Making incentive part of the wage and salary program

The first is a company-wide incentive pay program. You can have all employees participate, or have it across the whole company for FLSA exempt employees only. This is sometimes called a Team Award. The second option is to offer a pay incentive at a group or division level. This makes a lot of sense if you are in an organization that has many different locations, each with some unique challenges in its competitive environment.

The third option is to have incentive targets at the individual level. You have the choice to have one, two, or all three of these options within your incentive pay program.

You also get to decide what weight each component should carry as well as the timing of the payouts. He soon left that enterprise.

In another instance, a worker at an equine and cattle facility explained, "I work with the same amount of effort each month, but some months I get the added bonus of getting a profitsharing check. Since he was not putting any effort into obtaining the bonus, the employee felt that it was a windfall in those months when he would get something. Instead of being a motivator, profit sharing can discourage employees.

Not only are profits dependent on the efforts of the whole organization, but profits can be fickle. This is true for any organization, but it is especially true in farming where there may be a rash of good years followed by bad ones. Risk sharing is related to profit sharing. Here employees are given higher profitsharing bonuses in good years in exchange for getting a lower base pay than normal in unprofitable years. That is, in contrast with the normal system of profit sharing, in bad years the employees not only did not earn a bonus, but also lost part of their base salary; in good years, they earned bonuses much greater to what they would have earned normally.

It is not surprising that companies favor risk sharing ventures more than employees do "[The employee] gambles along with the company Clearly, at-risk plans shift some of the risk of doing business from the company to the employee. Any time employees are rewarded or punished for that which they cannot control, farm employers are asking for a cynical or disillusioned workforce. All this having been said, some farmers may wish to have a very small profitsharing bonus as a teaching tool for top and middle management.

Much better than profit sharing, however, is breaking down all elements under the control of employees or management that affect profits and rewarding personnel for achieving results. A Fortune executive, after explaining three of his most important goals--making an important contribution to society, developing excellent products, and making the organization a good place to work--made quite an impact as a guest speaker by pretending to momentarily forget his fourth goal: "The fourth goal.

I mentioned it in a speech at [a nearby university]. Oh yes, the fourth goal is to make a profit. Seasonal fluctuations and other factors may need to be considered when setting incentives. When attempting to control mastitis in the herd, for instance, a dairy manager has to consider variables beyond the control of her workers.

Because mastitis is caused by several factors, it is desirable to consider them all. A milker would soon be discouraged if, no matter how diligently he used any specific prevention technique, the mastitis level was sensitive to improper machinery maintenance or seasonal fluctuations caused by environmental factors. One way to categorize incentive pay is by whether individuals, small groups, or all farm personnel are covered. Probably the best-known individual or small group incentive pay plan in agriculture is piece rate.

Piece rate is more suited to crew work e. Outcomes from the former tasks are easier to measure—both in terms of quantity and quality—than the latter. Small group and farm wide incentives work better when it is difficult to distinguish individual contributions, or where cooperation and team work are critical.

Group incentives do not automatically foster team work, however. More productive workers may resent less motivated or less talented employees. A foreman reported that when his crews were paid a group incentive, the fastest workers would slow down the most. This is not surprising, given what we have said in earlier chapters, that the fastest employees are four to eight times more effective than the slowest. Some of them may ask themselves, "Why rush when we will all get paid the same?

The system has created tension and conflict among the workers. As the tie between individual work and results is diminished, so is the motivating effect of the incentive on the individual. If you use small group incentives, such as teams of pickers harvesting into one bin, it helps to have workers choose and control their own teams.

When workers who have partial control over results are not included in the incentive pay program, conflicts may arise. For instance, tension may grow between a field melon packing crew paid on a piece rate, and the hourly paid equipment operator. Being so specific about a single result may cause workers to achieve it at the expense of all others. Examples include the herd manager who reduced the average number of breedings per conception, but did so by culling several of the best milk cows; and the field foreman who increased yields but spent more on production than what the extra yields meant in profits.

The incentive is to get done as quickly as possible and go home. Dairy workers rewarded for detecting cows in heat as part of a breeding program may find an unusual number of cows in heat.

Instead, workers could be paid for detecting cows in heat that are later confirmed pregnant. The number one loophole for quantity production incentives is often quality. Growers who choose hourly pay over piece-rate pay often cite quality as the main reason for doing so. A number of approaches are either in use or have been suggested to motivate crew workers while maintaining quality see Sidebar Sidebar Approaches toward improved quality while paying a piece rate Hourly base pay with piece-rate pay.

The greater the proportion of pay going toward hourly pay, the less importance given to speed of work. Hourly paid vineyard crews are substantially slower than piece-rate ones without obtaining sizable improvements in quality.

Speed limit placed on workers. It is true employees who work faster than their skill level will do so by neglecting quality. Unfortunately, limiting worker speed, to be effective, would have to take place on a worker-by-worker basis. A maximum speed standard established for all crew members would likely result in expectations overly high for some and too easy for others.

Minimum standards are set—or workers risk being disciplined. This tactic is perhaps the most commonly used and works relatively well see Chapter Quality incentive.

This method may take more time to set up but has the greatest potential. Set up random quality-control inspections or spot checks. Substandard scores can result in additional training or discipline. Superior scores earn a bonus. The quality bonus has to be high enough as to provide greater rewards to the careful employee over the one who picks more boxes. Earn the right to work in a piece-rate paid crew. An effective management tool is to have employees work on an hourly paid crew until they can prove their complete understanding of quality considerations.

Only when workers have shown a complete mastery of quality are they moved to a piece-rate paid crew. As a condition of working in the piece-rate crew, workers are expected to keep up high quality performance. This approach can be effectively combined with the discipline and quality incentive above. When farm labor contractors, supervisors, or crew leaders are paid in proportion to worker earnings, farmers may inadvertently be encouraging less attention to quality. Unless worker earnings are also tied to quality, it does not benefit supervisors to emphasize quality, since workers would have to work slower and supervisors would earn less.

This process involves clarifying expected performance, considering agricultural variations, noting when it is fair to eliminate incentives, contemplating potential savings and gains, determining base wage versus incentive pay, anticipating effects of technological or biological change, and converting standards into pay. Clearing cuttings from the bottom of the vines? Tying canes to the wire? Sawing off dead wood? Or, will a veterinarian conduct a calf autopsy and decide if it was a preventable loss?

Agricultural variation. Variations in crop load, vine vigor, or conditions that may affect worker performance need to be considered. Each commodity has its own idiosyncrasies. In grape pruning, there are multiple possible variations from variety to training method to spacing that could affect worker speed.

Yet vine vigor and vine age both contribute most of the differences in pruning difficulty. Piece-rate pay could be based on the pruning brush weight of a random sample of vines within a block. Deciding pruning costs for vines that are affected by eutypa or other disease, very young vines, or vines that are in their prime becomes much easier to deal with, so it is fair to all involved.

Crop density can likewise be used to make decisions about harvest piece-rate pay. In one orchard operation, 11 crop density is also used to determine how to pay for thinning fruit load. Elimination of incentives. The specific circumstances for eliminating incentives should be clearly related to the incentive and articulated ahead of time. Employees on a milk quality incentive could lose incentive earnings, for instance, if 1 the milk got hot because no one turned on the cooler, 2 cows with antibiotics were milked into the bulk tank, or 3 line filter changes were neglected.

It makes little sense to eliminate a berry picking quality incentive for employees who commit unrelated infractions e. Any prolonged elimination of incentives risks surrendering any motivational effect the incentive program may have had. If the breach is so serious, perhaps the farmer should consider worker discipline or termination. Potential savings and gains. A dairy farmer trying to reduce calf mortality may ask: how much does it cost me every time a calf dies?

In a well-designed incentive pay program, a farmer should feel that the more his employees earn, the better off he is. There may be a point where improvements beyond a certain level require a substantially greater effort, yet yield less significant results. Efforts may be better directed elsewhere. There is a substantial milk production increase when somatic cell counts reduce from log scores of 5 to 4 or 3, but a smaller proportional increase in milk quantities for further improvements.

For the worker to achieve the first improvements, also, is much easier. Two conflicting principles must be balanced here: 1 greater worker effort should result in greater pay; and 2 greater employee earnings should result in increased profits for the ranch.

You may need to create a reward structure with a ceiling beyond which no additional pay increments are obtained. Base wage versus incentive pay. Other incentives are combined with base wage earnings Chapter 7. As a rule of thumb, the percentage of potential wages represented by incentives should consider the 1 amount of control a worker has over rewarded results, 2 importance of the rewarded results to the overall position, and 3 possible loopholes not covered by the rewarded results.

For instance, pickers and pruners often receive percent of their wages through incentives. As long as quality of work is controlled in some way, this will work well. That is, 1 workers have full control over their performance, 2 the importance of speed is essential to the job, and 3 no important loopholes are neglected, since quality is also considered.

In contrast, a herd manager does not have full control over calf mortality, nor does calf mortality reduction represent his main job. This same manager may also be concerned with herd feed intake, improving milk quality, reducing days open, and supervision of milkers. If the loss of a calf is very costly, the importance of the incentive may increase.

A calf mortality incentive in this case, then, could represent somewhere between five percent to 20 percent of potential wages. Anticipate effects of technological or biological change.

If new machinery, technology, biological stock or methods are being contemplated, farmers would do well to postpone introduction of new incentive programs until after such changes have been made and their effectiveness evaluated. Otherwise, the farmer will not be sure whether it was the technological change or the incentive pay that brought about results.

Workers may either be blamed or paid for something over which they had little control. For example, thousands of dollars can be spent on new equipment that would automatically improve workers' performance. If the incentive was established before the equipment was purchased, it would mean paying twice for the equipment: the direct cost of the equipment plus the cost of the higher remuneration to the workers.

Any changes in technology or measurement have the potential for a change in standard and can lead to distrust if not handled properly. A virtual classroom affords you many of the same learning benefits as traditional—all from the convenience of your office.

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To them? Keep in mind that the value your employees find in working for your organization typically goes far beyond pay. Consider your total rewards package , developmental opportunities, the ability to do meaningful work, or whatever your specific workforce finds most motivating. Your workforce is probably not monolithic. There are ways to consider various different personas within your workforce in order to identify the types of things that are likely to motivate your workforce.

One of the simplest ways to differentiate your workforce is by generation. It may or may not be the best way to segment your workforce, as generational stereotypes are often just that, stereotypes. That said, they do provide a great example for how groups of people may feel differently about variable pay. For example:. Segmenting your workforce into generations is one way, but perhaps not the best way, to divide your workforce to gain a better understanding of what motivates them.