I was having coffee with a really good friend in the business and we were talking about the costs of operating with employees. I know that I've been hit with questions about this before on comments to other posts. After talking for a little while, we both realized that there is likely too much manpower on the jobs and that the employee wages were hurting profits due to overages on hours.
One of the biggest problems I've seen that leads to out-of-control employee costs is always sending a pair of employees to every job regardless of the job size. I start with assigning one employee to each job and pair them only when it is essential to maintain quality or finish on a specific timeline for large jobs. If you always pair guys, it will certainly eat you up on the small jobs pretty quickly. Costs in this business can be really high with taxes and workers compensation, so I always shoot for a consistent margin based on an expected number of hours to perform the job plus materials cost. If the expectations on hours are not clear to an employee or consistently met, then you have a problem.
When there's a problem of an employee consistently going over hours, I find that to be caused by bad estimating (my fault), inadequate training, or taking advantage of you. Assuming that your estimating is based on good experience, then I've generally found it's the latter problem. Fixing this issue is essential, and if you've provided a good working environment (adequate training, realistic timeline, and good tools), then you need to serve up walking papers. Would you want to have the flu or a cold forever? Then why would you want the ailment of an employee who is not on your side? I consider keeping a bad employee a good strategy to delay your retirement.
Today I read an article in Inc magazine that discussed the importance of balance sheets in understanding the health of your business. The quickest way for a company to go broke is with employees and payroll that is not in line with proper job pricing. If your prices are healthy, then the only way to get around things is to do everything yourself-if you can do that. I was never able to do that and be available for my family without a lot of stress. Keep an eye on the important parts of your business besides seeing how many "guys" you have working for you. Unlike classic Italian sports cars in a garage, employees don't gain value in numbers just sitting on payroll doing nothing.
