Dreams of success fill the minds of every entrepreneurial spirit entering the business arena. But to attain success, many business responsibilities must be addressed and situations encountered that must be properly handled.
A situation contractors often complain about is the difficulty in finding good technicians. Hiring good techs is vital to a successful PHC service contracting business entity. But recruiting and retaining great technicians is the difference between a successful business entity and a very successful business entity.
When a problem pops up, I like to turn to a motto associated with the U.S. armed forces during World War II: “The difficult we do immediately, the impossible takes a little longer.” Finding good employees is difficult. Hiring and retaining great employees takes a little longer and requires creative logical thinking.
Creative logical thinking should help you to realize that your employees are actually your partners. Without them, you cannot deliver excellence to consumers so they can pay your business the money that will help you to recover your true operational cost — as well as a profit.
Unlike traditional partners, your employees get to share in the revenue brought into your business through the compensation you pay them. They do not have to pay the real costs associated with running the business — that’s your responsibility.
Your responsibilities include correctly identifying and calculating your actual operational costs; choosing a proper profit margin; developing properly profitable selling prices so you can recover your operational costs and earn a profit above those costs; hiring your employees; training your techs, not only in technical procedures, but also in the proper approach to quoting prices and delivering excellence to consumers; compensating your techs in a fashion commensurate with their contribution to your business; and constantly monitoring your business to assure the continuance of excellence while searching for, and addressing, situations that must be dealt with.
Avoiding the vicious circle
Employees talk to each other. In those discussions, compensation information is often exchanged. When Tech A finds out Tech B receives a higher hourly wage than he does, and Tech A believes he is a better technician, bitterness raises its ugly head. That acrimony is a cancer that decimates success and leads to increased stress, frustration and eventual business failure potential.
Then Tech A approaches you with a request for a raise. An unsettling feeling surrounds both of you. As you wonder how much he wants, he is wondering how much to ask for. If you offer him an amount below that of which he was imagining, or less than Tech B is getting, you will negatively affect his morale. And poor morale amongst employees causes lackluster results that, in turn, affect your business’ bottom line.
If you offer him more than Tech B is paid, as soon as Tech B finds out (and he will), he will now be knocking on your door to ask for a raise.
If both techs make the same amount, there is no reason for either to work harder than the other. When Tech C, who makes less than them, finds out the amount they are compensated, he will soon be knocking on your door for a raise. It doesn’t end there. After some amount of time passes, one of those techs will want a raise. It’s a vicious circle; the agonizing process starts all over again.
If you don’t compensate your techs in a fashion that can keep them content, you stand to lose the investment you already have in your quasi partners if they leave your employ for greener pastures. Obviously, poor-performing techs will be no loss. But great techs are hard to find and cultivate.
Losing great techs to greener pastures, which usually aren’t greener, is a loss to your business. There is the cost of looking for replacement techs, interviewing candidates, training them and enduring the frustration associated with the hunt for great techs. Retaining great techs — who deliver excellence in performance and integrity to your clientele as well as profitable revenue to your business — is vital to your goals of success. What are you to do?
The first step is to start thinking out of the box. Develop a system allowing you to vet tech candidates for employment to determine if they genuinely can be great techs. Then, put them on probationary employment for a few months to see if they have what it takes.
To make things fair for consumers, easy for your techs and profitable for your business, set up a menu of precalculated prices that can be quoted to consumers before they decide to purchase any service. When doing this, it is imperative that you properly identify and calculate your true cost — which includes proper compensation for your techs.
Then train your techs in the benefits of quoting prices before commencing service. Show them how to approach this pricing protocol with confidence, intelligence and honesty.
Base pay, incentive pay
As far as compensation for your techs is concerned, you can rid yourself of the awkwardness associated with the raise request by paying everyone with two levels of pay — base pay and incentive pay. Make sure to obey federal and state laws regarding mandates on employee compensation.
Base pay means all techs in your employ get paid the same base amount. Periodically, you can add to the base pay amount to cover cost-of-living increases. As to your rising operational costs, whenever your true operational costs rise, you must adjust your menu of prices to compensate.
Incentive pay requires creative logical thinking. It is the pay related to the amount of revenue technicians bring into your business while considering any callback expenses. Initially, you can start with a simple incentive structure that can be figured using a base percentage rate of each tech’s sales such as 1/4 percent, 1/2 percent, 3/4 percent, 1 percent, 2 percent or more, dependent upon your business’ pricing structure.
You can graduate to a more multifaceted calculating structure based on criteria that will allow you to objectively evaluate each tech’s performance so you can pay them a variable and equitable incentive compensation commensurate with their level of total performance. Monitoring tech performance is one of those business owner responsibilities I previously mentioned.
The multifaceted incentive structure places the onus on each tech to be the best he can be so that he can earn the compensation he wants and deserves for his contribution to your business. My book, “Solutions Management Theories and Methods for the Contracting Business,” delves into the complex method as well as the attributes you should look for in candidates for employment and tech performance evaluation.
For your techs to be successful, consistent, intelligent, honest and prideful in their workmanship, it is imperative to train your techs to sell to consumers that which they want as well as what they need. However, that salesmanship must be done with integrity and not with high pressure and possibly questionable sales tactics.
They should never sell services as needed unless those services are truly needed. A faucet that can be repaired does not require total replacement. In that instance, techs should quote two options with respective prices — one price for repairs along with any caveats regarding repairs, and another price for faucet replacement. Allow the consumer to choose which option, if any, he would like to proceed with.
More control over pay
By using this two-tier payment structure of base pay and incentive pay, you never have to be confronted with the awkward raise question again. Each tech will be rewarded based on his contribution to your business’ success. Instead of Tech A looking to see how much Tech B gets paid to determine if he is being paid properly, Tech A will only have to look in the mirror to find out what he is worth.
If Tech A finds out Tech B is making more money, instead of being jealous and bothering you for a raise, he could ask Tech B what he is doing to attain his level of performance and compensation so that he can emulate Tech B’s finer points. With this method, techs control their own destiny. The awkward raise question becomes nonexistent. Your business team works together.
Since employees are your quasi partners, they should bear the responsibility of proving how vital they are to your business. They can help in giving themselves raises by maximizing the quality of their workmanship and the revenue they bring to the business. They have no other responsibility other than to deliver excellence and integrity to the business’ clientele.
Creative logical thinking also allows you to employ the same methodology to your administrative staff as it pertains to their contribution to your business. After all, without your administrative staff, your techs would not have any calls to address.
If you need assistance in setting up this type of compensation structure or any other business protocol, give me a call.
Keep in mind, team success requires everyone on the team to pitch in, accept their responsibilities and be compensated in a proper manner commensurate with the efforts and results they contribute to the business. Your employees and administrative staff (your quasi partners) are part of your business team. Make their job and your job easier, more rewarding and pleasant for everyone concerned.