The Operating Room: Managing by the Hours

Landscape contractors are in the business of supplying labor to create and maintain landscapes. In fact, as the green industry’s single largest expense, 35 to 40 percent of the dollars that contractors invoice comes from labor. Because of this, labor is the primary factor on which all contractors need to focus. It also is an item that is easily controlled with the proper management tools.

As I visit clients throughout the country, there is one area that is consistently difficult for contractors to recognize and control: Non-productive, indirect labor that costs companies money without producing revenue. These are the hours spent on travel time, equipment maintenance, loading, etc. In the February issue of Lawn & Landscape, Jeffery Johns, president of Coastal Greenery, Brunswick, Ga., outlined how he and I worked together to turn his business around by tracking hours and understanding the numbers. This is exactly where we started and where other contractors also have to start in order to understand the impact of non-productive hours.

The next step is to develop the management tools to track those numbers. In a maintenance environment, I recommend tracking daily indirect hours as the man-hours spent from the end of the last job – travel time back to the yard, unloading, equipment service and "off-the-clock" time. All other hours should be charged to a job. Therefore, from the time a crew begins work, travels to and completes the first job, all man-hours are charged to that particular job.

Budgeting these hours is imperative and contractors should include travel time in their original estimates. In the case of a company that has foremen come in 15 to 30 minutes early to prepare for the day, those few minutes are charged to indirect costs, but that foreman’s travel time to the first job site is always charged to that job.

In the construction environment, tracking hours becomes simpler by charging all hours worked that day, including loading, travel, on-the-job hours, unloading, etc., directly to that job. Of course, this assumes that all the work performed for the day was related to a single job. Again, including loading and travel time in your original estimate is necessary and contractors should clarify that with their estimators. Neglecting to account for these hours can add up in terms of lost profit.

All field employees must understand how hours are charged to certain jobs in order to keep everyone working toward the same goal of reducing lost time. One way to accomplish this is to enlarge your company’s time sheet to poster size, fill it out as an example and hang it on the wall for your employees to view. Display one for the maintenance department and one for the construction department, as they will be slightly different.

With an understanding of how to track non-productive hours, contractors can begin budgeting for these hours on a daily basis. Without tracking these hours, many contractors see their crews beating budgeted hours on almost every job, but wonder why their bottom lines are not showing 10 to 15 percent profit. Perhaps their crews are accruing too many non-productive hours but are showing good job hours on their time sheets.

With both direct job hours and indirect hours budgeted, contractors must track these hours on a daily or weekly basis and report the results back to individual crews weekly. This can be done using a labor report listing all the jobs the crew was assigned to in the previous week. These reports show the total budgeted man-hours for each job, including travel time, and also the budgeted indirect man-hours for each day. By recording actual hours in these areas as time sheets come to the office, contractors can report back to each crew with their labor efficiency and any procedural issues that need to be discussed in order to increase efficiency.

Sharing this information with crews on a weekly basis helps contractors create accountability for each employee and recognize and reward excellent performances. Having everyone in the organization focused on man-hours is crucial, and budgeting, monitoring and tracking all the hours accrued by the company on a weekly basis will improve any company’s bottom line.

Jack Mattingly is a green industry consultant with Mattingly Consulting. He can be reached via e-mail at jkmattingly@comcast.net, through his Web site www.mattinglyconsulting.com or at 770/517-9476.