The keys to implementing production rates

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“Here we go again, another blown bid by sales.”

Ever heard that one? How about, “Oh, for Pete’s sake, the field is asking for more hours again!” If you have, take heart. You’re not alone.

Getting the field and sales employees to work together often feels like trying to reconcile a dysfunctional family, with the office staff stuck in the middle. The field employees are constantly asking for more time, while sales employees are saying there’s plenty of time. And the office is often left holding the hot potato.

Among all the companies that we’ve helped since our first client in 2004, communication regularly comes up as an issue. More specifically, a top aspect is the scope of work, including allocated time, materials and equipment. When disagreements occur, the fingers usually start pointing. And they point at people: “It’s Joe’s fault! He’s constantly blowing bids. He shouldn’t be in sales!” Or, “Sam is an idiot! There’s plenty of time. Why is he still running jobs?”

When there’s no relevant system in place, we have a tendency judge or criticize the other person’s intelligence or motives. In the absence of a process, it’s about the person. The result is nothing positive, and resolution rarely happens. In the meantime, productivity drops, culture suffers and profits get frittered away in unsolvable arguments.

The answer to these conflicts is systems. Specifically, one of the most powerful solutions we’ve found to helping teams work together, get past the blame-game, and actually work toward driving profits is through documented “production rates” and the process it takes to get them.

Simple and easy to understand production rates get your team focused on more objective topics. “Hey, Joe, you missed a couple of trees on the estimate. I count 20 needed, but it only says 18. Is that right?” That’s a much healthier conversation. Maybe Joe shouldn’t be in sales. But that’s usually someone else’s decision. Through production rates, he and the foreman can get through their issue much quicker.

“Hi, Sam. Our production rate for the job is two hours, so there should be eight installed by now, not six. Can we talk about how you’re going about installing them?” This is also a much healthier conversation. Maybe some legitimate issue was in the way, or maybe Sam needs training. Through simple production rates, the conversation can avoid accusation and focus on solutions.

Production rates also create a foundation to scale your business. If you want to grow, you need systems and a process so others can do as you do. Sales benefits through teachable estimating. Production benefits through trainable standards, including methods and techniques that hit the rates. So, let’s talk about how to implement them, using a PDCA method: Plan, Do, Check, Act.

Plan: A Recommended Approach. The goal of production rates is to assign a time-value to the individual components that together make an entire job. With service-oriented businesses like landscaping, what we sell is time. What your business does with that time is some form of landscaping. Time is the universal constant on which you can base price and scope. Each component or unit should be measured from start to finish. For example, measure the complete time it takes to install a shrub, or the complete time it takes to install 20 linear feet of pavers. This would include prep, install and finish. While this is not the only way to create production rates, it’s what we’ve seen to be most effective, easily measured and discussed.

I’ve seen several attempts to implement production rates stall or fail completely because of too much detail. Instead, make production rates simple and understandable. Trying to create precise and perfect production rates does more damage than good. In other words, keep it simple and get it done. The rates will naturally get more detailed with time.

Do: Start with a Small Group. Pick two to three other leaders in the company and schedule no more than four weekly meetings in advance. Block off the time on everyone’s calendar and defend it. The goal of the meetings will be to establish an initial list of rates that can be tested by the team.

At the first meeting, begin your list of items to measure. This is where some discussion needs to happen. Some items will be “components,” or units – such as trees or bushes. These items can be counted. Other items will need to be footage based, such as 100 square feet of grading or 20 linear feet of paver edging.

Keep this list to no more than 20 items at first. If you have more, you may be breaking items down into too much detail. Remember, keep it simple.

For homework, everyone should write down how long each item should take, “under normal & favorable conditions.” You can always add in tough conditions later. Also note: remember quality. A task done too quick will erode quality. At the following meetings, agree on the length of time each component should take. No more than four meetings should be needed – again, keep things simple.

At this point, you’ve established a “production committee,” that ought to meet at least monthly going forward to review, add and update rates.

Check: Time to Test. Using this initial list you created, put the times to test in two ways: (1) pick several recently completed jobs and recreate the bid using the rates, (2) do the same with a current job. Have this done by the fourth meeting. How did the rates compare with what was originally bid?

Another option is a great opportunity for an intern or apprentice: Time trials. We’ve seen some companies hire an intern to be at jobsites, timing activities. All that’s needed is a stopwatch and a notepad. Done over several jobs, over several weeks, you’ll have an incredible amount of information to get started. Choose a favorable job and schedule it for extra time. On the first day, outline what areas can be timed for production rates. You might be able to time some components start-to-finish in one run. Others you may need to come back to, so plan accordingly.

Act: Regularly Make Adjustments. This is where the continuing production committee is the heart of the project. The process of making production rates is often just as valuable as the rates themselves. No matter how tested the rates are, there’s always an opportunity to improve methods and techniques. After four to six months, the committee will produce a great list of rates that sales can begin using to estimate work. Further, as these jobs come to production, better planning and forecasting can take place. What business doesn’t want that?

Some of the steps above are easy, and some are not so easy. Getting your team to look past blame and work together is a difficult yet worthy task for any leader. Real work gets done in small groups of three to four people. Be sure to pick a small group that will like the project. Also, keep your eye on the prize: more systems to run the business and more people doing what you would do leads to more profitability. As Michael Gerber says in his book The E-Myth, “People run the systems, systems run the business.” That’s a strategy for success.

The author is a senior business coach at Nolan Consulting Group.