HOW WE DO IT: 'One Step' Up To Compensation Incentives

Back in the early 1990s, our company, One Step Tree & Lawn Care, North Chili, N.Y., was struggling to maintain a good client retention rate and, unfortunately, had to deal with some unhappy customers. We had to make a change that focused on building better relationships with our customers. The way we found to do this successfully was to adjust our approach to selling accounts and compensating our technicians.   

Like many companies, One Step Tree & Lawn Care originally had a salesperson on staff to sell residential lawn, tree and shrub care, and a number of technicians to take care of the applications the salesperson sold. A simple change in that approach turned all of our residential service technicians into their own salespeople, with each technician responsible for selling new work – including measuring a lawn and recommending an appropriate program – and making applications on those same lawns.

Along with the change in responsibilities, we also adjusted the pay schedule for our technicians. In addition to a base hourly wage of $8 to $10 per hour, our technicians also are compensated with a percentage of the total sale for each new account, as well as production pay as a percentage of each job completed on time. Altogether, this creates an incentive pay structure for residential lawn care work that encourages our technicians to build more relationships on their routes in order to sell and retain more work.

Originally, our technicians were given 5 percent of each sale and 5 percent of completed jobs. From this setup, we found a need to put more emphasis on the production end of the account, which led to some adjustments in the commissions. Now, our 12 lawn care technicians and three tree and shrub care technicians on our staff make 3 percent of sales and 6 percent of production. Each technician is responsible for 450 to 500 accounts on average, with customers paying $300 annually for a typical lawn care account.

In just one year of using this pay structure, our renewal rate jumped from 67 to 80 percent – a huge improvement. Because our customers saw the same technician from the time of sale throughout the entire application cycle, we were able to build stronger relationships with those customers. Another benefit to the company was that our technicians were no longer moving mechanically from lawn to lawn just to make applications. Instead, giving our technicians a stake in the sales helped them see how their day-to-day work impacted the company, giving them more ownership in their accounts. By starting customer-company relationships at the sale and seeing them through the application process, the technicians become familiar with both the lawn and the customer.

Moreover, at our company, the 3 percent/6 percent setup applies to both new sales and renewals, which means that technicians who build stronger relationships with customers can get the bulk of their sales compensation easily. A satisfied customer who trusts his or her technician is usually quick to renew their account. As technicians gain more experience, they’re able to earn pay raises by selling more work along their routes and may also receive increases in their hourly pay.

When we implemented this new pay structure 15 years ago, in addition to learning about customer satisfaction, we also learned about employee satisfaction. While we lost a few technicians who were reluctant to take on the sales aspect of the job, the compensation approach was pretty well accepted. For companies considering a non-traditional pay structure like this, we found that having a base hourly pay helps keep the payment fair, especially when their isn’t a lot of production to go around. In those cases, technicians can receive a higher hourly wage to keep total compensation from dropping below minimum wage and prevent the need for overtime.

Additionally, rather than paying employees at the time they make their sales, we withhold a portion of the commissions until later in the year. This helps us account for sales that ultimately fall through or customers that cancel. It also ensures that our technicians receive paychecks they are comfortable with when work slows at the end of the season.

One challenge we have with the pay structure is introducing it to new employees. Most recruits are unfamiliar with this type of compensation and focus more on how much they’ll be paid per hour. Because of that, our trainees remain hourly employees during their training, which could be as long as a year. Toward the end of that period, we introduce the production payment incentives at a much lower percentage – perhaps just 1 percent – to get the trainee familiar with the concept. Once the training phase is finished, he or she is fully integrated into the incentive program. We also show the individual how much they would have made during their first year using the sales and production pay model.

Overall, the incentive pay structure we use at One Step Tree & Lawn Care has helped us build a stronger customer retention rate, which currently stands at 84 to 85 percent. – Bob Ottley

The author is president of One Step Tree & Lawn Care, North Chili, N.Y. and can be reached at 585/594-1095.