Should Pest Control Companies Share Profits With Employees
There are many ways of rewarding employees with good salaries, commissions, bonuses and even share profits.
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Ownership Thinking by Brad Hams
Rudy Ayala is the ACE 1000 he is the owner and operator of Spearhead Pest Control in Ventura, CA,
Should Pest Control Companies Share Profits With Employees.
There are some that believe that company owners are greedy and should share in the profits.
Think real hard before you answer.
Everyone gets paid from the top sales and service.
Owners get paid off the bottom line after everyone else is paid.
As an employee what do you do every day that specifically contributes to the bottom line so that you can take a piece of it?
Most of the answers went along this line
Employees don’t deserve to get profits. This is the result of an entitlement mentality.
Employees get paid salaries owners get profits.
They can sell more To make more money.
They prefer commission over salary.
Pay your people well so you can retain them.
Company made 5 million in profit and all I got was a $35 check.
Owners are investors, sowers and tenders, took a risk when they started with 90% chance of failing and overcame obstacles that you are not willing to hurdle.
For the most part employees are reapers, they invested nothing in the most difficult part of a business which is the startup.
But only two owners answered the question correctly except I didn’t ask owners I asked employees surprisingly no employee could answer the question.
The question was “As an employee what do you do everyday that specifically contributes to the bottom line so that you can take a piece of it?”
This is the hard reality that employees don’t have the faintest clue of what or how they contribute to the profitability of a business and most don’t care.
By this some believe they should get Christmas and year end bonuses, bonuses are discretionary and not earned. No one is entitled to a bunus unless the bunus is tied to a production incentive.
If a business or owner decides to share profits it’s at its own discretion.
ESOP Employee stock ownership
Year end bonuses
Turkeys and Hams
But they expect raises, bonuses including Christmas bonuses. Yet they have no idea on what it takes to have enough gross profit to pay everyone nor net profit before taxes to pay investors mainly the owner.
I have a different view on this primarily because I’ve been an employee, manager and owner. I’ve been previ to the financials of most business.
Employees don’t participate in the business of the business they are only concerned or trained in the that tasks within the business. In other words they have no clue of what it takes to run a business, when someone quits their job to start a business most will fail within the first year and go back to working for somebody else again or say I had no clue it was going to be this hard.
The problem is I come from big corporate where financials are disclosed, in a mom and pop shops the employees see what comes in but don’t know what goes out and most owners don’t want you to know because they feel the finances of the business is private and that may be so.
There are too functions in a pest control business
Sales and service
Sale and service generates revenue or gross.
Management looks at costs what is spent.
What’s left over from the difference is net profit this is used to reinvest or use.
If you ask an owner what keeps them up at night
What do employees think about.
How to get the work done
What Employees want more than money?
How you compensate will determine how much you compensate.
Employee need a sense or knowledge of ownership in order to consider the ramifications of their actions.
As an owner I would be very concerned about the unrealized profit the one falling through the cracks.
If an employee understood that the company or owner is making at best if they are awesome managers or stewards of the business and if nothing unforeseen happens that on a $65 pest control Job they only make $13 at the end of the year and for every call back they need 5 jobs to make that up. You not only loose the profit but you loose the opportunity to serve somebody else that lost twice.
The problem is that compensation and incentive programs do not incentivize a focus on corporate profitability so in good times when the money is flowing in nobody cares as long as the sales and cash flow is coming in but in lean times you watch every penny.
The attitude is I sell it I got mine if the owner makes money that’s up to him.
As little as 10% discount can wipe out the profit on that job but because the business needs cash flow to pay everyone owners will take it and try to figure it out later.
When you under sell a job you affect the income of the tech and everyone else in the company.
All incentives in your business should pay for itself it should not be seen as a bonus or additional expense but rather a contribution to the business it needs to be tied to productivity.
If a bonus has little or no change on behavior it’s a new expense creates an angry and ungrateful workforce. It seen as an entitlement not compensation.
As an employer you need to create an environment that focuses on wealth creation for your employees and yourself. Through hiring the right person, provide constant training, having the right KPI, the right incentive.
If employees don’t know where the waste is they can’t cut it out and if there is no incentive to stop you won’t get it fixed this is why you need so many managers to manage waste but if you eliminate the waste you can get rid of the manager and compensate the employee.
Give all your techs a p and l. This can be profit sharing since they directly contributed to the bottom line but identifying and eliminating waste. Make every tech route managers.
This is what lean management is all about to identify and cut waste at all levels of the organization it’s not managements job it’s everyone’s job.
Creating a culture
Look at all the ways waste is falling through the cracks.
Equipment use and maintenance, sharing.