thoughts on employee production

[Just Another Sign Guy]

In the last few weeks I have had the topic of employee production arise. Specifically, what dollar amount should an employee be able to generate per day or per hour or what multiple of their pay should you be able to bill out.

Based on my experiences in the typical non dimensional, non illuminated/electrical shop a skilled employee should be able to produce 4X their hourly rate so if you are paying them $15 you should be able to bill out $60 per hour, I have known many skilled production employees who could turn out $1000 of work per day but in my experience most shops can not line up that much work for an employee per day in a way that it can be produced.

I've had installers/service guys that I have been able to bill out at $125 per hour and some that are so disorganized and unfocused that I would be embarassed for a client to see the rate of $65 per hour on their invoice....obviously those guys didn't stick around long.

Of course there are many variables and different situations, but as I said this topic has come up a few times in the last week with shops that I communicate with and I think there may be some value in sharing insight.

Often I find that people have no idea what their employees are capable of producing or what they are really costing them in relation to how much work they are or are not producing.

what are some of your experiences with this topic?

 

[animenick65]

Right now, its about bringing in enough work. A problem we have in our shop is spending the right amount of time on the right jobs. Certain jobs require more design time and a little more effort taking notes to ensure consistency in future orders. Other jobs can be worth quite a bit to the shop dollar wise, but are repeat orders or have high margins and don't require a heavy time investment. Sometimes its frustrating being rushed through a job that requires that extra detail or design time, by management. Not sure if that was a tangent or not!

$65 from my experience is certainly attainable for the right team, something I see in the shop I work at when it gets busy. Again, managing the workflow so that we are busy at the right pace is another story. In this economy, thats a job in and of itself.

 

[Dice]

Are you talking about a Sales / Design or Production Employee?

id move this discussion over to the premium section.

 

[onesource]

have your men keep time sheets on jobs for a while and see whats happening

 

[threeputt]

Dan, at our shop labor costs are 20% of final sales price. Been this way for a long time. Materials are a nick over 21%. These are yearly averages. Can vary day to day or job to job. (truck lettering is low on materials, for example)

That means if we're paying twenty bucks (that's about the number) then my guy is turning out one hundred bucks per hour in completed work. He does that and more when we're hitting on all cylinders. ie: when management is providing plenty of work, the right kind of work, all materials and information are at hand, etc.

We try for $7500. per week gross sales average. And he and I and our front office person (wife) can do that when the economy is ticking along nicely.

But right now things are slow, sometimes he goes and looks at projects, does counter sales, jumps in the shop truck for errands, etc. Depends on who's free and who's tied up.

I imagine our shop is very much like most other shops. We don't have high revenue producing items such as ad specialties flowing through. We don't sell time/temp digital displays, etc. That adds nicely to gross sales, but it's not us.

 

[Just Another Sign Guy]

i dont see any reason this needs to be in the premium section but if that makes everyone feel better than i am ok with that but i don't see what would benefit the general public in this discussion.

i understand things are slow and that selling the work is a problem everyone is faced with and i mentioned that most shops can not line up enough work to utilize production employees to their full potential but that isn;t what i am after.

what i am encountering is many shops who don't realize that if they are paying their production employees $30K a year to turn out $40K worth of work they are losing money.

myself my rule has always been that a production needs to produce a minimum of 4X their hourly rate for me to be justified in employing them.

designers are a different animal just as csr, phone, secretarial and i think including them in this discussion is only going to add confusion. i have hired many people because they make my job easier allowing me to do what i need to do without interuptions,etc and i use a different method for justifying their expense. but the 4X's rule has been my standard for production employees what are yours?

 

[threeputt]

what i am encountering is many shops who don't realize that if they are paying their production employees $30K a year to turn out $40K worth of work they are losing money.

What you are encountering is no different than what is going on idustry-wide. I suspect that many small shops have no clue.

We're paying full medical benefits, vacations, holidays, etc. He gets a cell phone paid, too. Our company is also funding an retirement IRA for him matching up to 3% of his salary.

Dan, this topic is near and dear to me but just gets my blood boiling because of all the crazy shops out there doing their "thing".

 

[Just Another Sign Guy]

it is near and dear to me as well threeputt (and we really need to work on that and make it twoputt) as i encounter so many signshops that have no idea where they are making money and where they are losing money.

it is refreshing when i encounter a small shop that is trying to do it the 'right' way meaning trying to do everything above board rather than utilizing 'subcontractors' when they simply are not...that is an old trick that the irs is wise to and if caught the penalities can be severe.

for many companies that have one or two employees i often recommend looking into employee leasing, you get to hire and fire your employees not like a temporary agency where they send you what they have. they often offer a benefit package, they do the payroll and you pay them a set dollar amount per hour for that employee of course that amount is higher than what you have agreed to pay that employee per hour to cover their costs but it is often more cost effective than providing benefits, doing payroll, and all that goes along with having employees when you get down to it...i had an arrangement with an employee leasing company at 8% above their hourly wage, it was a bargain to say the least.

 

[Rick]

I agree that designers are different because they are generally supplying the artwork needed to keep everyone busy. A designer dedicated to design and computer production should be able to keep 5-10 people busy. A designer with a computer production designer can keep 20-30 people busy at an efficient running shop.

When I got into the computer sign stuff, I worked at an established 2 man shop where we did vehicle graphics. Very slow production speed, lucky to be hitting 100-120k, but at the time I did not know any better. When I worked my way up to a high production vehicle graphic shop where they had an efficient system, they were doing a million+ in cut/screened vinyl, print and installation with a staff of 7. I was amazed at the speed, but after a few weeks I realized that's how fast it was supposed to go.

There are trained sign people that can do the production of 3-4 small shop sign workers because they were trained to work at a higher speed as a natural way of doing it. A trained employee should easily do 4x the amount of their pay if the work is there, they are working with good equipment, and there is a system in place.

 

[Dice]

Ya I would agree with Rick. Our production guys work as a team so it would difficult to separate out ROI. On a Slow day the ROI on the Team close to 4x on a busy day it's about 12x

 

[Rodi]

It all boils down to having knowledge of what each part of a job needs to get done, not just what an estimator thinks. It is really the sore spot of billing because so many snares are involved with each job. You think something will take x amount of time, but then people have to chase this rabbit or that rabbit, it is all a guess at best! Part of the problem is getting work from all different types of clients, with different ranges of wants, quality and time, and who is willing to pay.

 

[Just Another Sign Guy]

Dice I agree with you in regards to a good production person or team can crank out much more than 4X's their pay but that is the minimum that i have had to produce to justify their employment...there are many shops that want more employees to lessen their burden or whatever but they have no idea of the realities of this growth.

and the reality is that if you don't know your costs you don't know where you are losing money...i often find myself telling shops that i work with of another shop that i have been working with, a new generation has stepped in to run the show and they couldnt figure out why they were losing money and doing literally over $2m in sales per year...gross sales in and of themselves don't mean a thing to me. when we got down to the nitty gritty we found out that on average their crew was simply not cutting the mustard and that on average each employee was producing less than their annual salary..this is a good way to go broke and in a hurry.

they were afraid to bring in a qualified production manager because they 'couldn't afford it' in reality they couldn't afford not to. we outlined expectations and started interviewing for someone who could run the production end and was prepared for a serious restructuring. it was unfortunate to see people lose their jobs but there is a serious percentage of people within our society that think that showing up entitles them to a paycheck, who do not understand that if you want to keep your job you need to generate a profit...there are money makers and money takers and if you are the later of the two watch out because you won't have a job for long.

 

[Stealth Ryder]

A wise man once told me that an employee should me making the employer 3 times his/her salary... That wise old man went from flat broke having to get loans to make payroll to a multi-millionare in 20 years...

 

[luggnut]

these are the kinds of discussions i think we need more of...

so many don't look at the whole pic of doing biz and how (or if ) you are making any money. i know i'm still struggling with the business aspects daily. who cares what your new truck wrap looks like if you aren't making money and will be closed in a year or 2.

i think you can get by with basic design and layout skills but you must have the business down too. there are a lot of struggling extremely talented artist and a lot of successful talented business men with mid level design skills.

i have always been the artsy guy.. trying to learn to be a businessman. i still wonder would i be better off working for someone else (with the business skills)

on the topic ... if you are a one man show, what do you do when you need the extra set of hands for say a sign on post install. most of the time i can do all things that my place needs but... i need some more hands every now and then though.

 

[Just Another Sign Guy]

glad you found this topic luggnut.

some of the best partnerships i have seen have been someone who can handle the business end of things and someone who knows the sign end of things...but just a warning make sure you really identify your roles, responsibillities, expectations, etc i've seen many more partnerships fail than succeed.

i have known some absolutely amazing artists in this trade, artists that could hold their own in the professional art world but their hearts are in the sign trade...i only know a couple of these guys that have done much more than just get by, no retirement funds saved, they just squeaked by. there is nothing wrong with that money is not my primary motivator but these guys really had it (or still have it) they just were not able to charge what they were worth. we are a strange breed and if i have learned anything it is that many of us share very similar traits.

many years ago signsnow offered a deal where existing signshops could become signsnow franchisees for a very small out of pocket expense (there might have been a time where it was just a commitment to a part of your future earnings) anyways...a few sign guys i know went this route and we all hemmed and hawed but in reality what happened is that these guys that really had skills in the trade but had no idea how to price their work now had systems in place to guarantee that the projects that they took on were in fact profitable. their frustrations were that they weren't doing gold leaf work anymore or flexing their artistic muscles so one of them now that the shop was under control was able to paint in the evenings and went on to do gallery shows and sells paintings now for well over $10k (i have a painting from him that was a wedding gift that is one of my most prized posessions).

i think that many of us with artistic talent have a very hard time charging for that talent. no one came into this world with business acumen, rather we develop those skills through time and study anyone can overcome their weaknesses once they are able to identify what they are.

 

[Dice]

Ya having all of the talent in the world doesn't mean you can make it in business. You Have to know your costs and how to sell, and how to say no politely.

Dan It's difficult to look at a specific Employee and say you need to get X out of them. It's better to look at your processes. Watch how they work. Would it be better to build another work table to make them more efficient? Are they spending 15 minutes on each job waiting for the job to rip? Can you upgrade your Rip Machine for $500 and say him 5 minutes on each job. 10 jobs a day thats 50 minutes x $X savings.

I had one production design guy, had to teach him everything. He did pretty well at first but after a while I realized he was running at about half of the speed i was. When i started paying attention to what he was doing.

I noticed things like he would nest up a print run, sit and wait for it to rip, then watch it print. During this time he was doing very little. If it was me i would have been preparing the next print run as soon as i started ripping the first and would only vaguely keep my eye on the print. If something screws up on the print it's better to reprint it than waste so much time watching each print. I tried hard to correct his inefficiencies, Gave him 2 top of the line computers 1 for just rip. Daily I would have to reeducate him. After about a month of seeing I couldn't improve this guy, I finally gave up. Went looking for a replacement. 3 days later I had a new production manager. This guy runs circles around me and the kicker is he costs less than the first guy.