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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.
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This podcast is for you.
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And today on the docket, we're talking about when everyone wants a raise.
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No one deserves one.
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So kind of a little bit of leadership, I'm gonna guess.
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Also probably the fact, like I went through this at my first location, and that is I could not afford to pay anyone more.
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Also, I had no great system for paying people.
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And so their pay ranges were all over the place.
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Some people were starting at $14, $15 an hour.
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Some people were starting at $18 an hour.
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Some people were at $24, $26, $28 flat rate per hour.
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Had really no real rhyme or reason.
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The honest truth is...
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is that I probably gave out raises based upon when they asked me.
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And if I needed them, I probably said yes.
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And if I didn't really need them, I'd say, sorry, I can't afford it.
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And if they left, I really didn't care because we didn't need them at the time, like during the off season.
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So that was the way I back in the day used to give out compensation.
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Horrible, unprofitable, not fair.
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Uh, it's super not fair that someone works super hard, makes the business literally two to three times as much as someone else.
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It makes a dollar more an hour.
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That's not fair.
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And so, uh, as I realized that that's when the creation of pay for performance or P for P was created.
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Um,
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was in that realization.
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So as of today, my current CPA at homeservicecpa.com is Brad.
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And he was actually one of the people that asked for a raise and fully deserved one.
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But I did not have the money.
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And I remember leaving that one-on-one and I went straight into the office.
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And I told my then office manager, Liz, I said, we are switching to P4P.
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And if half the team leaves, I don't care because it's not fair that I say yes to some people and no to others that are asking for a raise.
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So without any further delay, let's go ahead and jump into the five questions that we have from the producer.
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And the producer went and did some larger questions, a little more in-depth.
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So let's see what we got today.
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Number one.
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When a technician asks for a raise, do you first pool their last 13 weeks of hard data, P4P earn percentage, rework, recall rate, on-time attendance, upsell, close rate, MPS, 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?
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So obviously we do not want to base our compensation model based upon seasonality.
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or like we give raises when we get busier.
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I am guilty of that in the past prior to pay for performance.
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It is absolutely a great idea when you're doing one-on-ones to bring data with you.
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Now, if you're doing pay for performance on P4P software, you can see the top ranking and top earners inside your organization.
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I would print that off before all my one-on-ones and show it to each person.
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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.
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And they pack their lunch.
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They make sure they fuel up at the end of the day.
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They make sure they're in and out of the shop within five minutes in the morning.
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They look at their job notes and their estimate video the night before.
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These are things that I can actually now use as ammunition to help lower performers make more money, so hit their goal, and...
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Make them a higher performer in the organization, thereby achieving the business's goals.
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And so that's the beautiful thing about P4P is that both the business and the employee both meet their goals.
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The employee makes more money and the business makes more money.
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And so this is a great point though.
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And that is when you're doing one-on-ones, bring the data.
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not just the top performers on paid for performance, but also what their efficiency score is.
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Look at several jobs.
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And again, this doesn't take maybe five to 10 minutes before a one-on-one to prepare.
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Look at the last few weeks of one-time jobs or recurring routes where they did really good and when they did really bad.
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And then just walk them through what you would, in your mind, like, oh, that's obvious.
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No, like some people are not going to connect the dots.
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What you're going to want to do is print off the route that was from that day and...
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That was really good and really bad.
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And then compare the two.
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And you can go over with them.
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Like, why did this day you make $29 an hour and this day you made $21 an hour?
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And then they'll actually remember if it's in the past week.
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Oh, yeah, so-and-so's job took forever.
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I had to come back to the shop.
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Oh, yeah, we had to stop and fuel up because we forgot the gas cans.
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Like, that's...
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These are the type of things that allow you to instruct using the numbers instead of you nagging on them.
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And the reason it actually makes sense to use the numbers is because by using the numbers, they make more money.
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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.
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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.
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No one's saying no.
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Now, there are some people that are very money motivated and are going to go to great lengths during a 101 to really understand how they can make more money.
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And then other people, they might not.
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But here's the thing.
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As long as they're performing above base pay on P4P, I'm fine with it.
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Like, they get the kind of the satisfactory, they get pass.
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If someone's under base pay, now it's a messing my numbers.
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I can no longer have a fixed percentage of labor revenue going to my employees on wages.
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I have a problem with it.
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But if they're above base pay, they get satisfactory.
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Some people are okay with just a few dollars above base pay and they pass the test and we're good to go.
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Other people, that's not enough of them.
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They are hungry.
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They're like, I want to learn how to make $5 more per hour.
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And then you use your top leaderboard to incentivize them and instruct them on how they can improve their performance and make more money.
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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.
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And why they had to come back to the shop to pick up a broken piece of equipment.
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Or they had to go to the mechanic because something broke that they drove over.
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These are the things they start to realize make a huge impact on their paycheck.
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And bringing this data allows them to know, how am I doing?
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One of the biggest things I think that employees want to know is, how am I doing at this job?
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And one of the ways that we as employers show how well someone is doing is we pay them more.
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That's what a raise traditionally is.
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Like, hey, I want more money or I'm going to give you more money.
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It's basically saying you're doing good at your job.
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And then if you say no, you don't get a raise.
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You're basically saying you're not doing good enough to warrant an increase in pay.
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You can change all of that by just having numbers tell the story for you.
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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.
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Now, management, you might tie to other things like close ratio, revenue growth,
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profitability, et cetera.
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But from a technician's perspective, when it comes to them asking for more money, I am always looking at efficiency score.
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I'm looking at budget hours.
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I'm looking at their budget hours versus their clock.
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That's their efficiency score.
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That's the main driver of, are they doing a great job?
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And then I'm also gonna usually break it down like, okay, let's look at one-time jobs.
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Let's look at recurring jobs.
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Because I've had team members that make $35 an hour on projects and then make like $19 an hour on recurring jobs.
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And it's not because the jobs are priced differently.
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It's because they have team members that do the opposite.
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And so it's like, let's actually figure out why.
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Oh, every time you get under the truck, after a stop, you get on your phone.
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Whereas the one-time project, you leave your phone in the truck and you just work all day long.
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Oh, let's add up five to 10 minutes after every single stop of across 20 visits and realize, oh, that's where all of your money's going.
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And so this type of one-on-one is the most important.
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Having metrics, breaking down individual jobs and routes for them to actually understand what to do next before their next one-on-one.
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I highly recommend one-on-ones at least monthly for your frontline team.
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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.
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And those start to see the consistency of the top performers and then watch what they do.
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And then you guide them on those one-on-ones to push them in that direction.
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All right.
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Actually, real quick, you also have managers that will do the same thing.
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They'll also ask for more money.
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And this is why leading by numbers is so valuable.
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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 just going to use close ratio for an example, here's what you're going to make.
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And here's your base pay.
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And based upon last year's performance, this is what you'll make if you hit that exact number.
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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.
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And so I have general managers and managers that...
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more than 50% of their compensation comes from incentives around their metric, whether it be profitability for their department, whether it be distributions.
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So that's what I do for my locations, Augusta locations.
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But then I'm managers in different departments and some are profit sharing.
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Some of it is based upon member growth.
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There's a lot of different ways to incentivize someone.
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And then when you have a one-on-one and you talk to them, it's very easy to identify, are you performing above, below, or at the average and what is expected of you?
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And their paycheck should just directly align with that.
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How I personally like to create incentives for higher-up managers that it's not as clear.
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It's not like budget hours and actual hours.
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And they have a lot of autonomy.
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I like to do it like this.
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This is how I like to do my incentives.
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I simply ask myself, what metric would I change and what would I be willing to pay for it?
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If I was able to move revenue to this number, how much would I today be willing to pay someone?
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Okay.
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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.
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Because if someone can take me from $10 million to $12 million, what's that worth to me?
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Okay, well then I'll just tie their incentive to when they hit $11 million, $12 million, $13 million, $14 million, $15 million.
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And there's your ramp.
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And on target earnings, last year we did $10 million.
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Therefore, if you do $10 million next year, you'll be exactly the on target earnings.
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Okay.
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For example, and I'm using revenue when I don't think any of my businesses use revenue as an incentive.
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I'm always looking at profitability of a department, profitability that I actually take distributions for my locations.
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I'm looking at counts.
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So like number of recurring customers is a great metric, especially if you have someone that's managing customer success.
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They're managing onboarding.
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They're managing sales.
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So...
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Those are some other metrics you could use for management.
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But the ultimate thing I would say is in your one-on-ones, use numbers.
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And when it comes to compensation, use numbers because those numbers should scale.
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There should never be a question like, I want to have a bonus.
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I'm sorry.
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I want a base pay increase or what's it called?
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I literally, this whole question is about it.
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It's about a raise.
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There should really never be a question about a raise because it should be very clear how they make more money.
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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.
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For frontline technicians, pay for performance.
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For management, incentives, bonuses, profit sharing, distributable cash.
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Like you got to make sure that the business winning allows them to win and them winning means they make more money.
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And so that would be my two cents on raises.
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All right, next question on the docket.
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These are a little longer.
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Let me know in the comments if you'd like these more in-depth questions.
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Hey, thanks so much for watching the video.
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Real quick, I wanted to invite you to a private event that I'm hosting online at myandys.com slash Black Friday.
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That's right, it's on Black Friday.
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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.
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It's going to be completely free for the first 500 people that sign up.
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So go to mikeandies.com slash blackfriday, sign up for the registration.
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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.
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So you'll definitely want to be there.
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mikeandies.com slash blackfriday.
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We'll see you there.
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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?
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Then either fix the math or confront the habits, late starts, sloppy staging, callbacks.
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And where exactly do you draw the line for act of God exceptions versus performance?
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Okay.
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Great question.
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So obviously budget hours versus actual hours, their efficiency is going to be dramatically impacted by things like the weather, whether or not trucks break down equipment.
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So when do you actually step in and make the adjustment?
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So here's my two cents.
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I like to simplify my services and standardize them so that this decreases dramatically.
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I see this happen the
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scorecards I see coming every day from P4P software.
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I see this happen most commonly when a business owner has to step in and change the budget hours on a big project.
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Usually, big project that they've never done before.
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So just stay away from those projects and this dramatically decreases.
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When you get into jobs that are custom, you've never done them before.
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They're not standardized.
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They're completely different than anything you've ever done before.
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There's no way to be able to replicate it.
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And none of your team have skill doing it.
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The likelihood of you getting accurate budget hours is so low.
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And a lot of times the reason people get allured into it is because of a big project.
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So that would be my first big caveat.
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When it comes to the act of God, like what happens when the weather is crazy and the job takes three times longer?
213
00:13:45.420 --> 00:13:50.784
I will step in many times on massive projects and help the team out in terms of budget hours.
214
00:13:50.824 --> 00:13:54.928
I think we did this back the first few years of P4P once or twice on projects.
215
00:13:55.008 --> 00:13:58.131
And every single time it was jobs that we should not have taken.
216
00:13:58.751 --> 00:14:00.092
And now we don't even offer those services.
217
00:14:00.233 --> 00:14:04.537
Like we would do this like very specialized porcelain, very large pavers.
218
00:14:04.797 --> 00:14:08.921
It looked beautiful, but it took like three times longer than we had thought in terms of budgeted hours.
219
00:14:09.601 --> 00:14:12.484
And so number one, stay away from those type of projects would be my recommendation.
220
00:14:12.744 --> 00:14:13.705
The next thing I would say,
221
00:14:14.926 --> 00:14:19.910
is we do think about weather and equipment.
222
00:14:20.771 --> 00:14:25.995
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.
223
00:14:26.335 --> 00:14:28.997
So we give a higher percentage on P4P to our team.
224
00:14:29.277 --> 00:14:32.459
So instead of say 28%, we give them 33% or 35%.
225
00:14:32.720 --> 00:14:36.462
We used to be back in the day even as high as 40% when the grass was growing like crazy.
226
00:14:36.963 --> 00:14:40.766
Again, the goal is that everyone is above base pay.
227
00:14:41.206 --> 00:14:43.688
At least half of your team above base pay on P4P.
228
00:14:44.168 --> 00:14:47.650
If they're not, there's no incentive for them to work faster, and P4P means nothing.
229
00:14:48.310 --> 00:14:54.393
And the whole objective of P4P is to be able to say a percentage is fixed as to what you give in wages.
230
00:14:55.033 --> 00:15:03.237
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.
231
00:15:03.297 --> 00:15:03.677
No, you don't.
232
00:15:04.317 --> 00:15:05.378
Most of your team's hitting base pay.
233
00:15:05.578 --> 00:15:09.540
You're probably hitting 45% of labor is going out the door of wages.
234
00:15:10.220 --> 00:15:11.041
So... Um...
235
00:15:11.961 --> 00:15:15.742
I think my biggest thing is how do I take ownership of this?
236
00:15:15.823 --> 00:15:18.964
And that is going to be I adjust pay structures based on seasonality.
237
00:15:19.404 --> 00:15:22.985
I avoid big projects that we have no business doing.
238
00:15:23.645 --> 00:15:26.306
And then I will say there's going to be jobs that come and go.
239
00:15:26.667 --> 00:15:28.547
And I have to explain this to the team on the upfront.
240
00:15:28.827 --> 00:15:31.849
There's going to be jobs you show up, it says 20 budget hours, and you knock it out in five.
241
00:15:32.309 --> 00:15:35.490
There's going to be jobs you show up, it says 20, and it takes you 35.
242
00:15:36.090 --> 00:15:36.911
It's going to happen.
243
00:15:37.391 --> 00:15:40.052
And what you have to do, that's why I'm so...
244
00:15:41.001 --> 00:15:43.383
bullish on everyone's got to be above base pay.
245
00:15:44.044 --> 00:15:48.468
Because as long as that's the case, they're going to realize that there's going to be times they win and there's going to be times they lose.
246
00:15:48.808 --> 00:15:52.352
And you educate them with open book management as to how the business does the same thing.
247
00:15:52.392 --> 00:15:53.393
There's months that are really good.
248
00:15:53.613 --> 00:15:54.514
There's months that are skinny.
249
00:15:54.554 --> 00:15:58.678
And you say, hey, the whole objective of P4P is that you guys get to win when the business is winning.
250
00:15:58.938 --> 00:16:00.359
And when you crush budget hours, you win.
251
00:16:00.640 --> 00:16:04.784
But the same thing is true when all of a sudden, like the weather changes, that the business is not winning.
252
00:16:05.324 --> 00:16:09.546
And therefore the team's not going to win as much on P4P in that scenario.
253
00:16:10.286 --> 00:16:15.888
The good thing is when they hit a bad job, they don't like, they don't wallow in it.
254
00:16:16.529 --> 00:16:21.571
Back before P4P when it was hourly, we'd have crews just staying out in jobs forever when the weather was bad.
255
00:16:21.611 --> 00:16:23.151
Now it's like, hey guys, let's get this done.
256
00:16:23.171 --> 00:16:24.892
And like, you're not going to make up a base pay.
257
00:16:24.912 --> 00:16:25.532
Let's move on.
258
00:16:25.552 --> 00:16:28.093
Let's get past this job and move on to the next one.
259
00:16:28.614 --> 00:16:32.075
And so it inspires the culture of like, hey guys, we're,
260
00:16:32.155 --> 00:16:34.495
we all know the weather's bad or a truck broke down.
261
00:16:34.595 --> 00:16:35.976
We're not gonna make P for P on this job.
262
00:16:35.996 --> 00:16:40.136
Let's get it behind us, make sure the customer's happy and let's make sure we can at least get a good review.
263
00:16:40.577 --> 00:16:45.718
And then things like positive reviews and referrals is where they can make some extra money for that job.
264
00:16:45.998 --> 00:16:47.078
That's where we start to push them.
265
00:16:47.598 --> 00:16:51.359
But yeah, I'd say one out of 20 projects especially are gonna go a little south.
266
00:16:51.839 --> 00:16:58.520
And then what we really incentivize or encourage is listening to your team when it comes to price increases.
267
00:16:59.080 --> 00:17:00.821
They know which jobs need to go higher.
268
00:17:00.901 --> 00:17:02.202
They know which type of services.
269
00:17:02.363 --> 00:17:05.425
It's very difficult to hit above base pay on P4P.
270
00:17:05.725 --> 00:17:06.566
So you listen to them.
271
00:17:07.006 --> 00:17:15.252
So when we would do a price increase, before we do it across the board, we just ask the entire team, all right, we're the top 10 customers you know right off the rip on your mowing route, you just can never hit budget hours.
272
00:17:15.652 --> 00:17:17.414
And they would fire them off because they know...
273
00:17:17.974 --> 00:17:21.195
now that they're getting paid based on budget hours, they know the jobs that are underbid.
274
00:17:21.556 --> 00:17:27.018
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.
275
00:17:27.398 --> 00:17:32.740
And especially if you have 10, 15, 20 people, they're like, oh yeah, these are the 10 people that are way underbid.
276
00:17:32.760 --> 00:17:41.804
We can never hit budget hours because the slope of the lawn or because the driveway or because the access or the gate, the gates, whatever it might be, and you raise prices.
277
00:17:42.044 --> 00:17:45.186
So when our team consistently was telling us that budget hours were off,
278
00:17:45.666 --> 00:17:48.411
on a specific service or customer, we would adjust prices.
279
00:17:49.453 --> 00:17:50.134
Number three,
280
00:17:51.192 --> 00:17:59.617
How much of your raises in the past 12 months were peacekeeping bribes to stop noise or resignation versus tied to a written skill ban or promotion rubric?
281
00:17:59.977 --> 00:18:09.103
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?
282
00:18:09.824 --> 00:18:10.304
Here's the thing.
283
00:18:10.904 --> 00:18:18.029
Until you have performance-based pay, you are giving raises based upon bribing people to not leave.
284
00:18:18.664 --> 00:18:20.385
That's the bottom line.
285
00:18:20.605 --> 00:18:22.347
Or stop noise, like stop complaining.
286
00:18:23.427 --> 00:18:30.993
Until you run the business based upon the metrics, you are simply at the mercy of team members staying and staying happy.
287
00:18:31.713 --> 00:18:33.935
And therefore, when they're not happy, you give them more money.
288
00:18:34.875 --> 00:18:39.158
And because of that, you have team members with all those different sorts of compensation.
289
00:18:39.278 --> 00:18:40.659
There's no system for it.
290
00:18:41.080 --> 00:18:44.182
It becomes very unfair and you don't open up your books because of it.
291
00:18:44.969 --> 00:18:48.154
So I could not do open book management without pay for performance.
292
00:18:48.795 --> 00:18:51.058
I could not do open book management without profit sharing.
293
00:18:51.138 --> 00:18:52.400
That's why you need all three.
294
00:18:52.660 --> 00:18:55.424
P4P, open book management, and profit sharing.
295
00:18:55.925 --> 00:18:59.310
If you open up the books and you don't do P4P, good luck.
296
00:18:59.971 --> 00:19:08.536
Because all of a sudden, people are going to start doing some math and realizing that they're only getting paid 50 cents more than the person that has been around for a long time.
297
00:19:08.876 --> 00:19:10.177
Or they'll make up random reasons.
298
00:19:10.197 --> 00:19:15.019
Like, I show up more on time, or I do different types of services, or I'm more skilled, I have more experience.
299
00:19:15.500 --> 00:19:16.180
You don't want that.
300
00:19:16.480 --> 00:19:17.381
It's based upon your production.
301
00:19:17.601 --> 00:19:19.842
It's based upon how much you bring to this business, and you get a cut of it.
302
00:19:20.182 --> 00:19:21.503
That's P4P for the technicians.
303
00:19:21.923 --> 00:19:22.864
Same thing with managers.
304
00:19:23.144 --> 00:19:25.305
I don't want a manager coming to me and asking for more money.
305
00:19:25.785 --> 00:19:28.487
I want them to have a very clear path as to how they make more money.
306
00:19:29.107 --> 00:19:29.788
Here's the crazy thing.
307
00:19:30.108 --> 00:19:39.636
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 was asked for a raise.
308
00:19:39.656 --> 00:19:41.137
Not one single time.
309
00:19:41.337 --> 00:19:42.258
Not one single time.
310
00:19:42.598 --> 00:19:52.327
And the reason is because if someone did, they'd 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.
311
00:19:52.927 --> 00:20:05.314
And so the same thing is true, whether it be P4P, profit sharing, percentages on 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.
312
00:20:05.474 --> 00:20:07.576
Otherwise you will have people asking you for more money.
313
00:20:08.096 --> 00:20:13.879
And I don't want it to be where the bonus is making up like 5% or 3% or 6% of their paycheck.
314
00:20:14.200 --> 00:20:15.280
I want it to be meaningful.
315
00:20:15.700 --> 00:20:19.643
And in my opinion, unless it's more than 10, 15, 20% of their paycheck, it doesn't move the needle.
316
00:20:20.143 --> 00:20:27.993
I saw an 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.
317
00:20:28.714 --> 00:20:34.781
And the base pay was, I think, like $60,000 or $70,000, and then it was like 25% of profit sharing.
318
00:20:35.543 --> 00:20:44.049
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.
319
00:20:44.530 --> 00:20:53.476
And so it's going to 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.
320
00:20:53.816 --> 00:20:57.139
But the likelihood of them staying the first year and a half when there's not profit, very low.
321
00:20:57.639 --> 00:21:00.742
And so we've got to realistically think, can they achieve these numbers?
322
00:21:01.042 --> 00:21:06.026
And if I tell them that the on-target earnings is $85,000 or $90,000, how are they actually going to make the extra $30,000?
323
00:21:06.046 --> 00:21:14.654
Because I believe a great pay package of like $65,000, $70,000 with $30,000 as a bonus that they earn because of incentives, I like that.
324
00:21:15.054 --> 00:21:20.499
I do not like where they're going to make $60,000 as base pay, and if they do really good, they'll get $5,000 extra.
325
00:21:21.680 --> 00:21:22.281
I don't like that.
326
00:21:23.262 --> 00:21:27.826
Now, they're going to be individual contributors that are mostly going to be tied to things.
327
00:21:27.906 --> 00:21:40.718
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...
328
00:21:41.579 --> 00:21:43.840
uh, not numerical incentives.
329
00:21:44.360 --> 00:21:49.402
And that's when sometimes tenor is going to be the way that you give a straight line of how they make more money.
330
00:21:49.782 --> 00:21:52.043
Hey, you've been here one year, two year, three year, four year.
331
00:21:52.403 --> 00:21:54.244
And so in my opinion, if someone has
332
00:21:55.308 --> 00:21:59.489
They have their hand in so many pots and they affect so many different numbers in the business.
333
00:21:59.829 --> 00:22:02.330
I don't want to create perverse incentives by incentivizing one.
334
00:22:02.790 --> 00:22:06.231
I want to rather focus on tenure and an office.
335
00:22:06.751 --> 00:22:08.631
In many cases, that's what I'm focused on.
336
00:22:08.811 --> 00:22:12.512
Unless it's like the office manager, I'm happy to give profit sharing, et cetera.
337
00:22:13.273 --> 00:22:14.053
All right, number four.
338
00:22:15.160 --> 00:22:19.062
Who actually gets the next promotion, the loudest complainer or the quiet executor?
339
00:22:19.462 --> 00:22:32.807
And do you have a promotion scorecard that weighs teachability, ability to train others, air rate thresholds, crew leadership behaviors, and basic P&L literacy over tenor and likability with a pass-fail gate that you will enforce even if it means leaving the seat open?
340
00:22:33.564 --> 00:22:34.425
Yeah.
341
00:22:34.785 --> 00:22:45.592
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&L and how they think about it.
342
00:22:45.612 --> 00:22:52.917
So this is why I like open book management is I'm actually really fielding the technicians as to who my next working GM is going to be.
343
00:22:53.597 --> 00:22:54.378
And I make them optional.
344
00:22:54.638 --> 00:22:56.740
So it's like, hey, you're not getting paid on P4P for this.
345
00:22:56.860 --> 00:22:58.042
This is time that you're going to spend.
346
00:22:58.062 --> 00:22:59.623
We're going to learn about the P&L.
347
00:22:59.983 --> 00:23:00.744
All the numbers will be here.
348
00:23:00.764 --> 00:23:02.226
I'll pin it up on the wall for the whole team to see.
349
00:23:02.246 --> 00:23:04.668
But if you want to show up early, I'll break all the numbers down for you.
350
00:23:05.229 --> 00:23:16.560
People that show up to that meeting and then start to take interest and start to take pictures of that P&L, start to ask questions, start to compare last month versus this month, that could be potentially your next working GM.
351
00:23:17.160 --> 00:23:21.543
And I am going to hire based upon the skills required for the job.
352
00:23:22.023 --> 00:23:26.366
And if they want those skills, understanding a P&L and how all the different levers in the business operate.
353
00:23:26.666 --> 00:23:33.771
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.
354
00:23:34.131 --> 00:23:35.352
That's why I like open book management.
355
00:23:36.272 --> 00:23:45.118
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, P4P.
356
00:23:46.417 --> 00:23:46.857
of an owner.
357
00:23:47.398 --> 00:23:55.943
So if they have the compensation and the information of an owner via P4P and open book management, I get to determine who's going to be the best manager, quote, owner of this business once I'm gone.
358
00:23:56.843 --> 00:24:00.326
Number five, has your pay structure flattened the incentive gradient?
359
00:24:01.327 --> 00:24:11.573
I.e., can your top 10% of techs realistically earn 1.8 to 2.2.5 times the bottom 30% through P4P and skill multipliers, or is your floor too close to your ceiling?
360
00:24:12.033 --> 00:24:19.297
Guaranteed hours, overtime smoothing, attendance forgiveness, such that A players subsidize C players and quietly plan their exit.
361
00:24:19.577 --> 00:24:21.298
This happens all the time.
362
00:24:21.858 --> 00:24:24.740
If you're not doing P4P, this is happening in the organization.
363
00:24:25.260 --> 00:24:26.401
Because here's the thing.
364
00:24:27.121 --> 00:24:38.807
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 the business.
365
00:24:38.987 --> 00:24:41.008
Each location brings to the business.
366
00:24:41.188 --> 00:24:42.589
Each department brings to the business.
367
00:24:43.049 --> 00:24:44.449
Massive distributions.
368
00:24:44.930 --> 00:24:51.393
But if you make the incentives based on tenor and skill, but then they're producing profit via being efficient...
369
00:24:51.973 --> 00:24:54.974
you have a perverse incentive, which is I just need to stick around.
370
00:24:55.314 --> 00:24:58.775
And this is where you get a whole bunch of people sitting around doing nothing.
371
00:24:58.995 --> 00:25:12.600
You have five people watching someone else doing the work on a big project, a big bloated company, is because everyone's incentivized to just stick around, like tenor, and get the certification, get the piece of paper, and not actually produce revenue for the business.
372
00:25:13.560 --> 00:25:21.323
And so I really do believe that the best comp plans allow someone to double their pay.
373
00:25:22.112 --> 00:25:23.073
So I'm just going to say it out loud.
374
00:25:24.493 --> 00:25:29.756
The best compensation plans allow someone to double their pay if they perform at a high degree.
375
00:25:30.196 --> 00:25:33.078
Now, don't make it where it's literally impossible.
376
00:25:33.838 --> 00:25:35.439
Ask yourself, what would it be?
377
00:25:35.639 --> 00:25:37.960
Like if someone ever came to me for a raise, this is what I say.
378
00:25:38.521 --> 00:25:38.921
Okay, great.
379
00:25:39.061 --> 00:25:40.822
I will give you exactly what you're asking for.
380
00:25:40.962 --> 00:25:42.123
And here's what you'll have to hit to do it.
381
00:25:42.863 --> 00:25:44.044
That's what I would do every single time.
382
00:25:44.364 --> 00:25:49.027
And then how much they're asking for would just simply correspond with how reasonable is they're going to hit that goal.
383
00:25:49.327 --> 00:25:52.510
If someone came to me tomorrow and said, I want a million dollars per year.
384
00:25:52.890 --> 00:25:53.790
I said, fantastic.
385
00:25:53.991 --> 00:25:55.372
We can make you a road to a million.
386
00:25:55.612 --> 00:25:58.434
You're going to have to produce all of these things.
387
00:25:59.815 --> 00:26:01.196
And that would be very, very difficult.
388
00:26:01.516 --> 00:26:11.444
However, I don't, I'm never going to say, I almost never say no to someone's raise once they're above technician, because I'm simply just gonna say, hey, I'm not gonna give you the money.
389
00:26:11.564 --> 00:26:13.806
I'm gonna let you earn it and I'm gonna give you a path to doing so.
390
00:26:14.347 --> 00:26:16.748
And that ramp might be way off in the distance.
391
00:26:16.768 --> 00:26:28.178
It's 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?
392
00:26:28.498 --> 00:26:35.523
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.
393
00:26:36.044 --> 00:26:38.425
This is why my general manager currently...
394
00:26:39.287 --> 00:26:46.873
has more than doubled his pay, almost 3x his pay, over the past five and a half years of working as the general manager.
395
00:26:47.154 --> 00:26:52.818
It's because he started off at like $52,000 as base pay, and this year will do well over $140,000.
396
00:26:52.838 --> 00:26:54.600
I think it'll probably more like $150,000.
397
00:26:55.340 --> 00:26:57.522
And that's literally almost a tripling of their pay package.
398
00:26:57.863 --> 00:27:05.049
But it's because he's been with me for five years, and there's a very easy and constant theme, and he can continue to make more money the longer he stays with me.
399
00:27:05.789 --> 00:27:09.393
And the business is profitable, but his base pay hasn't moved.
400
00:27:09.733 --> 00:27:14.077
We're still down less than half of his pay comes from base pay.
401
00:27:14.557 --> 00:27:18.921
And so in my personal opinion, having a 2X multiple on a top performer is great.
402
00:27:19.362 --> 00:27:21.404
It means half of their paycheck is based upon performance.
403
00:27:21.844 --> 00:27:30.813
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 an hour.
404
00:27:31.913 --> 00:27:40.017
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.
405
00:27:40.798 --> 00:27:48.581
And make sure that along that path, you keep them incentivized when it's very difficult to hit benchmarks.
406
00:27:49.061 --> 00:28:00.407
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.
407
00:28:01.187 --> 00:28:06.490
Um, but I will say 110% unequivocally, there are business, there are employees in your business.
408
00:28:06.510 --> 00:28:16.375
If you're not doing P for P, there are, there are employees in your business that are making two, three times as much profit as another employee and making five, 10, 15% more per hour.
409
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That's not fair.
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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.
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And so what happened when we implemented P4P?
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Yes, some people were mad.
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Those people were the low performers that a few weeks later left.
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And guess what?
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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.
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And in a more efficient route, a more efficient job, a more efficient business, and if my business is more efficient, I'll be able to pay people more.
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And so that is it for today.
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If you would like more about P4P, because that kind of is what this is all about, p4psoftware.com, up until the end of this year, it's completely free.
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So you get three months for free.
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If you're joining here in October, November, December, all free, try out the software, use it, just like we've talked about it.
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Allow your team to be able to be compensated like an owner.
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And once you do that, only after that, and you're given information of an owner via open book management, can you expect them to treat the business with high regard?
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I'm Mike Andes.
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This is the Home Service Millionaire Podcast.
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Comment below what you got out of it.
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And if you have a question, go to mikeandes.com slash question, submit a video, and I'll answer on the next show.
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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.
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This podcast is for you.
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And today on the docket, we're talking about when everyone wants a raise.
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No one deserves one.
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So kind of a little bit of leadership, I'm gonna guess.
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Also probably the fact, like I went through this at my first location, and that is I could not afford to pay anyone more.
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Also, I had no great system for paying people.
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And so their pay ranges were all over the place.
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Some people were starting at $14, $15 an hour.
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Some people were starting at $18 an hour.
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Some people were at $24, $26, $28 flat rate per hour.
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Had really no real rhyme or reason.
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The honest truth is...
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is that I probably gave out raises based upon when they asked me.
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And if I needed them, I probably said yes.
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And if I didn't really need them, I'd say, sorry, I can't afford it.
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And if they left, I really didn't care because we didn't need them at the time, like during the off season.
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So that was the way I back in the day used to give out compensation.
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Horrible, unprofitable, not fair.
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Uh, it's super not fair that someone works super hard, makes the business literally two to three times as much as someone else.
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It makes a dollar more an hour.
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That's not fair.
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And so, uh, as I realized that that's when the creation of pay for performance or P for P was created.
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Um,
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was in that realization.
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So as of today, my current CPA at homeservicecpa.com is Brad.
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And he was actually one of the people that asked for a raise and fully deserved one.
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But I did not have the money.
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And I remember leaving that one-on-one and I went straight into the office.
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And I told my then office manager, Liz, I said, we are switching to P4P.
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And if half the team leaves, I don't care because it's not fair that I say yes to some people and no to others that are asking for a raise.
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So without any further delay, let's go ahead and jump into the five questions that we have from the producer.
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And the producer went and did some larger questions, a little more in-depth.
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So let's see what we got today.
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Number one.
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When a technician asks for a raise, do you first pool their last 13 weeks of hard data, P4P earn percentage, rework, recall rate, on-time attendance, upsell, close rate, MPS, 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?
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So obviously we do not want to base our compensation model based upon seasonality.
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or like we give raises when we get busier.
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I am guilty of that in the past prior to pay for performance.
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It is absolutely a great idea when you're doing one-on-ones to bring data with you.
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Now, if you're doing pay for performance on P4P software, you can see the top ranking and top earners inside your organization.
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I would print that off before all my one-on-ones and show it to each person.
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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.
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And they pack their lunch.
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They make sure they fuel up at the end of the day.
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They make sure they're in and out of the shop within five minutes in the morning.
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They look at their job notes and their estimate video the night before.
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These are things that I can actually now use as ammunition to help lower performers make more money, so hit their goal, and...
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Make them a higher performer in the organization, thereby achieving the business's goals.
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And so that's the beautiful thing about P4P is that both the business and the employee both meet their goals.
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The employee makes more money and the business makes more money.
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And so this is a great point though.
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And that is when you're doing one-on-ones, bring the data.
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not just the top performers on paid for performance, but also what their efficiency score is.
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Look at several jobs.
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And again, this doesn't take maybe five to 10 minutes before a one-on-one to prepare.
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Look at the last few weeks of one-time jobs or recurring routes where they did really good and when they did really bad.
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And then just walk them through what you would, in your mind, like, oh, that's obvious.
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No, like some people are not going to connect the dots.
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What you're going to want to do is print off the route that was from that day and...
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That was really good and really bad.
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And then compare the two.
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And you can go over with them.
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Like, why did this day you make $29 an hour and this day you made $21 an hour?
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And then they'll actually remember if it's in the past week.
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Oh, yeah, so-and-so's job took forever.
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I had to come back to the shop.
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Oh, yeah, we had to stop and fuel up because we forgot the gas cans.
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Like, that's...
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These are the type of things that allow you to instruct using the numbers instead of you nagging on them.
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And the reason it actually makes sense to use the numbers is because by using the numbers, they make more money.
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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.
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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.
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No one's saying no.
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Now, there are some people that are very money motivated and are going to go to great lengths during a 101 to really understand how they can make more money.
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And then other people, they might not.
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But here's the thing.
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As long as they're performing above base pay on P4P, I'm fine with it.
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Like, they get the kind of the satisfactory, they get pass.
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If someone's under base pay, now it's a messing my numbers.
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I can no longer have a fixed percentage of labor revenue going to my employees on wages.
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I have a problem with it.
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But if they're above base pay, they get satisfactory.
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Some people are okay with just a few dollars above base pay and they pass the test and we're good to go.
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Other people, that's not enough of them.
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They are hungry.
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They're like, I want to learn how to make $5 more per hour.
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And then you use your top leaderboard to incentivize them and instruct them on how they can improve their performance and make more money.
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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.
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And why they had to come back to the shop to pick up a broken piece of equipment.
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Or they had to go to the mechanic because something broke that they drove over.
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These are the things they start to realize make a huge impact on their paycheck.
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And bringing this data allows them to know, how am I doing?
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One of the biggest things I think that employees want to know is, how am I doing at this job?
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And one of the ways that we as employers show how well someone is doing is we pay them more.
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That's what a raise traditionally is.
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Like, hey, I want more money or I'm going to give you more money.
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It's basically saying you're doing good at your job.
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And then if you say no, you don't get a raise.
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You're basically saying you're not doing good enough to warrant an increase in pay.
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You can change all of that by just having numbers tell the story for you.
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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.
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Now, management, you might tie to other things like close ratio, revenue growth,
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profitability, et cetera.
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But from a technician's perspective, when it comes to them asking for more money, I am always looking at efficiency score.
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I'm looking at budget hours.
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I'm looking at their budget hours versus their clock.
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That's their efficiency score.
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That's the main driver of, are they doing a great job?
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And then I'm also gonna usually break it down like, okay, let's look at one-time jobs.
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Let's look at recurring jobs.
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Because I've had team members that make $35 an hour on projects and then make like $19 an hour on recurring jobs.
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And it's not because the jobs are priced differently.
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It's because they have team members that do the opposite.
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And so it's like, let's actually figure out why.
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Oh, every time you get under the truck, after a stop, you get on your phone.
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Whereas the one-time project, you leave your phone in the truck and you just work all day long.
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Oh, let's add up five to 10 minutes after every single stop of across 20 visits and realize, oh, that's where all of your money's going.
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And so this type of one-on-one is the most important.
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Having metrics, breaking down individual jobs and routes for them to actually understand what to do next before their next one-on-one.
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I highly recommend one-on-ones at least monthly for your frontline team.
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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.
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And those start to see the consistency of the top performers and then watch what they do.
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And then you guide them on those one-on-ones to push them in that direction.
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All right.
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Actually, real quick, you also have managers that will do the same thing.
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They'll also ask for more money.
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And this is why leading by numbers is so valuable.
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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 just going to use close ratio for an example, here's what you're going to make.
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And here's your base pay.
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And based upon last year's performance, this is what you'll make if you hit that exact number.
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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.
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And so I have general managers and managers that...
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more than 50% of their compensation comes from incentives around their metric, whether it be profitability for their department, whether it be distributions.
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So that's what I do for my locations, Augusta locations.
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But then I'm managers in different departments and some are profit sharing.
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Some of it is based upon member growth.
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There's a lot of different ways to incentivize someone.
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And then when you have a one-on-one and you talk to them, it's very easy to identify, are you performing above, below, or at the average and what is expected of you?
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And their paycheck should just directly align with that.
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How I personally like to create incentives for higher-up managers that it's not as clear.
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It's not like budget hours and actual hours.
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And they have a lot of autonomy.
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I like to do it like this.
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This is how I like to do my incentives.
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I simply ask myself, what metric would I change and what would I be willing to pay for it?
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If I was able to move revenue to this number, how much would I today be willing to pay someone?
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Okay.
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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.
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Because if someone can take me from $10 million to $12 million, what's that worth to me?
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Okay, well then I'll just tie their incentive to when they hit $11 million, $12 million, $13 million, $14 million, $15 million.
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And there's your ramp.
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And on target earnings, last year we did $10 million.
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Therefore, if you do $10 million next year, you'll be exactly the on target earnings.
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Okay.
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For example, and I'm using revenue when I don't think any of my businesses use revenue as an incentive.
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I'm always looking at profitability of a department, profitability that I actually take distributions for my locations.
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I'm looking at counts.
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So like number of recurring customers is a great metric, especially if you have someone that's managing customer success.
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They're managing onboarding.
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They're managing sales.
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So...
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Those are some other metrics you could use for management.
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But the ultimate thing I would say is in your one-on-ones, use numbers.
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And when it comes to compensation, use numbers because those numbers should scale.
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There should never be a question like, I want to have a bonus.
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I'm sorry.
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I want a base pay increase or what's it called?
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I literally, this whole question is about it.
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It's about a raise.
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There should really never be a question about a raise because it should be very clear how they make more money.
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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.
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For frontline technicians, pay for performance.
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For management, incentives, bonuses, profit sharing, distributable cash.
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Like you got to make sure that the business winning allows them to win and them winning means they make more money.
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And so that would be my two cents on raises.
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All right, next question on the docket.
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These are a little longer.
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Let me know in the comments if you'd like these more in-depth questions.
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Hey, thanks so much for watching the video.
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Real quick, I wanted to invite you to a private event that I'm hosting online at myandys.com slash Black Friday.
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That's right, it's on Black Friday.
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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.
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It's going to be completely free for the first 500 people that sign up.
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So go to mikeandies.com slash blackfriday, sign up for the registration.
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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.
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So you'll definitely want to be there.
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mikeandies.com slash blackfriday.
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We'll see you there.
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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?
191
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Then either fix the math or confront the habits, late starts, sloppy staging, callbacks.
192
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And where exactly do you draw the line for act of God exceptions versus performance?
193
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Okay.
194
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Great question.
195
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So obviously budget hours versus actual hours, their efficiency is going to be dramatically impacted by things like the weather, whether or not trucks break down equipment.
196
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So when do you actually step in and make the adjustment?
197
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So here's my two cents.
198
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I like to simplify my services and standardize them so that this decreases dramatically.
199
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I see this happen the
200
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scorecards I see coming every day from P4P software.
201
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I see this happen most commonly when a business owner has to step in and change the budget hours on a big project.
202
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Usually, big project that they've never done before.
203
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So just stay away from those projects and this dramatically decreases.
204
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When you get into jobs that are custom, you've never done them before.
205
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They're not standardized.
206
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They're completely different than anything you've ever done before.
207
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There's no way to be able to replicate it.
208
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And none of your team have skill doing it.
209
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The likelihood of you getting accurate budget hours is so low.
210
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And a lot of times the reason people get allured into it is because of a big project.
211
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So that would be my first big caveat.
212
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When it comes to the act of God, like what happens when the weather is crazy and the job takes three times longer?
213
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I will step in many times on massive projects and help the team out in terms of budget hours.
214
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I think we did this back the first few years of P4P once or twice on projects.
215
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And every single time it was jobs that we should not have taken.
216
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And now we don't even offer those services.
217
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Like we would do this like very specialized porcelain, very large pavers.
218
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It looked beautiful, but it took like three times longer than we had thought in terms of budgeted hours.
219
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And so number one, stay away from those type of projects would be my recommendation.
220
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The next thing I would say,
221
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is we do think about weather and equipment.
222
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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.
223
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So we give a higher percentage on P4P to our team.
224
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So instead of say 28%, we give them 33% or 35%.
225
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We used to be back in the day even as high as 40% when the grass was growing like crazy.
226
00:14:36.963 --> 00:14:40.766
Again, the goal is that everyone is above base pay.
227
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At least half of your team above base pay on P4P.
228
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If they're not, there's no incentive for them to work faster, and P4P means nothing.
229
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And the whole objective of P4P is to be able to say a percentage is fixed as to what you give in wages.
230
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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.
231
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No, you don't.
232
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Most of your team's hitting base pay.
233
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You're probably hitting 45% of labor is going out the door of wages.
234
00:15:10.220 --> 00:15:11.041
So... Um...
235
00:15:11.961 --> 00:15:15.742
I think my biggest thing is how do I take ownership of this?
236
00:15:15.823 --> 00:15:18.964
And that is going to be I adjust pay structures based on seasonality.
237
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I avoid big projects that we have no business doing.
238
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And then I will say there's going to be jobs that come and go.
239
00:15:26.667 --> 00:15:28.547
And I have to explain this to the team on the upfront.
240
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There's going to be jobs you show up, it says 20 budget hours, and you knock it out in five.
241
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There's going to be jobs you show up, it says 20, and it takes you 35.
242
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It's going to happen.
243
00:15:37.391 --> 00:15:40.052
And what you have to do, that's why I'm so...
244
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bullish on everyone's got to be above base pay.
245
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Because as long as that's the case, they're going to realize that there's going to be times they win and there's going to be times they lose.
246
00:15:48.808 --> 00:15:52.352
And you educate them with open book management as to how the business does the same thing.
247
00:15:52.392 --> 00:15:53.393
There's months that are really good.
248
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There's months that are skinny.
249
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And you say, hey, the whole objective of P4P is that you guys get to win when the business is winning.
250
00:15:58.938 --> 00:16:00.359
And when you crush budget hours, you win.
251
00:16:00.640 --> 00:16:04.784
But the same thing is true when all of a sudden, like the weather changes, that the business is not winning.
252
00:16:05.324 --> 00:16:09.546
And therefore the team's not going to win as much on P4P in that scenario.
253
00:16:10.286 --> 00:16:15.888
The good thing is when they hit a bad job, they don't like, they don't wallow in it.
254
00:16:16.529 --> 00:16:21.571
Back before P4P when it was hourly, we'd have crews just staying out in jobs forever when the weather was bad.
255
00:16:21.611 --> 00:16:23.151
Now it's like, hey guys, let's get this done.
256
00:16:23.171 --> 00:16:24.892
And like, you're not going to make up a base pay.
257
00:16:24.912 --> 00:16:25.532
Let's move on.
258
00:16:25.552 --> 00:16:28.093
Let's get past this job and move on to the next one.
259
00:16:28.614 --> 00:16:32.075
And so it inspires the culture of like, hey guys, we're,
260
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we all know the weather's bad or a truck broke down.
261
00:16:34.595 --> 00:16:35.976
We're not gonna make P for P on this job.
262
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Let's get it behind us, make sure the customer's happy and let's make sure we can at least get a good review.
263
00:16:40.577 --> 00:16:45.718
And then things like positive reviews and referrals is where they can make some extra money for that job.
264
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That's where we start to push them.
265
00:16:47.598 --> 00:16:51.359
But yeah, I'd say one out of 20 projects especially are gonna go a little south.
266
00:16:51.839 --> 00:16:58.520
And then what we really incentivize or encourage is listening to your team when it comes to price increases.
267
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They know which jobs need to go higher.
268
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They know which type of services.
269
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It's very difficult to hit above base pay on P4P.
270
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So you listen to them.
271
00:17:07.006 --> 00:17:15.252
So when we would do a price increase, before we do it across the board, we just ask the entire team, all right, we're the top 10 customers you know right off the rip on your mowing route, you just can never hit budget hours.
272
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And they would fire them off because they know...
273
00:17:17.974 --> 00:17:21.195
now that they're getting paid based on budget hours, they know the jobs that are underbid.
274
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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.
275
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And especially if you have 10, 15, 20 people, they're like, oh yeah, these are the 10 people that are way underbid.
276
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We can never hit budget hours because the slope of the lawn or because the driveway or because the access or the gate, the gates, whatever it might be, and you raise prices.
277
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So when our team consistently was telling us that budget hours were off,
278
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on a specific service or customer, we would adjust prices.
279
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Number three,
280
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How much of your raises in the past 12 months were peacekeeping bribes to stop noise or resignation versus tied to a written skill ban or promotion rubric?
281
00:17:59.977 --> 00:18:09.103
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?
282
00:18:09.824 --> 00:18:10.304
Here's the thing.
283
00:18:10.904 --> 00:18:18.029
Until you have performance-based pay, you are giving raises based upon bribing people to not leave.
284
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That's the bottom line.
285
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Or stop noise, like stop complaining.
286
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Until you run the business based upon the metrics, you are simply at the mercy of team members staying and staying happy.
287
00:18:31.713 --> 00:18:33.935
And therefore, when they're not happy, you give them more money.
288
00:18:34.875 --> 00:18:39.158
And because of that, you have team members with all those different sorts of compensation.
289
00:18:39.278 --> 00:18:40.659
There's no system for it.
290
00:18:41.080 --> 00:18:44.182
It becomes very unfair and you don't open up your books because of it.
291
00:18:44.969 --> 00:18:48.154
So I could not do open book management without pay for performance.
292
00:18:48.795 --> 00:18:51.058
I could not do open book management without profit sharing.
293
00:18:51.138 --> 00:18:52.400
That's why you need all three.
294
00:18:52.660 --> 00:18:55.424
P4P, open book management, and profit sharing.
295
00:18:55.925 --> 00:18:59.310
If you open up the books and you don't do P4P, good luck.
296
00:18:59.971 --> 00:19:08.536
Because all of a sudden, people are going to start doing some math and realizing that they're only getting paid 50 cents more than the person that has been around for a long time.
297
00:19:08.876 --> 00:19:10.177
Or they'll make up random reasons.
298
00:19:10.197 --> 00:19:15.019
Like, I show up more on time, or I do different types of services, or I'm more skilled, I have more experience.
299
00:19:15.500 --> 00:19:16.180
You don't want that.
300
00:19:16.480 --> 00:19:17.381
It's based upon your production.
301
00:19:17.601 --> 00:19:19.842
It's based upon how much you bring to this business, and you get a cut of it.
302
00:19:20.182 --> 00:19:21.503
That's P4P for the technicians.
303
00:19:21.923 --> 00:19:22.864
Same thing with managers.
304
00:19:23.144 --> 00:19:25.305
I don't want a manager coming to me and asking for more money.
305
00:19:25.785 --> 00:19:28.487
I want them to have a very clear path as to how they make more money.
306
00:19:29.107 --> 00:19:29.788
Here's the crazy thing.
307
00:19:30.108 --> 00:19:39.636
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 was asked for a raise.
308
00:19:39.656 --> 00:19:41.137
Not one single time.
309
00:19:41.337 --> 00:19:42.258
Not one single time.
310
00:19:42.598 --> 00:19:52.327
And the reason is because if someone did, they'd 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.
311
00:19:52.927 --> 00:20:05.314
And so the same thing is true, whether it be P4P, profit sharing, percentages on 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.
312
00:20:05.474 --> 00:20:07.576
Otherwise you will have people asking you for more money.
313
00:20:08.096 --> 00:20:13.879
And I don't want it to be where the bonus is making up like 5% or 3% or 6% of their paycheck.
314
00:20:14.200 --> 00:20:15.280
I want it to be meaningful.
315
00:20:15.700 --> 00:20:19.643
And in my opinion, unless it's more than 10, 15, 20% of their paycheck, it doesn't move the needle.
316
00:20:20.143 --> 00:20:27.993
I saw an 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.
317
00:20:28.714 --> 00:20:34.781
And the base pay was, I think, like $60,000 or $70,000, and then it was like 25% of profit sharing.
318
00:20:35.543 --> 00:20:44.049
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.
319
00:20:44.530 --> 00:20:53.476
And so it's going to 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.
320
00:20:53.816 --> 00:20:57.139
But the likelihood of them staying the first year and a half when there's not profit, very low.
321
00:20:57.639 --> 00:21:00.742
And so we've got to realistically think, can they achieve these numbers?
322
00:21:01.042 --> 00:21:06.026
And if I tell them that the on-target earnings is $85,000 or $90,000, how are they actually going to make the extra $30,000?
323
00:21:06.046 --> 00:21:14.654
Because I believe a great pay package of like $65,000, $70,000 with $30,000 as a bonus that they earn because of incentives, I like that.
324
00:21:15.054 --> 00:21:20.499
I do not like where they're going to make $60,000 as base pay, and if they do really good, they'll get $5,000 extra.
325
00:21:21.680 --> 00:21:22.281
I don't like that.
326
00:21:23.262 --> 00:21:27.826
Now, they're going to be individual contributors that are mostly going to be tied to things.
327
00:21:27.906 --> 00:21:40.718
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...
328
00:21:41.579 --> 00:21:43.840
uh, not numerical incentives.
329
00:21:44.360 --> 00:21:49.402
And that's when sometimes tenor is going to be the way that you give a straight line of how they make more money.
330
00:21:49.782 --> 00:21:52.043
Hey, you've been here one year, two year, three year, four year.
331
00:21:52.403 --> 00:21:54.244
And so in my opinion, if someone has
332
00:21:55.308 --> 00:21:59.489
They have their hand in so many pots and they affect so many different numbers in the business.
333
00:21:59.829 --> 00:22:02.330
I don't want to create perverse incentives by incentivizing one.
334
00:22:02.790 --> 00:22:06.231
I want to rather focus on tenure and an office.
335
00:22:06.751 --> 00:22:08.631
In many cases, that's what I'm focused on.
336
00:22:08.811 --> 00:22:12.512
Unless it's like the office manager, I'm happy to give profit sharing, et cetera.
337
00:22:13.273 --> 00:22:14.053
All right, number four.
338
00:22:15.160 --> 00:22:19.062
Who actually gets the next promotion, the loudest complainer or the quiet executor?
339
00:22:19.462 --> 00:22:32.807
And do you have a promotion scorecard that weighs teachability, ability to train others, air rate thresholds, crew leadership behaviors, and basic P&L literacy over tenor and likability with a pass-fail gate that you will enforce even if it means leaving the seat open?
340
00:22:33.564 --> 00:22:34.425
Yeah.
341
00:22:34.785 --> 00:22:45.592
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&L and how they think about it.
342
00:22:45.612 --> 00:22:52.917
So this is why I like open book management is I'm actually really fielding the technicians as to who my next working GM is going to be.
343
00:22:53.597 --> 00:22:54.378
And I make them optional.
344
00:22:54.638 --> 00:22:56.740
So it's like, hey, you're not getting paid on P4P for this.
345
00:22:56.860 --> 00:22:58.042
This is time that you're going to spend.
346
00:22:58.062 --> 00:22:59.623
We're going to learn about the P&L.
347
00:22:59.983 --> 00:23:00.744
All the numbers will be here.
348
00:23:00.764 --> 00:23:02.226
I'll pin it up on the wall for the whole team to see.
349
00:23:02.246 --> 00:23:04.668
But if you want to show up early, I'll break all the numbers down for you.
350
00:23:05.229 --> 00:23:16.560
People that show up to that meeting and then start to take interest and start to take pictures of that P&L, start to ask questions, start to compare last month versus this month, that could be potentially your next working GM.
351
00:23:17.160 --> 00:23:21.543
And I am going to hire based upon the skills required for the job.
352
00:23:22.023 --> 00:23:26.366
And if they want those skills, understanding a P&L and how all the different levers in the business operate.
353
00:23:26.666 --> 00:23:33.771
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.
354
00:23:34.131 --> 00:23:35.352
That's why I like open book management.
355
00:23:36.272 --> 00:23:45.118
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, P4P.
356
00:23:46.417 --> 00:23:46.857
of an owner.
357
00:23:47.398 --> 00:23:55.943
So if they have the compensation and the information of an owner via P4P and open book management, I get to determine who's going to be the best manager, quote, owner of this business once I'm gone.
358
00:23:56.843 --> 00:24:00.326
Number five, has your pay structure flattened the incentive gradient?
359
00:24:01.327 --> 00:24:11.573
I.e., can your top 10% of techs realistically earn 1.8 to 2.2.5 times the bottom 30% through P4P and skill multipliers, or is your floor too close to your ceiling?
360
00:24:12.033 --> 00:24:19.297
Guaranteed hours, overtime smoothing, attendance forgiveness, such that A players subsidize C players and quietly plan their exit.
361
00:24:19.577 --> 00:24:21.298
This happens all the time.
362
00:24:21.858 --> 00:24:24.740
If you're not doing P4P, this is happening in the organization.
363
00:24:25.260 --> 00:24:26.401
Because here's the thing.
364
00:24:27.121 --> 00:24:38.807
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 the business.
365
00:24:38.987 --> 00:24:41.008
Each location brings to the business.
366
00:24:41.188 --> 00:24:42.589
Each department brings to the business.
367
00:24:43.049 --> 00:24:44.449
Massive distributions.
368
00:24:44.930 --> 00:24:51.393
But if you make the incentives based on tenor and skill, but then they're producing profit via being efficient...
369
00:24:51.973 --> 00:24:54.974
you have a perverse incentive, which is I just need to stick around.
370
00:24:55.314 --> 00:24:58.775
And this is where you get a whole bunch of people sitting around doing nothing.
371
00:24:58.995 --> 00:25:12.600
You have five people watching someone else doing the work on a big project, a big bloated company, is because everyone's incentivized to just stick around, like tenor, and get the certification, get the piece of paper, and not actually produce revenue for the business.
372
00:25:13.560 --> 00:25:21.323
And so I really do believe that the best comp plans allow someone to double their pay.
373
00:25:22.112 --> 00:25:23.073
So I'm just going to say it out loud.
374
00:25:24.493 --> 00:25:29.756
The best compensation plans allow someone to double their pay if they perform at a high degree.
375
00:25:30.196 --> 00:25:33.078
Now, don't make it where it's literally impossible.
376
00:25:33.838 --> 00:25:35.439
Ask yourself, what would it be?
377
00:25:35.639 --> 00:25:37.960
Like if someone ever came to me for a raise, this is what I say.
378
00:25:38.521 --> 00:25:38.921
Okay, great.
379
00:25:39.061 --> 00:25:40.822
I will give you exactly what you're asking for.
380
00:25:40.962 --> 00:25:42.123
And here's what you'll have to hit to do it.
381
00:25:42.863 --> 00:25:44.044
That's what I would do every single time.
382
00:25:44.364 --> 00:25:49.027
And then how much they're asking for would just simply correspond with how reasonable is they're going to hit that goal.
383
00:25:49.327 --> 00:25:52.510
If someone came to me tomorrow and said, I want a million dollars per year.
384
00:25:52.890 --> 00:25:53.790
I said, fantastic.
385
00:25:53.991 --> 00:25:55.372
We can make you a road to a million.
386
00:25:55.612 --> 00:25:58.434
You're going to have to produce all of these things.
387
00:25:59.815 --> 00:26:01.196
And that would be very, very difficult.
388
00:26:01.516 --> 00:26:11.444
However, I don't, I'm never going to say, I almost never say no to someone's raise once they're above technician, because I'm simply just gonna say, hey, I'm not gonna give you the money.
389
00:26:11.564 --> 00:26:13.806
I'm gonna let you earn it and I'm gonna give you a path to doing so.
390
00:26:14.347 --> 00:26:16.748
And that ramp might be way off in the distance.
391
00:26:16.768 --> 00:26:28.178
It's 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?
392
00:26:28.498 --> 00:26:35.523
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.
393
00:26:36.044 --> 00:26:38.425
This is why my general manager currently...
394
00:26:39.287 --> 00:26:46.873
has more than doubled his pay, almost 3x his pay, over the past five and a half years of working as the general manager.
395
00:26:47.154 --> 00:26:52.818
It's because he started off at like $52,000 as base pay, and this year will do well over $140,000.
396
00:26:52.838 --> 00:26:54.600
I think it'll probably more like $150,000.
397
00:26:55.340 --> 00:26:57.522
And that's literally almost a tripling of their pay package.
398
00:26:57.863 --> 00:27:05.049
But it's because he's been with me for five years, and there's a very easy and constant theme, and he can continue to make more money the longer he stays with me.
399
00:27:05.789 --> 00:27:09.393
And the business is profitable, but his base pay hasn't moved.
400
00:27:09.733 --> 00:27:14.077
We're still down less than half of his pay comes from base pay.
401
00:27:14.557 --> 00:27:18.921
And so in my personal opinion, having a 2X multiple on a top performer is great.
402
00:27:19.362 --> 00:27:21.404
It means half of their paycheck is based upon performance.
403
00:27:21.844 --> 00:27:30.813
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 an hour.
404
00:27:31.913 --> 00:27:40.017
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.
405
00:27:40.798 --> 00:27:48.581
And make sure that along that path, you keep them incentivized when it's very difficult to hit benchmarks.
406
00:27:49.061 --> 00:28:00.407
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.
407
00:28:01.187 --> 00:28:06.490
Um, but I will say 110% unequivocally, there are business, there are employees in your business.
408
00:28:06.510 --> 00:28:16.375
If you're not doing P for P, there are, there are employees in your business that are making two, three times as much profit as another employee and making five, 10, 15% more per hour.
409
00:28:16.655 --> 00:28:17.335
That's not fair.
410
00:28:17.936 --> 00:28:24.059
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.
411
00:28:24.908 --> 00:28:26.609
And so what happened when we implemented P4P?
412
00:28:26.869 --> 00:28:27.830
Yes, some people were mad.
413
00:28:27.990 --> 00:28:30.552
Those people were the low performers that a few weeks later left.
414
00:28:30.852 --> 00:28:31.373
And guess what?
415
00:28:31.773 --> 00:28:44.822
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.
416
00:28:45.162 --> 00:28:51.967
And in a more efficient route, a more efficient job, a more efficient business, and if my business is more efficient, I'll be able to pay people more.
417
00:28:52.681 --> 00:28:53.861
And so that is it for today.
418
00:28:53.981 --> 00:29:00.483
If you would like more about P4P, because that kind of is what this is all about, p4psoftware.com, up until the end of this year, it's completely free.
419
00:29:00.543 --> 00:29:02.043
So you get three months for free.
420
00:29:02.404 --> 00:29:07.585
If you're joining here in October, November, December, all free, try out the software, use it, just like we've talked about it.
421
00:29:08.065 --> 00:29:10.826
Allow your team to be able to be compensated like an owner.
422
00:29:11.086 --> 00:29:19.168
And once you do that, only after that, and you're given information of an owner via open book management, can you expect them to treat the business with high regard?
423
00:29:19.742 --> 00:29:20.083
I'm Mike Andes.
424
00:29:20.103 --> 00:29:21.629
This is the Home Service Millionaire Podcast.
425
00:29:21.649 --> 00:29:22.813
Comment below what you got out of it.
426
00:29:22.834 --> 00:29:28.555
And if you have a question, go to mikeandes.com slash question, submit a video, and I'll answer on the next show.
