Cost Sharing with Subcontractors

For some employers, a principle which is employed/applied is the principle of commitment.

An employer can/could/should budget for and provide 'sacrifices' for committed employees.

eg. good quality tree worker paid $25/hr in seasons of 'feast' yet because of commitment, continues to get paid in seasons of 'famine' because there is commitment on both parties. Because the employer is equally committed to the employee they account for and make the sacrifice of providing a wage during seasons of 'famine'.

I am very appreciative of my committed staff, and will find/make break even (or less) work in the winter to make sure they can pay their bills. Then in our season of 'feast' the storehouses are filled in anticipation of the next 'famine'.

I wont bring in subs because:
- there is no commitment to our team
- to do so shortchanges our committed team
- it is not sustainable for growth of the team

Notwithstanding all principles of commitment; budget and what the market will bare/bear significantly influences/restricts the ability to to provide all that I wish I could provide to these committed team members.

I know my current numbers inside out; I also have draft budgets with alternating variables such as increased salary, benefits, retirement assistance, fleet assets, real estate etc. I could do so much more for my team if it weren't for market influences.

JFK said "We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too."

Entrepreneurs choose the challenge not because its easy, employers choose to lead teams not because it is easy, skilled tree workers choose to climb for short pay not because it is easy - members commit to a team; not because it is easy, but because it's "haaad"! And because they believe that the commitment will organize energies and skills toward a mutual goal of success.

........ so who are subs committed to?

(Caveat - this missive is only one small perspective on the topic, and is not intended to define an "absolute", but provide additional views)
 
I used to subcontract a lot. I steadily raised my rates so hardly anyone calls me anymore but now I have my own clients so it doesn't matter. Usually I would come in and blow out a hazardous tree, hit the ground and leave; no raking, no picking up, get in my car and go. It sometimes sucked because I would blow out a 1600 tree in a few hours and get 15o bucks. I started to do the half day full day thing. Working with strange crews and tackling the gnarliest trees is awful work. The worst part of it was that whatever company I was working for would get all the credit for the nice work I did. Usually a bunch of hacks. Good companies are rare. I would get nothing in name recognition, whoever I was subcontracting for would win all the trees on the block which they wouldn't need me for and they would hacked to death. That always bothered me that I was advertising a false product. There are some nice things about subcontracting but for the most part it's rough. Your basically a rent a tool.
 
Mangoes

I appreciate your commitment to your team and the concept of taking care of people during times of feast and famine. I feel like there is a place for both employees and contract climbers in the right markets.

You are right, I have no commitment to my contractors that hire me. Obviously when someone has come through with work for me time and time again I am more likely to shift my schedule around a bit to meet their needs.

The companies that hire me regularly never seem to feel like I am shortchanging their team. I try and make every job a learning experience for everyone and point out things that I am doing or things that they are doing so that the next job they do can be that much safer and more efficient. My goal is not to keep them calling me but to get their crew good enough so that I get called less and less. The company that uses me and other contract climbers the most has done just that. They have used me extensively and because of it their crew has gotten so much better that I get called less and less. When I am there, they are seeing tools and techniques that they would otherwise maybe see in a Sherrill catalog or at a Vermeer seminar and never on the job and actually getting to see it used effectively and efficiently. During the time I have been climbing for this company, every year their gross has grown exponentially and they went from having a 6" chipper that a part time employee towed behind an Audi wagon and a pickup towing a small trailer that had to be unloaded by hand to running three crews with trucks and chippers. Contract climbers have been a huge part of the growth and training of this company. One of the huge benefits to companies like this is that they get to have huge production when they need it and none of the overhead of having a good climber on the books all the time. Some people would say I should have let this company sink or stagnate and slowly grow like everyone else had to. Perhaps I should have.

Where is the place in the industry for someone like me other than contract climbing? I absolutely refuse to work for a company as an employee full time. I have structured my life to make it so I don't have to work full time. It doesn't make financial sense for 10 companies in multiple markets to have me on their books or for me because of my equipment costs. Becoming a sub made it possible for me to write all of those costs off and simplified accounting for all of the people I was working for as an employee. Working as a sub is way more fun for me. I show up in my vehicle which if I was an employee and drove my vehicle to work I would have to get paid mileage and be covered by the company while I was on the clock. What it really comes down to is that it works for me and it seems to work for my clientele. If it didn't my phone would never ring. As it is currently I am booked every day I want to work.
 
treebing said:
I used to subcontract a lot. I steadily raised my rates so hardly anyone calls me anymore but now I have my own clients so it doesn't matter. Usually I would come in and blow out a hazardous tree, hit the ground and leave; no raking, no picking up, get in my car and go. It sometimes sucked because I would blow out a 1600 tree in a few hours and get 15o bucks. I started to do the half day full day thing. Working with strange crews and tackling the gnarliest trees is awful work. The worst part of it was that whatever company I was working for would get all the credit for the nice work I did. Usually a bunch of hacks. Good companies are rare. I would get nothing in name recognition, whoever I was subcontracting for would win all the trees on the block which they wouldn't need me for and they would hacked to death. That always bothered me that I was advertising a false product. There are some nice things about subcontracting but for the most part it's rough. Your basically a rent a tool.
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The false advertising bit has really bothered me a lot in the past. These days I'm really careful about who I contract climb for because of that. Lucky for me the Portland market has quite a few good tree care companies that still need me from time to time and I don't have to worry about them hacking everything up after everyone else sees my good work. I also have no qualms about walking off a job if I show up and the personnel that are there aren't up to the job at hand.

I used to not do a minimum charge and got bit in the butt a bunch because of that one. These days I just have a 5 hour minimum charge which usually works out just fine for everyone.
 
Ryan has hit many points that I agree with. Whether I was operating as a contract climber or tree co, my profit was my concern. When I priced a job it was with my costs in mind. My price reflected that and not my client's wish. Do I treat them fair sure, but I'm there to make what the market will bear for my skill set. It's up to the client to decide whether or not I'm worth it. It's not about sharing the cost of production but you the client deciding what level you're willing to pay. There may be jobs where a Ryan, isn't needed (like hiring a 100 ton crane to do what a 23 ton will do) but, that's up to you, the client, to decide based on the profit margin you've estimated.

As for the fair distribution, when has that been a consideration? Did any business start with fair distribution? Did they think jeez, I know the market for a laborer is $x/hr but I'm going to be fair and pay them $x+/hr? Contract climbers will have more competition as climbers make the shift from employee to sub. That will lead to the inevitable competition, much like the treeco biz did as well.
 
Hey Kevin (Mangoes), your's is the ideal attitude toward employees. Too often we see employees laid off without a qualm when things slow down. Too many have the attitude that employees are replaceable and there's no individual vale assigned to them.

But this brings up a good point, contract climbers will be the last person called during a "famine". So for those times they just suck it up and then need to chase work, drop prices, or do nothing while they still have overhead. None of their clients are thinking they should throw the sub a bone to keep them going. That is part of their cost structure.

Ward, this is another element that you get with a contract climber, the ability to train your staff, increasing your productivity long after they're off the job. There's value in that.
 
I think if u are a contract climber and are always busy, then obviously people are finding value in your work. I'm personally not a huge believer in the whole team/loyalty thing. I see the relationship between myself and my employer as a mutually beneficial arrangement. When you reach a certain skill and production level in this business in many cases u are much more helpful to your employer than they r to you.(not in all cases) if I constantly preform safe, skillfull, productive work then I'm not going to be super gratefull to be paid well and work year around. Just like I don't expect to be showered with praise and bonuses every day for doing my job. I def think contract climbers provide a very usefull service for many in this industry. Just my opinion.
 
Has anyone calculated the revenue per hour of each type of climber and made the comparison? That would show clearly whether the climbers you contract are giving you value for the dollar.
 
I don't know that it is exactly possible. I mean you can get a rough idea of somebody's productivity, but there are variables such as my own underestimation of work, etc. I can do it for my employees because I can track their man hour productivity vs. different crews over time. There is just not large enough a sample with a sub to get really exact with it.

Mangoes makes an excellent point about commitment. Besides being a topic worthy of another thread ("Commitment and Team Building"), the specific question was whether contract climbers had any loyalty and if that hurt the ethos of the team. There is a lot of positive energy in the Portland scene and I have always felt that everybody works at their best most of the time. The contact of my crew with contract climbers is almost always beneficial to their development, but I wonder if it doesn't make them yearn for independence. I guess I have learned that you can't hold on to people and the best you can do is to ask them to work hard, help them improve, and pay them what is fair. Our industry has a problem with retention of skilled people (there are so many unfilled jobs) partly because it is not reasonable to expect a young person to give their life to one tree service--even if their is built up trust and commitment. Rather than building little guilded cages for them, perhaps we should be setting the captives free.
 
Even a rough calculation will give you a sense of where you're at. It's not a survey of subs but an individual performance assessment that will allow you to see what that particular sub is doing for you.

As for commitment and loyalty. These are valuable elements of the employer/employee relationship that are moving targets depending on the economy. Let me reposition the question of contractor loyalty. When you work for a landscaper/construction contractor or a property mgr you're acting as a sub-contractor. Are you loyal to them? Strange way to put it, isn't it? You're fair with them but, there to make money. What needs to happen is to understand that you in a client relationship with the contractor, not an employer/employee relationship.

Employee retention is not our industry's problem. It's a small business problem in every industry. In a previous lifetime I was a job search facilitator and career development manager dealing with every industry sector and people from the unskilled to the professional and executive level for over 8 yrs. Every small business across all industry sectors had the same complaint about employee turnover and retention. They can't compete for the very talented and thus needed to take on people without much experience, train them and, watch them leave after a few years for better opportunities that they couldn't offer. Plan on it and build a strategy that will allow you to optimize your business. We could look to the other skilled trades to see how they have created apprenticeship programs that have been successful.
 
when I rent a chipper or a stump grinder, I pay a pretty hefty price. But then I return it at the end of the day with dull blades or chipped teeth and I don't worry about it. When I was hired as a sub contractor, I was given the nastiest and ugliest work possible and then returned when my usefulness was up. If you gave a regular employee that kind of job day in day out they would burn up and out very quickly. I also have to say that even when I was an employee, I was never very loyal or committed. I have always had the attitude that I was my own boss making my own way in life. I was in a sense hiring the company to find me a steady supply of trees to climb everyday. I remember going to a few job interviews in which I was interviewing the company rather than them interviewing me. A few companies just did not make the cut.

It can be a mutually beneficial arrangement but only so long as its mutually beneficial. I think there are a lot of climbers like me. I have always had my own ropes, saddle, gear, and my own sharp saw. One company I worked for tried to insist that I never do side work, to which I just nodded my head. Fire me if you wish, Same employer said I couldnt leave for a week in August to go to my sisters wedding (over a month of notice given) I again just nodded and went anyway. Basically I sucked as an "employee"
 
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During the recession of the early 90s and the subsequent growth period that followed the trend toward independent contractors began. This was an era when the idea of loyalty in employment being a valued asset ceased. Long serving employees lost jobs despite their loyalty. New positions were often contracts for shorter durations with no guarantee of renewal. Mergers and Acquisitions meant turmoil for many. Those who grew up in this era repeatedly watched their parents go through job after job, heard their warnings of no company loyalty. It was being written about in every paper, books were published about the changing face of employment and, courses -beginning in high school- were being taught on how to find work and that nobody should expect to be with a company for more than a few yrs at a time. I taught these courses and counseled students and job seekers on the new reality. What really cemented this loss of loyalty was the 2000s and the new wave in corporate America. shedding of the businesses acquired during the 90s and how all the rationalizations for the M&A craze were never realized. The only outcomes were people thrust out of jobs for the sake of a quick buck on the stock market.

Fast forward to today and we see the reaping of such teachings. The children of the nineties are the workforce of today. Workers no longer trust companies, large or small. To give over their trust leaves them vulnerable. Its look out for me, numero uno! If a better opportunity presents itself, go for it. Loyalty be damned. The mantra is now what's in it for me. Not that it's wrong but as employers, we must face this fact and better structure our businesses to account for this reality. Specially when its a boom market and employees are hard to find. Think about employee retention,(check out this article on retention strategies) and start running your business as a business not as a tree service. If you find yourself climbing into your desk chair or estimating vehicle more than a tree, your a business person not a "treeguy".
 
Amen Bing, I went out on my own because I interviewed the companies in my area and refused to have my name and work associated with them. I totally get the false advertising thing. One of the companies I sub for has built a name as "the removal specialist" in the area and they require me and my equipment to do those removals. Kind of leaves a bad taste in my mouth when I'm doing the specialized work and not making the majority of the profit. I've contemplated wearing my own shirts to the job site, but I figure that'd be kind of a dick move.
 
That is interesting Tree humper, I guess my experience excluded me from those Ideologies of that time period . My dad has a Tree service, My Brother, My cousin and my retired uncle. My reality was so much different from what was probably most peoples, good thing too I believe.
 
ward said:
Interesting to see the development of a robust subcontractor market in Portland. Average rates vary from $35-60/hr. Suppose an average of $50/hr. A very nice wage, indeed.

Now, the contractor has fixed costs which prevent the hiring of employees at $50/hr. How, then, do contractor's believe they can run a business regularly using contract climbers at above $50/hr?

This is a mystery to me as I watch other contractor's hire subs at these rates every day or every couple of days.

Although I like working with subcontractor's for a host of reasons, I am worried that I am paying a lot more out of pocket than they are--that they, in fact, make more money than I do on my contracted work. That, even though they are doing the work, they are free riding on the labor of the contractor in certain ways.
This is because of certain fixed costs that the contractor has that the sub does not. These include: employee hiring and retention, training; insurance and workman's compensation costs; equipment costss and insurance, finance costs; advertising costs; shop costs; estimating costs, etc. Subcontractor's regularly tell me that they do have stiff fixed costs, like buying an MS 200t or having their own climbing saddle and rope. But we provide all that and it is not where the bulk of the contractor's unique costs exist.

It seems reasonable that under these conditions (normal conditions), it might be a good idea to ask the subcontractor to help pay for some of the expenses incurred to secure and retain the work, prior to even working.

I was thinking of a variable $50-$100/day surcharge to help cover these costs.

I realize this will be a tough pill to swallow for my subcontractors and many will not work for me if I propose this scheme.

Have others found a way to share costs with subcontractors?
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Lol at your whining post, Ward.

Mate, you don't have to hire any of these people at all. Although the fact remains that you are fortunate to have them as an option. You can't dictate to them what they can charge....same as your clients don't tell you what you can charge....but all parties involved have the right to say - no thank you, and move on.

You made the decision to run a full tree service, others make the decision to be a sub contractor. Neither has the God given right to a bigger bank balance. You make your bed, you lie in it.

The fact that you even started this thread though makes me think some things up with your situation there. A good contract climber should be making you a pot of money each and every time you hire them....so either, your pricing or organization is poor, or the guys you are hiring are simply not fast enough. You say, you avoid giving them pruning jobs because they don't like pruning ? Seriously ?
 
Trolling again, Reg?

At least read through the thread, "mate". Because you seem to have missed the point entirely, I will rephrase the problem so that you can understand it: in a saturated market with multiple tree services bidding on jobs in which employee rates (topping out at about $25/hr) set the ceiling, how can small contractors integrate contract climbers who charge high rates--at least more than 1.5x the base rate for climbers?

This is a serious issue, Reg, if you care about contract climbing. What I propose is that a subcontractor and a contractor might strike terms based on a differential pay scheme depending on the daily gross rate. This way even small contractors could afford to use subs even more frequently.

From what I gather, most subs are killing it here and I recognize it is not realistic to ask them to voluntarily take less if they don't have to. When things tighten up, pain must be shared. Thats what I am getting on about here.

Please don't derail this thread with angry and vindictive bullshit.
 
ward said:
Trolling again, Reg?

At least read through the thread, "mate". Because you seem to have missed the point entirely, I will rephrase the problem so that you can understand it: in a saturated market with multiple tree services bidding on jobs in which employee rates (topping out at about $25/hr) set the ceiling, how can small contractors integrate contract climbers who charge high rates--at least more than 1.5x the base rate for climbers?

This is a serious issue, Reg, if you care about contract climbing. What I propose is that a subcontractor and a contractor might strike terms based on a differential pay scheme depending on the daily gross rate. This way even small contractors could afford to use subs even more frequently.

From what I gather, most subs are killing it here and I recognize it is not realistic to ask them to voluntarily take less if they don't have to. When things tighten up, pain must be shared. Thats what I am getting on about here.

Please don't derail this thread with angry and vindictive bullshit.
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It wasnt an angry or vindictive post. What would I be angry about ? Lighten up fella. I answered in a way I thought appropriate. No malice. Read the post again. I read the other posts and didnt think another complex long winder would add anything.

Ive been a contract climber for 20+ years so Im more than familiar with Tree service/sub-contractor issues. I'll say again, it sounds like either your rates are too low, your contract climbers are not that good, or you're not utilizing their time effectively. Nobody would be hiring any of these guys at the current rates if they werent making adequate money for the other tree service companies out there.

Is there no loyalty or commitment between you and any of these guys ? Ive always made a point of sticking with a handful of companies at a time....preferably ones that aren't at each others throat. For the rest of August Im committed between 3 companies on set days. Same days each week. All parties involved are flexible and willing to compromise though, should any one find themselves in a tight spot. None of these people knew each other before I came to Victoria....but thats how it is now, a good situation.

Ive never met you Ward, only read your posts here on treebuzz. So Im not sure how good you are at influencing people face to face, and making things happen. I personally dont see anyone going for your surcharge idea. But what you could do is explain to whoever your regular contractor is that the company simply isnt making enough money on the days they're being hired, and ask them what, if anything can be done on those days to increase productivity? Put the ball in their court.

If, like you say, these guys are charging double the rate of an inhouse climber....then they should be twice as quick, or something like. Otherwise just dont hire them.
 
Thanks for that, Reg. I appreciate your points here. The surcharge idea was a non-starter--but it sure started this conversation. Like I said in the post, my lead climber went contract climber and I had him on doing the work that we'd been doing but now as a subcontractor. At least for a lot of the smaller stuff which we sometimes end up doing in midsummer, it didn't make sense to hire. There is a broad range of talent out there, Reg, with climbers like yourself at the star end of the spectrum. How that contract climber rates get set is an interesting question. Some guys seem to know they are only good for $35-40/hr--other guys are asking for $1,000 per day.
 
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