Business Building Ideas
January 2007, Volume 2, Issue 1

Dear Friend:

Welcome to 2007! It is hard to believe that another year has passed. I hope that it was prosperous and joyful for you and your family and that you are looking forward to great things in this upcoming year.

Here at HomeTech, I believe we are starting off 2007 with some great news: The 2007 Remodeling Industry Compensation Salary results are in! Thanks to all of you who responded to our request to complete the survey this past October – we could not have produced this great research without you. As promised, in this month’s newsletter we’ll share with you some of the findings from this exciting research. We’ll also discuss why and how you can best use data like this when making hiring decisions and determining the compensation strategy for your own employees.

Happy New Year!

- Walt Stoeppelwerth, HomeTech Information Systems, Inc.

P.S. We’ve provided some results from the 2007 Compensation Survey below. You won’t want to miss the full report, though, which covers 18 positions in great detail. As a big thank you to the many newsletter subscribers who completed the survey, we’re offering the complete survey for $19.95 (that’s over 30% off!) for one week only. Don’t delay, because after next week, the list price goes back up to $29.95. For more information, click here.

In This Issue

Feature Article

How to Best Compensate Your Employees:
Lessons from the 2007 HomeTech Remodeling Industry Compensation Survey

by Mitch Lapides, Executive Editor, HomeTech Business Building Ideas

In preparing this article, I came across a great quote:

“{T}he right compensation system is pivotal in determining how effective you are at leading your company, how productive your staff is, and ultimately whether your company succeeds or fails.”
- from The Right Way to Pay, Inc.com.

Re-read this quote because it’s that important! Many business leaders simply want to know what their competitors are paying their employees, but real business leaders take all aspects of compensation in to account. Through this article, I hope to get you thinking not only about what you pay your people, but what you provide as a total compensation package to keep your employees excited about working for you and your clients.

What do you do for your employees besides pay them?
One of your greatest company assets is your people. Treat them well, and their loyalty and devotion to you and their work will provide financial return to you many times over. Treat them poorly and you may find yourself without a qualified staff to do the work you’ve promised your clients.

Whether I was growing a $20+ million dollar division or building a small company, the lesson was the same: your company’s performance is driven by your people. If you make a mistake in your marketing strategy or the way you’re delivering for a client - it’s your people who bring you out the other end with flying colors. If your employees truly feel “taken care of” by you, they will be motivated to do the best job, at all possible times, for you. In developing a compensation strategy, it is important to look at:

  • Salary – What are you paying your employees?
  • Benefits – What are you offering in addition to pay (paid vacation or sick time or medical insurance for example)?
  • Bonuses – Is there an incentive based program for work well done?

How a compensation survey can help you plan your compensation strategy
Probably the one aspect of a total compensation strategy that is the most important to an employee is how much they are paid. In determining pay rates and pay scales for positions within your organization, there are many factors to consider. Often times a compensation survey will include salary information. Questions you may ask yourself when reviewing salary survey data and thinking about your own pay rates include:

  • Am I paying or hiring employees at competitive rates? (Think about what happens if you don’t?)
  • Do you know what are reasonable increases for promotions or salary increases? (Pay too much, and you could be strapped with an unbearable salary burden. Pay too little, and people may leave. How many people have left your company who you didn’t want to leave?)

Use a salary survey wisely.
A salary survey is the result of asking many employers what they are paying their people. Salary data is collected for each position and then often segmented by geography, size of company, level of experience of the individual, etc. To review results from any salary survey, you’ll want to understand several important terms:

  • Salary Range: The range gives you an idea, from the lowest to the highest level, what people are being paid for a job. Typically, you may want to ignore the very highest and the very lowest salaries provided in a broad range. Those who respond may not all have the same understanding of what the job responsibilities are. Or, one company may be in an especially competitive geographic region where they just can’t find many qualified people. The size of the company may also affect what someone pays.
  • Lower, Middle, and Upper Third: A salary range is often divided into 3 sections. The lowest third is where the least experienced employee’s salaries may fall. The middle third is where most of your employees should be. The upper third should be reserved for those who are highly skilled, extremely valued by your organization, and provide a solid return for you because of their skills. Be careful of overpaying, though. You still need to be aware of where competition is. Just because someone has been with you for years doesn’t mean they should be in the upper third. You need to make that call.
  • Midpoint: This is the average salary in the range. It doesn’t indicate what you should pay, but it is a gauge for what the market, overall, is paying, on average. If you’re paying well above or well below it, you should be doing so for very good reason.
  • Sample Size: No single survey should ever be your only factor when considering compensation. The sample size and its distribution across geography, company size, company type, union/nonunion, etc. affects how valid it is for you. For example, our HomeTech survey received 523 responses, which we organized by geography and size of company. We report the number of responses for each category so you can easily gauge how valid the number is for your situation.

What else can I expect from a compensation survey?
As mentioned earlier, a true compensation strategy should also include components of benefits and bonuses. If done well, a compensation survey will not only include salary information, but will include information on benefits and bonuses as well.

When determining your own compensation strategy, it would be important to ask:

  • What benefits are your competitors paying and how do you stack up? (It’s not always the direct pay that keeps people. A bonus, health or other benefits can be what keep your best employees with you for the long haul.)
  • Are your competitors offering bonuses – individual or corporate incentive based, referral or other?
  • How is overtime calculated and paid?

Understanding that compensation is more than just “salary” is the first step in developing a compensation strategy for your own organization. Reviewing and using data found in compensation surveys can help you determine what it is you want to offer your own employees as a total compensation package.

In our 2007 HomeTech Remodeling Industry Compensation Survey, we surveyed compensation and benefits for 18 different positions within remodeling firms. See our Survey page on the Web for a list of all positions surveyed.

Select results from the 2007 HomeTech Remodeling Industry Compensation Survey and what they mean to you
As promised, we wanted to provide some of the results here for you to get an idea of what we learned by analyzing the survey data:

  • The positions with the highest salary were HVAC installers, electricians, and plumbers. We believe that many employers reported rates for what they pay to subcontractors, which would be a bit higher than if they were your employees. Nevertheless, the results are good to understand, especially when considering what you’re paying your subs.
  • Not surprising, journeyman carpenters commanded, on average, 20% more than carpenters. This is a great number to share with your carpenters because it’s clear that experience delivers more pay.
  • The West appeared to command, more often than not, the highest average wage of any other region. If you’re trying to get away with paying less than average in an expensive region, beware of turnover.
  • Interestingly, sometimes larger firms paid less, on average, for a position, while for other positions, they tended to pay more.

Production Managers/Superintendents were paid, on average, $28.25 per hour (i.e., the midpoint). Hourly pay reported ranged from $14.50 per hour to $75 per hour. When you look at the distribution chart in the survey, you can see that most of the salaries reported, though, were between $20 and $35 per hour. As far as benefits go, only 11% are paid overtime, 10% get bonuses, while 13% get paid vacation, sick, or holiday time. Think about what your company can do to differentiate yourself from the 90% who don’t pay any of these additional benefits.

We break out all of this data in our full report by region and by size of company. There are a lot of ways to structure compensation, and knowing some of these numbers can really help you consider what might be right for you and what can help you get the best competitive team you can get.

Additional Resources
There are so many great books and articles on the subject, but I’ve listed a few for additional articles from Inc. Magazine below:

  • Compensation – published by Inc. Magazine, a great roundup of articles relating to the many issues of thinking about compensation
  • Paying for Performance – published by Inc. Magazine, an interesting article on bonuses
  • The Right Way to Pay – also published by Inc., a good overview of how to think about pay

HomeTech ADVANTAGE Tip

Organize Your Estimates Into “Phases” and Save Time on Revisions!

In its simplest form, a “phase” is merely a chapter or subdivision of your estimate. By organizing your estimate in to “phases”, revisions for changes in project scope can be made quickly and easily. For more details on how to setup your estimate in to “phases” for quick revisions and calculations, click here.

Did You Know?

According to the most recent data available, there are about 210,000 general remodeling contractors in the United States. 82,900 (39%) of those firms had payroll employees while 127,200 (61%) were classified as self-employed contractors. Those with payrolls had average revenues of $549,000 per year.

Source: Unpublished tabulations of the 2002 Construction Census Joint Center For Housing Studies, Harvard University

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