Every business struggles with getting the most out of its employees. Our industry struggles more because of the service and truck-roll aspects of our businesses. Most professional consulting businesses look for 70-percent utilization (hours billed to the customer vs. hours paid to the employee), whereas the average CEDIA business has a utilization rate of around 50 percent (20 hours or less billable to the customer). I know what you’re thinking…“that’s not me!” Before you think it’s not you, take a hard look at your numbers. My company did. The truth motivated us to do better.
How many hours per week do your technicians bill? How many do you want them to bill? Are you happy with your utilization right now? If you are, then congratulations. If not, welcome to the club!
We look for 25 billable hours per week out of our technicians (62.5-percent utilization). We have 12 technicians. That’s 300 hours per week we need billable to the customer. The technicians are all paid 40 hours (or more) per week. The Department of Labor (bless their hearts) disconnects the linkage between what the company makes and what the employee makes. For the most part, we find hourly employees have a hard time putting together who actually writes their paycheck (the customer) and the need to move with urgency. The company makes money based on competitively priced jobs with 40-plus point gross margins. The employees make money based on the passage of time. Wow! Who thought this was a good idea? I know, I know, I’ve read a history book or two, and we can thank the likes of US Steel and Standard Oil for abusing their employees with low wages and 70-plus per hour work weeks.
Don’t mistake my dim view of the U.S. hourly wage program for anything other than a viewpoint that it’s a disservice to hourly wage earners destined to keep them from earning more money and fully realizing their potential (consider the misguided minimum wage movement to raise wages to $15 hourly, which is pure pandering to an low information cohort). We want to change that within our company.
Because we know that 25 billable hours per week is the goal, it’s easy to measure where we are and where we need to go. Last week we billed 278 hours. We needed 300 hours. Only 22 hours off. No big deal, right? Let’s look at it another way. If we missed the mark by 22 hours per week every week, we miss out on 1,144 billable hours per year. If you average a bill rate at $100 hourly, that’s a loss of $114,400 per year. Worse yet, that money’s not coming back. Time is the most precious resource of all. When it’s gone, it’s gone.
We did a look back and concluded that our installers averaged 19.8 billable hours weekly over the last year. In that 19.8 hours lives high performers, low performers, up weeks, and down weeks. It’s sobering to think of an environment where you’re paying out 40-plus hours in hourly wages to folks only billing less than 50 percent of the time. That’s where the “Drive For 5” comes in.
Dante (our installation manager) and I have been working on the “Drive For 5” program over the last few weeks. It’s pretty simple. We realized that if we can get our monthly billable hours to 1,200 ($120,000) monthly, we will be introducing a ton of profit to the bottom line (which we can share with those who helped produce it). In a good month, we might hit 1,000 hours, but most of the time, we’re hovering between 850-950 hours.
The “Drive For 5” pays out a progressive percentage based on growing billings north of 950 hours. For every 50-hour increment between 951 hours and 1,200 hours, we pay out a higher percentage. For example, we’ll pay a six-percent bonus on 951-1000 billable hours, seven percent for 1001-1050 hours and so on. You get the idea. At 1151-1200 hours, we’re paying 10 percent out on the entire overage (all the way back to 951 hours). A top-performing installer could add more than $6,000 to his comp annually within this program.
Does the “Drive For 5” work? We’ll see. It does, however, beat the pants off what we’ve been doing: head-scratching, whining, and nothing.
I’m looking forward to sharing our success stories on helping our hourly workers earn more and share in the successes of the company. If you have a program that works well with your hourly workers, please share it in the comments. For those of you who’ve emailed me directly, thanks so much and know that I will respond. Since I’m one of you, you know how busy the day can get.
Stay frosty and see you in the field!