Productive profit sharing

After a shift in leadership, Landscape Workshop, a multimillion-dollar company, realized in order to grow, its employees needed to better understand what it takes to make a profit.

“There really wasn’t any growth happening at the time,” says Christianna Denelsbeck, finance and operations manager for Landscape Workshop. “The company was losing profits and the employees didn’t see how we could start gaining revenue while providing the same quality of service.”

Paul Young, COO, joined Landscape Workshop in 2014, a time when the company was losing money.

“The (managers) thought they were making money,” he says. “They were doing good work, but they were shocked to see the actual numbers.”

Young says the company had absolutely no transparency before he started working for them. The managers didn’t even realize that the business was actually losing money, not making it.

When Young joined the team, the company started profit sharing and rolled out an incentive program in 2015 along with it. From there, revenue and profit grew. Landscape Workshop landed the 47th spot on this year’s Top 100 list with $34.7 million in revenue, up from 54 in 2017.

The company has seen an increase in productivity and profits since then. Financials are shared with general managers, account managers and business developers.

$470,000: How much Landscape Workshop paid out in bonuses, which is more than the net income of the company in 2014.

Behind the curtain.

For a company of any size, sharing this kind of information may seem risky. Denelsbeck says there were things to consider before deciding to share the information.

“The (employees) were going to see this large top line number,” she says. “And revenue does not mean profit.”

Young says he wasn’t apprehensive to start the profit sharing process because he knew the company would see immense benefits from it.

Each month, the company goes over key financials via a conference call with all Landscape Workshop branches. During the calls, year-to-date finances are covered along with revenue breakdowns and profits. The company also goes over year-to-date customer retention numbers for each account manager and branch.

“The employees were going to see this large top line number, and revenue does not mean profit.” Christianna Denelsbeck, finance and operations manager

A learning experience.

In order to make profit sharing beneficial, a lot of education went into the process. The company wanted to make sure their employees were understanding the numbers they were looking at, especially since many of the managers hadn’t been privy to the information before.

“We had to teach people that we are in business,” Young says. “We had to make an educational process.”

The company started with the basics, going through a sort of “P&L 101” course, teaching managers financial basics like understanding direct costs.

Once the company began to share financials, management built an incentive program into the profit sharing. It was a way to motivate the managers and hold them accountable for their successes. General managers and account managers were eligible to earn incentives in the form of bonuses based on their individual P&L performance and customer retention.

“The whole process of introducing the incentives was really positive,” Denelsbeck says.

“We had to teach people that we are in business. We had to make an educational process.” Paul Young, COO, Landscape Workshop

Landscape Workshop uses two metrics to guide them through the incentive and profit sharing process. “We’re looking at performance and customer retention, essentially,” she says.

In 2017, Landscape Workshop paid out $470,000 in bonuses – which is more than the net income of the company in 2014. The company now sees retention rates between 85 percent and 94 percent since they’ve put the incentive program in place.

Before they were able to implement the new processes, the company had to compile about 12 months of performance data. “We needed the data to tell us how we could tie performance to these actual numbers,” she says.

Data driven.

Denelsbeck says before a company can start providing incentives based on profit sharing, it needs to have solid data to build the incentive program. For now, Landscape Workshop is only incentivizing its general managers, account managers and business developers.

“We’re hoping to extend to program to our field managers,” Denelsbeck says. “But for now, we just don’t have a way to get the right data we need and have that translate into something measurable.”

The company does offer special recognitions for field managers, however. While it’s not an official incentive program yet, Young says they award $100 bonuses occasionally to their field managers.

Both Denelsbeck and Young believe profit sharing is doable for a company of any size.

“It just depends on how willing you are to share (your financials),” Young says. “You really have to look at this long term.”

For Landscape Workshop, management knew employee retention would increase with the incentive program. Young recommends setting aside money in the budget to pay out the bonuses to employees.

“You have to budget for it,” he says. “It’s really doable for anyone.”