[Grant]

Well it's that time of year where my supervisor/right hand man have our annual review and salary discussion for next year. This guy has been with me for 15 years - hired right out of highschool. He supervises 2-3 emplyees regularly but not everyday. He can run the field operations but has little to do with the administration side of the business. I do consult him when bidding on new work and when considering the addition of new equipment. His job is seasonal in that he has January and most of February off. We are a maintenance and design/build company that grosses about $300k per year. I feel that at $40K salary he is at the top of the pay scale for what he does. I do pay a bonus based on profitability that could add up to $2k to his salary. Every year I remind him that I do value his service but that no one is irreplaceable. I have often even suggested that he consider trying it on his own if he feels undercompesated. After going around and around we always seem to settle on a cost of living increase bases on the consumer price index and our end of year profitabilty bonus (which only I decide). How do you guys compensate your supervisors? Any different ways of doing this in a way that creates incentive? Thanks for yor input.

[Matt Kulp]

It seems that you do value this employee, however you the owner reminding him that he is replaceable and that he should "try it on his own" is in my opinion is not a good approach. You may wake up one day and he does go out on his own and take some of your customers and trade secrets with him. Employees need to feel valued as well as be told that they are valuable. If an employer told me that he valued my service and then reminded me that I was replaceable, I would not feel as if I were part of the team.

As far as pay, I don't know where you are from, but depending on his skill level I would say that $40,000 is not at the top of the pay scale for what he does. However, he may be at the top of his pay scale with your company.

Maybe a better approach would be to tell him that the company can't afford to pay him more at this time. If you are interested in growing your company, tell him that if takes on additional responsibility to relieve some of your field work and allows you to grow the company, there will be growth potential.

No one wants to be in a job where they are at a dead end and the boss politely tells them that when they are in for there annual review. Especially a guy in his thirties, possibly with a family to feed.

When I hired my first supervisor and I wanted him to take on more responsibility, I actually paid him more "take home" then I was getting. Once the company started to grow, I brought my wage more in line but I never just gave him a cost of living raise.

JMO

[PSUscaper]

I'm in agreement with Matt on this pretty much. With a gross of 300k, I don't really think there is a whole lot left over to be paying someone much more. The bottom line is he needs to start producing more/taking on more responsibility to free yourself up to start creating more revenue. 15 years is a long time, and a great thing to have in an employee, but, after that long, he should be capable of taking on a great deal of resposibilty. He should be able to just about show up at the beginning of the week and not talk to you til the end only to discuss the weeks events.

40k for a supervisor is darn cheap around here. The papers claim that poverty level is about 42k for the area I live in. Its a rough world out there, and I don't know how we do it anymore.

The main thing here is to start getting that employee in track for what you need him to do......which is take on more responsibility. Until he does that, he is topped out, and you can't really pay him anymore than you do.

[Mac]

maybe Im in left field, but I do not see how supervising three maintenance employees is a full time job. If you are predominantly a maintenance company, it should be able to self sustain with little managerial assistance.

In my budgeting, I plan on a manager for every 10-12 maintenance employees. I know for certain I would barely make profit if i had one supervisor per 3 laborers. You definately have enough manager man power to fuel a good bit of growth.

If he wants a raise, tell him to earn it. A wise man told me that the only way an employee can earn more in his company is to either do more or produce more. My company functions the same way; if a laborer wants to earn more they will work more efficiently and if a support person wants to earn more, they will take on more responsibility (beyond 12 maintenance employee for example). Any other way cuts into YOUR profit.

[cutntrim]

If 2-3 employees is your total labour force, then I would agree with Mac that you don't even need a supervisor. I'd also agree with PSU that 300k gross probably doesn't afford you the luxury of paying said supervisor >$40k/yr.

Without knowing all the particulars, it sounds like you either need to expand (and increase his duties), or he's topped out. Although, I"m not sure that $40k is all that bad as far as compensation, since I don't know how many days/hours he works per season.

You might consider other benefits such as letting him have the use of a company truck, and cellphone, providing health coverage, etc... as other options versus just a straight raise if he's that valuable to you.

[johnkeegan]

Does he work 40 hours/week or 60? Does he have paid vacation & holidays, retirement, health ins. etc.? As far as raises go, unless he's gained new skills, increased his production levels or taken on new responsibilities (or he was previously underpaid), a mere COLA seems fine. Having said that I believe a person's pay level has to be in line with simply supply and demand. If a person of his skill level etc. can easily make more elsewhere, beware, you might loose him. So pay more if it you can't afford to lose him. On the flip side, if there are alot of prospects out there able and willing to do his job for less, you may be overpaying him.
And, oh yeah, can you afford him? Normally an employee making $42K w/bonus would really be costing you at least $52-55K once you add in worker's comp., unemployment, your 1/2 of SS and Medicare, etc. If you grossing $300K and you've got 2-3 other employees, equipment, fuel, materials .... the real question may be are YOU getting paid enough. Sit down and figure out how much you're paid per hour for everything you do all year (including doing this) and see who gets more per hour.

[Grant]

Thank you all for your thoughts. I agree with most of what you have said. As it turns out, we have landed a large contract for next year (and potentially for an additional 3 years ) that will add approximately 30% to our revenues. I have explained to him that it is essential for this him to assume more duties if this added revenue is to translate into additional profit. He says that he is on board with this and willing to take on more. Given all of this, I have less of a problem with paying him more.
As far as supply and demand for supervisors go, the state employment commission and the U.S. Dept of Labor have him at about 82 percentile. I don't know what others are paying. I think that if I decide to keep this guy and pay him more that the ball is in my court to grow the company and set it up so that he is helping to produce more profit. Johnkeegan, you raised a good point when you stated that the real question may be am I getting paid enough. Thanks for all of your help. I will now start planning on how more aggressively grow my company.

[TrickyDick]

you didn't say where you're from. 40k in West Virginia's a lot more than in New York or California.

[Dale Wiley]

The question I need to ask is this person a working supervisor and what percentage of his hours are being billed and

What percentage is being recovered in overhead for supervisory duties??

40K for a maintenance supervisor with 3 people is way over paid. I would look at the surverys in one of the trade magazines, but I am thinking that 35K would be tops with responsibility for at least 8 crew members.

The fact that your comapny is doing 300K a year, I would expect that at least 75% of his time was billable.

And using your state commission and Employment Departments as a bench mark is flat wrong. That don't have a clue what the actual market value is.

My business is just a bit larger than your's and I have a foreman / supervisor / mechanic that will be making about $ 20.00 per hour, plus paid health insurance, company paid IRA contribution, company paid cell phone, shop privledges, and he also makes a production bonus, but that is totally different from his compensation package. He will probably make about
$ 48K next year.

He will be responsible for field operations that should generate about 500K in gross sales. I expect that comp package to stay the same up to the company getting to a million dollars in 2009.

You as company owner need to set bench marks as to what , when and how the production gets done. Meet them in quality style or move on.

And john is exactly right about not paying yourself enough. Been there and done that, and with just the 2 dollars figures that you disclosed, you simply cannot be paying yourself what you should, given average landscape industry cost parameters.

[Fine Edge]

42k is poverty in NJ?
That's crazy.

[PSUscaper]

I look at things around my area and just don't know what to say anymore.

Average home cost is 300k, and that is nothing too fancy. Same house my sister has in dallas for 180k is close to 400k here.

Auto insurance is one of the most expensive of the states. With a newer vehicle, you can be close to 2k with no problem.

Health insurance is the same as pretty much anywhere....rediculous. 2, 3, 4......6k a year. Maybe even 12k plus for a family plan.

Cost of living....high. Have to drive everywhere and at 2 plus a gallon, no travel plans are cheap.

Bottom line is, you start adding up a mortage for that 300k house, insurance, house hold bills, car payments, gas, and you are strapped at 42k a year. Now lets say you are a family, have a wife and child at home and the only one making money.....well.......42k is poverty level.

Its scary, and quite frankly, I wonder why anyone would want to work in this industry. Something is just not right. I can't understand how anyone is making ends meet, but they seem to. It boggles my mind.

Do any of you ever sit down and wonder how that employee of yours with the 3 kids and wife at home lives on what you are paying them? Could you be happy with that? Could you live on that?

I just read a quick article in a trade magazine about the shortage of skilled foreman that is developing. Basically, a lot of large companies are feeling a pinch because of all the Migrant workers. They come in for a few years, make their money, and leave. Eventually, as time passes, all we are going to be left with is a bunch of unskilled laborers with NO ONE capable of taking wheel and run the job site.

I agree that immigrant labor may be part of the shortage of skilled foreman/supervisor candidates, but isn't the only reason. Maybe the fact is, no one is paying enough to encourage people to fill these skilled positions. If you want skilled people, you have to pay skilled people wages. This industry is not really doing that. Our wage scale is not what I would call inviting for skilled people.

If we want to attract more qualified people, we need to up the pot here. Really, who wants to work 50-60 hours a week, bust their backs, and walk away with enough money to just pay their bills???

It's not surprising at all that no one can find skilled employees when you look at what we are asking them to do and what to do it for.

[RHayden]

I don't know, the 42K is relevant to location. Would be top end here in the sticks but low end in other locales. For a 300k business a great deal of this salary has to be coming from net profit unless the owner is mostly absentee.

If you are going to encourage an employee to "try it on his own" make sure they've signed off on a no compete. Last thing you want is another competitior who already knows your clientele on a first name basis and is privy to your pricing structure and procedures.

Are you sure he is "replaceable", at least at the moment? Granted, no one is irreplaceable in the long term but how badly would you stumble if he walks tomorrow? Do you have a plan in place in case he does? Any one of my key guys could step in for any other if needed but I doubt the transition would be totally seamless even with all of their experience.

As far as compensation, try a small increase in base wage with quarterly production bonuses tied to production and profits. The more the company makes, the more he will make. It works well for us and keeps everyone focused.

[johnkeegan]

I read the same article about foremen and he's right. (I think it was VanderKoi). In my area unemployment is damn near 3%. Which means every body that wants a job, has one. Just finding and attracting someone with an "OK" work ethic is a needle-in-a-haystack. Finding an experienced, "skilled" craftsman with a work ethic is an even smaller "needle." And, finally, finding someone like that who has the temperment and focas to be a true manager/foreman feels like a pipe dream. In my experience, a lot of the most experienced workers really have no desire to be a true foreman. They just want to do their job and go home. They like the title but they either totally ignore a trainee or berate them, or if the new person is actually bright and skilled, they feel threatened by them. And, as that article pointed out, even (legal)immigrant foreman can only provide a temporary fix.
This isn't to say there's no solution but until you can admit to the severity of the problem (at least in a tight labor market) it will be hard to make the difficult changes necessary to provide a long term solution.

[Grant]

Our operation is in the Mid-Atlantic area where the unemployment rate is 2.7%. Finding a replacement for this guy might prove difficult. Close to 100% of his salary is being recovered as he is a working supervisor. I will try to dig out some of the recent trade publications that published industry salary figures. You guys that pay bonuses based on profit - how much of your business do you share with your employees to justify thier bonuses?
Thanks for the useful comments!

[Dale Wiley]

We paid out about $ 1,500 in profit sharing to each employee this year. It was a year end deal, clearly labeled as profit sharing as the employees went the extra mile.

We actually paid out more as there was probably another $ 300 per employee in cash bonus's I handed out at various, random times.

I will be going to a straight production bonus program next year, the one I used in COMPASS operations. I expect those payouts to at least double, but they will also make me a pile of money in the process, as we are going to attempt to grow about 100% in the next year.

You have to pay based upon the companies ability to pay based upon the successful execution of a consistent string of profitable jobs and operational efficiencies. Nothing else makes any sense.

The company has to be taken care of first, net profits protected and preserved, minimal unbillable times and sustainable growth.