Blog

How To Create a Culture of Winning to Increase Your Profit Margin

By Greg Herring on May 13, 2021 in BlogNo Comments

How To Create a Culture of Winning to Increase Your Profit Margin graphic

In the landscape industry, a business owner must manage labor hours, which are usually the biggest controllable cost.

There’s a simple way to rely on psychology to do the heavy lifting of labor hour management for you. In two words, psychology for labor hour management means developing a culture of winning and competition. Here is how these two concepts can help you manage labor hours with less effort.

Create a Culture of Winning

Most employees in the landscape industry do not know whether they are winning or losing. Since most people want to win, owners are missing out on a huge opportunity to improve employee morale, the company culture, the operating profit margin and the owners’ life margin (time and energy no longer required by the business).

By adopting a culture of winning, you can teach employees what it takes for them to win each day. Employees feel great about their workday when they go home knowing that they won. You also want your customers to win – the right work at the right price at the right time. If employees and customers are winning, then owners can win too.

The Concept of Competition

Whether it be football, softball, gymnastics or cornhole, who doesn’t enjoy a little competition? Human nature seems to be hard-wired to compete, and competition that’s conducted in a positive way can actually benefit a business by improving team performance.

Friendly competition in labor hour management makes work more fun. Competition also reduces the management burden on managers and owners, increasing their life margin. Specifically, we encourage companies to set up scoreboards and processes that encourage competition among crew leaders and production managers.

How to Get Started

Here are six recommendations to get started helping employees win and creating friendly competition:

  1. Define the win. Usually a win is measured as actual hours divided by budgeted hours – the lower the number the better, provided the work is done at an appropriate level of quality.
  2. Educate your crew leaders and production managers on the definition of a win.
  3. Brainstorm with your crew leaders and production managers as to what they can do and not do to achieve a personal win. (Everyone can win, but not everyone can be number 1.)
  4. Ensure that your actual hours by production manager or crew leader are accurate, posted timely and compared with the budgeted hours.
  5. Create friendly competition among the crew leaders and production managers and publicize a scoreboard showing who is number 1.
  6. Ensure that you have an adequate system for verifying that the crews are performing quality work.

In our annual Peer Benchmark Report for the Landscape Industry, The Herring Group found that the average operating profit margin for a landscape company is about 5%. We believe the operating profit margin should be more than 10%. Operating profit margin is revenue less all expenses, including depreciation and compensation for the owner, divided by revenue.

Why then do only 15% of landscape companies win at that level – an operating profit margin exceeding 10%? Part of the reason is that they have not created a culture of winning, specifically as it relates to managing labor hours.

These recommendations are part of our list of 32 Golden Opportunities for your landscape business. You can get a free digital poster of all 32 opportunities here. These opportunities will increase both your profit margin and your life margin.

How about your company? Do your employees know if they are winning or losing? Let us know in the comments if you’ve adopted these concepts and how it worked out for your business.

How To Create a Culture of Winning to Increase Your Profit Margin graphic
Greg Herring
Greg is the CEO of The Herring Group, an operational and strategic finance consultancy. Using its proprietary Path to 12%, The Herring Group serves landscape business owners with systems that provide more margin for their businesses and their lives. Reach him at greg.herring@herring-group.com.
No comments yet.

Leave a Reply