Eliminating Inefficiencies To Realize True Profits: The COMPASS System

"I always figured if I could just work an extra 10 to 15 hours a week, things would just work out better," said Carver, owner of Carver’s Lawn & Landscape Inc., New Castle, Del. "I didn’t know what I was doing wrong because I was always taught the harder you work, the luckier you’re going to get."

Carver decided it was time to change his hours and the amount of time required to run his business. He wanted to be able to spend more time with his family, and he started thinking about an exit strategy so he could go home that night and tell his family he would be home evenings and weekends. But as he sat there that Friday night going over the company financials, knowing there had to be a better way to run the company, Carver started thinking about time - how much time it took to estimate; how much time his crew spent doing basic tasks; how much time was being wasted each week on needless inefficiencies. That evening was the start of a total turn around for Carver and his business that led to the development of a complete operations system wrapped around a bonus and incentive plan, which has helped him grow his four-division, full-service maintenance and installation company.

ELIMINATING INEFFICIENCIES. Beginning in mid-1996, Carver started developing what is now called COMPASS (Complete Operations Management Program And Systems Solution). Carver developed the system for his company to eliminate wasted time with the goal of reducing employees’ schedules to a 40-hour workweek. However, through prodding from industry contacts, such as Dave Tucker, Sensible Software Inc., Ijamsville, Md., Carver has allowed COMPASS to be packaged as a system and taught by industry consultants at seminars called COMPASS Academies. The objective is to let other companies benefit from the system that worked so well for Carver’s company.

Carver said COMPASS reduces inefficiencies in the operations of a business and promotes employee satisfaction and retention through bonus plans and 40-hour workweeks. The system works based on converting each aspect of an operation system to time. "COMPASS has a system of formulas to help a business not only control and operate by time, but track by time. If you track by time, your dollars will fall right in line," explained Carver.

"We start with the most horrible hidden inefficiency that we never look at - the way that we estimate," he said. At COMPASS Academies or individual training sessions at a company's place of business, COMPASS advisors, or trainers, analyze a business’ chart of accounts and formulate three pie charts: one for what levels a company has been at, one for where the company is now, and one for where the company wants to go. Advisors then convert time to money within those areas. For example, Carver said advisors will help a company figure out the net profit it wants to make from a job. Then the company should estimate the time to complete the job and make sure it can make that profit when hourly labor and other overhead costs are factored in. Then the company should factor that formula in to every hour it estimates for any job.

The reason COMPASS targets estimating first is that figuring the time to do a job is the basis for how much money a company can make on that particular job. Therefore, the time to do a job essentially dictates a company’s billable rate. Of course, overhead expenses like labor and machine costs enter into this pricing, but Carver said COMPASS teaches business owners how to view these costs as time, too. "In COMPASS we don’t try to go from 60 hours worth of billable time at 5 to 6 percent net profit," he explained. "We try to achieve a true 40 hours of work, 40 hours of billable work, and pay 40 hours worth of completed billable work, with a net percentage that the owner has set."

In addition to estimating, Carver said even minor inefficiencies in a business operation can be adjusted to make a company more productive and to protect a company’s bottom line. For instance, Carver noted that moving a dumpster 35 yards to the opposite side of his lot near what he calls the "truck line" made it easier for employees to deposit their trash at the end of the day, saving precious minutes a day and resulting in a cleaner workplace. Additionally, fuel tanks are located in the truck line. Here, a crewmember can refuel the truck at the end of the day in preparation for the morning, while other crewmembers prepare other items for the next day’s work. If a company does not have fuel on site, Carver said sending one truck and driver to get fuel for all the crews will save time compared to sending each crew to the gas station individually.

"Capturing the inefficiencies is like capturing more of the dollar," said Carver. He noted that COMPASS helps companies understand that if a company has 10 employees and can save 10 minutes a day per employee, the realized savings are 100 minutes per day. Multiply those 100 saved minutes by five working days in a week, and a company has saved 500 minutes of previously unproductive time in a week - that’s more than eight full man-hours, or essentially one crewmember’s pay for one day. Over the course of a season, those 10 minutes saved per employee will result in thousands of dollars of savings.

But it all starts with estimating, reminded Carver. "If you’re inefficient in estimating, your operation has a built-in hidden inefficiency in every single hour that you think you are supposed to making money on. All of the little inefficiencies just compound the problem that much greater," he said.

FOCUS ON EMPLOYEES. Human resources is a big focus of COMPASS, as the system allows employees to partner with owners, sometimes unknowingly, to get jobs done on time and under budget, according to Carver. This is done primarily through a bonus and incentive plan called BOSS (Bonus for Operating a Smarter System).

The BOSS system can be developed uniquely for different companies, but Carver’s Lawn & Landscape includes bonus potential for every job and weekly and monthly incentives.

"In COMPASS, employees are taught in a very easy way that the more you learn, the more you earn. And they earn more because they are continually learning more," said Carver.

Employees can earn more by completing jobs in less time than what was initially budgeted. Carver’s employees can receive time-and-a-half pay for every hour they come in under budget on jobs as long as they put their 40 hours of work in that week. He explained that the extra money a company pays for those bonuses does not come out of net profits because each job is estimated properly by time, including all labor needed in each separate labor budget.

"All this money that you’re paying in incentives and bonuses is paid through the transformation of your inefficiencies to becoming efficient," Carver explained. "You’re billing more money, which means your profits are more. Nothing comes out of your net."

Not only are employees getting paid more, they are also working less and are home at a normal hour each evening and on weekends. This motivates most employees to stay on schedule, and it results in more satisfied and more loyal employees, said Carver. "The system is a step-by-step procedure to get your people at the gate on time, to get them back in on time, to get all your jobs done on budget, and every single hour of every day you’re working, your employees have the opportunity to make more money as long as they get their work done in a 40-hour week," he explained.

Obviously, crews do not want to go over the budgeted time on a job because that means bonuses are lost, but COMPASS has a built-in way for companies to still profit on jobs that are over the time budget. Carver explained that a foreman needs permission to go over budget on a job. The foreman must call his supervisor and explain why a job will be over budget prior to going over the budgeted time; then the supervisor will send support help to the job in order get done as close to budget as possible. Although the support help may increase labor costs on a job, the job is still estimated based on time, so the closer it is completed to the budgeted time, the less profits are lost - a big plus for the business owner and company as a whole.

Other incentives Carver designed for his employees include naming employees of the week, employees of the month, jobs of the month and crews of the month. Additionally, he hands out "Carver Bucks" to any employee spotted doing something good that has nothing to do with his mandated job. Those actions include picking up trash, teaching an employee something new and even telling a joke. Carver Bucks then go into a lottery each week and the winner gets the total winnings in the form of a gift certificate or catalog purchase.

SYSTEM IS TAKING OFF. Carver said companies using COMPASS have seen their receivables go up 30 to 50 percent because it features important instructions about communicating with customers. Additionally, companies using the system are seeing drastically increased net profits, even prompting the wife of one business owner to ask Carver to explain how it is possible for her husband to be making $50,000 more for this quarter than he did for the same period the previous year. The COMPASS goal is to help owners realize a totally stabilized company economy.

Although happy to be sharing his operations system idea with other companies and teaching them to be successful, Carver doesn’t understand what all the excitement is about COMPASS. "It’s just the way I’ve been running my company," he said.