When Everyone Wants a Raise (And No One Deserves One)

All right, everyone, welcome to the number one home service podcast in the world for millionaires that are doing over a million dollars and you're in the home service industry. This podcast is for you. And today on the docket, we're talking about when everyone wants a raise and no one deserves one. So kind of a little bit of leadership, I'm going to guess. Also probably the fact like I went through this at my first location and that is I could not afford to pay anyone more. Also I had no great system for paying people. And so their pay ranges were all over the place. Some people were starting at 14, $15 an hour, some people were starting at $18 an hour. Some people were at 24, 26, $28 flat rate per hour. Had really no real rhyme or reason. The honest truth is that I probably gave out raises based upon when they asked me me and if I needed them, I probably said yes. And if I didn't really need them, I'd say, sorry, can't afford it. And if they left, I really didn't care because we didn't need them at the time like during the off season. So that was the way I back in the day used to give out compensation. Horrible, unprofitable, not fair. It's super not fair. That someone works super hard, makes the business literally two to three times as much as someone else and it makes a dollar more an hour. That's not fair. And so as I realized that, that's when the creation of pay for performance or P for P was created was in that realization. So as of Today, my current CPA@homeservicecpa.com is Brad and he was actually one of the people that asked for a raise and fully deserved one. But I did not have the money and I remember leaving that one on one and I went straight into the office and I told my then office manager Liz, I said we are switching to P4P and if half the team leaves, I don't care because it is not fair that I say yes to some people and no to others that are asking for a raise. So without any further delay, let's go ahead and jump into the five questions that we have from the producer. And the producer went ahead did some larger questions a little more in depth. So let's see what we got today. Number one, when a technician asks for a raise, do you first pull their last week 13 weeks of hard data, P4P earned percentage, rework, recall rate, on time, attendance, upsell, close rate, NPS or review mentions, safety incidents, training, completions and budget hours then compare to team median and local market comp. Or do you negotiate off antidotes and pressure from busy season? So obviously we do not want to base our compensation model based upon seasonality or like we give raises when we get busier. I am guilty of that. In the past prior to pay for performance, it is absolutely a great idea when you're doing one on ones to bring data with you. Now if you're doing pay for performance on P4P software, you can see the top ranking and top earners inside your organization. I would print that off before all my one on ones and show it to each person. So because whenever someone says I want to make more money, I just point them to the three or four people that are making the most money and say here's why they're making that kind of money. And they pack their lunch, they make sure they fuel up at the end of the day, they make sure they're in and out of the shop within five minutes in the morning, they look at their job notes and their estimate video the night before. These are things that I can actually now use as ammunition to help lower performers make more money. So hit their goal and make them a higher performer in the organization, thereby achieving the business's goals. And so that's the beautiful thing about P4P is that both the business and the employee both meet their goals. The employee makes more money and the business makes more money. And so this is a great point though and that is when you're doing one on ones, bring the data not just the, the top performers on paid for performance, but also what their efficiency score is. Look at several jobs and, and again this doesn't take maybe five to ten minutes before a one on one to prepare. Look at the last few weeks of one time jobs or recurring routes where they did really good and when they did really bad. And then just walk them through what you would in your mind like oh that's, that's obvious. No, like some people are not going to connect the dots. What you're going to want to do is print off the route that was from that day and that was really good and really bad and then compare the two and you can go over with them like why did this day you make $29 an hour and this day you made $21 an hour. And they'll actually remember if it's in the past week. Oh yeah, so. And so job took forever. I had to come back to the shop. Oh yeah, we had to stop and fuel up because we forgot the gas cans. Like these are the type of things that allow you to instruct using the numbers instead of you nagging on them. And the reason actually makes sense to use the numbers is because by using the numbers they make more money. And there is no one on your team right now that if you just offered them more money would be like, nah, don't think I really want that. And so that's the common reward that you know, the incentive that you know everyone's going to want because if they were offered more of it, they would take it. No one's saying no. Now there are some people that are very money motivated and are going to go to great lengths during a one on one to really understand how they can make more money. And then other people, they might not. But here's the thing, as long as they're performing above base pay on P4P, I'm fine with it. Like they get the kind of the satisfactory they get pass. If someone's under base pay now, it's messing my numbers. I can no longer have a fixed percentage of labor revenue going to my employees on wages. I have a problem with it. But if they're above base pay, they get satisfactory. Some people are okay with just a few dollars above base pay and they pass the test and we're good to go. Other people, that's not enough for them. They are hungry, they want, I want to learn how to make $5 more per hour. And then you use your top leaderboard to incentivize them and instruct them on how they can improve their performance and, and make more money. And then by looking at the top performing one time jobs and recurring routes on their past week of work, you're able to really laser in on specific instances that they can improve on and why. They had to come back to the shop to pick up a broken piece of equipment or they had to go to the mechanic because something broke that they drove over. Like, these are the things they start to realize, make a huge impact on their paycheck. And bringing this data allows them to know, how am I doing? One of the biggest things I think that employees want to know is how am I doing at this job? And one of the ways that we as employers show how well someone is doing is we pay them more. That's what a raise traditionally is like, hey, I want more money or I'm gonna give you more money. It's basically saying you're doing good at your job and then if you say no, you don't get a raise. You're basically saying you're not doing good enough to warrant an increase in pay. You can change all of that by just having numbers tell the story for you. Even if you don't do P4P, have numbers that prove who's doing the best job on the team when it comes to production. Now management, you might tie to other things like close ratio, revenue growth, profitability, et cetera. But from a technician's perspective, when it comes to them asking for more money, I am always looking at efficiency score. I'm looking at budget hours, I'm looking at the their budget hours versus their clock. That's their efficiency score. That's the main driver of are they doing a great job? And then I'm also gonna usually break it down like, okay, let's look at one time jobs, let's look at recurring jobs. Cause I've had team members that make $35 an hour on projects and then make like $19 an hour on recurring jobs. And it's not because the jobs are priced differently, it's because they have team members that do the opposite. And so it's like, let's actually figure out why. Oh, every time you get under the truck after a stop, you get on your phone. Whereas the one time project, you leave your phone in the truck and you just work all day long. Oh, let's add up five to 10 minutes after every single stop of across 20 visits and realize, oh, that's where all your money's going. And so this type of one on one is the most important. Having metrics, breaking down individual jobs and routes for them to actually understand what to do next before their next one on one. I highly recommend one on ones at least monthly for your frontline team. This allows them to have four weeks of improvement and adjustment and then getting a new. If you're using P4P software, a new leaderboard where they see who's winning now and they'll start to see the consistency of the top performers and then watch what they do and then you guide them on those one on ones to push them in that direction. All right, actually real quick, you also have managers that will do the same thing. They'll also ask for more money. And this is why leading by numbers is so valuable. And having benchmarks of on target earnings for managers of like hey, if you just do what we did last year in terms of close ratio, I'm going to use close ratio for an example. Here's what you're going to make and here's your base pay and based upon last year's performance. This is what you'll make if you hit that exact number. Now if you increase that number by this number, or increase revenue by this number, or increase profits by this number, here's what your on target earnings are. And so I have general managers and managers that more than 50% of their compensation comes from incentives around their metric. Whether it be profitability for their department, whether it be distributions. So that's what I do for my locations, Augusta locations. But then I manage different departments and some are profit sharing, some of it is based upon member growth. Like there's a lot of different ways to incentivize someone. And then when you have a one on one and you talk to them, it's very easy to identify like are you performing above, below or at the average and what is expected of you and their paycheck should just directly align with that. How I personally like to create incentives for higher up managers that.

It'S not as clear, it's not like budget hours and actual hours and they have a lot of autonomy. I like to do it like this. This is how I like to do my incentives. I simply ask myself what metric would I change and what would I be willing to pay for it? If I was able to move revenue to this number, how much would I today be willing to pay someone? And if I, and that gives me a lot of clarity in terms of what should I make the bonus or the incentive or their base pay be? Because if someone can take me from 10 million to 12 million, what's that worth to me? Okay, well then I'll just tie their incentive to when they hit one. 11 million, 12 million, 13 million, 14 and 15 million. And there's your ramp and on target earnings last year we did 10 million. Therefore if you do 10 million next year you'll be exactly the on target earnings, for example. And I'm using revenue and I don't think any of my businesses use revenue as an incentive. I'm always looking at profitability of a department, profitability that I actually take distributions for my locations, I'm looking at counts. So like number of recurring customers is a great metric. Especially if you have someone that's managing customer success, they're managing onboarding, they're managing sales. So those are some other metrics you could use for management. But the ultimate thing I would say is in your one on ones use numbers and when it comes to compensation, use numbers because those numbers should scale. There should never be a question like I want to make, I want to have a bonus or sorry, I want a base pay increase or what's it called? I literally this whole question's about it. It's about a raise. There should really never be a question about a raise because it's very, it should be very clear how they make more money. Like a raise is simply telling would be screaming to me. I have not made it clear on how to make more money in this organization. For frontline technicians, pay for performance, for management incentives, bonuses, profit sharing, distributable cash. Like you got to make sure that the business winning allows them to win and them winning means they make more money. And so that would be my 2 cents on raises. All right, next question on the docket. These are a little longer. Let me know in the comments if you like these more in depth questions. Hey, thanks so much for watching the video. Real quick, I wanted to invite you to a private event that I'm hosting on online@mikeandys.com Black Friday that's right, it's on Black Friday. It's going to be a live stream that includes a whole bunch of training that I've been working on for over a year. It's going to be completely free for the first 500 people that sign up. So go to mikeandy.com black Friday sign up for the registration and there's also three massive announcements that I haven't even shared with my team that I'm going to be sharing at the end of that live stream. So you'll definitely want to be there. Mikeandys.com Black Friday we'll see you there. When crews miss their P4P bonus and blame the plan, do you audit inputs such as job pricing, accuracy, estimator errors, drive time assumptions, material pickups, weather and seasonality, and publish a transparent scoreboard then either fix the math or confront the habits, late starts, sloppy staging, callbacks. And where exactly do you draw the line for act of God exceptions versus versus performance? Great question. So obviously budget hours versus actual hours. Their efficiency is going to be dramatically impacted by things like the the weather, whether or not trucks break down equipment. So when do you actually step in and make the adjustment? So here's my two cents. I like to simplify my services and standardize them so that this decreases dramatically. I see this happen the most often across the thousands of scorecards I see coming every day from P4P software. I see this happen most commonly when a business owner has to step in and change the budget hours on a big project, usually big project that they've never done before. So Just stay away from those projects and this dramatically decreases. When you get into jobs that are custom, you've never done them before, they're not standardized. They're completely different than anything you've ever done before. There's no way to be able to replicate it. None of your team have skill doing it to. The likelihood of you getting accurate budget hours is so low. And a lot of times the reason people get allured into it is because of a big project. So that would be my first big caveat when, when it comes to the act of God, like what happens when the weather is crazy and the job takes three times longer? I will step in many times on massive projects and help the team out in terms of budget hours. I think we did this back the first few years of P4P once or twice on projects, and every single time it was jobs that we should not have taken. And now we don't even offer those services. Like, we would do this. Like very specialized porcelain, very large pavers. It looked beautiful, but it took like three times longer than we had thought in terms of budgeted hours. And so, number one, stay away from those type of projects would be my recommendation. The next thing I would say is we do think about weather and equipment. And when it comes to weather, like during the spring rush when the grass is growing really fast, we know it's going to take longer. So we give a higher percentage on P4P to our team. So instead of say 28%, we give them 33% or 35%. We used to be back in that even as high as 40% when the grass was growing like crazy. Again, the goal is that everyone is above base pay. At least, at least half of your team above base pay on P4P. If they're not, there's no incentive for them to work faster. And P4Pmeans nothing. And the whole objective of P4P is to be able to say a percentage is, is fixed as to what you give in wages. And if everyone's below base pay and they're all hitting base pay, that means you're paying more than what you think in terms of like the 30. We pay 33% of P4P. No, you don't. Most of your team's hitting base pay, you're probably hitting 45% of labor is going out the door to wages. So I think my, my biggest thing is how do I take ownership of this? And that is going to be. I adjust pay structures based on seasonality. I. I avoid big projects that we have no business doing. And then I will say there's going to be jobs that come and go. And I have to explain this to the team on the upfront. There's going to be jobs. You show up, it says 20 budget hours and you knock it out in five. There's going to be jobs. You show up, it says 20 and it takes you 35. It's going to happen. And what you have to. That's why I'm so bullish on everyone's got to be able to base pay because as long as that's the case, the they're gonna realize that there's gonna be times they win and there's gonna be times they lose. And you educate them with open book management as to how the business does the same thing. There's months that are really good, there's months that are skinny. And hey, the whole objective of P4P is that you guys get a win when the business is winning. And when you crush budget hours, you win. But the same thing is true when all of a sudden, like the weather changes, the business is not winning and therefore the team's not going to win as much on P4P in that scenario. The good thing is when they hit a bad job they don't like, they don't wallow in it. Back before P4P, when there's hourly, we'd have crews just staying out in jobs forever when the weather was bad. Now it's like, hey guys, let's get this done. And like, we aren't gonna make up a base pay. Let's move on. Let's get past this job and move on to the next one. And so it inspires the culture of like, hey guys, we all know the weather's bad or a truck broke down. We're not gonna make P4P on this job. Let's get it behind us, make sure the customer is happy and let's make sure we at least get a good review. And then things like positive reviews and referrals is where they can make some extra money for that job. That's where we start to push them. But yeah, I'd say one out of 20 projects especially are going to go a little south. And then what we really incentivize or encourage is listening to your team when it comes to price increases. They know which jobs need to go higher, they know which type of services. It's very difficult to hit above base pay on P4P. So you listen to them. So when we would do a price increase before we do it across the board, we just asked the entire team, all right, where the top 10 customers, you know, right off the rip on your mowing route, you just can never hit budget hours. And they would fire them off because they know now that they're getting paid based on budget hours. They know the jobs that are under bid and they'll just tell you. And you can just literally take their word for it because they would not tell you otherwise if they were making a bunch of money in these jobs. And especially you have, you know, 10, 15, 20 people, they're like, oh yeah, these are the 10 people that are way under bid. We can never hit budget hours because the slope of the lawn or because the driveway or because the access or the gates, whatever it might be, and you raise prices. So when our team consistently was telling us that budget hours were off on a specific service or customer, we would adjust prices. Number three, how much of your raises in the past 12 months were peacekeeping, bribes to stop noise or resignation versus versus tied to a written skill ban or promotion rubric? And if more than 25 to 30% were ad hoc, how are you accounting for the permanent payroll inflation that didn't move productivity per labor hour or gross margin? Here's the thing, until you have performance based pay, you are giving raises based upon bribing people to not leave. That's the bottom line. Like, or stop noise, like stop complaining. Until you run the business based upon the metrics, you are simply at the mercy of team members staying and staying happy. And therefore when they're not happy, you give them more money. And because of that you have team members with all those different sorts of compensation. There's no system for it. It becomes very unfair and you don't open up your books because of it. So I could not do open book management without pay for performance. I cannot do open book management without profit sharing. That's why you need all three P4P. Open book management and profit sharing. If you open up the books and you don't do P4P, good luck, because all of a sudden now people are going to start doing some math and realizing that they're only getting paid $0.50 more than the person that is been around for a long time. Or they'll make up random reasons like I show up more on time, more I do different types of services or I'm more skilled, I have more experience like you don't want. It's like it's based upon your production, it's based on how much you bring to this business and you get a cut of it. That's P4P for the technicians. Same thing with managers. I don't want a manager coming to me and asking for more money. I want them to have a very clear path as to how they make more money. Here's the crazy thing. Now I am out of daily operations, but for the three or four years that I was still around the shop, I never one single time after we implemented P4P did was asked for a raise. Not one single time. Not, not one single time. And the reason is, is because if someone did, they just know. I would look at the scoreboard and I would look at the highest performers and I'd start going over all the things they're doing that the person in front of me is not. And so the same thing is true, whether it be P4P profit sharing percentages and commissions for salespeople. You got to make sure the numbers are achievable and that it's very clear as to how they make more money. Otherwise you will have people asking you for more money. And I don't want it to be where the, the bonus is making up like 5% or 3% or 6% of their paycheck. I want it to be meaningful. And in my opinion, unless it's more than 10, 15, 20% of their paycheck, it doesn't move the needle. I saw a owner in the chats we have at Augusta for multi unit operators and he's looking for a sales oriented GM that's trying to scale very quickly. And in the base pay was like, I think like 60 or $70,000. And then it was like 25% of profit sharing. And then the problem with that is if you're in sales and growth mode and you're trying to grow a location really fast, you probably won't see any profit sharing for like a year, maybe a year and a half. And so it's gonna be very, very hard to convince someone to join at base pay with this incentive of like 25% profit sharing, which is very good if they stay for five years, but the likelihood of them staying the first year and a half when there's not profit, very low. And so we've got a really realistically think can they achieve these numbers? And if I tell them it the on target earnings is 85 or 90,000, how are they actually gonna make the extra 30 grand? Because I believe a great, great pay package of like 65, $70,000 with $30,000 as a bonus that they earn because of incentives. I like that. I do not like where they're gonna make $60,000 as base pay and if they do really good, they'll get $5,000 extra. I don't like that. Now they're gonna be individual contributors that are mostly going to be tied to things if they don't produce and they also don't drive management and like, actually guard the profit and loss. They're individual contributors. Things like an office manager that it can be difficult to create numerical incentives. And that's when sometimes tenor is going to be the way that you give a straight line of how they make more money. Hey, you've been here one year, two year, three year, four year. And so in my opinion, if someone has.

They had their hand in so many pots and they affect so many different numbers in the business, I don't want to create perverse incentives by incentivizing one. I want to rather focus on tenor and office. In many cases, that's what I'm focused on. Unless it's like the office manager, I'm happy to give profit sharing, et cetera. All right, number four, who actually gets the MEXT promotion? The loudest complainer or the quiet executor. And do you have a promotion scorecard that weighs teachability, ability to train others, error rate thresholds, crew leadership behaviors and basic P and literacy over tenor and likability with a pass fail gate that you'll enforce even if it means leaving the seat open? Yeah, I think that by having optional meetings for your technicians around the profit and loss statement and open book management, you get a really clear understanding very quickly of who thinks about the P and L and how they think about it. So this is why I like openbook management is I'm actually really fielding the technicians as to who my next working GM is going to be. And I make them optional. So it's like, hey, like, you don't. You're not getting paid on P4P for this. This is time that you're going to spend. But I'm going to. We're going to learn about the P and L. All the numbers will be here. I'll pin it up on the wall for the whole team to see. But if you want to show up early, I'll break all the numbers down for you people that show up to that meeting and then start to take interest and start to take pictures of that P and L, start to ask questions, start to compare last month versus this month. That could be potentially your next working gm. And I am going to hire based upon the skills required for the job. And if they want those skills, understanding a PNL and how all the different levers in the business operate. And then usually that person also starts to become really efficient on pay for performance because they start to see how the business is actually operating behind the scenes. That's why I like open book management. I want to be able to see the top performer and the top performer is many times the one that has the information, open book management and the compensation P for P of an owner. So if they have a compensation and the information of an owner via P4P and OpenBook Management, I get to determine who's going to be the best manager, quote owner of this business once I'm gone. Number 5. Has your pay structure flattened the incentive gradient, I.e. can your top 10% of techs realistically earn 1.8 to 2.2 and a half times the bottom 30% through P4P and skill multipliers? Or is your floor too close to your ceiling? Guaranteed hours overtime, smoothing attendance forgiveness such that A players subsidize C players and quietly plan their exit. This happens all the time. If you're not doing P4P. This is happening in the organization because here's the thing, even if you have tiers based upon experience and skill level, there is still going to be massive distributions of how much profit each team member brings to to the business. Each location brings to the business, Each department brings the business massive distributions. But if you make the incentives based on tenor and skill, but then they're producing profit via being efficient, you have a perverse incentive which is I just need to stick around. And this is where you get a whole bunch of people sitting around doing nothing. You have five people watching someone else doing the work. On a big project, a big bloated company is because everyone incentivizes to just stick around like tenor and like get the certification, get the piece of paper and not actually produce revenue for the business. And so.

I, I, I really do believe that the best comp plans allow someone to double their pay. So I'm just going to say it out loud. The best compensation plans allow someone to double their pay if they perform at a high degree. Now don't make it where it's literally impossible. Ask yourself what would it be like if someone ever came to me for a raise? This is what I say, okay, great. I will give you exactly what you're asking for and here's what you'll have to hit to do it. That's what I would do every single time. And then how much they're asking for would just simply correspond with how reasonable is they're gonna hit that goal. If someone came to me tomorrow and said, I want a million dollars per year, I said, fantastic, we can make you a road to a million. You're going to have to produce all of these things and that would be very, very difficult. However, I don't. I'm never going to say, I almost never say no, no to someone's raise once they're above technician, because I'm simply just going to say, hey, I'm not going to give you the money. I'm going to let you earn it and I'm going to give you a path to doing so. And that ramp might be way off in the distance and very, very difficult if they're asking for something unreasonable. But I'm most of the time asking myself, from a management perspective, how do I cover basic living necessities and then give them a massive ramp for their career. So as they gain more skills, gain more knowledge, gain more authority with the team and more experience, they can make a lot more money. This is why my general manager currently has more than doubled his pay almost 3 times 3x his pay over the past 5 1/2 years of working as the general manager. Because he started off at like $52,000 as base pay and this year will do well over 140. I think I'm probably more like 150 and that's literally almost a tripling of their pay package. But it's because he's been with me for five years and there's a. There's a very easy and constant theme. And I like he can continue to make more money the longer he stays with me and the business is profitable. But his base pay hasn't moved. We're still down. Less than half of his pay comes from base pay. And so in my personal opinion, having a 2x multiple on a top performer is great. That means half of their paycheck is based upon performance. That's why if someone's base pay is $20 per hour on P4P, your top performer, if they absolutely crush and annihilate projects for a paycheck, should make 40 bucks an hour if you have a manager and their base pay is 60, 70 grand, if they crush it and stay with you for a few years and really dial in that location, they should be able to make six figures and make sure that along that path you keep them incentivized when it's very difficult to hit benchmarks. So if you're doing it based on profitability for a manager. Make sure that if you're also expecting them to grow revenue in the first few years, you incentivize the revenue growth and swap it to profit sharing once it goes into profit mode. But I will say 110% unequivocally. There are business, there are employees in your business. If you're not doing P4P, there are business, there are employees in your business that are making 2, 3 times as much profit as another employee and making 5, 5, 10, 15% more per hour. That's not fair. And the moment you change that, you allow A performers to make way more money and the B and C players make less and they leave. And so what happened when we implemented P4P? Yes, some people were mad. Those people were the low performers that a few weeks later left. And guess what? Out of the I think probably 15 people that we had two or three people left. We didn't have to hire anyone else because all the slack was picked up by the rest of the team.

That was very happy to take on the extra work and make more money and in a more efficient route. A more efficient job means a more efficient business. And if my business is more efficient, I'll be able to pay people more. And so that is it for today. If you would like more up P4P because that kind of is what this is all about. P4psoftware.com up until the end of this year it's completely free, so you get three months for free. If you're joining here in October, November, December, all free, trial the software, use it just like we've talked about it. Allow your team to be able to be compensated like an owner. And once you do that, only after that and you give an information of an owner via open book management, can you expect them to treat the business with high regard. I'm Mike Andes. Did the Home Service Millionaire podcast comment below what you got out of it? And if you have a question, go to mikeendes.comquestion, submit a video and I'll answer on the next show.