Cleaning Technicians Don't Grow Well When Kept In The Dark
Residential cleaning can be a low profit and highly competitive industry. Cleaning business owners must juggle the cost factors that drive profit margins. Pricing must be competitive, yet margins must be profitable in order to pay expenses and retain earnings for future growth.
Why your cleaning technicians cannot grow if you keep them in the dark
We've all had employees that get a peek at a check left by the client for their cleaning services. They take one look at the check, do the math on what they made on the house, and think we're pocketing the rest! Little do they know just how much actually goes in our pocket.
As the business owner, you may be the only one that has complete access to the company's financial information. What if you shared some of your company's financial information with your employees so they can see just where the money is going? This sharing of financial information is called Open Book Management (OBM).
OBM is not about completely opening your company finances to your employees. That's none of their business. Rather, it's a transparency of sorts – a window into the financial picture of the company. One example would be to show employees how their job productivity and decisions while on the clock impacts the success of the company.
Let's say they didn't bother to do the checklist to make sure everything was completed before leaving a home. The client calls later that day to complain that they missed several items that should have been cleaned and they want a discount on the cleaning for that day. So you, wanting to make the customer happy, send the team back to take care of the items they missed, and also give a discount to the customer for that cleaning. Suddenly, that cleaning went into the red instead of being profitable.
Illustrating the additional costs incurred because of their not checking to make sure everything was complete, just cost the company money. The added costs include the additional payroll to send them back to the home, the additional gas to get them there, and the loss on the discount the client received. You can now illustrate it on paper, showing that cleaning just cost the company money instead of making the company money.
Why should they care when they still get paid for all their time? You might remind them that if they want to get pay increases, the company must be profitable. By making this mistake, it not only cost the company money, it was an incident that could potentially cause the customer to fire your service. And when you lose a customer or lose money on a service in this way, it cuts directly into profits. And without profits, there are no pay increases.
The idea of OBM is to get the employees to understand what makes the company tick, so that better economic decisions will be made while on the job. Your front line employees become front line managers, ensuring profitability, thus improving their own income.
Every Monday morning our team, which included the owner, bookkeeper, team leaders, and cleaning technicians, would gather in the conference room to discuss upcoming work schedules, projects, vacations, and discuss any concerns. The conversations were never one sided, always an open book policy. Meaning, everyone had an opportunity to voice their opinion or provide feedback regardless of the topic being discussed or where they stood in the so called hierarchy of the business ladder. Company information was shared freely and often, including certain financial information. We stressed the importance of why a job has to be completed in time and how cost overruns affect profits.
Although this management style may seem unconventional to some, our open book policy allowed our company to stay within its projected budgets.
Implementing the Open Book Management Style
What and How Much Should You Share:
The decision is entirely up to you. There is no right or wrong answer. Share as much or as little as you feel comfortable with. If management is willing to be a little more transparent with sharing company information, good and bad, employees will likely be more understanding of the company and its mission,
Perhaps a good starting point for your OBM would be explaining to your employees that the cleaning industry is a low margin-low profit business. Most employees won't instinctively figure this out on their own, it is up to you. Employees will generally view the company as an entity making the “big bucks” while the front line workers only receive a small piece of the enormous profit pie. As a business owner, help your employees understand how much it really costs to operate a business and how much profit actually remains after paying all of the bills.
We're not suggesting opening up the company balance sheet and divulging the internal operating figures, but allow employees to see the percentages of where the money goes. This will not only display the low margin business that you struggle with, but allows them to be involved in the success of profits and the disappointment of losses.
Educating Your Employees:
Here is a simple way to demonstrate the high costs associated with running a business. Start by giving an employee 100 pennies. This will represent $1 dollar in sales. Then ask the employee to pay 7 pennies for supplies and equipment, 55 pennies for payroll and payroll taxes, 4 pennies for rent and utilities, 7 pennies for insurance, 6 pennies for administrative costs, hiring and training, 3 pennies for office supplies and uniform costs, 5 pennies for benefits, 5 pennies for marketing (of course you will want to use the numbers that are true for your business).
After all the expenses are paid, the remaining 8 pennies represent the amount of profit the business has earned. Believe me; this will be a lot less than most employees assumed. And some of them will assume you simply pocket those remaining 8 pennies. But you know that in order to keep the business running, you must keep most of that profit working in the business (meaning you're not simply adding to your own pockets by withdrawing all profit).
With this simple demonstration, you have provided your employees with the basic understanding that you are not pocketing the bulk of the money coming into the business, and that they play a very important role in controlling costs and profitability. They will learn that giving 100 percent effort will help ensure the company makes a profit today and will be around tomorrow. Everyone's paycheck depends on it.
Objectives and Aspirations:
The goal of OBM is to improve employee performance and reduce costs by using knowledge as the tool. Creating a culture of company responsibility, commitment, and cultivating the employer-employee relationship. Let them know that even a nickel profit is still a profit and those profits do add up. It will provide the company with future growth potential and the result will be passed on to employees with more opportunities for promotion and benefits for individuals who earn it through hard work and dedication.
Employees want to feel they are contributing. By educating them about the internal workings of making a profit, they are more likely to be engaged, productive, and feel like they are part of the company's successes.
Everyone in the company is important, from the president to the person who takes out the trash. Without one, the other cannot thrive and survive. It's imperative that everyone is aware of the importance of their responsibilities. Employees should have a clear understanding of how the lack of performance from just one person can dramatically impact the company, financially.
Understand the Internal Workings of the Company:
It's also a good practice to explain how the company is always undergoing change and how the cleaning industry can be a trying business to compete in. Share quantitative information face to face with your employees; at a scheduled meeting or over a pizza lunch.
Cover the company's goals, new strategies, and brainstorm ideas. By sharing this information, you exhibit your willingness to be open and honest, demonstrating that their ideas, suggestions, as well as complaints, are always welcomed. Most employees want to have input into their jobs, their duties, and the projects at hand. They will be eager to be part of the company's goals and strategies.
Conclusion:
Everyone's idea about OBM is different, and it should be. If you think OBM is something you want to incorporate into your business, design it so that you are comfortable with what is shared and so that it fits your particular needs and desired outcomes.
Information is the power that runs your company and your employees; and you need to be connected to both. Employees want a boss who they feel is “in the know”. Someone they trust to share important information with them, which brings management and employees on the same page, sharing the same goals.
It will instill a closer commitment by everyone to the mission of the business. Your employees will be more eager to engage in the goals of the company, often offering meaningful and noteworthy suggestions for improvement and problem solving solutions. Don't keep your employees in the dark, because things don't grow well there.
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