How important is having the right crew size to running a successful operation?
It’s one of the core elements. We are in the business of selling time. Our number one line item on our profit and loss statements is labor. Labor, it’s either efficient or inefficient. One of the big factors in determining if it’s efficient or inefficient is the size of the crew. There are a number of different factors that go into a crew, but the crew size directly affects how productive we are. It affects how efficient we are and if we’re achieving our target man hour rate.
There are two huge factors in the profitability of the business. First, what is our hourly man hour rate that we’re producing by service type, by crew, and by property? The other is how much non-billable, non-productive time are we incurring? The more people you put onto an inefficient crew, generating a high level of non-billable time, the more money you cost yourself. Lets say I have a two man crew that works eight hours a day and they incur three hours of non-billable time a day. If I give them a third man without increasing efficiency and they are still incurring three non-billable hours a day, I’ve added another three non-billable hours to my payroll and that costs me profit.
To summarize, crew size determines efficiency. There is a number of other factors within the organization of the crew that also determines efficiency, for example, the individual running the crew and the productivity of the workers on the crew. But, crew size is going to determine if you’re hitting your hourly target man hour rate that produces the desired profit margin. Then, that crew’s efficiency and productivity is going to determine if you’re going to minimize or maximize the non-billable time incurred. All non-billable time is a drain on profit. If you add too many people to the crew and you’re inefficient both when you’re billing time and when you’re not billing time, you will drain your profit margins. Crew size is at the heart of running a successful profitable operation.
