Case Study: An Incentive System that Works
By Jeffrey Scott
Are you looking for ways to increase motivation and job satisfaction while raising your profits? Bestyard.com had this challenge; here is how they solved it:
The problem
John Dominy and his son Chris bought Bestyard.com two years ago, and found that their labor costs were hurting profits. John needed increased cash flow to pay off the note for the business he had just financed (necessity is a great motivator).
The process
John had an idea on how to solve his labor costs, and so he brought his ideas to his peer group meeting. He proposed an incentive system to the group, and he got some tough-love feedback and steering on how to successfully implement this new system.
The incentive solution
John decided to pay his crews a percentage of the revenue they billed out every day. He calculated that he needed to keep labor expenses to 25 percent of revenue for the majority of their services, so he offered to pay his 2-man crews a total of 25 percent. The more work they did, the more they earned. John tracked their hours and overtime, and made sure he complied with the law.
The improvement
Labor costs were reduced by 15 percentage points on average for the fertilizer, mowing, holiday lights and snowplowing divisions, and John is now experimenting with garden care and irrigation. Some of his employees did not like the new system and left the firm. Those that stayed on ended up earning more money every day. It was a big win-win for those employees who gave it a try. Moreover, production (throughput) was increased by 30 percent, so the company was able to get more work done, without buying more trucks and equipment.
Keys to success
The Bestyard crews can calculate their bonus (pay) on a daily basis; this is highly motivating when you have a feedback system that tells the employees each day how much money they earned for their extra efforts.
Crew wages so far have increased by 25 percent. Their employees are earning more money by hustling and by being empowered to find efficiencies in their work.
Quality has become a more important issue. Bestyard has implemented specific quality assurance and control systems. One example is an innovative daily quality control system used to maintain standards, and to assure that the clients and the crews are “in agreement” on the quality performed. Any sub-par quality work is made up by the employees on their own time. Since their employees are still earning more money overall, it is still a win-win.
“My ultimate success would depend on the details of this implementation, and my peers helped me work out the bugs and avoid many potential snafus,” John said. “They have helped me set it up, and they helped me with the quality control systems. So far, it is working great.”
Jeffrey Scott is an author, speaker and green industry business consultant. He facilitates peer groups for landscape professionals who want to transform and profitably grow their business. In the safe environment of a peer group, contractors are able to support one another, enjoy camaraderie and accountability, and benchmark and share strategies for real improvement. To learn more, contact Jeffrey at Jeff@JeffreyScott.biz or visit www.GetTheLeadersEdge.com
