What Do We Mean By Labor Productivity?

By Paul Starkey
Published on: October 1, 2020

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Maximizing labor productivity is, perhaps, the #1 challenge and opportunity for integrators.  Monthly labor revenues are a huge contributor to top-line Gross Profit. But your GP on goods is also impacted by labor productivity – if the techs aren’t out on projects, they’re not delivering goods and the associated GP. And you’re not realizing income.

Right there you have one of the most important data points for labor productivity – how many hours/week are your techs actually working on projects? The more time they can bill to projects, the more labor revenues will be produced.

What counts as billable time varies company to company. In one, drive time is billed, in another it’s not. Ditto design and engineering time, logistics management (ordering, receiving, staging, loading trucks, scheduling), and project management. These could all be justifiably billed as project costs. All you have to do is … Do It!

Or maybe not? Most business owners are uncomfortable asking customers to pay more for things that the owner themselves might not feel comfortable paying. If that’s your issue, please hire my electrician. He charges $190/hour – more than any integrator I know – and the clock starts when he gets in his truck. Yeah, $190/hour for drive time.

Other Productivity Issues

Do you keep track of time allocated versus time used on projects? Going over on allocations kills the productivity numbers. This could be a pricing issue, with salespeople/specifiers not allocating enough hours to begin with. Or, it could be a logistics issue: scheduling for a site that’s not ready, forgetting needed products, not planning around geographic proximities. Or, it could be a skills issue, i.e., the tech(s) doesn’t have the needed skills to complete the task in the allotted time.

And what about no-charge warranty time? Service calls are expensive enough without you not being able to charge for the visit.

These are just a few of the types of issues we focus on to increase and maximize labor productivity. You should too!

Keep it vital.

Paul Starkey

Paul Starkey

Paul Starkey is a 23 year CI industry veteran who led control manufacturer ELAN from infancy to a 150 person company. He is a visionary, keen on innovation, pioneer of on-line training, and numerous product innovations. He is co-founder of Vital Management.

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