ADVERTORIAL
Have you ever tried to drive your car forward while looking in the rear view mirror? Likely few have and those that survived would agree the rear view is not adding much value. We encounter the same challenge every day in our businesses. Most business owners, landscape contractors included, spend too much time focusing on what occurred rather than what is going to occur in the future. We are stuck looking at results through financial statements, post-performance job cost reports, and other lagging metrics. Results based reporting can be very valuable, but the past is not always a good predictor of the future.
As landscape contractors, we need to find tools that allow us to predict future resource needs rather than focusing on the past. We believe there is an effective approach when it comes to managing labor. Our processes focus on forecasts that allow us to predict staffing, identify capacity issues, and provide better information for our managers to make decisions.
The Process
There are four basic steps that we go through to manage our labor head count and the hours that they work in any given period of time. The steps are: 1) establish a job level estimate, 2) forecast the estimated hours, 3) manage to the forecast, 4) reconcile and repeat. The process can be applied to maintenance contracts, enhancements, or large installation projects.
- Establishing an Estimate
The first step in the process is to determine an accurate estimate for the work to be performed. The data to build the estimate may come from a number of resources such as plan takeoffs, GIS measurements, physical site measurements, and general observations made by management. There are numerous methods to calculate an accurate estimate, but we are focusing on the keys for managing labor in this situation. There are a few key items that we need to be sure to capture.
- Hours to perform individual tasks – this is important to be able to provide the detail you need by service. The estimate must account for the services being done at different times and the fact that each may take different hours to perform. Lumping too many items together will lose seasonal fluctuations that occur in our industry while getting too detailed can make the process overly complex. You must find a balance.
- Frequency of each task – you must identify the frequency each task must be performed during the year. The frequency in the estimate should align with your contract specifications in order to properly price the job.
- Hours to perform individual tasks – this is important to be able to provide the detail you need by service. The estimate must account for the services being done at different times and the fact that each may take different hours to perform. Lumping too many items together will lose seasonal fluctuations that occur in our industry while getting too detailed can make the process overly complex. You must find a balance.
- Forecasting Estimated Hours
The next step is to establish a forecast of the labor hours that we calculated in our estimating process. This step is fairly rare in the industry since we are focusing on the future and not limiting the process to one given week. Our forecast will be a projection of the estimated labor hours allocated to each time period through the life of the contract. The complexity of the forecast is determined by the level of detail in your estimates, number of jobs, and frequency of changes. The value of having more detail is that you are able to more accurately identify labor hour fluctuations in each time period.
Building a labor forecast for numerous jobs including multiple different services can be very complex and time-consuming if you do not have the correct tools. Historically, this process was done with dry erase boards and a few markers in most companies. More advanced companies began building the forecasts in Excel spreadsheets to automate some of the process. In today’s world, software such as our BOSS® LM system can make this process simple by allowing you to combine multiple labor estimates to create a forecast. This is key as you must be able to accumulate a significant amount of data and provide it in a format that is meaningful to your managers. In my opinion, BOSS® LM has enabled advanced capabilities in this area of labor management projections that we were not previously able to achieve using any other means. Manually, it was too time consuming, so we were never able to look into the future like we are able to now.
The end result of a forecast is a list of jobs and their specific tasks that provides estimated hours for each period of time (week or month typically). The hours can be subtotaled by client portfolio, routes, managers, entire company, or any other subtotal that may have value to your management team. We can utilize this information to determine staffing levels of crews, production teams, and the entire company.
- Managing to a Forecast
The value of the forecast is that it provides information to your team about how many hours are estimated to be worked in various scenarios. That in itself does not make the company any more efficient or profitable. We must use this information to make better management decisions.
We like to think in FTE’s (Full Time Equivalents). An FTE is the number of hours an average employee is expected to work in a period of time, typically one year. The default is 2,080 hours which is calculated by multiplying 40 hours per week by 52 weeks in the year. We tend to use a slightly higher value since we budget to work more than 40 hours per week in production. We use the FTE concept to look at annual, monthly, and weekly labor forecasts.
- Annual Forecasts – we divide the annual FTE hours into the entire annual labor forecast. This provides us with a general head count value for that book of work. This can be helpful when considering average head count during budget season or to look at crew sizes for various routes for an entire year. It provides a baseline for the year, but does not provide much tactical data while in the production season.
Total Labor Hours / Annual FTE Hours = Average Annual Head Count
As an example, for a $2.5 million company, an annual labor forecast might look similar to the following:
80,700 / 2,080 = 38.8 average annual head count
- Monthly Forecasts – we divide the monthly FTE (one twelfth of annual FTE) hours into the monthly labor forecast to get head count for any given month. You will begin to see fluctuations between months for seasonal services and changes in job scope. This is incredibly valuable for staffing.
Monthly Labor Hours / Monthly FTE Hours = Monthly Head Count
As an example, for a busy month in the spring:
7,700 / 173.3 = 44.5 Monthly Head Count
We oftentimes take an average of the forecasted hours for two or three months if we know the services can be stretched over that period of time. This will reduce the fluctuation in head count between months to simplify staffing. As you become more efficient at this process, you can begin to take into account the other factors that influence monthly FTE hours such as the fluctuations in working days in each specific month, timing of weekends, and holidays.
- Weekly Forecasts – we do these a little differently. We do not have the ability to add or reduce staff on a weekly basis in an effective manner. Instead, we are comparing the weekly labor forecast to our head count to calculate how many hours the crews will work that week. We are accounting for over or under staffing by increasing or reducing the hours worked by each employee. This can be done at the company-wide, production team, crew, or job level.
Weekly Labor Hours / Head Count = Average Hours Per Employee that Week
By utilizing these forecasts, you can begin to create a system to predict staffing needs, identify capacity issues in advance, and plan your production hours more effectively.
- Annual Forecasts – we divide the annual FTE hours into the entire annual labor forecast. This provides us with a general head count value for that book of work. This can be helpful when considering average head count during budget season or to look at crew sizes for various routes for an entire year. It provides a baseline for the year, but does not provide much tactical data while in the production season.
- Reconcile and Repeat
The purpose of reconciling is to ensure that your forecasts are accurate and achievable. We typically utilize forecast vs. actual labor reports for the reconciliation process. As you identify variances, it is important to research the variance to understand why it occurred. Many times it may be a valid reason such as a weather event, job site issue, or scope overlooked in the estimating process. We must determine if that variance will occur again and if it needs to be accounted for in future forecasts.
Managing labor hours is an ongoing process that requires constant attention or it will quickly unravel. A variety of factors can impact a forecast leading to frequent changes. The process described in this article should be repeated over and over throughout the year in order to stay in tune with the changing factors. So, it is important to reconcile the performance on a weekly, monthly, and annual basis. The capabilities provided by our software allows us to repeat this process with new factors, as necessary, without requiring an inordinate amount of the effort.
Conclusion
With the right tools in your tool belt, you can begin to look forward at the labor needs for your company. Our tool of choice for managing this process is BOSS® LM. With BOSS®, we have the ability to effectively transform estimates into forecasts and utilize its reporting functions to ensure that we are achieving our forecasts. A tool of this nature can provide powerful information to your management team for effective decision making today that was really not available in years past. There are times when it is appropriate to stray from the forecast for justifiable business reasons, but that becomes a conscious decision when you have this information. A company can see significant improvements in labor management if they have the right tools, keep a disciplined approach, and keep focused on sustaining this process.
Matt Bland, Bland Landscaping Company, mbland@blandlandscaping.com
