Profitability Master & CEO
What changes do you need to make to get the most profitability and productivity from every dollar that comes in the door? How do you break through the old habits and change for good?
Here are three suggestions.
The first and most important step is to track field labor. How many hours are they putting on their time cards? How many hours can you bill to a customer? Calculate the billable percentage. Put these percentages on a chart where everyone can see it. Productivity will increase. Why? Simply because it is being tracked. What gets watched gets improved. If you continue to track and post labor productivity every week, then this alone breaks the old habits. The week you stop tracking and posting is the week that everyone starts slipping back into hold habits.
Your service technicians should be billing a minimum of 6 hours for an 8 hour day. Your installation crews should have a minimum of 7 billable hours for an 8 hour day. This means service technicians get dispatched from home. They receive one call at a time and are routed efficiently. Installation crews have all materials ready at the shop when they arrive in the morning. Or, they go directly to the job and their time starts when they arrive on the job.
Office personnel get the billing and accounting completed on time without overtime. They must answer the telephone promptly and handle other office functions when they are not on the telephone. Your office personnel (including managers) are responsible for ensuring the field personnel stay productive.
Second, give everyone an incentive to be productive. The best way to do this is to share the profits of the company. If everyone works towards increasing productivity and profitability, they deserve a share of the results. How do you do this so it’s fair? The best way is to determine what percentage of profits will be shared. Usually this figure is less than 50%. You need the other profits to be saved for manager’s bonuses based on the profitability of their departments, future growth, increased raises, and company stability. Everyone must understand this.
All non-managers get a piece of the profitability percentage. It is based on their salary and the number of years they have been employed at your company. Many companies maximize the number of years at 20 years. The employee’s percentage is their salary times the number of years they have been employed divided by all of the employees participating salaries times the number of years they’ve been employed.
Managers get a bonus based on the profitability of their department. They receive the percentage of the net operating profit that the department earns. For example, if their department earns 12%, they receive 12% of the net operating profit. If their department earns 20%, then they receive 20% of the net operating profit.
Third, ask everyone how to increase productivity in a manner that they understand. For example, how can we bill 15 minutes more per day? How do we save $100 per month in overhead costs? How do we generate $10 more per service ticket?
They can visualize a 15 minute increment, a $10 service ticket increase or $100 overhead decrease. They can’t relate to 5 hours or $10,000. If five people have a different idea that can be implemented you’ll increase revenues and cut costs. The key is to take their ideas, implement them, and track the results through a chart on the wall. Keep that chart updated every week.
For any of these ideas to be successful, you as the owner must be serious about change and implementing the changes. Communicate this to your employees, solicit ideas, implement them, track them constantly, and report the results. This is how long lasting changes get made, productivity increases, and your company’s bottom line profits.