Tony Italiano
NASHUA, N.H. - Tony Italiano said there are many reasons why contractors miss their labor estimates when costing a job. As a result, this can cause contractors to lose money.

According to research recently completed by the Building Services Institute (BSI), contractors miss labor estimates because of equipment failure and human error; poor estimates; poor project mobilization and staging; poor coordination of resources; failure to communicate to the installation team the job's scope and tasking schedule; and poor field labor management practices.

"For one thing, you need to set everything up on the job for the installers," said Italiano. "You don't want your techs coming into the office. Productive time is lost."

Italiano added that labor cost overruns should be figured into the contract and any savings on these overruns should be shared with field personnel or given back to the customer. He said that this procedure adds to motivating employees to move the jobs along faster.

"We remove obstacles to the employee's success by implementing proper business delivery processes," said Italiano. "I even handed out cash as awards for such things as ‘best dressed employee.' These were great motivators."

He highlighted a field incentive plan, noting that it typically involves a 60/40 split, with 60 percent going to the team.

According to Italiano, average positive labor variance gains can run from 2 percent to 15 percent of the labor, which provides huge motivation to be more productive to achieve profits.

Italiano suggested that payouts from this plan be on a weekly, and not quarterly, basis. "The sooner you pay out money, the better," he said. "Cash is king."

He also added that non-field labor should have an incentive plan, too.

"These people are a true cost," Italiano said. "We have to pay them a little differently. Incentives should be based on a rating system."

Having a good rating system goes back to having an organization with job descriptions, according to Italiano.

"If you have a job description, you can formulate a rating system for merit increases," he said.

Publication date: 05/31/2004