Supercharging Efficiency in Painting with Performance-Based Pay

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We'll go through what this is generally and then how to how you can implement this and also give you some specific tactics that you could use that I've seen other painting businesses successfully use . So , first of all , what is performance pay ? Performance pay is just recognizing painters or crews that beat budgets .

So when you are doing your estimates , hopefully you're using production rates , and those production rates should be generating a set of budgeted hours for the project that you're estimating , which basically is how many man hours is it going to take to paint this project , and so that should help you generate your price that you're going to charge your customer , and

then also it will give you the amount of budget hours that you need to give . That will go on to the work order that you will give to your crew lead and they will then have that budget hours to work from to hopefully beat the budget . And what you can do is incentivize them to beat the budget by giving them bonuses when they do so .

That's the general idea , but there's some terms in there that I'd like to define here . First of all , production rates are basically specific amounts of hours it takes to paint a specific surface . So , for example , a production rate might be 10 linear feet of a specific type of railing .

It takes an average painter two hours to paint , or one hour to paint as a production rate . Or 100 square feet of a particular type of siding takes one hour to do 100 square feet . So basically , you would either internally develop these production rates by through your experience , or the PCA has a production rate book .

If you go to the PCA's website and look up costs and estimating , they actually sell this huge binder that has a bunch of tables of production rates , which was developed in the 90s and it's basically based off of the average painter speed and it has all these different surfaces .

So you could you could get that to start out with if you don't have any internal production rates , or just develop them on your own based off of your observation of your team , how long it takes them to paint specific surfaces . So the idea is production rates .

You would use that to generate your estimate by actually measuring out each surface that you need to account for in on the painting project that you have .

I can walk into a room and I can tell you how long it's going to take my guys to paint this . Now , I would never pretend to be able to do that . I would struggle with the tape measure . To be honest with you , remember when I was at PCA this last February , one of the presenters was talking about that .

And so I'm in a room full of experienced painters and he says so , we're sitting in this conference room , fairly simple , it's a commercial room , nothing too fancy . And he says who wants to take a stab at bidding out this room ? And a couple of the braver painters raised their hand and he said all right , so how many hours ? How much ?

How much to paint this room ? And then immediately he starts shooting holes in his estimate because , well , there's a chair rail . Did you take into account the chair rail ? What about this wall over here ? It's got a huge window in it . So you know you got to take that out , but then you've also got the three feet above the window .

And so , you know , the point was , a simple conference room isn't so simple and if we don't take the time to , you know , measure it all out and get it right , then it could take us a lot more hours than we had budgeted for and that is going to directly eat in , you know , to our , to our margins , and we might even lose money on the job .

But if that's true , you're likely not going to be able to hire someone else that can do that as well . You can't , you can't impart your intuition , your magical intuition , to someone else , so you're going to have to have some sort of system to teach your new salesperson . And so production rates is where that comes in .

It's a scalable process that anyone could use if they can use a tape measure . So maybe not you , richard , since you struggle with tape measure , but most folks you know measure out the tape measure or laser measuring apparatus and and figure out how , how much space , how much , how long things are . Adding up those things just becomes a math problem .

So as long as they can do basic math , they should be able to put together an estimate when you use , when you're using , production rates .

I mean , some of the time we we spend in doing the extra measuring , which is time well spent . We might be able to get some of that back in being able to put together a quicker estimate using some of the estimating software out there .

But once you load it up in there , you know it can be pretty quick to generate those estimates . Once you got everything loaded in with your production rates , like you said , the most amount of time is really spent measuring the things and then it's just playing in that those measurements in and getting your price .

And then also the other feature of these of things , like of those softwares , is most of them generate work order as well . So generate the estimate . Here's what you're going to charge the customer with your markup in there . Hopefully you're doing somewhere around 100% markup on your , on your cost .

So you're shooting for 50% gross profit , which we talked about in the prior episode . So hopefully you're doing that . But also you're getting that estimate .

But you're also getting the work order which would then be handed off to your crew lead and that will have the budget hours which is based off the measurements you did and your production rates that are built into that to that software , and so this is where it's the painter performance pay system it starts to take place

. The first step is you have to provide the budget hours to your crew lead so they know what the expectation is for this project , and set the expectation . You know , hey , here are the budget hours . The expectation is that you beat the budget hours in order to be eligible for the bonus .

And you know from there If a project's budgeted for 100 hours , let's say , and you have two painters executing that job , let's say they beat the budget , so you could do a bonus program . For when this happens and most cases , what you'd want to do is not pay them . You would want to pay them a portion of the labor saved on the project .

So if it's budgeted for 100 hours and they do it in 80 hours , they saved 20 hours of labor on that project , let's say . So if you're running a program like this , you generally don't want to do the full 20 hours paid out to them as a bonus , because there is some administrative costs to running a program like this .

You have to keep track of it , do the job costing , so there's some admin burden in this for sure . So you'll need to determine a percentage of what you would want to pay them out as a bonus . Somewhere between 30% and 70% is what I generally see . And so let's say you chose 50% , just to split it on the middle .

So if there's 20 hours that they went under budget by 20 hours , you would multiply your percentage , which in this case let's say we chose 50% , so you'd pay out a bonus of 10 hours to them for beating the budget by 20 hours . The other amount would go towards you administering this program .

Now , now the comes the question okay , do you pay it out immediately ? Do you wait till next quarter to pay out the bonus ? Are they accruing the bonus and it's paid out each quarter . There's many ways to do this . So it really comes down to what your preferences are .

Some folks , what they'll do is they'll pay it out immediately and they'll adjust their percentage that they're paying down . You know , maybe instead of paying 50% , they pay 30% just in case there's callbacks . So you're only paying out a smaller portion of the budget hours .

So I think the benefit of paying out immediately is that your painters can see oh , I'm getting a bonus right away . So that's the benefit . The downside is that you're kind of risking the paying out a bonus when you had a callback and you had to do touch ups . The way you can mitigate that is one is having some sort of quality check .

Maybe we're a production manager or somebody is doing some sort of quality check to verify a job's done . You can also reduce the amount of the percentage that you're paying out after the . You know , like I had said , maybe keep a lower percentage of safe labor paid out to them .

Now , if you hold on to the bonus and then , like , keep track of it and pay it out each quarter or , you know , over a certain period of time , the benefit is that you'll be able to see those callbacks and maybe keep track of oh okay , there's a callback so they didn't hit budgeted hours , so I'm not going to pay them a bonus .

So you might , you know , save a little bit of money on the bonuses you're paying out because you're waiting a period . The downside is that it's less immediate for your painters , so they it might not be as impactful or as motivating to them to have to wait three months to get the bonus because you're holding on to it .

It might be less impactful there , yeah .

Yeah , I think sometimes employees especially , you know , those employees who are kind of type A and always trying to , you know , high achieve they feel like there's a little bit of a ceiling , right , I mean , they're earning their pay but it's hard for them to break through that ceiling .

But by offering them this performance pay , it gives them a venue , a pathway to really , you know , showing their work ethic and their skill and being rewarded for that . So I really like that aspect of it .

But then I think I think the big concern that most people are going to have is well , if I , if I motivate my guys to get the job done faster , are they going to cut corners ? Is the quality kind of suffer ? Have I , you know , incentivized them to do a bad job , you know , for the sake of speed ?

Are there ways that we can , you know , kind of mitigate that or make sure that that doesn't happen ?

So some ways you can improve quality while trying to stay efficient is have obviously processes in place and checklists and maybe a quality check with the production manager . Maybe you have a production manager or maybe you're the production manager .

You do some sort of final walk around with the crew lead to sign off on the fact that it is truly done before it gets to the point where you're saying the job's done and getting paid from the customer so you might have some stipulation for the bonus . It has to be done under budget . But also you can't have failed a quality check or something like that .

So you can't . If you have a quality check at the end with a production manager , it goes and does a final walk around . If he catches anything , you don't get the bonus .

So you can kind of do something like that where you're trying to not ignore the fact that it still needs to be high quality and then obviously , if you get a callback , that also would negate the bonus too . That would be another way to do it , but preferably would want to catch it before it got to that point .

It probably depends on what kind of warranty you offer or how long the average customer might give you a callback holding it onto that bonus until afterwards . Because if we have to go back and spend five hours fixing what should have been done right the first time , then that negates the bonus .

You have to have a work order that has the budget hours on there so the crew lead knows the expectations . You have to identify . What is the structure of the bonus ? Is it going to be 50% of the labor saved , 30% , 70% ? What is that going to look like ? And then , are there any stipulations ? Are you going to require a quality check ?

Does that quality check ? If they fail the quality check , do they still get the bonus If there's a callback ? Those stipulations get a thing about those . And then the timing of when you're paying the bonuses . Are you going to pay it quick for high impact but then potentially pay someone and also get a callback but mitigate it some other way ?

Or are you going to hold on to the bonuses and have maybe less of an impact but not pay out bonuses when you shouldn't have ? So you have to look at that , the timing of the bonuses , and then from there it's the actual act of running the payroll for this .

And so just some of the administrative things that you'll need to definitely think about is your time tracking . You'll need to have that dial . Then , obviously , you know I'll talk to some painting businesses and they want to do time tracking but they can't get their team to do it .

But I would tell those painting contractors there's a ton of painting businesses that do get their team to do it . So don't see that as an unsurmountable task , because there's plenty of painting businesses that get their team to log into a time tracker and properly select the job that they're on to track their time .

So there's solutions like clock shark , quickbooks time . Those solutions integrate with QuickBooks online and it will allow your team to log into the proper job start time and rack up those hours against that project . And those two systems clock shark and QuickBooks time also integrate with QuickBooks payroll and also gusto payroll , and so they'll be able to sync .

You approve the hours in the time tracking system clock shark or QuickBooks time and then you sync the hours over to your payroll , which you know you're running out of the guest to payroll or QuickBooks online payroll .

It will sync those hours over so you don't have to do a bunch of duplicate data entry , and so those are common solutions for painting business live scene . Quickbooks time clock , shark gusto . Quickbooks payroll .

Well , let's show me the money .

And so , once you get your time tracking setup and it's synced over to your payroll , you know you would just run the hours that they signed in on , but then you would have to have some sort of other calculation to set for each project .

You know your budget hours for each project , so you might have to have a separate spreadsheet for each project that just has the budgeted hours so that when you run payroll you can refer to that spreadsheet .

You'll also need to probably run some customer reports in your time tracker , like to see how much overall time was done on the project so you can calculate .

Okay , the overall project had 80 hours between three different people , but you know , person a work 10 hours on the project , person B worked 50 hours on the project and person C worked 20 hours on the project . So this you would need to pay a what's the word ?

I'm looking for a proportional amount of the bonus for the person , the people that work the most on it , you know . So there's some math in there that you would need to calculate , to calculate the bonus for each individual person .

So again , so that takes some administrative brainpower , some additional tracking in that separate spreadsheet , which is why you're not paying out the full , the full labor saved through payroll . You want to save some of it so that you can cover the additional admin costs of running the program .

You definitely want to treat your guys as well as you can , but I appreciate , daniel , you making the point that this is not cost-free to the company , and so you don't want to be losing money , and that's why you need to hold back some of that labor savings for yourself , to cover these costs and also to make your profit margins as well .

to go to some events that you're holding for high performers , that for crews that consistently beat bonuses or beat budgets . You can maybe do some sort of event that you would hold for the high performers as an idea .

We're humans , we like to work with other humans , we like to get to know each other , and letting our guard down and not being in such a professional environment all the time can really do a lot to build those relationships .

You can go to Facebook and type in Grow , your Painting Business and request access , and we will definitely accept your invite . Let us know what you think , what your thoughts are on that topic , and or if you have any other topics for future episodes or any other questions . Definitely let us know .

you listening and look forward to seeing you on the next podcast .