Are You Paying Employees to do NOTHING?! (How to Measure)

Ladies and gentlemen, it's Mike Andes. And today we're talking about whether or not your crew is efficient. And I'm going to give you the exact metric to be able to measure whether or not your crew is being lazy or whether they're being average or whether they're absolutely crushing it. Okay, My name is Mike Andes, founder of Augusta Lawn Care and co pilot CRM. And today we are talking about something that is probably the most important thing for home service businesses. Why? Because we sell labor. Ultimately, the. The whole essence of home services is taking 20, $25 per hour labor an hour of that and selling it to a customer for 100 or $200 per hour. That's like the whole business model. And we have systems and procedures and training and equipment and trucks to be able to give our crew to turn their $25 of hour an hour of labor into making it worth $100 of value to the customer. So let's go ahead and talk about the metric that I make sure I measure every single day, every single week, every single month for every one of my employees, as well as for all of my locations at Augusta Lawn Care, because this is the measurement, in my opinion, that makes it very possible to see which crew, which employees are being the most efficient. All right, I'm going to pull this up on the whiteboard, and we're going to talk about something called budgeted hours. Okay? Now, this is a very simple metric that you should be able to get from pretty much any CRM, and that is how many budget hours on the schedule, as well as how many clocked hours did your crew have for the week. So this is what we're looking at. We're looking at our labor.

Efficiency.

Okay, I'll make myself a little bit smaller here. Boom. So we're looking at labor efficiency, and this equation is equal to budgeted hours divided by clock dowers. Okay? So what this means is if I work eight hours in the day, that would be eight clock dowers. Okay? But if I completed six budget hours worth of work, maybe I did a few small projects or did a route of, say, 10 different jobs. And. And they were all about half an hour, a little more than half an hour of each. I completed six budget hours in eight clocked hours for the day. This would mean that I had a 75% efficiency score.

Right. How do I come with that? Six divided by eight is 0.75. Right. So that would. That's what leads me to believe that this person is 75% efficient. Now, let's do another example of a less efficient crew. So let's say for example, that they work again eight clock hours. But hey, they take their time. You know, they stop at the gas station several times, they take a bunch of, make a bunch of smoke breaks, they didn't get packed their lunch, they have to stop for an hour for lunch, they take a nap in the truck and all the rest of it. And now all of a sudden this, this employee that worked eight clock hours gets three budgeted hours done for the day. So now if we take 3 divided by 8, that is something along the lines of like point 4 or so. All right, don't hold me to it. Which is approximately 40% efficiency score. Not good. This is a great metric to be able to measure the efficiency of an individual team member or a crew. So for example, for a crew we could also say, okay, well there's three crew members and they all work 10 hours a day. Three times 10. We know we have 30 clocked hours. And again, we can look at our dispatch board, we can see, okay, what were all the jobs that were completed? Maybe it was a big project, maybe it was a few small cleanups, maybe it was a whole route. Whatever it was on this, this specific one, they completed 20 budget hours on this one day. And we're doing it for daily. For now in this event, we take 20 divided by 30. That is going to be a 0.66efficiency score or 66%. The reason I like this so much. Efficient, I don't how to spell efficiency. Efficiency. There you go. The reason I like the score so much is because if you are 100% efficient, what that means is, is that you would have eight budget hours worth of work completed in eight budgeted or sorry, eight clocked hours. What that means is you're 100% efficient. This would be equal one, which is equal to 100% efficiency. Which also means if I completed 10 budgeted hours in a eight clocked hour day, I would actually be 125% efficient because I'd completed more budget hours than clocked hours. Okay, here's the thing. There's waste in every single day, which means there's load time, drive time, people have to get gas, take breaks, etc. There's equipment safety talks in the morning. All of that takes time. And so there's going to be a certain amount of waste. For me personally, I don't want more than 20 to 30% waste in someone's day. Anything more than that. I typically can't make any money, but I Want to give you the exact benchmarks that I use to be able to determine whether or not a business is actually having efficient labor. And you'll see when I do turnarounds, I, I'll look at this number a lot. This is a really easy way to measure whether or not your crew or your team member is being efficient. If you're at 50% or so efficiency score, which again, budget hours divided by clock hours, that would mean that half of your day is not completing work that is bad. If you, if, if you ever have less than 50% efficiency score, I almost never see that business make a profit profit because that means that more than half of their day the crew is spent doing something other than actually producing work, I. E. Completing budget hours. Very bad. You might have a day or two where there's bad weather or something bad happens. But like over the course of several months, if a whole team is less than 50% efficient, that business will never make money. This, in my opinion, 70% is average. Okay, so if you can do about 70% efficiency score, that means that 30% of your day is waste, drive time, load time, unload time, safety meetings, all the other stuff that goes into getting your, your, your equipment set up for the morning, cleaning your truck at the end of the day, all of that other stuff has to be done. And that takes away from 100% efficiency, 90%. This is great. I have never seen a home service business that has an efficiency score of 90% or more not make very good profit margins. And so I just give these as an example. There's. You're never going to get a hundred percent. There might be days like you could, you could also have really bad estimates where the budget hours are way off. But in general, if your budget hours are accurate, these numbers are very good benchmarks as to whether or not a team member is efficient or not, whether or not a crew is efficient or not. And then if you look at the totality of these numbers, whether or not your business has efficient labor, because that's what we're trying to measure. We're trying to measure is the one thing that a home service business actually does, which is produce labor and make it be efficient and profitable. If you're not doing that well, there's a really good chance you're not making money in your business. And so whenever someone is like, well, like, everything is going good, I got good leads are coming in and like, my pricing is pretty good and all those other things look good, but then they don't know whether or not Their crew's like hard working or not. Like what do you compare it to? Do you compare it to yourself? Do you compare it to, you know, what you've done in the past or your first employee or the first couple employees? Like how do you compare efficiency? This is a very easy way to do it. And you can actually track this every single day. And whether it be manually and just doing what I did here, budget hours divided by clock hours and do a calculation. You can also get the score on P4P software.com this is like literally every day we track this for our team members to be able to have a scoreboard and we can share this number. We can share who's the most efficient, who has the best efficiency score for the pay period for the month, give away prizes. I've seen some people do like a big UFC belts and they give it to the person of the month. I've seen people rent out, lease a car and, and then whichever employee has the highest efficiency score gets to have that car for the week or a special parking spot for them or they get their own truck for the for the month. These are the type of things you can do to incentivize efficiency of labor. Because again, if your labor is not efficient, it is very unlikely that in home services you'll be able to make profit. Because our entire business is selling labor. That's exactly all we do. You might have some product costs, you might be able to do some material markup or add some fees in there. But ultimately what we're doing for customers is selling them time. And if that time is not being spent efficiently, there's a very good chance you won't be able to make profit. So use these numbers, 50%, 70% and 90% as sort of benchmarks. They're not golden for your business, but like use them as benchmarks of whether or not you're going to able to actually make profit and whether or not your team members are burning time. Because I think when people actually do this for the first time, start realizing that more than half of an employee's day that's inefficient is spent not making money for the business. And that is very scary. Ideally you compensate your employees to be more efficient using something like pay for performance so that the harder they work and the higher this efficiency score is, the more money they make. You can check out p4psoftware.com training a whole bunch of free material in there or go to mikeandys.com P4P and get a whole bunch of free training about this efficiency score and how you can compensate your team on it.