Gregory Encina Billikopf
Results from a 1990 incentive pay study are in. Most of the 158 farmers who responded to a call for participation published in People in Ag newsletter and Ag Alert had used incentives at some time. Their average experience with incentives was about 8 years. Half of those who had paid an incentive had eliminated at least one of their incentive programs at some time. An additional dozen respondents had never used incentives.
A third of the farmers who used incentives described their feelings about using them. Of these, about 65 percent were positive, 10 percent were ambivalent or had reservations, and 25 percent were negative.
Sixty-six percent of the one-third who indicated an opinion felt that employees generally liked incentives. Another 15 percent felt workers were about evenly divided between those who liked and those who disliked incentives; 3 percent felt employees disliked incentives; and 16 percent were not sure. One respondent, with whom I personally agree, said that "good workers" liked incentives.
Incentives That Worked
The most frequently mentioned benefit of pay incentives was better work quality. Examples given by the diverse group of respondents ranged from improvements in bed straightness in land preparation, to cultural practices in budding, thinning, pruning, and harvesting tree fruit crops, to milk quality factors including bacterial and somatic cell count.
Farmers also observed that their incentives led workers to increase productivity and lower costs, to pay attention to detail, and to report problems rather than ignore them. Incentives also helped farmers measure work efforts, reduce turnover, and reduce complaints about difficult conditions (such as the night shift). As another plus, employers felt that incentives gave workers added flexibility. For instance, during picking, workers could work harder for fewer hours and leave before it got too hot. And workers who hustled could earn more.
Effective labor management programs bring side benefits, and incentives are no exception. Several farmers reported improved worker morale and loyalty.
Problems with Incentives
Paradoxically, for respondents who were either negative or ambivalent about incentives, quality was once again at the top of the list. Their observations, however, were of decreased work quality. About two-thirds of these respondents appear to have rewarded employees for increased productivity but had not established checks and balances to protect quality. Farmers can either reward employees for surpassing quality standards or discipline those who do not meet minimum requirements.
Output incentives may cause unexpected problems. The medication that employees used to keep hogs healthy in one operation cost more than the operator saved in reduced mortality rates. Caps on spending need to be added when setting this type of incentive.
A few farmers who offered incentives for quality encountered poor productivity. Their employees became too focused on quality. Once again, a balance between quantity and quality needs to be rewarded.
Next in importance after poor work quality in the list of difficulties, farmers noted that employees did not always change their behavior after the incentive was in place. Often the reason is that workers simply do not see the connection between the reward and their added hustle. A successful grower in the first-year of a program gave his three best-quality workers lunch at a local restaurant. Employees may not try as hard in the future, if they see that the same few tend to be the only ones rewarded. Studies show that top workers today are likely to be tops tomorrow.
Some employees may not try hard out of a fear that the harder they work, the more the employer will expect of them. And yet others prefer to work at a slower pace and earn less. When employees do not seem motivated by an incentive program, farmers may want to note how widespread the situation appears. If only a few workers are not interested in the incentive, perhaps the difficulty lies with them. If 40 percent of the employees are not motivated by the incentive, the problem may be the way the incentive was developed or presented to them. In some cases, farmers simply need to give the incentive more time to work.
Some farmers felt their employees were not getting enough of a reward for their effort. I know of farmers who pay very small incentives that motivate employees, nevertheless. In these cases, workers are motivated by the recognition from the farmer and the satisfaction of helping to meet company goals. In others, workers find that recognition is nice but does not pay the bills.
One farmer reported that some employees did not make minimum wage when working under piece rate. If a substantial number of employees are not making minimum wage, perhaps the piece rate level is set too low. It is also possible that some of the employees are not qualified to do the job. I favor the use of brief practical tests where employees prove they can do the job before being hired. It may also be possible to place workers making less than minimum wage in a different type of task, rather than have everyone performing at a level below their capacity.
Other problems with incentives included (1) profit sharing that was not profitable and (2) reduced value for the commodity (the reduced profit margin meant that the farmer could not afford the incentive). Employees often do not see the connection between their hard work and pay under profit sharing. One farmer felt that profit sharing was a plus for him because it helped employees feel the ups and downs right along with the owner. Commodity prices can fall through no fault of people at a given ranch.
Some farmers found that employees took their incentive pay for granted. They expected either a check at the end of the year or an extra amount in their regular paycheck. Even though incentives may be paid at irregular intervals, farmers may want to keep employees informed about their performance more frequently. To emphasize the incentive, it helps to pay it at a different time than with the regular paycheck. One farmer reported lack of gratitude on the part of employees who were allowed to leave work early. Employees may have feared that showing gratitude would mean additional responsibility. Perhaps they had to work hard so they could leave and felt they earned the privilege.
Other difficulties included the effect changes had on incentives, complicated record-keeping, and lack of worker understanding. It may be worth waiting before establishing an incentive program when changes, such as introduction of new machinery, are foreseen. Records are critical, but should be kept simple. Keeping the program understandable helps, but increased communication between the farmer and employees is often required.
A final difficulty reported by farmers was supervisors' lack of interest in the incentive program. Perhaps some supervisors do not see how they will benefit. Some workers may earn more under incentives than their supervisors. At times farmers pay supervisors a percentage of the incentive given. This is a fine idea, but it is critical that the supervisor be rewarded for all the important criteria that the farmer seeks to fulfill. If paid only on the basis of production, the supervisor may be the first to ignore quality.
Future Study
This study raised more questions than it answered. In the near future a follow-up incentive pay questionnaire will be mailed to interested farmers.
A set of guidelines on developing or fine-tuning an incentive pay program
is available at no charge from the author at University of California Cooperative
Extension, 733 County Center III, Modesto, CA 95355 (phone 209/525-6654).
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