppliers and distributors and thank them for being part of the Mullican family. Guests were encouraged to make full use of the Greenbrier’s four 18-hole golf courses, the gun club, casino and spa. As an added treat, PGA golfer Ben Crane was invited to give a golf clinic and CBS Sports golf producer Lance Barrow was the dinner speaker.
During the brief business meeting held at the event, Neil Poland, Mullican’s president, highlighted a few of the milestone changes that have happened both within the industry and at the company, which is now headquartered in Johnson City, Tennessee. For more details, I invite you to listen to my audio interview with Neil. In this age of consolidated producers that now offer the market multiple types of flooring surfaces as bundled programs, it will be interesting to monitor Mullican’s success as a privately owned hardwood-only supplier with traditional values.
If you have any comments about this month’s column, you can email me at email@example.com.
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