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Hiring Superstars and the Real Costs of Wages

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Business Advice

Dan and Bill met for a 6pm dinner meeting at the local diner. Dan’s day had been a disaster. A site layout mistake led to an entire armor stone to be torn down and rebuilt. Shortly after, his equipment dealer called and explained that the skid steer that went in for repair needed major undercarriage repair and the cause was neglected maintenance.

“How can this budget help me when we keep making costly mistakes? We’re our own worst enemy!” complained Dan. “I can’t be the only one to follow up on the little, important things – but when I don’t, nobody else seems to care. And when I have to chase people to make sure every little task is done properly, then I can’t manage the big important things.”

“Do your people know exactly what’s expected of them? And exactly how and when to carry out these tasks?” asked Bill.

Dan nodded, “We don’t have the time to spell out every task, but I think the biggest problem is that nobody else cares if things go right or wrong. They get paid either way; but my paycheque only comes in when things go right!”

“If they have the systems in place, but don’t care, you’ve simply got the wrong people in those positions.” said Bill.

“That’s what I‘m starting to suspect” said Dan, “but they’ve been working for me for years…”

“Seniority doesn’t guarantee performance. If your people aren’t producing and resist improvement, you may have to change your underperformers. You have a responsibility to build a successful company. You can’t allow a few bad apples to get in the way of achieving success. If you fail, your entire team— stars and poor performers alike—are looking for new opportunities.” said Bill.

“In my experience, the best companies solve the people problem by:

  •  Systematically hiring great performers while avoiding bad ones
  • Training and developing superstars in-house
  • Retaining their superstar employees with career opportunities”

“Are you doing anything to recruit and train your people? Or do you hire the first guy in the door with a driver’s license and just let him grind away until one of you loses interest?” said Bill.

“We are investing more in training this year – and it’s starting to help, for sure.  I’ve tried to hire good people,” said Dan, “but they all want more money.”

“Your budget will tell you what you can afford. But you need to attract and hire the best people for your money. Most companies in this industry don’t follow a hiring process. Put together and follow a hiring process, and the best will actually want to work for you.”

“Have you ever considered how much money your company loses by not hiring great people? For example, let’s say you’re considering three candidates for foreman. One is excellent, one is average, and one is a poor candidate. The excellent candidate wants $25/hr; the average candidate wants $21/hr; and the poor candidate only wants $18/hr. In my experience, excellent candidates can be up to 20% more productive than average candidates, and they can be up to 40% more productive than poor candidates. Excellent foremen plan their work better, have more experience, better leadership, and hold crews to higher standards of production and efficiency.”

Dan interrupted, “So how do I avoid hiring bad candidates since I can’t afford the excellent ones?”.

“Maybe you can’t afford NOT to hire the excellent candidate.” retorted Bill.  “I’ll use simple numbers to illustrate what I mean…”

“Let’s say an average foreman on a crew of 3 generates $340K in annual revenue. Using the performance adjustments we just discussed, the superstar crew would generate $408K, while the poor crew only completes $272K. Since the laborers get paid the same on all 3 crews, the difference in the total annual wages between the crews (at 5000 total hrs) is less than $12K. But the difference in revenue is over $135K! The superstar’s cost, per sales dollar, is actually lower than the other two candidates – you can see that clearly by looking at the labor ratios.”

“Although it may seem that your ‘superstar’ is the most expensive option, it’s not really the case. To save $7/hr in wage costs, ($25/hr vs. $18/hr), your ‘less expensive’ foreman might actually be costing your company over $100K per year! And wages aren’t the only costs involved! Superstars take better care of equipment (reducing replacement and repair costs), train their crews better (improving productivity and development of new superstars), and require less management and supervision (freeing up more of your time to develop your business).”

“I never actually considered all these costs…” said Dan.

Bill nodded. “Your labor budget will establish exactly what you can afford, but don’t ignore the hidden costs of underperformers either. Your budget, looking at both expenses and sales, can make decisions like this simple.”

“The best people in any industry are looking for the best opportunities. Make the right first impression with an amazing website, a professional hiring process, an engaging interview process, and a compelling offer of employment. When candidates experience a professional hiring process, candidates they naturally assume they are dealing with a professional company, offering the best opportunity.”

“Our website was built for customers; I never considered recruits would look there.” said Dan.

“These days, the internet is the first place recruits look for company information. A professional website not only attracts better customers—it attracts better people.”

Bill continued. “Managing people is one of the hardest tasks of a business owner, Dan. But to be successful, you must recruit the best performers and use systems to turn average performers into great performers. Think of your company as a sports team – you recruit, play and pay your superstars well to help you win every game. Poor performers don’t make the cut. Playing them will hurt your team and drive your superstars to look elsewhere. The people process is a challenge, but winning this challenge will reward you and your people with improved profits, happier customers, and better quality of life.”

For more information on Landscape Management Network’s landscape business management tools and systems, email info@landscapemanagementnetwork.com or call 1.888.347.9864. 

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