The changing market for ceramic tile in the USA

Donato Grosser’s Coverings presentation looks at the sales patterns for independent distributors


Donato Grosser, principal of D. Grosser and Associates, Ltd.

As part of the conference program at Coverings 19, Donato Grosser, principal of D. Grosser and Associates, Ltd., in New York, offered an analysis of ceramic tile business in the U.S., based on interviews with distributors in Florida, Southern states (Tennessee, Georgia, Alabama, Arkansas, Mississippi, Louisiana, Carolinas), Texas, the Southwest (Arizona, Utah, Nevada, Colorado, New Mexico), California, the Northwest (Oregon, Washington), the Midwest (Ohio, Michigan, Illinois, Wisconsin, Minnesota), New England, New York, New Jersey, and the Middle Atlantic (Maryland, Pennsylvania, Virginia).

The overall findings, targeted to inform independent distributors, show that though there was a strong market increase from 2012 to 2017, a slowdown occurred in 2018. The strength of suppliers like MSI, Emser, Floor & Décor have negatively impacted independent distributor business. Other factors in sales slowdowns are the strengthening of luxury vinyl tile (LVT) and Chinese competition, as well as high cost of installation. The bright spots in Grosser’s report were that remodeling kept distributors in business during the recession, and areas with high birth rates and low taxes and immigration are the strongest economically.

Number of distributors shrinks; big companies get bigger

Grosser’s research shows that although there were 21,725 ceramic tile contractors and dealers in the U.S. in 2008, now that number has plummeted to only 16, 406 in 2018, with a slight swell expected to 16, 806 in 2019. 

These trends run inverse to U.S. ceramic tile consumption, which was at a high of 3,315 million of square feet (m. sq. ft) in 2006, and dropped to only 1,959 m. sq. ft. in 2009. It has slowly increased to an expected 3,170 m. sq. ft. in 2019. Consumption was nearly flat from 2017 at 3,046 m. sq. ft. to 3,107 m. sq. ft. in 2018. 

Overall, Grosser reported that the number of distribution outlets are declining, the number of ceramic tile distributors has fallen from a high of 1,376 in 2014 to a low of 1,241 today. The big are getting bigger and the small are getting smaller, with large distributors expanding and small distributors shrinking. In terms of ceramic tile sales, 2018 was nearly flat, and the growth of LVT as well as flat residential construction will keep sales low in 2019 as well, Grosser predicted. 

Total U.S. manufacturing capacity is now about 1,204 m. sq. ft., with usage of manufacturing capacity at about 80%:

  • Dal-Tile: ~613 m. sq. ft.
  • Italian plants (Stonepeak, Florim, Florida Tile, Del Conca, Landmark): ~430 m. sq. ft.
  • Other main manufacturers: 161 m. sq. ft.

Regional synopsis

Here’s a synopsis of distributor activity according to region. 

Florida – After lows in 2009, sales spiked 60% in 2012-2014, with a 2017 boom for some distributors due to residential and commercial construction. Currently, most sales are for remodeling and commercial construction. Some distributors are exporting to Caribbean islands. Hurricanes turned out to be a mixed bag: sales were lost for a month, but then sales to fix storm damage surged. Negatives include an oil spill in the Panhandle in 2010, Chinese competition, and flat sales from 2017 to 2018 due to competition by Floor & Décor, MSI and Emser.

Southern states – Sales have improved across the South since 2013. In Tennessee, some distributors report a boom; others complain of sales lost to LVT. Sales are up in Georgia, and booming sales in Alabama credit high-end residential and new commercial projects. Arkansas is enjoying a boom; healthy sales in Mississippi and Louisiana are up 10-15%, and sales in the Carolinas are flat to 15% up. 

Texas Though there was a slowdown at the end of 2018 – which some companies attributed to the mid-term elections – many companies have reported sales gains of 15-20% per year since 2014. Commercial construction, hospitality and remodeling are abundant; sales are surging in Houston due to remodeling after hurricanes. 

Southwest – New construction in residential, hospitality and restaurants is contributing to 20-30% boom conditions in parts of Arizona, especially in Phoenix. Utah is seeing sales rise 7-20% due to rise in multi-unit residential projects, mid-to-high-end residential and commercial construction. 2018 sales are up in Nevada 10-20% due to new construction and residential remodeling, though LVT is impacting tile sales as builders embrace LVT. Colorado is reporting sales increases across the board, especially in the Denver area and suburbs where high-end residential construction and new commercial construction are going strong. In New Mexico, one distributor reported 10% sales gains last year due to mid-to-high-end residential construction and new retail and hospitality construction; another distributor said he was impacted by loss of government money in the region. New construction is strong for healthcare projects.

California – The Golden State has enjoyed steady growth from 2010 to 2018, though the rate has slowed in the last six months. Bright spots are growing sales in tile slabs, large importers selling to tract housing developers and small and medium distributors supplying remodeling efforts. The interest in low-cost Chinese tile is being felt in this state. 

Midwest – After sales bottomed out in 2008-2009, Ohio distributors saw sales surge up to 20% 2013-2016, mostly for residential remodeling. Last year sales were up for commercial projects, retail, institutional and offices. Michigan saw similar growth over those years due to new hospitality and office construction, and high-and-mid-level residential, with 60% sales due to remodeling. 2018 saw a slight slowdown. Illinois saw 15-20% growth per year 2012-2018 in residential remodeling or multi-unit construction until a slowdown in 2018. Post-tornado sales in 2015 soared. Tiles are mainly used in bathrooms and some kitchens, fighting competition from wood flooring. Wisconsin is a mixed bag with some reports of booming 30% sales increases from 2017 due to high-end residential, remodeling and new commercial building; others saw sales are down due to competition from VCT and LVT. Minnesota distributors saw yearly increases of 10-20% from 2012-2016; in 2018, some reported 10% hikes, while others said installation costs are negatively impacting tile sales and one distributor said sales fell 20% due to customers switching to LVT. 

Northwest – Sales in Oregon last year spiked 5-15%, with residential construction doing well; some distributors reveal that remodeling makes up 50% of sales. In Washington, recovery began in 2013; between 2016-2018 new high-end residential and retail projects pumped up sales 10% each year. 

New England Sales were mostly flat for 2018, declining in the second half of the year. New high-end residential and commercial fueled sales, but some distributors say companies are leaving Connecticut due to high taxes and the recently-instituted $10,000 cap on state and local taxes (SALT) that taxpayers can claim on their federal income taxes. 

New York – Though sales surged in the wake of Hurricane Sandy, 2018 was mostly flat in the area, except in high-end Manhattan apartments and suburban areas with high birth rates that spurred residential remodeling. Big-box competition, internet sales, and exodus of people to the South and West are depressing sales in the region. 

New Jersey – 2018 was stellar for many companies, though sales fell after August and some companies are reporting flat sales, depressed by competition from Floor & Décor and similar stores and high installation costs that spurred a switch over to LVT products. Sales health was found in new commercial building and residential remodeling.

Mid-AtlanticSales were down or flat in Virginia and Pennsylvania (except for an increase from 2011 to 2018 in Pittsburgh); Maryland is expecting an increase in the first quarter with most companies reporting 5-15% increase due to healthy mid-to-high-end residential and commercial, except in areas where construction is down. 

NTCA Five-Star friendships lay groundwork for business partnership

There are many benefits to being a contractor member of NTCA. If you are wondering what they are, take a look at the May TileLetter Benefits Box to see them all in one fell swoop.

There are additional paybacks to being one of the elite contractor members known as NTCA Five-Star Contractors. This group has a rigorous set of requirements to join, but enjoys special perks such as manufacturer discounts, special regional training opportunities and attendance at the annual NTCA Five-Star Summer meeting. At the summer meeting they are privy to top-notch speakers, presentations and demos on technical and business aspects of their business, and ample chance to network with fellow Five-Stars to share best practices. 

Dan Welch, Welch Tile & Marble

Sometimes, partnerships grow out of membership in this network of high-caliber contractors. A joint venture between Welch Tile & Marble Co., in Kent City, Mich., and Kemna Tile in Dallas, Texas, is one such partnership that owes its beginnings to a Five-Star connection. 

Working together

Dan Welch of Welch Tile & Marble and Barry Kemna of Kemna Tile worked together before they became NTCA Five-Star Contractor members, spurred by the need to diversify in light of the 2008 downturn. In the tradition of NTCA members helping each other, Welch Tile – at the time a labor-only company – received a hand from full-service contractor Kemna Tile, both of whom were NTCA board members at the time, about 2010. 

Barry Kemna,
Kemna Tile

“The relationship blossomed since we were sharing labor,” Welch said. “We took a lot of risks together. Now we are team building.” Before Kemna developed its own terrazzo team, there was a lot of terrazzo work across the country with clients Kemna had relationships with, and Welch was able to joint-venture with an experienced crew.

Over the years, Welch grew into a full-service company and in 2017, “sold more work than we could do,” Welch said. Kemna came to Welch’s aid on the Klondike Cheese plant project in Monroe, Wis., and terrazzo projects Travers City East Elementary and Mercy Hospital in Muskegon, Mich. “Roles go back and forth, based on workload,” Welch said. 

Working on projects like the Duke Cancer Center in Durham, N.C., Portneuf Medical Center in Pocatello, Idaho, Seton Medical in Killeen, Texas, the Federal Building in Tuscaloosa, Ala., and the Faena Forum Event Center in Miami spawned a learning friendship, in which each company learned how each others’ team operates. 

“In Miami, the project scope expanded,” Welch explained. “Welch shipped a terrazzo grinder down. It helped him to not have to put out $30,000 for a grinder, and it helped us get the job. We pool our labor forces, equipment and people,” he added, shipping equipment to or from Texas and Michigan where needed.

Kemna remarked, “We are both working on projects out of town, having the confidence to know Dan will send folks if we get behind. That gives us confidence to bid; we have another resource to call on for labor.”

At times, the company has pulled in other NTCA Five-Star Contractors to assist; for instance, Neuse Tile Service in Youngsville, N.C., did all the tile work on the Duke Cancer Center, and Collins Tile and Stone in Ashburn, Va., partnered on a D.C. project. 

The arrangement offers tremendous flexibility, offering both companies opportunities to take jobs they wouldn’t be able to complete on their own. Plus, they are pooling their expertise to make better business decisions, touching base once or twice a week. “Between the two of us, 150 people are at stake,” Kemna said. 

The Duke Cancer Center in Durham, N.C., was one of the first projects that Welch Tile & Marble and Kemna Tile partnered on. Not shown here is tilework installed on this project by another NTCA Five-Star Contractor: Neuse Tile Service.

The NTCA Five-Star connection

Amber Fox, NTCA Five-Star Program Director

The NTCA and caliber of the NTCA Five-Star Contractor community laid the groundwork for this relationship to blossom. “We come together at meetings as part of a bigger group, and there’s an opportunity to have growth,” said Amber Fox, NTCA Five-Star Contractor Program Director. “The NTCA Five-Star Program is the catalyst of bringing people together and providing opportunities.”

“NTCA Five-Star is an opportunity to start relationships so things can happen in the future,” Welch said. “If you are going to take on that big a risk, you need someone you can trust. Without NTCA or NTCA Five-Star – or both – we would never have gotten to that level to take on that risk.” Plus, Welch added, “If you enjoy each other, it makes it easier to do.”

“NTCA Five-Star has allowed us to make our businesses stronger,” Kemna added. 

At the upcoming NTCA Five-Star Summer Meeting July 16-19 in Montreal, Fox will offer non-competing contractors who are interested in exploring joint venture possibilities the opportunity to process issues together to open the door for reciprocal communication and relationship building. Depending on feedback, follow-up opportunities will be planned. 

“Due to relationship with Dan, it’s given more opportunity,” Kemna said, pointing out that the synergy between the two companies has provided a buffer against competition. 

“We are NTCA Five-Star contractors that do tile, but businesses have grown and incorporate other things,” Kemna added. “Carpet contractors started taking work away from us by being able to do carpet and adding tile. Now I see because we are doing terrazzo, polished concrete, stone panels, thin panels and tile, we are the biggest piece to put under contract. If we ONLY did tile, it would be easy for carpet guys to take it over.”

Welch said that his partnership with Kemna helps manage schedules and the fluctuations of the economy. “You surround yourself with people who have strengths where you are weak,” he said. “Change is inevitable – managing it is everything.” 

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For more information on becoming a NTCA Five-Star Contractor, contact Amber Fox at 858-674-6908 or at [email protected].

New protection for Illinois contractors – the buck stops at contractual privity

Privity of contract: A concept in law providing that only parties to a contract can enforce their rights or claims against one another. 

In late 2018 the landmark Sienna Court Condominium Association v. Champion Aluminum Corporation case overturned three decades of Illinois precedent that had allowed owners a narrow exception to assert claims against contractors and suppliers with whom the owner did not have a direct contractual relationship. The Illinois Supreme Court’s decision in Sienna, while only applying Illinois law, is important for owners, contractors and suppliers nationwide to review and understand as it addresses the bigger question of when or whether an owner can sue a contractor with whom the owner has no privity for defects claims (or other types of claims). In answering that question, Sienna provides much-needed guidance and protections to contractors who are not in privity with an owner.

In 2018, recovery for defects in the construction of a new residential property against a contractor who was not in contractual privity with an Illinois owner was through the doctrine of implied warranty of habitability (“IWH”). The IWH is a warranty implied by the courts as a matter of public policy that essentially promises (or warrants) that a home will be suitable as a residence. Prior to Sienna, owners of homes with construction defects had a narrow right (under limited circumstances) to sue the contractor who built the home under the IWH where contractor did not have a direct contract with the owner. Now under Sienna, however, the purchaser of a newly constructed home cannot assert a claim for breach of the IWH against a contractor when that contractor had no direct contractual relationship with the purchaser even if the builder-developer is insolvent and the homeowner has no other recourse. 

Sienna brings much-needed clarity for owners, general contractors and subcontractors who previously had to face potentially conflicting approaches to IWH claims. In Sienna, the Court emphasized that the warranty was an implied contractual term and therefore reasoned that absent contractual privity the IWH could not be applied to the subcontractors. To put the Sienna decision briefly in context, although the doctrine of implied warranty of habitability was first recognized by the Illinois Supreme Court in 1979, Illinois still did not allow homeowners to pursue a claim for breach of an implied warranty of habitability against a contractor with whom it had not contracted. But subsequently in 1983 the Illinois Appellate Court for the First District in Minton v. The Richards Group of Chicago held that the IWH could be asserted against contractors (including downstream lower tier contractors) by homeowners who sustained a loss “due to the faulty and latent defect in their new home caused by the subcontractor” and when the builder-vendor was insolvent. Minton became the precedent followed in Illinois for three decades until it was overruled by Sienna in late 2018. 

The Moorman Doctrine reaffirmed 

In overruling Minton, the Sienna court also reaffirmed the economic loss rule, which is in effect in many states, including Illinois. The economic loss rule provides that claims for classic breach of contract cases must be asserted only between parties to that contract (and thus an owner cannot directly sue a subcontractor for IWH claims when the owner did not directly engage the subcontractor). The economic loss doctrine makes it very difficult for homeowners to successfully bring claims for economic losses for repairing defective work against contractors and suppliers who were not in privity with the owner. 

Exploring “vicarious” liability for lower-tier contractors

In light of Sienna, subcontractors are now largely protected from direct claims by owners, but what about general contractors who find themselves liable to the homeowner by contract? No doubt the general contractor will almost always seek a defense, indemnification or contribution from their lower-tier and downstream contractors who were responsible for the claimed defects pursuant to their subcontracts. If their contractual risk transfer and indemnification agreements require the lower-tier contractor to indemnify and hold harmless the upper-tier general contractor now facing legal liability and exposure, it would be logical to expect that IWH liability would be passed on to the lower-tier contractor (absent specific contractual language to the contrary). The upper-tier contractor may also be protected as an additional insured under the lower-tier contractor’s insurance policy for the actions or non-actions of the lower-tier contractor. But even under such risk-transfer scenarios, which may include a contractual responsibility to make whole an upper-tier contractor that sustains a loss or incurs a financial liability, it would seem logical to expect that if the upper-tier contractor cannot be held liable in the first place under the IWH as spelled out in Sienna (meaning that the general contractor did not contract directly with owner), that there can be no claim for the homeowner to pass through for recovery from the lower-tier contractor. 

However, there are also scenarios that potentially may create exceptions to the protections under Sienna such as when an express warranty is given by the subcontractor and is then assigned to the buyer. But it will remain to be seen whether the subcontractor and by extension the indemnifying lower tier contractor can avoid IWH liability in such a scenario. 

Even though Sienna would appear to protect lower-tier and downstream contractors from IWH liability when, like the subcontractors, they have no contractual privity with the purchaser, the absence of case law providing Sienna-like protections specifically to lower-tier contractors means that lower-tier contractors would be well-advised to carefully construct and negotiate the terms of their indemnification and hold harmless agreements and limit the scope of their liability to higher-tier contractors. Likewise, lower-tier contractors may want to review how they craft and enter into contracts conferring additional insured protection to higher-tier contractors with a view towards limiting potential coverage liability. 

Post-Sienna, unanswered questions remain as to scenarios that may still open the door to IWH liability for downstream contractors. Sienna, for example, did not address whether its ruling could extend to other implied construction warranties, such as the implied warranty of workmanship. Sienna does, however, reiterate for owners, contractors and subcontractors the importance of a carefully drafted construction contract that explicitly addresses warranties (or waivers thereof) and properly allocates risk to the parties that can best protect against potential economic loss.

How will you stand out in a crowd of tile installers?

When I was 17, I started working with tile. Almost daily, when our crew would walk into the local sandwich shop or taqueria, we would get asked, “What do you do for work?” When we replied “We install tile,” nine times out of 10 the person behind the counter would reply one of two things: “I’m a tile installer too!” or “My neighbor/brother/uncle/son/daughter is a tile installer!” We would always get a chuckle and look at each other and say, “Yep, everyone is a tile installer!”

Seventeen years later, things haven’t changed much, and every third person seems to claim that they’re God’s gift to tile; it doesn’t seem to matter that they are currently hanging drywall or pouring overpriced lattes to hipsters.

So how will you stand out among this massive crowd of “tile installers”?

See, you and I understand that you’re different. For one thing, you’re reading the April issue of TileLetter. You also know what the TCNA Handbook is and have EJ171 memorized. You dream about tile and spend your free time hanging out online discussing best practices and sharing photos of your favorite work. But unfortunately Mr. and Mrs. Jones don’t necessarily understand the difference between you – the professional who has devoted your life to tile – and the weekend “contractor.”

Market what sets you apart from the crowd

So on top of memorizing the TCNA Handbook and spending all your free time thinking and discussing tile, you also need to be focusing on your marketing and selling skills. In fact, it’s your duty as the professional to educate your potential customers and your community on the proper ways to install tile that can last a lifetime and add major value to their home.

Unfortunately, you can’t just claim to be the best and expect results. You also don’t typically get to show off your knowledge of codes and “geek out” on an unsuspecting homeowner.

So what helps people see the difference? What motivates people to choose the right contractor for the job?

In this modern world, people have less and less time. Instead of researching books and instruction manuals, they are researching photos and videos of tile on their smart phones.

The good news is we all have the capability to produce the type of content they are looking for. 

These days it’s very easy for consumers to collect all the pretty photos of tile work they love, and they do this during the weeks and months prior to picking up the phone and calling a contractor. When it’s finally time to call someone, who do you think they’re going to call first? 

That’s right, the contractor that they already like, know and trust from that social media app. 

I want to encourage all of you to embrace the latest social media trends and find out where your ideal customers are hanging out online. There are many social and photo sharing apps but for now let’s just focus on Instagram (IG).

Focus on Instagram

I’ve gotten dozens of jobs from my presence on IG. I’ve done this by being consistent, showing my personality, creating a buzz by introducing new ideas and products to my followers – and above all interacting.

Just yesterday I was out to dinner with my family and a group of strangers came up to me and said they loved my tile work on IG! 

What are other examples of great IG content?

Carl Leonard of Cutting Edge Tile in Florence, N.J., and his business partner Dani Ganix have been creating Hollywood-quality promotional videos for their YouTube and IG pages. These are the type of videos a potential customer would watch and find entertaining and educational. @cuttingedgetile

Jason McDaniel of Stoneman Construction, LLC in the Portland, Ore., area, has been using his IG account to showcase his scribes, letting potential customers know that if they want a custom design, they need to call the Stoneman! @stoneman1273

I could go on and on and wish I had the space to mention all the amazing tile work I see on IG daily. If you’re new to IG or social media and don’t know where to start, feel free to reach out to me, I’m happy to help in any way I can. 

Luke Miller recently hired Designer Drains to create this one-of-a-kind drain cover to resemble an iconic landmark in his city; this has created a small buzz on his Instagram account. (Original art of Morro Bay, Calif., by Forever Stoked)

Three technologies you need to integrate into your business

Get ahead of the curve by becoming familiar with three new technologies

One of the hardest things for a business to understand today is how, by how much, and why their customers have changed. There is no doubt that the changes that have taken place in the past 10 years have been more profound than any in the past thousand years as related to commerce. To ignore this reality and try to do business “the way we have always done it” is a fast track to irrelevancy and bankruptcy. I would like to explore here some of the major factors that are influencing your customer and more importantly, how you can use this information to keep them coming back to your business.

Humans change core beliefs and values very slowly but they do change what we often call “habits” relatively quickly and easily. Think of your own shopping patterns. Are you buying the same groceries you bought five years ago? You would most likely say “no” because your circumstances have changed in the past five years. You may be eating healthier (or the opposite!), you may have shipped a voracious eater off to college, or you may have added a new member to the family. Think about what you now have for dinner and lunch and how that likely differs from five years ago. Think where you are buying your food and even what food you are buying. Likely it is very different due to the reasons above and for even more reasons. 

But what is likely enduring is that you have standards for the quality of the food you consume as well as how you consume it. You have probably not stopped using a fork and knife and switched to just eating with your hands (or maybe you do if you have a burger now and then!). Our core behaviors, learned as children, are harder to change and remain more constant. The way we shop changes as we grow; where we shop also changes with our lifestyle and influences of our society. 

The mobile phone has been one of the greatest “disruptors” that we have ever seen in retail. Given the ability to instantly access not only information but also input from family and friends about every purchase has changed the way consumers view and interact with retailers. Long gone are the days of getting in your car to drive to different stores to compare prices; they are now available right in your hand. Gone also are the days of waiting to ask friends or family their opinion of a desired purchase or feedback after the purchase, such as “What do you think of my new kitchen floor?” Now the opinions and feedback occur in real time before, during, and after the purchase, making the path to purchase very different from what it used to be.

Technology beyond the phone is also having a profound impact. There are three technologies in particular that you need to not only pay attention to – but more importantly – have a strategy of integrating into your business. These three technologies are Augmented Reality (AR), Conversational Commerce and the Internet of Things (IoT). Each of these technologies is having an impact on your customer’s shopping journey and therefore needs to be part of your strategy today.

Augmented Reality

Augmented Reality is the ability of computers – and more often mobile phones – to insert objects into a real environment. The use of this technology is growing daily. Think of your customer taking a picture of their kitchen and then with a few swipes adding a new floor, cabinets, appliances and lighting, totally customizing the scene. And because this technology can also provide exact measurements, the customer can decide how much tile is required, the size of the cabinets that they can have, the size of the appliances, and get an accurate cost estimate for that makeover. This is not science fiction; it is being done today by many retailers for components of it, and it will not take long until all of this ability becomes integrated into one simple app. Remember, one of the things the new consumer has learned to love is DIFM (Do It For Me), and there are thousands of apps and companies doing just that.

Conversational Commerce

Conversational Commerce, (think Alexa and Google Voice) is just in its infancy and yet it is quickly moving from the home to the auto to the mobile phone and to every part of our lives. People love to talk to their devices even more than just typing or swiping. As these helpers get more sophisticated, consumers will rely more and more on them to assist them in day to day living. They will ask Google or Alexa to show them what a new bathroom would look like, give a price and schedule an installer to make it happen. Voice is becoming the next frontier for acquiring products and services. These artificial intelligence devices will become smarter and smarter and more integrated into our everyday lives and that means how we buy things.

The Internet of Things 

The Internet of Things (IoT) is simply adding smart technology to devices that can then be controlled or programmed to behave a certain way. Imagine your refrigerator with the ability to schedule a service visit when it knows that a part is failing, or a heated floor in the bathroom that turns on when you tell the shower to start and brings the floor to a preset temperature based on ambient temperature and the preference of the individual taking the shower. The shower will also be the desired temperature for the individual based on the family member’s preference. The IoT device is imbedded in the water lines and in the floor heat controls. There is no end to how the IoT will change the way we live and interact with our environment. Try telling a 16-year-old today that there was a time that you had to get up and twist a dial to turn on a TV, and that to change the channel you had to get out of your chair, walk to the TV and turn the dial. This behavior seems almost quaint today. Just think about most of what we now do that will also seem quaint in 10 years!

The three technologies that I described are here today; they are also integrating with each other and exponentially changing what is possible and what we will be experiencing in the VERY near future. As a business, you need to be aware of each of these technologies, hire people who are familiar with them, get your own Google Voice and/or Alexa, as well as download AR apps to your phone and play with them. 

Remember the words of Jack Welch (which, by the way, GE failed to listen to): “When the rate of change outside your business exceeds the rate of change inside your business, the end is near.”

For more information about James Dion and Chicago-based Dionco, Inc., retail, consulting and training company, please visit www.dionco.com. 

Why we all need Why Tile

Understanding the who, why, what, when and how of one
of the industry’s more important initiatives

Launched during Coverings 2017, the Why Tile® program is the tile trade’s first industry-wide initiative to demonstrate the benefits of ceramic tile. While the initiative is a definite positive for the general tile industry, many tile contractors have yet to discover how the program can benefit them. By understanding the program better, and the resources it offers, contractors just may discover that the program is not only a good resource, but an important tool in helping them provide valuable information to their clients. 

Who is Why Tile?

As mentioned, Why Tile, coordinated by the Tile Council of North America (TCNA), is the tile industry’s only joint initiative to provide the market with education and information about tile. Before its launch, key stakeholders from the installer, contractor, manufacturer, distributor, and retailer sectors all collaborated to create this massive undertaking. Today, leading industry organizations and manufacturers contribute to the program to continue the growth of its already-robust content. Some of the noted industry organizations that support Why Tile include Ceramic Tile Distributors Association (CTDA), National Tile Contractors Association (NTCA), Ceramic Tile Education Foundation (CTEF), Tile Contractors Association of America (TCAA), and Tile Heritage Foundation (THF). 

Why the industry needs Why Tile

While Why Tile started out as a massive marketing and education initiative designed to inspire consumers and provide information on all of tile’s benefits, it has become much more in the past two years. When launched, WhyTile.com offered consumers inspiration, ideas and advice on tile. The site has expanded to include an extensive commercial section that provides industry-specific content and tools for architects, designers and specifiers. The commercial section even includes case studies, application information and a resource library. 

Kathy Meyer, TCNA’s Director of Marketing, says the content and topics on whytile.com are still expanding, allowing the site to become a good information source for the industry and their clients. “Why Tile provides information that also goes beyond style to explore how tile can improve the functionality of any space, and how ceramic tile compares to other surfaces, including plastic floors,” she said. “Why Tile provides excellent content and examples to share with customers and employees.”

Meyer stresses that whytile.com is a useful resource for contractors as well. “The information and ideas at whytile.com can help a tile contractor articulate, with consistent and valid messaging, the benefits of using ceramic tile for their customer’s specific industry, application, or project,” she said. All the resources available on the site are free and are ideal in helping installers explain certain aspects of tile to their clients, including selection, design and maintenance tips.

What about those resources?

For those who haven’t visited whytile.com, the resources that it offers are numerous. For installers and their clients, it provides pattern ideas and an impressive design gallery to help with the creative stages of the project. The site also includes an “Easy Care” page that is ideal to share with clients after a project is complete. The page explains how clients should maintain and protect their investment (and the installer’s hard work) for years to come. 

Meyer explained that the Why Tile Partners web portal is another important – and free – resource installers may want to consider. “Why Tile Partners can take full advantage of these resources to help themselves, their employees and their customers become educated about the smart and beautiful choices with ceramic tile,” she explained. 

After they register, the portal offers Why Tile partners four key resources: the Why Tile Activation kit, Why Tile logos for co-branding opportunities, monthly social media posts, and a comprehensive Why Tile presentation that amplifies the strengths of ceramic tile. The monthly social media posts include text and images partners can use on their own social channels as long as they include the hashtag #whytile.

NTCA developing installer-centric content

In response to trending topics, technical advances, and educational needs, Why Tile is continuously adding content to its site. Meyer says to expect to see even more new resources and content on the site this year. 

But 2019 will be a milestone year when it comes to tile contractors and whytile.com. The NTCA is taking part in a joint project with the Why Tile team to produce content and resources specifically with tile contractors and installers in mind. “We are excited to see this joint venture take shape,” said NTCA Executive Director Bart Bettiga. “I look forward to seeing what the venture produces. Plus, I think whytile.com is an excellent asset to use to communicate the importance of using qualified labor to residential and commercial audiences.”

How to become more involved

Meyer said Why Tile is always looking for new partners. Anyone who is looking to become more involved in the program can register to become a partner by visiting the Why Tile Partners web portal or reaching out to Meyer or Roxanne Morris.

How to make and keep workplace New Year’s resolutions

calendar

According to a study by New York Times bestselling authors Joseph Grenny and David Maxfield, three out of four people make a New Year’s resolution to improve their work/life balance, but fewer than one in 10 people succeed at this resolution.

The study found those who did succeed in keeping their workplace resolutions attributed it to one or more of the following four behavior changes:

  • Making and keeping habits/rituals/regular behaviors
  • Defining and keeping priorities
  • Organization – do this here, do that there
  • Creating space or break times 

I couldn’t have asked for more solid evidence that the principles and practices that have evolved in the Productive Environment Institute over the past 30+ years can indeed help you to “accomplish your work and enjoy your life!” So let me elaborate: 

Making and keeping habits

Your habits determine your results. Clients often ask me, “What SHOULD I do?” My reply, “That is the wrong question.” The question that will get the results you want is “What WILL I do?” 

There are so many ways to get to the same result. For example, if you want to increase your marketing efforts, you can attend more networking groups, send more emails, write more notes, make more phone calls, ask more clients for referrals, etc. The question is, which one WILL you do, and then, most importantly, create a plan to make it a habit. 

For example, I enjoy writing personal notes, and I have found them to be very effective. When I was a child growing up on the farm in Nebraska, we weren’t allowed to work on Sunday, but one thing my mother had me do on Sunday was write thank you notes. To this day, I spent almost every Sunday afternoon writing notes. 

Defining and keeping priorities

The refrain “If you don’t know where you’re going, any road’ll take you there” was essentially a paraphrase of an exchange between Alice and the Cheshire Cat in Lewis Carroll’s Alice’s Adventures in Wonderland: “Would you tell me, please, which way I ought to go from here?” 

One of the biggest stumbling blocks to defining and keeping priorities is not being able to define specifically where you want to go. When my first marriage of 14 years came to an end, I was sitting in a counselor’s office. She asked the question, “Barbara, what do you want?” My reply, “I really don’t know.” Her reply has become a cornerstone in my life and my business: “Let’s start with what you don’t want.” What you don’t want is “clutter” – and it comes in many forms including physical, digital, emotional and spiritual. I’ve observed with clients that physical and digital clutter is a symptom of emotional and spiritual clutter. As it says in Proverbs, “Without a vision, the people perish.” 

Organization

My business has been based on four words: Clutter is Postponed Decisions®. Unfortunately, many people misunderstand what “organization” really means. For example, they have heard the oft-quoted phrase, “A place for everything, and everything in its place.” If that statement were a requirement for organization, I would be classified as one of the most disorganized people on earth. It’s true – there must be a “place for everything,” – but “everything in its place” is impossible for most business owners who love to start things but have difficulty finishing them! (Guess how I know?) The solution? Identify a specific day each week to clear the clutter. If it takes more than 15-30 minutes to do it, there’s something wrong with your SYSTEM (Saving You Space Time Energy Money). 

Creating space or break times 

This principle applies to physical and emotional space. A study by Office Max found 87% of workers admit that during those times when their space is cluttered they feel less productive. A study by Brother International indicated that collective, messy desks and time spent looking for misplaced items cost corporate America $177 billion annually. One of our most popular solutions to increase productivity and teamwork in an office is holding a “Productivity Party” – a day packed with training, de-cluttering – and prizes! 

Personally, this past year has been my most productive year ever – and I attribute it to one major change. I spend at least 15 minutes first thing every morning in prayer and planning. That space in my day and habit in my life has dramatically increased my ability to accomplish my work and enjoy my life. 

Research shows that you are 77.6% more likely to accomplish a goal if you have an accountability partner. I’ve had numerous accountability partners through the years, and it sums up one of my favorite Productive Environment Institute principles: “Together We Are Better!” 

Bonds and the construction process

What is a bond?

No party enters into a construction contract expecting any party to default. Contracting parties, however, must manage the inherent risk of the unexpected during construction projects.  Construction bonding is a method commonly used by contractors, subcontractors and owners to redistribute the risks associated with defaults during the life of a construction project.

A bond is a contractual obligation undertaken by a surety company (often, an insurance company) to perform or pay a specific amount of money if the principal (often, the general contractor or installation contractor) does not perform or pay.  A surety relationship is a three-party contract that guarantees that the principal will fulfill its obligations to the third party, the obligee (often the project owner for performance bonds).

In other words, by taking out a bond, the principal and surety have made a contractual promise to complete the principal’s obligations or to pay the obligee the costs of completion up to the agreed-upon surety amount (called the “penal sum”).  The principal will thereafter have a reimbursement obligation to the surety for any amounts the surety may pay out on the bond to the obligee.

Types of bonds

The three most common construction surety bonds include:

  • Performance bonds which secure the general contractor’s promise to perform the contract in accordance with its terms and conditions. The surety bond provides for compensation to the obligee (generally the owner/developer for the project) for financial losses if the principal (traditionally the general contractor) fails to perform. 
  • Payment bonds which guarantee the principal’s obligation (typically being the general contractor) to make payments to subcontractors and suppliers hired by the principal; the surety is also responsible for defending and indemnifying the project owner against claims of nonpayment and assumes the responsibility for paying these claimants.
  • Bid bonds which provide protection to the obligee (again, generally the owner) if a winning bidder (the contractor) fails to follow through with executing the contract.

Insurance vs. bonds

Although surety bonds and insurance are both risk-management tools, surety bonds are not a form of construction insurance and are quite different in many important respects. An insurance policy is a two-party agreement where the insurer generally expects losses from covered events (and generally the insurer does not seek reimbursement from the insured). A surety, on the other hand, does not necessarily expect losses, will take steps to prequalify principals before they can be bonded, and will generally seek reimbursement from the principal. Likewise, where an insurance policy’s coverage comes into play when unexpected or fortuitous events occur, a surety bond is triggered only upon default by the principal regardless of the reason for the default (with certain exceptions). In a way, a surety bond is more like a tripartite credit agreement with the surety guaranteeing financial support on behalf of the principal.

Bonds matter

The goal of the suretyship is to provide (conditional and necessary) financial support to owners and contractors (as well as lenders and equity investors) in the event of a default in order to keep a project moving forward. While there are certainly advantages and disadvantages to any construction risk management method, suretyship is an excellent fiscal tool to provide confidence to the key stakeholders of a construction project that the project will be completed and will be free from encumbrances.

No matter the type of surety bond, these are contracts, and these contracts require careful review so that all parties – owners, contractors, sub-contractors, lenders, investors, and public officials – understand their respective rights and obligations. Parties also need to follow state and federal laws governing the bonding of public and private projects. A review of these issues, including suretyship obligations and protocols, defenses, claims, the form agreements and recent case law in suretyship is beyond the scope of this article. Nonetheless, such issues must be carefully considered before a bond should be issued.

Supervising: get bad at what you do

Manager. Foreman. Supervisor. Boss. These are all titles for the person who is responsible for getting a job done by directing other people. They might describe you or someone you work with. The key point, regardless of the title, is that this person is tasked with accomplishing a certain amount of work beyond that which one person is capable of doing. And, this person is expected to oversee the production of others to get that work done.

Often, this person is placed in this position of responsibility because of demonstrated proficiency at the task he or she is supervising. For example, an adept carpenter is told he will now supervise three other carpenters on a job; he becomes the foreman. No big deal really, as he generally works alongside the other three, setting the pace, and, if necessary, taking immediate corrective action if one of his crew makes a mistake.

The foreman is commended for his ability to “make it happen,” and this reinforces his behavior. He may be promoted to superintendent, where he will oversee several foremen. Each time he visits one of his crews, he shows them the “right way to do it.” After all, he is one of the best carpenters, which is how he got to be in the position he’s in. With pride, he steps in and implements the corrective action. The work is executed well and the company is happy. 

But the crew is not. 

This situation is not limited to the field; it happens in the office, too. Consider the accounting supervisor who is known for her attention to detail. Nothing slipped by her when she was a clerk, and now, nothing slips by her as a supervisor. The reason for this is that she practically replicates the work of her team as she closely checks and re-checks their work. She puts in longer hours, but that’s what it takes to make the numbers right. Her people may not get it right, so she will make sure everything adds up. 

As you read the two scenarios, you could probably identify the same characters in your organization. The fundamental problem here is that these people fail to recognize they are no longer getting paid to actually do the work. They are getting paid for the work to get done – by others. Unfortunately, we often end up rewarding them for the result rather than the process. I’m not saying we should not hold people accountable for results. But we shouldn’t reward them for repeatedly using the wrong method to get the work done. By insisting on doing much of the work themselves, they are failing to exercise supervision. They’re still trying to be the best at what they used to do, rather than growing their team’s abilities as well as their own. This creates several bad situations: 

The first is poor morale. The vast majority of people pride themselves on doing a good job. They want the opportunity to make a contribution. When insecure supervisors jump in to “fix” a problem, they send the message that the employee is incapable of doing the work correctly, that they don’t trust the employee. The employee is not held accountable, and is prevented from making the contribution to the company that he or she would like. 

When the supervisor does the work, the subordinates lose the opportunity to train and grow. In the same breath with which they lament that there are no good employees, they berate their own subordinates because they can’t do the work like they are “supposed to.” But, how can the employee improve if the supervisor keeps jumping in to “help”?

Eventually, the supervisor gets tired. He/She is putting in longer hours to get the job done because he/she is spending too much time doing the work of their people. The supervisor gets burned out. This leads to a number of additional bad situations: turnover, low production, and even lower morale, to name a few. 

If the supervisor is too busy jumping in and re-doing work, then they are not using their time to carry out their own responsibilities. These other things may not be directly related to production, so they may not be missed initially. But they will be caught later, after the problem has snowballed. For example, the superintendent may be in charge of filling out time sheets. Half the time, he turns them in late, and the rest of the time, they are inaccurate. Payroll is now forced to track him down to correct the problem. 

Finally, this supervisor is holding himself back. By continuing to micromanage his staff, he is insuring that they don’t develop. If there is no one to replace the superintendent, then he, in turn, cannot advance. Some people mistakenly think that, by not developing their subordinates, they are maintaining job security for themselves. In fact, what they’re doing is hurting the company. 

So, how does a company overcome this situation? Three basic steps are: 

  1. a thorough description of the superintendent position, 
  2. strong leadership from those who oversee the superintendent, and 
  3. training for the newly promoted superintendent in time management, delegation, and profitability.

If you are the best in your company at the work you do, let yourself get bad at it. Your supervisors are not getting paid for doing your work. This is not to say that the leadership of the firm should forget all they learned about the business on their way up the corporate ladder, but it is saying others should learn the task and the leadership should be learning new things. The pace of change is rapid today and employees need to be doing what they are paid to do. Line employees need to produce, supervisors need to oversee the production of line employees, and senior leadership should do whatever it can to make sure those two groups have the right training and resources to do their jobs the best they can. If you are in charge of people, your goal is to help them get better at what they do, not to do it better than they do. 

Risks regarding contingent payment and no compensation for delay clauses

“When” and “If” payment and “no damage for delay” verbiage can result in very different payment outcomes

“Contingent payment” and “no compensation for delay clauses” can be very damaging to a subcontractor who is unaware they exist within the subcontract. It’s important to read these clauses carefully, determine what is enforceable, and lobby hard not to sign these inequitable clauses. 

Let’s start with defining the two types of contingent payment clauses: paid-when-paid and paid-if-paid. While both of these clauses are contingent upon payment from the owner, they have a very different meanings. 

Simply put, a “paid-when-paid clause” states, “I will pay you after the owner pays me,” but does not relieve the contractor from the contractual obligation of payment. A “paid-if-paid clause” states, “I will make payment only if the owner pays me“ and attempts to relieve the contractor from the obligation of payment. 

In most states, the statutes permit a “paid-when-paid” clause, allowing the contractor a reasonable time to resolve differences with the owner and obtain payment, prior to paying the subcontractors. What we should be looking for when reviewing these clause are terms relieving the contractor from the contractual obligation of payment if he is not paid. When a payment provision states the contractor and subcontractor share the risk of owner payment – or if the contractor is not paid he has no obligation to make payment – it becomes a “paid-IF-paid clause.”

The statutes regarding paid-when-paid and paid-if-paid vary by state. The American Subcontractors Association published a very informative document titled, “Contingent Payment Clauses in the 50 States.” Although it is a 2014 edition, it points us to statutory provisions and state case law.

www.keglerbrown.com/content/uploads/2014/09/ASA-Contingent-Payment-Clauses-in-the-50-States-2014-Edition.pdf or https://bit.ly/2weasej.

No compensation for damages and delay clauses

Inequitable “no compensation for damages and delay clauses” have become very popular within subcontract agreements, especially the term stating, “the subcontractor will receive compensation to the extent the contractor receives compensation from the owner and an extension of time is the sole remedy for delay.” These clauses sometimes state that even if the contractor directs the subcontractor to make changes in the scope of work and the contractor does not receive payment from the owner the subcontractor will not be paid. With this statement the clause becomes a “paid-if-paid” provision.

Many subcontracts will state the subcontractor is responsible for all damages in a delay caused by the subcontractor, but the contractor has no responsibility or obligation for delay damages or compensation for any reason whatsoever. Although these provisions seem very inequitable, they will be strictly enforced as allowed by statute. As with payment provisions, the enforceability of “no damages for delay clauses” vary by state. Some states allow the enforcement of these clauses on privately funded projects but not on state-funded projects. Some states have not had a state or federal court consider the validity of a “no damage for delay” clause.

The law firm of Woods & Aitken has published a very helpful document, “Survey 50 State Matrix Pay-if-Paid / Paid-When-Paid, and No Damage for Delay.”

www.woodsaitken.com/wp-content/uploads/2012/02/Survey_50-State-Matrix_Pay-If-Paid_No-Damage-for-Delay.pdf or https://bit.ly/2wiZILE. 

It’s important to understand the enforceability of these clauses in the states we perform work. In negotiating these terms, it can be helpful to point out that the provision is not enforceable in the state the work is being done and it is not a good business decision for either party to agree to a provision that is not in compliance with the statute or case law. Removing a term that is unenforceable by statute can eliminate the discussion, argument and attorney’s fees if the issue arises during the course of work.

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