What Do We Mean By Labor Productivity? And, What's the Data Look Like?
Maximizing labor productivity is, perhaps, the #1 challenge and opportunity for integrators.
As we mentioned a couple Coffees ago, monthly labor revenues are a huge contributor to top-line Gross Profit. But your GP on goods is also impacted by labor productivity – if the techs aren’t out on projects, they’re not delivering goods and the associated GP. And you’re not realizing income.
Right there you have one of the most important data points for labor productivity – how many hours/week are your techs actually working on projects? The more time they can bill to projects, the more labor revenues will be produced.
What counts as billable time varies company to company. In one, drive time is billed, in another it’s not. Ditto design and engineering time, logistics management (ordering, receiving, staging, loading trucks, scheduling), and project management. These could all be justifiably billed as project costs. All you have to do is… Do it!
Or maybe not? Most business owners are uncomfortable asking customers to pay more for things, than the owner him-/her-self might feel comfortable paying. If that’s your issue, please hire my electrician. He charges $190/hour – more than any integrator I know – and the clock starts when he gets in his truck. Yeah, $190/hour for drive time.
Other Productivity Issues
Do you keep track of time allocated vs time used on projects? Going over on allocations kills the productivity numbers. This could be a pricing issue, with salespeople/specifiers not allocating enough hours to begin with. Or, it could be a logistics issue: scheduling for a site that’s not ready, forgetting needed products, not planning around geographic proximities. Or, it could be a skills issue, ie, the tech(s) doesn’t have the needed skills to complete the task in the allotted time.
And what about no-charge warranty time? Service calls are expensive enough without you being able to charge for the visit.
Here’s what key productivity measures look like…
The first panel shows labor Margin – at 51.5% it just makes it to the “Good” (green) range of 50% or higher. Mix – labor revenues as a % of total revenues – is less than ideal at just 22.2%
The Productivity panel shows that, year-to-date, techs are billing over $10,000/month in labor revenues. That’s “Very Good” (blue). But in the month just ended, the dial/pointer show that the per-tech average of $7,720 is only “OK” (yellow).
Utilization is also only “OK” (yellow) at just 46.6% ytd – and decidedly “Not OK” (red) at only 35.6% in the dial. That’s only 14.3 hours billed per tech in the most recent month.
Taking actions using these three measures will spur the team to better productivity once they know how and what is being measured.