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How To Maximize Labor Productivity?

February 27, 2019


* In this issue: Unlocking Labor Productivity

* Less than 281 words, a two minute read. 





We define Labor Productivity as the Labor Revenue generated per 40 Hour Tech Equivalent over the course of the Month. A great target is $10,000 per month or $120,000 per year. Don't leave out your sub-contracted labor. In the best cases, we should make 60% to 65% margin on this level of production. You probably think it is about timekeeping and detailed project reporting. It's not. Here are the real creators of high labor productivity.

1-You must have adequate dollars in every proposal; a 30% labor level is minimum. Review each proposal before presented to client. Consider a higher commission rate on Labor.

2-Your Labor Rate to Wage Cost must be 4X minimum; higher is better,

3-You must bill for every 8-hour direct employee everyday without exception. If they are on the clock, they should be charged to a job. Few exceptions. If you pay them to get to the job; the client should too. Why should delivery be free?

And, planning the work is as chargeable as doing it.

4-How Can the Team help the techs complete the jobs faster? Identify ways to use less than the budgeted hours on every job.

5-Conduct post mortem on every job over a certain amount. Catalog what could have been improved. Implement change. Effective Labor MGMT is more in the number of hours you bid than in the hourly rates you charge.

6-Have the techs share in the improvement dollars per tech per month. If you want to improve by $3,000K assign 25% of the improvement to a tech bonus pool. Who can’t use $750 a month? Report productivity by tech.

right respective buckets.e7-You must make sure all items are classified properly to get Labor, Equipment & Parts in th

What Outcomes You Should Look For
      Labor Gross Margin of 60%
      Labor Rev Per Tech/Month of $10,000 
      that is, Billable Revenue/Direct Tech Payroll at 40-hour equivalents
      Labor Mix above 30% & increasing
Conclusion: you cannot achieve exceptional profit performance unless you manage the labor part of the business extremely well.



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