By BOB MIODONSKI, of CONTRACTOR’s staff
SAN DIEGO, CALIF. — Most plumbing service companies have developed a system of paying their field employees in a way that rewards their least productive people, consultant Ron Collier said.
“You’re the only service industry that I know that pays people to work slower,” Collier told contractors April 14 here at the first Comfortech RoadShow produced by CONTRACTOR and Contracting Business magazines. “We’ve got to allow the really great workers in our company to make as much money as they want.
“We’re rewarding people right now for working more hours. We’re encouraging slower workers through our system. The answer is performance-based pay.”
Service plumbers should earn $50,000 to $60,000 a year, he said, and those pay levels would encourage more young people to enter the plumbing industry. Many good workers are leaving the industry because they can make more money somewhere else, he added.
In fact, when contractors shift to a performance-based pay system, they can expect to lose 20% of their field personnel, Collier cautioned.
“But you’ll do more work with the 80% who are left,” he said. “Those workers typically make 25% to 40% more with performance-based pay.”
Before a service company makes the transition to this type of compensation, it must establish a measurement system to track travel time as well as billable and unbillable hours, he said. This process starts with reviewing the hours that it took to perform typical service jobs in the past and developing guidelines for what procedures can be repeated on these jobs. The contractor also should create a “perfect service call” procedure.
Collier recommended that contractors should dispatch all plumbers from their homes to increase billable time per day. Dispatching can be done using computers, fax machines, pagers or telephones.
“Those of you that allow plumbers to come into the office every day are losing a lot of money,” he said. “Those of you that allow plumbers to take trucks home at night can get to the first call earlier the next day.
“The only two reasons to bring in field employees are to restock and to turn in invoices. The interesting thing about performance-based pay is that they don’t want to come into the office.”
He further advised that dispatchers not give plumbers all their service calls for the day in the morning. That frequently results in rushed service work and callbacks.
“The No. 1 reason for callbacks is bad dispatch,” Collier said.
Callbacks play an important role under his system. By definition, callbacks are like service calls except that the plumber comes back without any money. So, whenever possible, the employee who performed the original service call should return for the callback and be penalized for not doing the job correctly in the first place.
“This system requires discipline,” Collier told RoadShow attendees. “If we’re going to pay field people a lot of money, we must have accountability.”
Collier presented the idea of a callback bank into which the business owner would deposit a certain number of “callback hours.” The service plumber would lose a callback hour every time that he returns to fix the work done on the earlier service call. At the end of the year, the owner would pay off the plumber for any hours remaining in the callback bank, thus rewarding those with the fewest callbacks.
Performance-based pay plans work best at service companies that have adopted a flat-rate pricing system, Collier said. Then, once flat-rate hours are determined for certain service tasks, unused callback hours can be exchanged for flat-rate hours in determining a field person’s compensation.
“Pay all performance-based personnel a minimum amount per week or performance-based pay, whichever is greater,” he said. “Set up these co-workers in payroll with the minimum amount, then bonus them the difference if they earn more through performance pay. Pay overtime if appropriate.”
Collier suggested that contractors start the comp plan with their best service employee and track his costs, hours worked and performance-based pay. After the trial period, the contractor should have this tech introduce the program to his co-workers.
The owner stays involved by providing training for service and bookkeeping employees and by meeting with the techs weekly for the first month to critique and adjust the program as needed. Subsequently, these meetings should take place monthly for six months, and then the contractor can review and update the tasks when needed.
Collier also presented this program at Comfortech RoadShows April 19 in New Haven, Conn., and May 3 in Arlington Heights, Ill. Upcoming programs will be May 18 in Fort Collins, Colo.; May 24 in Portland, Ore.; May 26 in Sacramento, Calif.
Rheem Water Heaters and Honeywell are the Gold Sponsors for the Comfortech RoadShow Series. Silver Sponsors are: Charlotte Pipe and Foundry Co., A.O. Smith Water Heaters/State Water Heaters, Peerless Boilers/Pavilion Air, Equiguard, Allstate Insurance, Johnstone Supply, Aprilaire, Zone-A-Trol, Emerson Climate Technologies, Rheem Air Conditioning Division and Duro Dyne. Contributing sponsors are: Taco, Bradford White Corp., Laars Heating Systems and Nexstar Network.