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James Leichter

Pay for Performance: A Conversation with James Leichter

June 30, 2017
He has a true desire to nurture the entrepreneurial spirit of those in the mechanical trades and help them build successful companies that engage employees and customers.

By Kelly Faloon

Ask James Leichter about the HVACR and mechanical contracting industry and you’ll hear many reasons why he believes the industry is a lucrative and rewarding field, and why more young people should enter the trades. He has a true desire to nurture the entrepreneurial spirit of those in the mechanical trades and help them build successful companies that engage employees and customers.

Leichter is president and CEO of software company Aptora Corp., Mr. HVAC LLC, and RA Tax and Accounting Inc. We talked with him recently about his thoughts on today’s HVACR industry.

1. When and why did you decide to go into your particular career field?

I grew up in a single-parent, alcoholic, drug-using family, and when I was in high school, my counselor brought me into her office shortly before graduation and reminded me I had a low IQ and a low GPA.

She asked me what my plans were for the future, and I stared at my feet. She went on to say, ‘You're probably not college-bound. You might want to consider a trade school such as plumbing or heating or air conditioning, possibly a career in the military. Have you thought about that?’ And I continued to stare at my feet. I glanced up at all the plaques on the wall and didn't dare argue with her. She went on for another few minutes, thanked me for coming into her office and I walked out.

Shortly after that, I got into the mechanical trade by signing up for something called the Job Training Partnership Act. It's not around anymore. It was a government program paid by welfare dollars that would pay me half my wage for 1,000 apprenticeship hours. So the government paid me $2.50 an hour, and the employer paid me $2.50 an hour, which was close to minimum wage at the time. And the employer was responsible for training me on useful skills, and my job was to learn and not become a permanent drain on society.

2. How did you develop the passion you have for the mechanical contracting industry?

I've had people ask me, ‘Why are you so passionate? Why are you always smiling? You're always in a good mood. Where does that come from?’ It began with that first mechanical trade job. I excelled at it. I was awesome at it, frankly. I was just very gifted for the trade. I came out of my shell, I had self-confidence, I felt important. I became a whole new person.

And I owe all that to the HVAC industry, and I've done extremely well financially and every way else. I've raised an awesome family. I mean, life has been fantastic, so why not smile all the time? That's why I'm always walking around with a grin on my face because life is awesome.

One thing I’ve learned about contractors, and this really hurts them, is they think their business is so unlike any other business that you could not and should not take advice from somebody who owns a lawn care company or a manufacturing company or a bar and grill. They couldn't possibly help you because you do heating and air conditioning, right? But really, HVAC is the product and service. Everything else is the same.

3. What's the most important thing you can impart on the readers for what they can expect to hear during Contractor Leadership Live?

My topic is performance-based compensation. That is basically pay for performance. And the good news is, business owners get paid by performance.

When owners hear performance-based compensation, at first they say, ‘Maybe I should do that. I don't know if we can. I don't know if we should implement that. Will people like it? Will it motivate people?’ Well, sure it will because performance-based compensation is the single method of paying a business owner. When the business does really well, you get paid. When the business does really poorly, you stop getting paid. It's just that simple. So all business owners are on performance-based compensation.

What my class will do is propose that we pay everybody on some form of performance-based compensation, a form that meets their individual culture, so it's not one-size-fits-all.

But I think what'll surprise them is how simple performance-based compensation is, how we're already implementing it in our company, and finally, how American performance-based compensation is. Performance-based compensation is about as American as apple pie.

4. Tell us something interesting about yourself.

I make my living running the software company called Aptora, but my passion is Mr. HVAC. It's a trademark of mine, and it came from being insulted. So part of that passion story is when I was an apprentice, I ran to the truck, I ran up the ladder, I ran down the ladder, and someone said, ‘Oh, look, there's Mr. HVAC.’ And I thought, ‘I like that.’ So I insisted everybody call me Mr. HVAC. Then I trademarked it and bought the domain name for it.

5. What's the most exciting part of your job right now?

Well, I believe public speaking and teaching classes is the most fun a person can have. It's a lot of fun filling a room full of people and showing them things maybe they haven't seen before or giving them different ways to think about things.

The other thing I really enjoy doing is being part of the design team that builds software for the contracting industry, so I serve as a software architect, not the same thing as a programmer. Being involved in designing software that makes the lives of contractors better is what Aptora is all about, and so it’s the second most fun that I have, building software, being part of the process.

6. What is the biggest issue we need to face in the HVACR contracting space?

I believe the biggest challenge the HVAC industry has is finding good employees, specifically service technicians. In fact, it's really hard to find employees, period. It doesn't matter what business you own because everywhere you go, there's a “Help Wanted” sign, but it's really difficult in the plumbing and HVAC industry because young people don't want to get dirty. They don't want to use tools. There are young people that have never fixed anything. They've never used a tool to make a repair.

Many of us in my generation, we fixed everything we could. You fixed the car, the toilet, you changed your own oil. But many young people just have no interest in repairing anything. And by the way, my two sons are just like that. One's 19, one's 22. They don't want to fix anything. They don't want to get dirty. They don't even want dirt on their hands. So it's really difficult when you combine that with a 4.2 percent unemployment rate nationally.

The other part of the problem, and people don't like to hear this, is there are too many owners. Too many technicians who start their own heating and air-conditioning business. Now, my daughter's middle name is America, so I'm about as pro-American as you can get. I'm all for starting your own company. But here's the difference. Many people start their own company because they have a better mousetrap to sell.

But in the HVAC industry, many people start their own company because they're tired of putting up with garbage from other people. So they walk out of your office and they quit. ‘I'm going to start my own heating and air-conditioning company,’ they say. So it wasn't that I thought I had a better idea. It's because I got tired of you telling me what to do. That's the wrong motivation because you trade one boss for hundreds, maybe thousands of bosses — your customers.

Many of them fail. Some struggle and do very poorly. They don't make as much money as they would working for somebody else, especially a good company. And they put up with a lot of stress they don't need. They put their family through stress they don't need. And again, it isn't because they are an entrepreneur at heart, it's because they were avoiding authority.

I mean, the economy can be so good that decent people can do pretty well. But when things get really tough, a lot of these weaker companies go out of business, and it's sad because many consulting people like me see a lot of pain. We've seen a lot of families in bad shape because the man, typically it's a man, is just dead-set on calling his own shots.

So if they would just go to work for other companies and get along, if we could all just get along, we would have many more technicians to pick from.

Owners need to think about it like this. You have to make the transition from technician to business owner. A lot of us are under the mistaken impression you can make more money by turning your wrench a little faster. But at some point, you realize you've maxed yourself out, you've done all you can do with a toolbox, right? So you have to graduate to pushing the pen.

But many of us come from a background where our families made fun of pen pushers. If you grew up middle class, lower middle class like me, the people who sat behind the desk, they didn't work. The people who made the company were the ones out turning the wrench, right?

But it's a team effort. That's like saying the head coach doesn't need the quarterback, and the quarterback doesn't need the coach or the offensive line. It's a different mentality to think you're actually working by sitting at a desk.

7. What technology is coming up in the near future that you believe will alter the mechanical contracting course forever?

I believe home automation could be potentially very bad for the contractor. As homes become ‘smarter,’ then it means things are going to get more and more sophisticated, leaving out unsophisticated contractors. So, in other words, if thermostats can monitor the operating conditions of the heating and cooling system, if water heaters can send a message to somebody saying, ‘I'm not heating water,’ if the home gets really, really sophisticated, it spells doom for smaller contractors that can't keep up with technology.

For example, many contractors have failed to transition to mobile software. Full disclosure: my company makes mobile software, among other things. But many contractors have said, ‘No. No, we're not doing that. My people won't like that. We're going to use pen and paper.’ If you're using that excuse, you're being left behind because it’s basically UPS vs. the United States Postal Service. UPS went high-tech long before the postal service did, and we all know how that worked out. UPS has done far better, and so has FedEx, right?

So dealers have to understand, contractors have to understand that they have to keep up with technology. Home automation means the larger companies have a chance to do away with the smaller contractor and I'll give you an example. Amazon sells you a thermostat that understands when the HVAC system isn't working properly. The thermostat then sends a message to Amazon, and then Amazon gives the service call to the lowest bidder.

And that's what's going to start happening. You're going to have home automation companies — Honeywell, Amazon, and others — starting to take away our customers. So our customers aren't going to know us anymore. They're going to know Amazon, Honeywell, etc., and they won't care about the company that actually comes out and does the work. They're going to steal my relationship with my customer.

About Contractor Leadership Live

You can hear James’ presentation, “Everyone Wins with Performance-Based Compensation: Reduce Employee Turnover and Improve Morale by Rewarding your High-Productivity Employees,” at Contractor Leadership Live, Sept. 12-14 at the Huntington Convention Center in Cleveland.

Contractor Leadership LIVE is a new, multi-day event that brings together the resources you need to transform your business. You will see the latest technologies and learn about proven strategies from a powerful line up of today's HVAC industry experts. There's no better opportunity to level up your business while building a solid foundation for the future.

Slated for September 12-14 at the Huntington Convention Center in Cleveland, this national event will feature conference sessions by top educators to inspire you to transform your business while delivering insight on the latest industry trends that are impacting contracting business owners and service professionals. The expo hall will give you an opportunity to learn more about the latest products that help drive business and boost profitability while connecting you with the manufacturers that are responsible for developing those tools and solutions that are critical to your success in this ever changing business environment.