Is Service Work Recession-Proof?

Construction activity in many regional markets has heated up to the point that some areas are experiencing worker shortages. In the midst of such a boom, it is easy to forget that, for every boom, there is a bust.


That uneasy thought prompted us to recall a widely held belief that service work is as recession-proof as anything in electrical contracting can be. During periods of economic recession, customers may not start new construction projects, but they have to keep their existing facilities running. They may delay capital investment, but they cannot entirely avoid ongoing requirements for service and maintenance.


What if ECs dedicated time and resources to developing the service side of their operations while construction is going strong? Most thought leaders in the field of organizational change would definitely advocate such a move. They would say the best time to effect change is when times are best.


As we assembled questions for an interview with an executive in a successful electrical contracting firm, we began to test our own assumptions.


Fred Sargent (FS): Would you agree that companies in a range of industries are rescued by their service activities as a source of revenues when times are bad in their core business?


Andrew McCoy (AM): Yes, the evidence is quite striking.


FS: What do you see in electrical field service work that sets it apart from other businesses when economic conditions are at their worst?


AM: Everybody needs lighting, power and communications. There’s no getting around these basic requirements. Customers’ critical operating needs drive electrical service work opportunities.


FS: Some business experts insist the best time to introduce strategic change to an organization is the present when business is going well—that is, when they feel as though they can afford to do it.


AM: I agree. When times are bad, companies focus on cost-cutting tactics to preserve their bottom line. When times are good, if they choose to do so, they have the ability to focus on ­revenue-creation strategies to improve their top line.


FS: Therefore, in addition to every other kind of new initiative that they might be examining, during this period of relative prosperity, wouldn’t it be prudent for ECs to reinvest some of their present gains to increase their service delivery capabilities? That way, they will be better equipped to capitalize on service work opportunities in future downturns.


AM: It’s precisely the right time to do that. It calls for considerable effort. However, it is an investment that will pay big dividends for a long time to come.


FS: This idea of looking ahead to make changes to offset the impact of future economic downturns falls under the general category of long-range planning. Unfortunately, that’s not a widely observed practice in the construction industry.


AM: Maybe. But just about every industry has a great deal of room for improvement in the area of long-range planning.


FS: Another way of describing what we are discussing is simply this: If ECs took advantage of present-day prosperity and endeavored to make service work a perpetually larger share of their overall revenue mix, they would be ready for any downturn that might come along.


AM: You know, we spend so much time wondering why downturns happen rather than focusing on how to make ourselves recession-proof! We often hear “the best offense is a good defense.” At Virginia Tech, our industry partners often advocate offense in good times and bad times. Cultivating service work as a defensive measure will only help grow our markets along with balancing against the financial hardships of an economic downturn.


FS: That sums it up very nicely. I think we’re ready to interview that electrical contractor who has told us about his bustling service and maintenance operation, which in his estimation has always been there to carry his firm through extended downturns.


If you are an EC that has offset the negative effects of an economic downturn with the positive impact of recurring revenues that continue through tough times, please contact us. We will continue this discussion in future articles.

About the Author

Andrew McCoy

Service and Maintenance Contributor

Andrew McCoy is professor and head of the Department of Building Construction, the Preston and Catharine White Fellow in the Myers-Lawson School of Construction and director of the Virginia Center for Housing Research at Virginia Tech. He has...

About the Author

Fred Sargent

Service and Maintenance Contributor

Fred Sargent is an electrical industry consultant focusing on service expertise. His latest book, “Great Service Made Simple,” is available online. Reach him at fred@greatserviceforums.com.

Stay Informed Join our Newsletter

Having trouble finding time to sit down with the latest issue of
ELECTRICAL CONTRACTOR? Don't worry, we'll come to you.