Better Decisions: Does an incentive plan have a place in your business?

Wednesday, December 19, 2007

by GARY MAWHINEY

For several years, producers have been looking for ways to provide their workers with an incentive-based pay scale. The mostly commonly used form, particularly in the seasonal operations, has been the bonus system whereby a worker received extra pay just for completing the season.

But people employed in supervisory positions on horticulture farms have been seeing something different in the past few years. One method is to pay a worker based on thegrade which the crop receives when marketing it. This is being done in the horticultural industry, where the higher the grade the commodity receives, the more the bonus is.

However, the worker has to agree that the bonus will not be paid until the crop is sold. If the worker agrees to this method, it has the potential to pay big rewards. And it does give employees a sense of "ownership" in the crop, thereby encouraging them to take extra care in their duties.

Some livestock producers are using a similar method, in their case basing the incentive on production. If a dairy farmer has a certain base production, he would then look at any extra production that the herd can achieve as a basis for incentive payments. When using this method, farmers are encouraging better herd management techniques as well as best practices for the entire operation.

With some creative thinking, these methods, or one similar to them, can be adapted to any farming operation today. It is a way for producers to reward good employees and reduce their labour turnover.

Casual incentives such as a "pat on the back" or sincerely acknowledging good work are also a must today if farm owners want to keep and maintain a stable workforce. Casual incentives may also take the form of dinner at a good restaurant, tickets to a theatre performance or sporting event. Even some extra cash, such as a $50 bill, is a form of a casual incentive. These types of incentives send the message to employees that you notice their efforts and are prepared to do something positive about it.

There are some drawbacks, though. Other employees may become envious or feel that the farmer has favourites. These can be overcome by communicating to your employees that everyone is entitled to these incentives and that "actions speak louder than words." Another method of overcoming possible problems would be to have the workers actually nominate the person for the reward, thereby eliminating the possibility of favouritism by the employer.

Structured incentives often help focus workers' efforts and show that their pay can rise, along with their sense of job satisfaction. A benefit to the producer is that the farmer will know ahead of time exactly what his costs will be if his employees perform beyond expectations and qualify for the incentive. The farmer can also build this type of plan into his overall business plan.

The structured incentive can take many forms - piece rate pay; allowing workers to go home after completion of the task; end of season bonuses for those that complete harvest; and, as mentioned earlier, profit sharing.

When using a structured method of incentive, one must make sure that they are capable of fluctuating as the performance changes and that the reward is based on a specific accomplishment. It is paramount that any system must be clearly understood by both worker and farmer. Including any and all incentive plans in an employee handbook will reduce any misunderstandings in the future.

Any incentive plan can present problems and structured plans are no different. Workers may not pay as much attention to tasks that are not on the incentive plan. Or the worker may simply be happy with the base rate of pay. As well, there may be difficulties for the grower in establishing standards. One problem that must be taken into consideration is the amount of technology or mechanization on the farm. And, as with any incentive plan, there will be extra work for the farmer in the area of record-keeping.

Despite these potential obstacles, many producers do use incentive programs and are very happy with the results. More employee commitment to their day-to-day work, cost reductions and a net increase in the farmer's profit are just some of the positive results.

Although wages are not the single most motivating factor in employee retention and satisfaction, they are important. Employment on a farm has traditionally been seen by workers as involving long hours, hard work and low pay. But the face of agri-business is changing rapidly today and, in order to compete for the best employees, farmers will need to develop and implement new and creative methods of compensation. BF

Gary Mawhiney is human resources management program lead with the Ontario Ministry of Agriculture, Food and Rural Affairs.