February 1, 2021
How much should you pay a good foreperson?
Rules of thumb for staff wages
By MARK BRADLEY
2020 WAS A YEAR OF UNCERTAINTY for most in landscaping. It began with a hard stop-work order due to the pandemic. About six weeks later, there was a boom across almost every landscape sector, with the exception of commercial maintenance. With travel restrictions in place, homeowners prioritized their own outdoor spaces. Design-build companies struggled to keep up with the work and began booking customers well into 2021. LMN saw a massive influx of new estimates, and the green industry was busier than ever. More work means room to grow, the opportunity to hire new staff, add more equipment, and hopefully, improve profitability.
One of the biggest mistakes I made in my own landscape business was growing the company before having the right people and right systems in place. I recently had the opportunity to be on the Landscape Disruptors podcast with Stanley "Dirt Monkey" Genadek and answered questions about waste elimination in landscaping. One of the questions was, “How much does a reasonable foreperson cost, or what should a company be willing to pay a good foreperson?” Here's a not so common, common-sense approach.
When I started my company, I often hired completely inexperienced employees. I would seek out people I saw had potential and heart, and who were willing to put the work in. Once I identified those traits and characteristics in someone, I knew they could be an excellent hire for the company, as well as someone I’d want to work with.
Foreperson compensationForepersons are the staff members who make or break the company's wallet on any given job. Everything costs money on a job site — except for a smile. The way you approach the project, everything you do when it comes to executing the work, how you order material or fuel your trucks, and storing the material on the job site. All these different things cost money. If you've got somebody careless at the wheel, such as the wrong foreperson, it is impossible to make any profit. So when it comes to setting a foreperson's wage, I've always erred on the high side. The caveat being that having a budget will ultimately help you make a more informed decision.
Reverse engineering your foreperson’s wageI always look at how much revenue a foreperson produces. That’s how I determine their wage. It’s a bit like reverse engineering.
A good rule of thumb for landscape maintenance wages is to spend about 30 to 35 per cent of revenue on labour. So if you've got a $300,000 maintenance route, and you're going to put a crew of three or four on it, you've got $100,000 to spend on labour. You can't spend any more than that, or you won't make any money. So with $100,000 on that $300,000 of business, you have to ask yourself, "Is it going to be most efficient with a three-person or four-person crew? And then how much am I going to pay that crew leader?" If it's a three-person crew, I'll probably be giving the foreperson 50 per cent of the wage, which would equate to about $50,000. The two labourers would then split the remaining $50,000. So that would be a guide for a landscape maintenance crew.
Suppose it was a construction crew. The general rule of thumb is to pay the crew about 25 per cent of its revenue. So if they are producing $400,000 in revenue, and they're a crew of three, you have $100,000 to spend on the crew.
Again, I'd probably look at doing something similar where the foreman is getting 50 to 60 per cent of that budget, and the rest is spread out amongst the supporting labourers. That type of model has always made sense because the foreperson’s compensation goes up as they get faster and can handle more staff, more significant projects, and more complicated work.
As a crew generates more revenue, say upwards of $600,000 worth of work, you could have a $150,000 budget for wages. If you can do that with a crew of four, then for sure I can pay the foreperson $60,000 or $80,000 a year while still paying the rest of the crew, but I can't pay a foreperson $80,000 a year to go out and produce $300,000 worth of work as a construction crew.
Share the numbers with forepersonsI’ve found by sharing the numbers with forepersons, they become a lot more entrepreneurial and accountable. Ultimately, they get more work done each day and generate more revenue for the company. So, as we move into 2021, make sure you hire the right people and implement systems before scaling up. Although a budget sounds simplistic and perhaps unexciting, it will be the most informative tool to help you make decisions when hiring, adding equipment, and growing your company.
I hope this helps and I wish all of you success in 2021.
Mark Bradley is CEO of LMN Software, and former CEO of TBG Environmental, both based in Ontario.