You get what you pay for

Features - Business Management

If you pay for production, that's what you'll get. And it may be at the expense of quality and profits.

May 5, 2010
Brad Johnson

What do you pay your technicians for? I would venture to say that most workers in the lawn care industry are paid mainly for showing up for work and putting in their time.

Nothing gets done without investing hours into the work, but to be more successful, a business owner must measure and pay employees for reaching the goals of the company.

Call it a bonus, incentive pay, commission, whatever you want – it’s paying for performance and results. After all, that’s what lawn care operators want, and that’s what customers deserve. I’m an ex-school teacher; one frustrating aspect of my former profession was the fact that I was doing a better job teaching students than many of my peers down the hall, yet I was getting paid less simply because they had more years in the system. That’s not fair, nor is it in the best interest of the students.

When I entered the business world as a lawn care operator, I wanted to pay employees based on their contributions to the company and according to how they grew and serviced their customer base. At my previous businesses and at my current company, LawnAmerica in Tulsa, Okla., all team members are paid not just a base salary – for putting in the hours – but they also earn incentive pay.

Many lawn care companies pay a commission on production – usually about 5 percent. We measure and incentivize much more than production. Production is important, but service, growth and profits are just as important, so we measure those factors and pay employees incentive pay based on performance.
If you pay for production, that’s what you get. And it may be at the expense of quality and profits.

How We Do It
We currently have five team leaders who manage 12 route managers and six technicians in the field. Depending upon the position, their performance and the team’s performance, 25 to 38 percent of their total annual salary will come from incentive pay and profit sharing.

We measure many areas of our business that affect growth, quality and profits: things like the number of re-sprays in a route, response times for an estimate and first applications. We measure what customers think of our service, through something called a Net Promoter Score (more on that later). We measure net customer gain, which is a great indicator of service quality and customer satisfaction.

And the bottom line – we measure profits, and we share 25 percent of those profits with all team members.

Everyone Sells
We’ve never had dedicated salespeople at LawnAmerica, because everyone is selling all the time. While most of our customers come from referrals, we also invest in marketing and advertising. Everyone learns how to sell, and puts a lot of effort into growth of our customer base, in large part due to the fact that we pay people for growing the company.

For example, our route managers this year will earn $25 incentive pay for each net customer gain per month. With an average net gain of 60 customers per route, that leads to an extra $1,500 pay. That’s good motivation to work harder to save a customer from cancelling, and push harder to sell more accounts. And by incentivizing the net gain and not just sales, their focus is not just on obtaining new customers, but on keeping customers.

With this pay structure built into our system, our field staff especially loves new customers and growth – just like I do. But unless employees are rewarded directly for growth of your customer list, are they going to be as passionate about growth as the owner? Not likely.

Setting Goals
At the start of every season, we sit down as a staff and set goals, most of which are then built into the incentive pay structure to reward team members. For example, if a route manager hits his goal of average response time to complete a re-spray of 1.5 days (including weekends and rain days), then he will receive incentive pay of $100 during each of the three months in spring, and $75 during the summer months. The same holds true for other time-sensitive service areas, such as evaluations and first applications. So again, frontline employees have an incentive to perform well, are accountable for results and will be responsive to service issues.

I decide the financial value of reaching these goals each month. I project what employees’ base salaries and total incentive pay will be when planning our financial budget. We have a monthly plan that shows the financial rewards with hitting those goals. We measure constantly, and post charts and spreadsheets at the office for all to see and monitor. Some of the goals are individual, some are teams and some are for the total company. Our office staff spends a lot of time in tracking and measuring these results, but the time invested is well worth it.

Net Promoter Score Notes
The Net Promoter Score (NPS) is derived from customer surveys, and is a simple way to measure customer promotion (by asking whether customers would refer us to others). In many lawn care companies, it’s management and maybe a few dedicated employees who are as passionate about pleasing customers as the owner is. We use the NPS to constantly gauge how our customers perceive us and to respond when it’s not up to par.

At the end of the season, if a particular route, or an area, have met their NPS goal (69 percent in our case), they receive a bonus divided in two payments in December and January.

In the case of the five team leaders and upper management, that bonus is substantially more. Our employees are passionate about pleasing customers, which leads to happier customers, a stronger company, higher profits (hopefully) and a happier owner.

Bottom Line
And the bottom line is profits. At the end of the year, we take 25 percent of total cash profits, and divide it among all employees depending upon their salary. So with our profit-sharing plan in 2009, employees earned from about $900 to more than $4,000 as cash bonuses just before Christmas. By sharing in profits, employees have more at stake in the business, and are rewarded for good performance and results.

Our incentive pay leads to employees who feel they have ownership over their jobs and the company. They are not owners. They have no money invested in the company. They are not at risk every day as I am. However, they do have some freedom and autonomy to work and act as owners, and they feel and perform like they have a stake in the outcome. This creates more of a team atmosphere. It makes everyone accountable for specific and measurable goals.

Our incentive pay plan has grown and evolved over the years. It sometimes takes time for employees to understand and buy into the potential of it. It also takes a smart and hard-working employee to fully realize the upside potential of our incentive plan. It seems to work.

We grew about 13 percent last year, and appear to be on track to exceed our budgeted 10 percent growth in 2010, with current projections to end up at about 12 percent growth this season. That’s without a dedicated sales force, without telemarketing and without spending a ton of money on advertising or buying customers. By spring, we’ll be past the 8,000 customer mark after 11 years in business.

While our incentive pay plan is not the only reason we’ve grown, it does play a major part in any success we’ve experienced. And, our best, smartest, and hardest-working employees really love it, as they put more money into their pockets by achieving more.

Route Manager Incentives:  Click here to download an incentive pay template to use in your office.

The author is president and owner of LawnAmerica, Tulsa, Okla.