ONLINE EXTRA: What Do Your Managers Wish You Understood?

Editor's note: The following Online Extra titled "What Do Your Managers Wish You Understood?" is an addendum to the August Cover Story Roadmap to Profitability: 10 Tips for Enhancing Your Company's Bottom Line by Lisa Lupo.

You, as an employee, are your company’s greatest expense; but you also have the greatest potential for increasing its profitability.

According to a PCT e-mail survey of pest management business owners and executives, 65 percent of respondents cited salary and wages or employee benefits as the cost of doing business which most impacts a pest management company’s profitability. You are, however, also its greatest asset, in that 48 percent see employee productivity as the single greatest factor which can improve their company’s overall profitability.

To encourage this, 77 percent of all responding companies reward profitability, with 57 percent of these providing incentives through individual compensation, and the others motivating employees through profit sharing, year-end bonuses and annual or monthly rewards.

The greatest difficulty, however, is that most business owners and executives do not feel that their employees truly understand the costs of doing business or the importance of making a profit. As most succinctly stated by Tim Selbach, owner of Pride Pest Control, Las Vegas, Nev. “It takes money to run a business, and the employees need to know without their dedication and motivation, you have a dying business and unhappy employees.”

Two-thirds of respondents included comments as to what they wish employees understood about company finances, all of which can be grouped into: costs of doing business, productivity, value and the benefits of profit.

• Costs of doing business — This phrase was repeated more often than any other in answer to what respondents wish employees understood. Owners acknowledge that it is difficult for someone to have a full understanding without “actually writing the checks to pay the bills,” but they would like employees to have a basic understanding of these costs and their own part in keeping them in line. “I would love for employees to understand the true price of doing business, instead of figuring out what chemicals cost and thinking all owners are millionaires,” said one respondent. “This is disturbing and creates animosity if employees aren’t aware of the real costs of doing business.”

• Productivity — Employees do not always understand that “they are the ones who really make something profitable or not.” It is the amount of day-to-day production which really determines the success of the business, owners and executives stated. “Every hour is productive or not; each dollar of revenue is made one service at a time.” Because many of a company’s costs are fixed, each minute of productivity gained or lost has great impact on the bottom line. In essence, one respondent stated, “they are the heart blood of the company, and the things they do, don’t do and say affect customer service, therefore company profitability.”

• Value — In the pest management, as in most service industries, it costs significantly more to bring on a new customer than to retain an established one; in addition, “it only takes one unhappy customer to spread the word about their experiences.” Thus providing value to customers and ensuring their satisfaction can be critical to a company’s financial future. “Every customer that is kept increases the value (and profitability) of the business which has a direct impact on their (the employee) earnings potential,” said one respondent, a statement that not only focuses on value but leads to the final point…

• Benefits of profit — Profit is good, many of the respondents felt a need to stress. “There is a direct correlation between pricing for profit, the level of service that we can afford to provide at a given profit margin and each employee’s paycheck/benefit package,” one respondent said. In many cases, they believe, employees do not understand that it is good for everyone in the company when the business makes a profit, stating that profitability equally affects all company personnel. “We deserve to make a profit,” respondents wish employees understood. “It is the most important reason that we are in business.”

Other survey responses indicate that:
• In 62 percent of the companies, pricing is determined by the sales or service person, based on his/her judgment, inspection or given set of criteria.

• 93.4 percent believe that an essential element in making a profit is marketing, with 65 percent considering it to be very important for profitability.

• Less than five percent feel that cost cutting or price increases have great impact on a company’s profitability.