Paying Your Landscape Team: Hourly? Salary? Commissions?

Hey everyone, this is Mike Andes and you're listening to the landscape business course podcast. Today we're talking about commissions and bonuses and how you can incentivize your people to work better and make you more money in your lawn care and landscaping business. Before we get into today's show though, a big thank you. Today's sponsor, which is Jobber. If you haven't already, go to getjobber.com im andes a n D E s my last name and they're gonna give you a discount in the first six months of the softw after the free trial. One question that a lot of people ask when it comes to jobbers, like will it really save me any time? And I think what it comes down to is like do you want to work at night or do you not want to work at night? For a lot of us that are small business owners, you have one, two employees. A lot of the estimating office work is done at night. And if you want to do it, then that's great. It's the most effective time for you cause your kids are sleeping, fantastic. But if you don't want to be working during that time and you want to automate a lot of those functions, this is a great, great way to do it. And this is a great way to actually prevent having to hire someone to do your bookkeeping because you can handle it for a lot longer before you actually do need to hire someone. And your business is of size. So by using jobbers software, customers are able to manage everything from quoting to scheduling, job tracking, invoicing and just make everything go a lot faster. So if you're in that kind of limbo area of like 2 to 300,000 in revenue, this is a great time to have a software like this that makes you not have to hire an office person. Now if you're at 5, 600 plus thousand revenue, instead of hiring two people, you can get away with one person in the office maybe part time if they have a software like Jobber. If you're out by yourself in the field, this is a great way to do all of your bookkeeping on your phone while you're working throughout the day. I promise you you won't regret it. Get on a software like jobber. Go to getjobber.com im andys and I would appreciate that. So now today we are talking about commissions and bonuses. This question came from Don over on the landscape business course Facebook group, which you should always join because that's where I'm looking at. I'm trying to get Questions from you all and trying to answer as many of those as possible. And Don was asking a question, or was it Dawn? I could be wrong here. Ooh, sorry. I think it was, don't quote me on that, but it was about giving his secretary bonuses or giving her a commission based upon how much revenue she brought and how many jobs were closed and she was able to book giving her commission on that. And so, first of all, let me say this. I believe that performance based pay is the way we have to go in this industry. I feel like all industries are gonna have to do this. As the labor market gets harder and harder, as it's harder and harder to find great talent, great people, it's going to be more and more imperative that the grade A, the top performers are paid what they're worth and that other people are just flushed out of the system. And in order to do that, I feel like pay by performance systems have to be created in order for that to work, in order to pay the people who are really good and to flush out the people who are not good at all and are bringing your company down. And we are privileged enough in the United States where it's pretty easy to fire people, which is a really good blessing when it comes to having systems around pay by performance and getting rid of bad cultural implies. Now. So before I talk about.

Pay by performance commissions, bonuses, et cetera, let me put a preface to all that by saying I believe it is the way of the future. I believe it's the way that all businesses are gonna have to go, especially small businesses, to attract talent in tight labor markets in small towns. In order to get the good people, you're gonna have to have a system that allows for really good people to make more money, and it keeps the bad people from making any money, hardly at all, which flushes them out of the system. And so that's my preface is that we all need to be moving this direction. I feel it's laziness to pay people by the hour only because it's very easy to measure. It's something that we've. It's super simple time clocks. It's very, very easy to figure out a system like the system for hourly wage earners is they punch in and they punch out. That's like the system most business owners, especially in this industry, landscaping, lawn care, are just too lazy to figure out a system that works for pay by performance that is simp enough to use and isn't super cumbersome when it comes to figuring out the number side and because they're lazy. They just stick with the hourly because it's easy. It's easy for the employees to find a job that's higher. If you want someone to work for you and they're getting 14 an hour, you just offer them 16 an hour and you now have a better job. And so there's just. It's super easy to compare apples to apples when you're talking about hourly. And so people just go default to it because it's so simple.

But I do feel like it is a lack of. We're failing the employees by not investing the time and educating ourselves necessarily to create a system that actually incentivizes really good work and punishes the people who are slackers and just along for the ride. And so I wanted to preface all of what I'm talking about today by saying I think it's the way of the future. I think we have to go that way. I think in five, 10 years, I will not be the only person waving the flag of pay by performance in this industry. I feel like it'll be much more common. And so whether or not people take the time, they figure it out, have the hard discussions, fire a few people to make it work, this is gonna be what's necessary in this industry. So first of all, let's go to Don's question. He's talking about a secretary, her being on the phone, closing the deals, getting on the schedule, him wanting to give her a percentage of revenue or commission based upon how much she sells. Now, my biggest thing is that I want to make sure their pay structure, their incentive is as closely linked to their direct performance as possible. So what I mean by that is I'm not going to give a frontline employee a percentage of all sales of the whole business. The reason for that is because their piece of the business, they could have a really bad year, like, horribly, like, produced really poorly for the company. But because they're getting paid for this overarching, like, profitability of the whole business or like revenue of the whole business, they somehow get, like an incentive. And so I'm a big. I really hate split bonuses. I hate this whole idea of, like, again, I think it's lazy. Like, okay, we're just gonna take a percentage of profit and divvy it up among the employees. Like, yeah, I get it. I like the fact that you're, you know, trying to create something for your employees, but I just do don't see the buy in from the employees ever. I've never seen that system work great when it's like, okay, we're just gonna take a percentage of profits and then divvy among the employees. Because the employees don't. Their actions today do not affect that number. Their actions this week do not affect that number. There's gotta be, like, consequences and benefits to the daily, weekly, minute by minute actions of the employee if you actually want it to move the needle. And so I just don't believe in the whole split pool quarterly bonus thing. It does not drive behavior. You might get 1 in 10 people that their mind is built a certain way where they actually are thinking every minute of every single day about their quarterly bonus. And so they're actively thinking about it. But especially if you're not tracking that all throughout that quarter, it's very rare that a quarterly bonus is enough for someone to run across a parking lot instead of walk or save 10 minutes by not going to a gas station. It's very rare that when you draw out the length of time that the incentive happens, that the minute by minute, hourly by hourly, day by day, is actually affected. Cause that's when in this industry of efficiencies and minutes and seconds of time savings, if you don't have a compensation package or an incentive that ties directly to that minute by minute, I just don't see the quarterly thing working. Especially when you just take a percentage of an arbitrary profit number and then divide it arbitrarily against how many employees you have. And just everyone gets a piece of money because one of those employees, maybe you give them all 500 bucks each quarter for their quarterly profit sharing bonus. And one of those employees worked their butt off, is on the weekends studying about landscaping, is showing up early to do extra things off the clock, is listening during team meetings, contributing, helping the new people. And then the other employee that also got $5 was showing up right on time, if not a minute or two late, didn't contribute during team meetings, wasn't helping. New team members would never show up on the weekends, if needs be, would ask off a day or two before they needed the days off. And yet you're gonna give them the same bonus. Like, it's crazy. It's ridiculous. And so I feel like that's a very lazy way again, a very lazy way. And the reason I can say this now is because I guess my mind has changed. Like a year ago, this is my theory would have been a year or two ago. It's like, I'm not gonna do pay by performance because the time it takes to manage the system is going to take Longer than the efficiencies gained. And that's just not true. If you have a good system. If you have a pathetic system, yes, maybe that's true. But if you have four, five, six employees, it does not take a long time if you have a good system in place. At Augusta Lawn Care for our franchisees, we will be pushing pay by performance so hard in the initial TR that, like, if they don't have it implemented within six months and they have issues of any sort, I'm gonna be pulling them right back to that same spot. Like, we're not enforcing. They don't have to do paper performance if they wanna do hourly. If that's what they're doing, that's fine. But we're gonna be pushing them very hard to switch over and showing them what we've done to create the system where it does not take long. Like, we're talking maybe.

I would say five to six hours per week that is spent on the system for all the employees in their whole company. And so the amount of return on the investment is huge. Because one person spending maybe 45 minutes to an hour a day working the system, getting the numbers, figuring out pay by performance, the whole thing, like, max. Sometimes less, sometimes more. But like, I'd say max that maybe 30 minutes for, you know, what is it? Maybe 10, 15 people out in the field working. And so the amount of return investment is huge. But I said all that to say is like, I think a year ago I would have said that I wasn't doing a pay per performance model simply due to the inefficient, the amount of time it took to run the system. But if you get a good system, it does not take very long and the returns are huge. Now, looking back, I would say that I was just being lazy. That's really what it was. I did not want to spend the time. And it took like a good eight months to develop a system, you know, test it, talk about with the employees, switch over, have discussions, fire people that weren't gonna work well with the system. And I feel like most people in this industry are not switching to some sort of pay by performance model simply due to laziness. Cause it's easy to pay by the hour. And if they take another step and they believe in a lot of things, I talk about culture and employee engagement things. They're like, okay, well, we'll do a profit sharing. We'll do some sort of bonus thing based upon how profitable the business is. And they'll just do it again, take the money Split it up. And it's just, again, it's very lazy.

That's really. If you actually look back, if you look at why people aren't doing it, it's laziness. Because if they say, well, I don't know what the system is, okay, well, you could become a part of a franchise like Augusta, or you could just go take the time to figure it out, educate yourself, read all the books and figure out a system that works. It's not gonna be easy. You're gonna lose people. Good, experienced, qualified people are gonna leave your business if you switch. Because some people will not work well in this system. It's built on trust and it's built on accountability and built on who works hard. And you're gonna lose people. And so some people just, they're too lazy to do that, to do the hard things, ask the hard questions, make the hard decisions. And so when it comes to like salespeople, secretaries, project leaders, I really don't like commissions and bonuses based upon things that are not in their control. For example, Dawn's secretary, she can, if she's getting a percentage cut of all the business that she brings, let's say she brings in $100,000 and she gets 2% commission, she gets $2,000 bonus for every $100,000 worth of business or project she books, just arbitrary number. The problem with that model is you're incentivizing that secretary to sell more work. It does not necessarily mean it needs to be profitable work. So she could discount a job by 10% or 15% and eliminate all profitability from the job and still make her money. So if a job is $100,000, she might cut it down to 80,000 and she still will make $1,500 or whatever, $1,600 in commissions, $1,600 in commissions. And yet the business will make zero because she just cut all the profit out of that job. So I don't like paying people based on, upon gross revenue because.

You'Re basically asking for perverse incentive, alright? So if you're going to incentivize gross revenue, realize people are going to get more gross revenue. If you incentivize people to work faster, they're going to work faster. And so what you need to do, I'm not saying you should not do that. What I'm saying is that if you're going to have sales as your determining factor for a bonus or an incentive or commission, if you're gonna have that, you gotta have a counterbalance, alright? So I'M not saying that you shouldn't give someone gross revenue commissions or bonuses based upon gross revenue or speed. I'm saying you've gotta have a counterbalance. So for example, if I'm going to give someone.

A commission or pay them based upon the speed in which they do the job, I have to have a counterbalance. I can't just give everyone based upon like, okay, if we have 10 hours budgeted on this job and you get done in four, you get paid for 10, that's great. But what about the reason everyone doesn't do that is because they're like, they're worried everyone's just gonna cut corners, do sloppy work and the quality is gonna really deteriorate. What you do is you have a counterbalance. So that might be a manager, that might be a foreman, that might be a secretary, whatever, someone that's responsible for the opposite. So if you're paying people based upon speed, you need to have other people based upon quality and then they counterbalance each other. If you are paying your secretary based upon gross sales, you should make sure that your estimator is being paid based upon whether or not the budget hours were hit or something like that, so that there's a balance. So that way the estimator can't cut the budgeted hours and the secretary make the money on the commissions. And yet the job is unprofitable. And so you've got to have that counterbalance if that's, that's what you want to do with your system. And again, a lot of people, when they hear me talking about counterbalance, they hear me talking about bonuses based upon revenue numbers and percentages and perverse incentive because people will start going down a certain. They start, okay, I'm just gonna make it simple. And they just pay by the hour. And that is a very lazy way to look at it, in my opinion. It's not bad, it's not horrible if you do that. I did that for a long time. But you gotta figure out a way to either pay by commissions or bonuses or pay by performance or some way to make sure that you are paying people based upon how much money they bring to the business. And so that's the number one thing. And if that's quarterly, great. If that's monthly, better, if that's weekly, better. The closer you can get to the day by day functions and them seeing a return on their investment of time, labor, energy, effort, sacrifice. The closer you can get to the minute by minute decisions, the better and better they will become because they're always thinking about it. So number one takeaway from the day is, you got it. I would highly recommend you have a system in place to pay people based upon performance. Whether it be bonuses, like on some sort of schedule.

Commissions of some sort, whether it be based upon hours, whether it be like budgeted hours. So it'd be based on speed, whether it be based upon.

Customer service or customer. What's the word I'm looking for? Satisfaction. So based upon, like the reviews they're getting online or if you do a survey and then there's bonuses based upon what those surveys are to the customer, you've got to figure this stuff out. You got to figure out your pay structure. And at Augusta, we have a system that we use to balance out quality and speed. That's all I'm thinking about. And so that way, when I leave and I'm not there, I know that I have a. Now I have people driving for speed and production. So you've got to balance out two things. Production and quality. Those are the two things you got to balance out, right? And so I have people driving for production thinking about every minute efficiencies coming up with, I gotta have that. Then I also have to have a balance of, like, the work's gotta be done in a profitable manner at a certain quality standard, and it has to hit that standard all the time. And so then that's the other side of the compensation line is like, yes, you can go as fast as you want and make more money, but if you don't, there's this other angle, this other counterbalance that's going to make you go back and do the work and fix whatever you broke for free. You're not gonna make any more money. It's off the clock. There's no more money if you have to go back. So there's ways to do it, there's systems. I just wanted to make this to have you have a conversation about it. All the franchisees that are coming in November for initial franchisee training, literally, we will probably spend about four to five hours just going through the system we've created for this compens package for pay by performance. It's absolutely imperative. It's the best way. You want the system to police the employees. You do not want to be the police. You don't want to be the guy driving up to your employees and trying to see who is on their phone and are they actually working hard today or tracking them and seeing are they at all these gas stations and why were they at the gas station? And like trying to find them. I don't want to be the police. I want the system to police the employees. And trust me, they would much rather prefer the system than me to be the guy always over their shoulder, micromanaging, always on their back, always correcting them and getting mad at people. Just let the system. And you want to make sure that the incentives are not perverse. In other words, you don't make it where they're just going to try to trample other people or, or they're going to disqualify or discredit the quality and just like go all speed. Like you gotta make sure it's a balance system that works every time. But I promise, pay by performance, commissions, bonuses, that's the direction this whole industry has to go if we're going to actually take a players and pay them what they're worth and then discard people who are C players that are just floating along, showing up and, and basically costing you money by being your employee. Those are the people you don't want. And by getting rid of them, you get more work for the people who are trying to produce, trying to work, grind, sacrifice and are going to make more because they're not all these bottom feeders hanging onto them all the time. So that's my two cents. Maybe I'm wrong. If you disagree with me, comment below. I'm totally open to discussion on this topic. I've just seen the numbers time and time and time again. Whether it be at my company or all the other companies that I have helped change over to pay by performance, it's absolutely worth it. I've never seen one company, never seen one company go to a pay performance model and then switch back to hourly. I've seen a lot of, I've seen it be really, really hard to switch over to pay by performance. But once they've actually made the switch, I've never seen someone go back. It's worth the heartache, it's worth the headache, it's worth the number crunching. I promise you it's worth it. If you can make it a system based upon commissions, bonuses, pay by performance. It's the way of the future and I hope you get ahead of the curve and start working on it today. And if you want to be a franchisee, you're going to learn what we do. But regardless of whether or not you're a franchisee, this is something you have to do. So if you're interested, we still have a few more spots available at Augusta Lawn Care for the franchises. So augusta lawn care services.com.

Whole bunch of videos there gets you a bunch of information and you can set up a call with me directly and we'll go over and see if your business is able to convert if it's gonna work good for you. Also, check out my YouTube channel because I just did a video that compares all of the different lawn care franchises and the pros, the cons and how Augusta stacks up and what makes us so different in terms of royalties, initial fees, and I just just show all the data there right from all their FDDs. I compiled it all for you all so you can see competitive analysis. Check that out on YouTube. YouTube.com mikeandys I'll see you next time. Be great because nothing else pays.