Last month we looked at how to set goals for sales + design staff. Using their rewards as the foundation for their sales goals, the sales goal, and why we need it hit, is crystal clear for both parties. You need your staff to hit a certain sales goal to be worth the wages you pay them. Good people want to work for a company that can afford them opportunities for success. With a clear sales goal, their success is your success, and vice versa.
But selling the work is the easy part. It’s getting these jobs done on time, on budget, with as little warranty, fixes and re-work as possible that’s the hard part. Right now, 95% of your peers, and your competitors, pay staff by time and that’s the end of the story. The more hours staff work, the more they get paid. But most staff have little, if any, idea, what they’re actually worth and how much work they should be completing. Even worse, neither do most owners.
Goal-Setting for Foremen and Field Staff
Setting productivity goals and incentive systems for landscape foremen and field staff won’t take much more time or effort than it did for your sales staff. In fact, it might even be easier.
It’s important to remember that different types of work have different levels of goals. A landscape maintenance foreman can’t drive the same annual revenue as a landscape construction/install foreman. The install foreman will have the value of materials padding their sales revenues, while the maintenance foreman is limited, in most cases, to just labor hours + equipment charges. If your business performs different types of work (construction, maintenance, irrigation) each type of work should have its own benchmark for goals.
Step One: Establish Your Sales/Production Target (by division)
If its your first time through this process, the easiest way to set realistic goals is by using last year’s numbers. Start with your sales, by division. It’s safe to leave snow revenue completely out of this process, as snow revenue is primarily dictated by weather.
| Division | Last Year’s Sales |
| Design-Build | 1,000,000 |
| Maintenance | $500,000 |
Now add one more piece of data. Add up the total wages paid to field staff (don’t count office/overhead staff here! – only include the wages of staff who actually work on jobs). If you had some guys who bounced back and forth between divisions, do your best to guesstimate how much time they spent in each division and divide their wage accordingly across both. Don’t let the fact that you don’t have these numbers separated to-the-penny stop you from you from reaping the benefits of this process.
Once you have the total field staff wages for each division, divide the costs of labor by the sales to arrive at the ratio of wages to sales for each division.
| Division | Last Year’s Sales | Last Year’s Field Payroll | Field Wage Ratio |
| Design-Build | $1,000,000 | $240,000 | 24% |
| Maintenance | $500,000 | $175,000 | 32% |
Your numbers may differ than the ones above, but those are typical numbers for both those divisions. (Note: maintenance ratios can differ significantly depending on how much enhancement work is included in maintenance revenue figures)
Now review your profitability last year. Were you happy with your profits? If so, those ratios from last year will likely serve your company well again. If you weren’t very profitable, you should either increase your sales goal, or reduce what you spend on wages to help improve your bottom line.
The owner of our sample company didn’t make much profit last year, and he’s got some changes in mind as well.
- He has the opportunity to hire a more skilled (and more expensive) foreman to replace a foreman who is not coming back
- He’d also like to give another construction foreman a raise
- He doesn’t think he can sell any more maintenance work, so he reduces his payroll costs by $15K with the intention of getting the same work done more efficiently, with one less summer student.
His goals now appear below:
| Division | Forecast Sales Goal | Forecast Payroll | Field Wage Ratio |
| Design-Build | $1,181,000 | $260,000 | 22% |
| Maintenance | $500,000 | $160,000 | 32% |
Step Two: Make the Company Goals About the Individual
With his labor ratios in place, our fictional owner calls that new, more expensive, construction foreman in for his hiring interview. He’s experienced, he’s worked for a few other good companies, but he insists he needs to make $50K/yr to take the job.
Is $50K too much? Is it too little? Can we afford it? All these questions can be answered easily using those ratios you calculated above.
First, we’ll do our best to estimate the total annual wages for the new foreman’s crew. The foreman will be running a 3 man crew for most of the year, but will probably have a fourth guy for some occasional larger jobs. We estimate his crew’s annual wages below:
| Position | Estimated Hrs | Hourly Wage | Expected Annual Pay |
| Foreman | 2,000 | $25.00 | $50,000 |
| Lead Hand | 1,800 | $18.00 | $32,400 |
| Laborer | 1,700 | $15.00 | $25,500 |
| Estimated Annual Payroll for Crew | $107,900 | ||
Their ‘production’ goal is now simple. Just divide their wages, by your division’s target labor ratio. The foreman’s production goal is: $107,900 divided by .22 = $490,454.
To be worth $50K a year, this foreman and his crew needs to complete $490,000 worth of landscape construction projects this year. In just a few minutes, we’ve created a clear, measureable production goal for the foreman, that relates directly to what he wants to earn. If he fails to hit his goal, or come reasonably close to it, the company can’t afford to pay him the wages he’s looking for.
Step Three: Measure and Track Progress
Don’t make the mistake of setting this goal, then never mentioning it again until the end of the year. That’s not going to help him hit the goal, and if he doesn’t hit the goal, you won’t make your profit!!! You all need to stay on top of where you’re at and where you’re trending. You can track your progress with a simple spreadsheet.
All you need to do is assign each invoice (or split it up by line item, if it’s a big job) to the foreman that completed the job.
| Invoice # | Line Item | Amount | Foreman |
| 1159 | All | $6,500 | Greg |
| 1160 | Patio | $4,100 | Pedro |
| 1160 | Planting | $6,200 | Kate |
| 1164 | All | $12,200 | Kate |
| 1168 | All | $8,100 | Pedro |
It really can’t get much easier than that. Take an hour at the end of each month to allocate each invoice (or line item) to your foremen, then you can total how much invoiced revenue (production) each foreman has completed. It works for construction or maintenance and now you can monitor progress (and results at the end of the year) using real numbers instead of emotions and feelings. If your foremen want to make more money, all they need to do is help you make more money, and when you’re both making more money, you’re both happy.
Step Four: Reward Productivity. Improve Problems.
The final step to the process is rewarding those who beat/exceed their goals. It’s important to remember that, if everything else remains a constant, your company is wildly profitable on all work done above and beyond “the goal”. Consider the foreman in the example above. Their goal was $490,000 in production.
By eliminating mistakes, forgotten tools, rework, poorly managed materials, better productivity on the job, and more, let’s assume this same crew beats their production goal by a few thousand. By saving hours, they can more work accomplished, faster. When each job takes 10% less time, you end up with 10% more time at the end of the year to squeeze in a few extra jobs. We’re not suggesting we need to work a bunch of overtime. More productivity = more capacity for sales/production. Let’s assume this crew completes $520,000 by the end of the year.
Your profitability on this extra work is superb. If they can do more work in the same time, they really have’t increased labor costs/payroll. They’ve just got more done in those hours. Equipment costs are basically the same. Fuel may increase (slightly), but leases, insurance, licensing etc. all remain about the same. Subs and overhead costs are unaffected by this extra production. In fact, you could argue that your only expenses on this extra work are materials. For most install companies, that leaves you with a net profit margin of between 60% and 75% on this extra work.
Which also means, you should be ecstatic to cut some bonuses for those crews who make it happen for you. You could bonus them 10% of every dollar over and above their sales goal. Or, you could give them what they should have earned in wages on production exceeding their goal (at 22% labor ratio, that’s $30,000 x .22 = $6,600). Either way, with an opportunity to earn between $3,000 and $6,600 in a bonus at the end of the year, your foremen have plenty to get motivated about.
Often the question comes up ‘Don’t you worry about rushed work and lots of warranty problems?” There’s a simple fix for that. Insist that foremen repair their own warranty jobs. That way, the foreman + crew will go crazy if they have to go back to fix things. While they are fixing deficiencies in their work, their payroll costs are rising, while their sales/production goals are staying the same! Every hour worked on warranty work makes it that much harder to hit their end of year bonus goal.
