“You’re opening yourself up for a big liability if you don’t measure every last detail,” stressed Mattingly, during the seminar “Structuring Your Business For Success” at the 1999 Lawn & Landscape School of Management. “You have to estimate everything. You have to measure everything. I guarantee right now that if you don’t, you’re profits are too high or too low.”
Knowing all of the details, including the trivialities, such as how long it takes to plant a 3-gallon shrub vs. a 3-inch caliper tree can make a difference. According to Mattingly, increased profitability can only be reached if contractors evaluate and improve upon existing systems and mplement other systems that are necessary for tracking labor and production into their businesses.
|Step by Step|
The stairway to greater profitability is easy to climb, according to Jack Mattingly, green industry consultant, Mattingly Associates Consulting, Woodstock, Ga. The key is to follow the steps:
STEP 1. Identify the weak areas/systems at the company
STEP 2. Recognize the working, existing systems at the company and train employees to follow them properly
STEP 3. Implement new systems
OPERATIONS SURVEY. The first step to profitable business systems, Mattingly pointed out, is evaluating the current operations to target where they fall short in certain key areas, including:
- Estimating – How often are production rates based on the take-off and/or field measurements for estimating projects as opposed to “eye-balling?”
- New Job Start-Up – How often is the field prepared prior to starting the work?
- Field Production – How often are jobs performed with the utmost efficiency?
- Job Cost Feedback – How often do managers/supervisors know man-hours and profits related to the budget of each job via consistent reporting on a weekly/monthly basis?
- Budget Hours Feedback – How often do field foremen/leadmen know the status of each job via consistent weekly reporting of budgeted vs. actual man-hours per project?
- Communications – How often are formal and regularly scheduled planning, coordination, communication meetings held?
- Training – How often are formal and regularly scheduled training programs conducted for employees in all levels of the field? How often are employees trained/developed? How often is progress recognized?
- Evaluations – How often do supervisors schedule formal and regular reviews with all of their employees? How often are employees advised of their weaknesses? How often do supervisors set specific goals for their employees?
- Planning – How often are all of the employees involved in the planning of a project that is to be performed or completed for the client?
- Accountability – How often does every employee – from manager to field – understand his or her full responsibility and exactly what he or she is accountable for? How often is the company held accountable?
Mattingly said these questions should all be answered ‘always.’ Systems that fall in the ‘seldom’ to ‘never’ categories are the company’s weak points and could be to blame for hurting profitability.
ON THE RIGHT TRACK. While looking at the results of an evaluation like this can be overwhelming, and all of a company’s weak systems can’t be turned around overnight, there are certain tracking systems that Mattingly believes should be implemented in all green industry companies as soon as possible.
A landscape company can become more profitable just by taking the time to keep better track of its labor costs, Mattingly said, explaining that the key to doing this is focusing on reducing labor costs by 10 percent.
“If your company has a net profit of $450,000 and you reduce a 35 percent labor cost to 25 percent, your net profit increases to $555,000,” Mattingly explained.
A few ways to reduce labor costs include simplifying employee time sheets and recording budgeted labor hours while at the same time providing employee incentives to improve work quality.
“Some contractors believe in tracking load time and travel time separately,” he explained. “I don’t agree. If you track it separately, your employees will get smart and fudge travel hours to meet incentives because they lingered while loading the equipment. If you have equipment loading, travel time and the job time as one number, your employees won’t linger around loading if there’s an incentive to meet for overall time. At the same time, it makes the tracking process simpler because employees aren’t tracking every number.”
Letting all of the foremen know the number of hours budgeted for a job holds them accountable for getting the 10 percent reduction in labor costs and gives them an incentive, Mattingly related.
“This pushes the accountability from the account manager to the foremen, forcing them to keep their hours in check as well,” he said.
Overtime is usually a big problem when it comes to focusing on reducing labor costs. According to Mattingly, 10 percent is an acceptable rate for overtime.
“If overtime is at 19 percent of all of your hours worked, it is too high,” he asserted. “If you’ve had your employees near 20 percent overtime for a long time and then decide to cut down, you should also expect them to be upset, however. It’s something that you’re going to have to deal with.”
Also, Mattingly noted that it’s usually cheaper and more beneficial for a company to spend more money training current employees vs. recruiting new employees.
“Recruiting is quick labor, but it's also expensive and can be a gamble,” Mattingly said. “Training takes more time, but in the end it’s cheaper and helps you to retain your employees.”
Tracking quality is a very subjective process, but it can be done, Mattingly assured, recommending a point system of one through 10 for each job based on turf color, overall appearance and other qualities critical to maintenance.
“Then for each employee you can figure out a percentage of the quality of his or her work,” Mattingly said. “This gives your workers additional incentives to do their job better and more quickly.”
The author is Assistant Editor of Lawn & Landscape magazine.
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