Labor is your single highest cost. Put effective systems in place to manage overtime, efficiency and quality. This is essential to ensure profitability. Start by checking out our Labor Management Tool. The key: Budget labor hours based on job estimates. How do you figure out budgeted hours? Some companies divide a desired hourly rate into the monthly price. This gives them the monthly hours, which they divide by weeks for a weekly budget. Keep in mind, budgeted hours will be variable by season. For example, spring can require more hours on properties for clean-ups and mowing when grass is growing faster. But how do you manage overtime?
Manage Overtime: The Basics
Is overtime really bad for your business? On the surface, it seems that way if you figure you’re paying 50 percent more for the same hour of work on straight time. And it’s true, unplanned overtime is usually not a good thing—especially if that overtime gets out of control because of poor planning, lack of processes or short staffing. But, sometimes overtime is necessary. Here are some pointers:
- Plan head. Consider your workload and align that with staffing.
- Go back in history. Refer to production rates and historical information to build job budgets. Hold people accountable for hitting those budgets.
- Approve unplanned time. Supervisors need to justify why overtime is necessary. This is important because simply explaining it can be a deterrent to using overtime without planning. You can monitor potential issues that are causing the need for overtime.
Manage Overtime: Use Overtime as Management Tool
If you have a peak in workload, working an experienced crew overtime can be a better alternative than adding staff, which requires onboarding and training to get them up to speed. If you’re in a peak, you might not have the workload after this rush to justify the extra staff, so giving extra hours to your existing team can be preferable.
Manage Overtime: Planned Overtime
In some cases, overtime can be an incentive for employees. Those who work efficiently and deliver quality service can gain overtime opportunities if they choose. (Remember, this is planned overtime!) Be sure to award overtime wisely. Overtime should not become a reward for workers who take too long to get a typical day’s work done.
Manage Overtime: Prevent Overtime Abuse
Never allow overtime without management or owner approval. Put a process in place for approving overtime so crew leaders cannot call in for an approval at the last minute to finish a job. Make decisions to extend overtime in advance so managers can determine whether to reprioritize work or add to the crew to eliminate the need for overtime.
Owners and managers should track overtime hours with each payroll. Look for changes. Identify whether overtime spikes are due to an increase in business or if there are efficiency issues in the field to address.
Never reward slow work with overtime! If you control overtime, it will not control you. Aggressively monitor and manage overtime and set the tone for what is planned overtime so everyone in the organization understands efficiency expectations.
EDITOR’S NOTE: This story was an excerpt from one of NALP’s member resources, providing by well-known industry consultant Bruce Wilson. Want to learn more about bettering your business? Become a member to enjoy these resources and more.
Looking for more tips to help your crews perform better in the field? Attend LANDSCAPES!