Issue link: https://read.dmtmag.com/i/1132012
30 • JULY 2019 • WORLD FENCE NEWS Keeping up with the costs of direct labor in the fence industry BY TOM LUBY, PRESIDENT, PROFIT BUILDERS INTERNATIONAL With unemployment running only 2% to 3% in some areas of the coun- try, quality workers are at an obvious premium. Finding good, qualified employees is one of, if not the big- gest challenge, for fencing companies across the country. I am constantly hearing com- plaints in the field about how difficult it is to find good qualified help. I am sure you find it that same way where you live and work. Many of my best clients are feel- ing increasingly greater upward wage pressures and have to increase wages to keep their best people. The "canni- balization" of contractors' best work- ers has become an issue in the indus- try. Supply and demand, and the need for good workers is great. But the danger for the owners is too much upward wage price pressure that can lead to dramatically falling profits, and worse. A balance must be reached for the company to succeed and continue to pay higher and high- er wages, and that balance must be a combination of increased bid prices and/or increased productivity for the increased wage costs. Pass through, or passing on the higher cost of wages, is a lot easier for commercial fence work than for resi- dential work; pushback of higher pric- es is more hard felt with homeowners than general contractors, in my expe- rience. Many of your more demanding residential fence customers still shop three, four and more fence companies while shopping for price and they do not want to hear the fact that wage pressure is forcing up installed fence prices, and it is hard to convince them otherwise. Commercial and industrial ac- counts, on the other hand, have a somewhat easier time. In fact, most expect to see higher labor numbers on their competitive bids. All this makes things more difficult for the residen- tial fence contractor in today's market. Similarly, another dominant issue in our current business culture is how to train, motivate and otherwise stim- ulate current employees to reach their maximum productivity. In order for your fence company to maintain your competitive advantage in the market- place, you need the best help you can possibly find. And then, how do you maintain that quality of workmanship your customers demand? And that's not enough – how do you pay for all that? With production and installation labor costs increasing across the coun- try, companies need to be creative to keep the profit margins at a reasonable level for the com- pany to survive. There are several ways to do this. How about increased performance without in- creased expense? Improved produc- tivity by improving employee per- formance? Gee, what a novel idea! Shortly I will address ways to help increase performance through the es- tablishment and enforcement of labor and production standards. Another idea to help curb the ever rising direct labor costs is through greater mechanization in your fence company. The other day I spoke to a very good client who advised me he add- ed another $2 million of work to this year's work log, pushing him over $9 million in confirmed bids and we are barely half way through the year. How can he handle all the work? His direct labor costs are soaring and he is hard pressed to find more talent- ed people. To add to productivity, he is add- ing close to $500,000 of new equip- ment to his already impressive list of apparatus. The more mechanized his fence company is, the more produc- tive they can be, and that also attracts better employees. No one wants to hand dig when they can use a power auger and do twice the work with half the effort. Another advantage of mechani- zation is that machines seldom have hangovers, call in sick or complain about health care benefits. They rare- ly cause injuries if used properly, and instead reduce injuries, improve work speed and accuracy and never take breaks. Not to mention working smart and with the right tools can and does also cut workers' comp rates. Many of my clients are under 1. (As you know, fencing equipment goes far beyond power augers. Look through the pages of this issue for several advertisers who offer a vast array of time-saving and labor-saving equipment.) Equally important is having mea- surable labor standards in your fence company. Having the best tools and Many of my best clients are feeling increasingly greater upward wage pressures and have to increase wages to keep their best people.