Understanding Pay Structure and Its Impact on Your Business

A2O  Digital meets with hosts Brandon Falone and Justin Bencsko to discuss pay structure and how it can impact your business. How can pay structure be profitable for your home service business? Listen to this episode for a deeper dive on how to navigate pay structure based on performance and position tiers and see what will work for your business!

Transcript

Justin  00:00

All right, welcome back, guys. My name is Justin Bencsko. I've got my buddy here, Brandon We've obviously, you know, you've seen us before. Today we're going to be talking about how you pay your employees. How do you pay your technicians, installers, all those types of things? What things should you be thinking about when you do this? And Brandon's got a lot of good experience on this, and he's going to be able to, kind of, like, talk, talk a lot about this, and give you some, some really good ideas, and plusses and minuses, pros and cons and all that type of stuff. So let's get into it. I don't know, do you want to talk about how you pay your employees right now, and where you're at now? And then maybe we can go back and you know. Have you messed around with different pay, different ways to pay and incent technicians and installers?

Brandon  01:09

Yeah no, over the past 10 years, you know, being in the garage door space, knowing the trades, the pay has changed drastically over time. Different factors have also come into play, whether it's reviews and different performance tiers that you want to hit. So it's really moved a lot over that time period, and it also depends on the position. So making sure that you have that right combination to keep somebody incentivized while also making it fair, both for the company and for the employee, is really, you know, it's this, it's this balance that is not always...it's easier said than done. And then as you change people in their positions, making sure that you're continually incentivizing them to, you know, you know, go out there and work for not only themselves, but work for the company if that, that makes sense. 

Justin  02:02

Gotcha. So it sounds like, you know, I think the two sides...you could do hourly, right? Like, some people just say, I'm paying you an hourly rate. You could go straight commission on paying you based on what you sell and produce. Sounds like you do something, a hybrid in between that? 

Brandon  02:18

Yeah, so it depends on the position. Now, the revenue driving positions, I do believe in a high, in some sort of a base, keeping them hourly. We have laws in our, in one of our states that we have to deal with when it comes to paying hourly, so we have worked that into our pay structure. You know, we messed around with that when we were down in Texas when we put a business down there. We didn't necessarily need to give them hourly, and it definitely backfired a little bit because you can just pay straight commission. But we like to have this combination of being paid based on, you know, hey, you've got this base level. You have a production component which brings into account whatever production they do for that day, whether it's revenue from installs, revenue from a new service that they do, fixing and repairing and replacing garage doors and those, production, that's a big part, right?  Because that is that component that keeps them driving towards being better, you know, and making sure that they're they're maximizing opportunities. And I say maximizing opportunities really following, following a system that we put in place to make sure that, that we're fixing the doors right and fixing them right for the long term. So that's a huge component, the production component. 

Justin  02:18

So let's break it down. Let's talk about, let's say, to keep it simple, technician only and then maybe we can talk about like, an installer and how that's, you know, you may be slightly different. How exactly do you pay? And so, you said there's a base thing. So that's a base hourly rate? 

Brandon  03:52

Yes.

Justin  03:52

Is that like something, is that minimum wage? Is that, you know, a higher number than that? How do you come up with, what's that number?

Brandon  03:59

So when it's the installer position, which is...

Justin  04:02

Let's talk technician. 

Brandon  04:03

Technician, apologies. So yeah, so the technicians position, we have a low hourly rate. It's below minimum wage. It gives them a base of, call it $20,000 for certain positions. That's the most common. After that, we do have this production that I was talking about, and this is a percentage of the gross profit that they bring in for the repair work that they do. The next component that they have is the reviews. We incentivize reviews. Obviously happy customers not only mean they're going to come back to us when they need future work, but they're going to recommend us to other people. So incentivizing them and our technicians to go out and create happy customers, that unbelievable experience pays multiple dividends for us. So keeping it...so we've got the base, we've got that production, and then we've got the review bonus. And then... 

Justin  04:57

How does the review bonus work? Is it like a certain dollar every review they receive? What's, how does that work into it?

Brandon  05:04

And this is something that we've messed with over the years. We actually pay per point, and we put different values on various types of reviews that, whenever there's a more important type of review. Right now everybody in the service space knows Google is the priority, right? There was actually a time when Yelp was a priority because we wanted to make sure that they were going out and getting Yelp reviews that stuck. Google has stayed strong knowing that that's the most important. So we'll give two points. And when we open a new location, or we have a new satellite location, we'll add more points to that to incentivize the guys to get it, and then we'll pay a dollar amount per point. 

Justin  05:05

Got it. 

Brandon  05:18

So that's those, those three components, and... 

Justin  05:25

And then you can, sorry, going back to the reviews. So then you can change around...do you ever change around the points? That's the whole point of doing it based on points, like, we really need Google reviews. So that's gonna be worth more points per se. And then that might change, and Yelp is worth more points. Is that the reason for that?

Brandon  06:05

Yeah no, that's, that is the reason for that is, we can keep changing based on what we want and it's kind of fluid. And we pay out the bonus for reviews at the end of the month.

Justin  06:17

And what percentage of like, I'm sure it can vary depending on how many reviews. But is this like, an extra couple bucks? Is this a significant portion of their wages that's based on that? Like, what percentage?

Brandon  06:30

It could be as much as 10% of somebody's salary. If they're making six figures...

Justin  06:34

So it's significant, yeah. 

Brandon  06:35

They can, we've got guys in, you know, making over $1,000 on reviews each month and it's a really nice way to make, you know, extra, extra money, and it's just another component of their pay. It also is one of those things where certain guys put much more emphasis on it, you know, and where it's constantly a struggle every day to make sure that they're buying in. With the guys who do buy in, it can be significant amount of money and, you know, we kind of tell them, hey, you could buy... this could pay for a car payment for the month. 

Justin  07:07

Yeah. 

Brandon  07:07

Yeah. And then the last component which is more variable, is, is creating some incentive pools for people. We have tiers that they can hit. They'll get a bonus on some other special monthly bonuses that we will incentivize them on. Quarterly bonuses, daily bonuses, so different bonuses that they can actually go after and reach and obtain.

Justin  07:32

Talk about the tiers. You said you have tiers like, explain that. How do, how do they work? Just, you know, for people that are listening that, explain that to us.

Brandon  07:41

Yeah, tiers. We wanted, we realized that, there was actually a time maybe seven, eight years ago when we started to post people's numbers each month, that they were in production each month, and that was great, and guys were competing with each other. We also wanted them to compete to get to a next level by adding that component. So if they went over a certain amount of revenue, they would go from tier five, or tier one to tier two, tier two to tier three. And it was just another extra push for guys at the end of the month, or the last week of the month, to get to that next level that they wanted. And that tier will pay out a bonus, and we'll incentivize at different times when we know we have goals to hit. We'll incentivize...hey, we'll say, if you hit these tiers, you're gonna get a bigger, bigger bonus, you're gonna double up this bonus. So making it predictable, but letting the the compensation be variate.

Justin  08:39

So you can be flexible on...listen, goals of a business change, right? So if you're trying to really push a certain thing, that tier can be the way that you, you know, push that, that month or whatever period. 

Brandon  08:50

Yeah no, and that's, that's a huge, it's...you need to keep it fresh. I think when anything gets stale, people gets old. People also don't like change. So they like a little bit consistency, but we got to spice it up every once in a while, so it's nice giving them incentives. The daily bonus has been a really great way to to push people to reach certain goals really short term. So some some days, it'll be a really cold day, and I know our guys. When it's cold they'll either game up and get ready to go, or they'll be like, I want to be done with the day as quickly as possible. So what we'll do is we'll make a daily incentive bonus pool, and people will push and we'll see a big...

Justin  09:32

What would that look like? 

Brandon  09:33

I've done one that's really successful is like a bonus boost, or like a commission boost, which will be say, hey, like a 50% bonus boost. Whatever your commission is, another 50% on top of that. For that day. And it's nice, you'll see an increase in opportunity average at the end of that day. Sometimes we'll do it with motors. You know, we did it with, we worked with a vendor, and we had a bonus for for motors, and that was for the month. Or, that was actually for the quarter, I apologize. And we continue to kind of pump different things, but they like to keep it fresh. They like to have new objectives and ways to make money, but...

Justin  09:46

For that day.  Give them...constantly change and give them something different to be working towards, keep them engaged. Smart.

Brandon  10:13

Yeah, yeah. And the quarterly was another interesting way from, because you also have to find ways to keep your more senior people engaged while making it fair. I believe in fairness. I don't like having different pay structures for a lot of different people. I believe that we should, you know, what we believe here is very open. You know, we're partners. They're partners with us, we're partners with them. You know, you can only earn so much more, you know, commission. It's hard to play with those numbers because it can be an uncontrollable thing, but adding quarterly bonuses for top tier people is really great. And actually, some of that, you'll see some of the lower guys pushing really hard to get into this, to this tier. So, it's also, that's been great. And then lastly, we do pay out year end bonuses, which has year over year been a great success for us. It keeps people happy. 

Justin  11:08

What are those based on?

Brandon  11:10

So it depends on the position. If speaking about technicians, this majority position that we have here, we'll base it on overall revenue that they produce throughout the year. Then we'll also base it on some discretionary...like, value adds to culture. Culture is such an important part of our company, so if they're adding extra value in other places, they'll be able to make more money. It's just tough. That's more discretionary, which can bring into play some tough conversations with, with people. But yeah no, it's, it's great. The bonuses are really something that people look forward to.

Justin  11:45

So how did you figure out the percentages of all this? Because, right, if you want to be a profitable business, you have to fall within a range, right? And make sure that you're, you know, you want to obviously pay really well so that you can get really good people, but you also you can't, you know, pay 75% of the revenue of each job with all their expenses. Or, how do you figure out that sweet spot? And it sounds like you have all these different bonuses. How do you, how do you figure that out, with all these bonuses, to be in a good spot where you're really competitive, paying your guys well, but at the same time making sure that, you know, you're profitable as a business and not like, you know, losing money? 

Brandon  12:25

Yeah, it's, it's, it is funny. Not funny, it's, it's, it's tough. We've seen people lose their jobs because they've set the wrong bonus structures they can't get out of. It is really hard to take something back once you give it to somebody. So trying to keep things that are big changes, making them short term, letting people know the expectation going in that, hey, this can change, like we're trying something new, we're trying to see how it goes, is really important. But you are going to have moments where you're going to kind of lose money, but you just have to kind of adjust and adjust.

Justin  12:58

Is that something you look at in, like, financials on a monthly basis or something to make sure, and then you'll make adjustments off of that? Is that, how you kind of do it? It's like a constant, like, all right, how did it come out? This...is there a number that you're, like, looking for to be within there?

Brandon  13:13

Yeah, wage percentage is a huge number that I track when it comes to profitability. Profitability is...we're in business, vanity or sales sanity is profitability, and knowing your profitability goal going in and how to reach that number through different, you know, components. You know, when it comes to wages, wage percentage is really important, knowing that, hey, technicians need to fall within this range of blank to blank. I, you know, know that certain guys are going to be more than that, some guys are going to be less than that, and that's the way it works, right? And some guys that are less than that eventually are more than where you want them to be because they're more senior, but you want to keep them around because they're steady. So having wage retention is really important. Constantly tracking that number is important. You don't want to wait until the end of the year. 

Justin  14:02

So you need someone that's really good with the financials to be able to constantly be giving you that number, tracking it. If you're not doing that, yeah, you end up at the end of the year and you're like, oh crap.

Brandon  14:11

Yeah, backing into numbers and constantly tracking them, making adjustments in real time is really important. Having those conversations and saying, hey, we need to make an adjustment because of blank. You can't just raise your prices to fix profitability issues. I think the industries, a lot of this trade's industries, have seen that over the past couple years. People are raising prices, you know, and that that can fix some of your problems. But really, what you need to do before you raise prices or make some changes, is to make sure that your pay structures are working correctly. So we're constantly changing, adapting. People are very used to the fact that that stuff is changing month by month and even year by year. That's a big time to reestablish and reset expectations.

Justin  14:57

Cool. So that, you know, we talked a lot there, that was all technicians. For your installers, is it different? Is it, is it basically the same, you just have different K, you know, KPIs, and what you're bonusing them on? Or do you do anything differently for like, an installer versus...technician is like the salesperson, right? They're going into the home, they're you know, they're fixing the garage door, but you know, they're, they're a salesperson. They're going in there and, you know, trying to recommend the best option to the customer and they're getting paid off of that. An installer is just, hey, we have to install this garage door. It was already sold, right? So, how do you, how is that a little different for maybe an installer compared to technician?

Brandon  15:44

Yeah, and it talks about the personality types. Certain people, even if they know that there's a way for them to make more money through a incentive based compensation plan, they would choose the safer option rather than a more like, risky option. And I take that into account based on each position that we're looking at. Installers, for instance, are more risk adverse, right? So they'd rather a more safe plan. So they're gonna have a higher base, but still be attached to that revenue to know, hey, we're gonna give you a piece of this revenue. Because the more you do...the more we make, the more you make, because we're a partner. Every position in the company is a partnership in some, in some way.

Justin  16:26

Is that, so the personality, based on their personality, they end up gravitating towards being an installer because of that? Is that what happens? Or, because you said you know, you're paying them a higher base, less off of the production, but still some production. What if there's technician that is really, you know, hungry and wants, you know, more? Is that, just like, not a good position for them? 

Brandon  16:49

The installer you're saying? 

Justin  16:49

Yeah, the installer.

Brandon  16:49

Yeah if, well, no, because they're going to have opportunities to make more money, but it's not going to be the same leaps and bounds, like a technician. 

Justin  16:58

So just like this, so technician, there's more on the production side, and installers, more on the hourly side, less on the production side. You kind of just move those dials a little bit. Do I understand that correctly? 

Brandon  17:09

Yeah, there's a lot of positions like that. I mean, entrepreneurs, business owners, you think about what's their risk averse, right? They're, they're all risk, they're all risk you know, their, their winning is coming from profits of the company. There's not a lot of a big safety net at the beginning. So different people, and we've seen people shift from role to role based on that personality type. As we've gotten smarter over the years, getting somebody into the right position earlier on is so important, and compensation is, probably this is the number one factor. There are some people that would just like consistency. That's it. Technicians do not have consistency. You know, there's days where they're making, you know, very little, no money. They'll come back and say, I made less than minimum wage today. But the next day they're making...

Justin  17:10

A lot more, yeah, 

Brandon  17:14

Over six figures. And it's definitely one of those, those things where the personality type...so over time, we develop different positions with different compensation plans. Like I'll say, our customer service reps, we tried incentivizing them, but they're more risk averse. They would rather a higher base and know what their expectations are. So we're still, but we're still messing around with their compensation a little bit, because we want them to be a little bit more aggressive. 

Justin  18:23

Yeah. It always feels like they're always, you should always, not always, but it's good to have some type of performance metric in there to, you know, so they're trying to achieve the goals that, you know, you want as a business, them to achieve. But yeah, I get that, you're tweaking the dials depending on the position and and all that. So like, if someone came in and they want that, they applied for a technician let's say, which is more sales, more, let's say, like, up side versus, but they are a person that kind of, their personality isn't that way. Would you, is that something that you would say, ah, they may not, might not be a good fit for a technician, and then you try and fit them into maybe an installer, and see if that's a better fit?

Brandon  19:06

Yeah. I mean, almost every, every interview that I conduct, no matter what the position is, I'll talk about hey. Option one, this is your pay structure. And option two, this is your pay structure. That question tells me a lot about the person's personality type and how risk adverse they are. The technicians have to be kind of used. So it's, they're almost in business for themselves, you know, not by themselves, kind of a thing. So yeah, it's Yeah. And over time, I think the mistake that some people do make is they try and make everybody production based, which mentally can leave somebody sitting going, Oh, well, you know this is, this is not a job for me. I need more consistency. I know what my bills are each month, my phone bill, my rent, all of these, car payment, all these things. It'll work in their their disadvantage for the company, if they're trying to push them, incentivize them, if that's not their personality type. So, yeah, that's a it's important. And I think getting to know your your team members, and getting to know who they are and what kind of makes them tick is really important.

Justin  20:15

Cool. What else I mean? I think that's a good discussion. Anything else you you got for us today, or things to walk away with from this? 

Brandon  20:25

Yeah, I mean, pay is people, they don't live to work, they work to live. And having that nice balance is really important. Um, finding different ways to give people nice little perks is huge, too. You know, I've done a lot over the years. You know, we just signed up. We're paying for somebody's peloton to help their, yeah, to get them incentivize the person.

Justin  20:50

How'd that come about?

Brandon  20:51

Oh it was the year end review and the person said, "Hey, I had some weight fluctuations". And I said, "Well, what went well last year". She said, Well, when I was doing my Peloton before my wedding, it was awesome. I said, "All right, if you use your Peloton, and you show us proof we're gonna pay for your Peloton each month," buying into them. So that little cost that they said, Hey, I don't really want to do this. Yeah, we can kind of kick in and be like, you know something. We're gonna take care of that, buying into them from there, doing various things for different people. You know, car reimbursements, travel. You know, it's important people are traveling and going a little bit more above and beyond for them, so they have a little bit of security when it comes to their vehicles. Our technicians and installers, a lot of them take their vehicles home. You know, that's a part of their compensation. They don't have to pay for that gas to and from work every day. They don't have to pay for the wear and tear on their vehicle. Having that open, honest conversation of how you're making money is really important. I'd say our area, you know, tipping is really nice. You know, getting excited in the room about guys getting tips because there's, it's double edged sword on there, where you want them to know, hey, listen, we know you're still getting tips like it's good. We're happy about it. It's, it's one of those things. They claim it on their taxes, but that's, you know, their own stuff. And you know, when we do have customers that overpay, we take that money, we put it through payroll when we give them their tips through there so.

Justin  22:21

What do you mean, a customer that overpays?

Brandon  22:23

Well, they'll overpay and give an extra tip.

Justin  22:25

Got it, they'll round tip on the so you can do that in like the...

Brandon  22:28

All the way down to the cents, yep, if it's 10 cents, we're giving them the 10 cents. And it's important, because it's that, that fairness, balance that we need to create. So I guess my question for you from a marketing standpoint, you know, as we wrap this up, and maybe it's a conversation for another day, but from recruiting, you know, we started looking at this like, what is the best way to advertise pay, right? We have this complicated compensation plan. What is the best way to attract candidates to this? Is there a certain way to get better candidates in your mind, like that would fit these compensation plans?

Justin  23:04

Yeah. I mean, I think this could be definitely another topic that we could talk about, like recruiting and that type of thing. You definitely, I'm not an expert at this. Let me say that we're starting to do some stuff with with some recruiting, try and put more emphasis on it for you guys, actually. And I think you want to keep it simple. I think if you just tried to, in a, you know, in a job posting, try and explain what you know, you just said, that's going to be really tough, right? Keep it simple. If you can show, like your technicians, the good ones will make, can make over six figures, right? Yeah, that's a big number, right? That six figure number, if you can say that in the job posting, and you want to be, you don't want to lie either, right? You don't want to, you know, say something that's not true, but potential to earn over six figures, right? You can kind of show the the potential upside there. I definitely think that's, you know, a good thing. And you started talking about a lot of the things that we're going to be focusing on with some of these kind of recruiting campaigns and ads that we're going to be running, take your truck home, you know, like, what are all the perks of the job? Obviously, pay is a part of it. But you know, you talked today about all different things you do to try and make, you know, have your guys, like, where they're working, enjoy it, right? Show that you care all that stuff. So, like, how do you portray that when you're, you know, trying to recruit and get good people in so I think that's a discussion that we could talk a whole episode about which maybe, maybe we do recruiting. How do you, how do you do it, you know, what are some, some tactics to keep some really good people coming in.

Brandon  24:52

But, yeah, no, that's, that's exciting. I do think that's the next, you know, kind of code to crack. But I will end on one other thing. If feedback helps. You know so much. You know, asking people what how do they feel? Are they happy, and then using that information to then market towards people. But this was awesome. A good fun topic to talk about. 

Justin  25:11

Yeah, absolutely.

Brandon  25:12

Awesome.