Gregorio Billikopf

“One means by which an employee has been able to keep his head above water and prevent being oppressed by the employer has been that the employer didn't know just exactly what the employee could do." –N. P. Alifas (Taylor & Alifas, 1921:148, emphasis added).

Individual incentive plans offer the clearest link between a worker’s effort and the reward. Probably the best known individual or small group incentive pay plan is piece rate. Piece rate is more suited to repetitive crew work (e.g., boysenberry picking, vineyard pruning) than to precision planting, fertilizing, or irrigating. As the tie between individual work and results is diminished, so is the motivating effect of the incentive on the individual. My on-going research on piece-rate pay spans over two decades, beginning in 1985. The objective of this paper is to summarize much of this work, and give clear and precise suggestions for the effective design of piece rate pay. A number of serious challenges that threaten the effectiveness of this pay method are also included. While my work has been primarily in agriculture, the principles can be easily adapted to other types of work.

I was taken back by the assertion of a colleague at the University of California, Davis, “Civilized nations,” he argued, “have moved away from paying by the piece.” Certainly, there are articles and papers on the death of piece rate. While piece rate is still utilized widely, it often fails to motivate employees as much as it could. Greed—on both sides—often gets in the way. Traditionally both the farm employer and worker have come to believe that the other is out to cheat him. Piece rate, rightfully so, is often associated with a game played between the two.

Employers can build piece rate systems that prevent workers from earning higher wages at the expense of the enterprise. But just as important, employers can design piece rate approaches that help build worker motivation and trust. What is at stake is a sustainable pay system with the potential to greatly benefit both employer and employee in the long run. Growers can reduce costs while increasing productivity. Workers can earn substantially greater amounts. Such farm enterprises are likely to have a waiting list of excellent people who wish to work for them and have little to worry when talk of labor shortages are raised.  

Framing and reframing are important aspects of negotiation—of viewing issues from a particular perspective. At a seminar I asked growers, “How would you feel if some of your crew workers made twice the minimum wage and you still saved money?” The general consent was that this would be great. “How about three times the minimum wage?” I inquired next. “Would that make you nervous?”

“No, this would be wonderful!” exclaimed one of the producers. His neighbor, however, poked him on the side and said, “Now, be honest, you’d be scared spitless if some of your workers were making three times the minimum.”

Certainly, the very thought of farm workers making three or more times the minimum wage would send some producers straight to the trauma center. These growers are likely to feel that they made a mistake when they set up their piece rate. One need to reframe, then, has to do with the bottom line. Instead of panicking at the hourly equivalent that a piece-rate paid worker is earning, look at the bottom line such as cost per vine pruned or pound picked.

Put yet another way, in the form of a question: “Does your farm operation make more money as your workers make more money?” If the answer is a ‘maybe’ or a ‘no,’ your pay for performance design is faulty. If the answer is a ‘yes,’ why worry because some of your workers are going home with their pockets full of money?

Crew workers, in turn, live in fear that growers will cut their piece-rate pay—either now or next year—if they perform at their full potential. Some growers who have understood and overcome this trust issue have had employees make three times the minimum wage and more. At one farm operation a crew worker earned almost eight times the minimum wage.

One positive psychological approach to effective communication is clearly announcing changes in behavior when negative practices are abandoned. Farm employers who want to speed the process of having workers feel safe about putting forth their best efforts will want, at the very least, to have a frank conversation with employees about piece-rate games. Talking explicitly about these issues is beneficial. Most farm workers have experienced piece-rate cuts either directly or through someone they know well. For a piece rate to be well designed it requires trust and confidence on the part of the crew workers, that their interests are being protected. Without a doubt, nothing can kill worker motivation faster than having the piece rate lowered—or the fear of the same.

It has been said that “where you stand depends on where you sit”. A good exercise is to determine the rules before we know where we will sit. If there is only one piece of cake left, and two individuals who want it, it seems fair that one will cut the piece in half, and the other will select a desired piece. Using the same test of fairness, we would design the pay system without knowing what our own role might be. Without knowing if we will turn out to be the employer or the employee. And if the employee, will we be the fast, average, or slow worker. Such an exercise will help us discover and repair design flaws and yield sustainable results that are good for the employer and the worker in the long run. Only when there is a mutual valuing of inputs can a piece rate approach be trusted and help both the farm owner and farm worker.

Some decisions require a degree of boldness. Those who have watched the equestrian events at the Olympic Games have noticed the coordination that is required between horse and rider to clear the jumps. The obstacles have to be taken without hesitation. Lack of unity between horse and rider—or not permitting the horse the right number of strides before a jump—can lead to potentially disastrous consequences, the most serious of which is lack of confidence or trust in each other.

Before the competition, riders spend considerable time and effort walking and studying the course. But when the time comes to ride, there can be no timidity. There are similarities in terms of how crew workers are paid. There must be no tentativeness. Of course, an important difference is that while it is only the rider that walks through the course ahead of time, in establishing and maintaining piece rates both management and workers can look over the course, and work out the impending potential obstacles and difficulties jointly. Confidence and trust will build over time.  

Walking into the Field, Orchard or Vineyard

When paid by the hour, the fastest crew worker performs at the same speed of the slowest one. This can be easily observed when driving by a field or walking into an orchard. All the workers seem to be moving across a field or orchard together. When workers are moving very fast or running, or are well spread out through the field, it usually means that the piece-rate pay has been well designed—at least from the worker perspective. If workers are moving faster than by the hour but not as fast as in a motivating piece rate, it often means that workers are paid on a group piece-rate.

What does it mean when crew workers look as if they were paid by the hour, but are in reality paid by the piece? It signifies that the crew workers have not bought into the piece-rate plan. Four key reasons why farm workers may act as if they were paid by the hour—even when paid by the piece—include: 1) the piece rate is too low and they are hoping the employer will raise it; 2) the piece-rate design is faulty (such as the famous hourly pay plus piece-rate bonus or other types of incentives that do not reward effort); 3) there is not enough work (workers realize that if they hurry they will work themselves out of a job); and 4) mistrust that the piece rate will be reduced (when the employer sees what workers are capable off). We will look at these and other factors related to piece-rate pay plans.  

Rate Cutting

Once standards are set, a farmer may lower the requirements but never make them harder without loosing trust. I have a collection of horror stories. Some are quite blatant, such as the worker who was promised $1 per box of apricots harvested. When the employer saw that the worker had picked over 100 boxes and it was still early in the day, the wages were cut to $1 per two boxes.

A vegetable grower underestimated worker performance by a long shot. When workers earned much more than the farmer expected, he lowered the piece rate. The farmer lost credibility, worker morale fell sharply, and many left for other jobs. A more subtle—but just as destructive—approach is lowering the piece rate next season for equivalent work, when it is less likely to cause a stir.

A grape grower called in frustration because he had “made a mistake” in terms of the piece rate and workers were earning too much. “I have been thinking of reducing pruning pay rate from 32 cents per vine to 28,” he argued. I explained that the piece rate should not be diminished, that half his crew was apt to leave—the better half—and the other half would never trust him again. “I was just putting you to the test,” the grower retorted. “I reduced the piece rate last week, and half the crew already walked out.”

A second grower called in frustration: “We have an employee who is earning $45 per hour by the piece! We must be doing something wrong!” Like the first farmer, she wanted to cut piece rates, but fortunately she had not yet made the change. At the time of the call, these wages represented almost eight times the minimum wage. Research shows that the best worker is capable of four to eight times the performance of the worst in an average crew. This particular farm area pays wages substantially higher than the minimum, making the wage quite reasonable. This farm operation needed to be congratulated; they had achieved the trust of their crew workers, which is no easy task.

More Piece Rate Games

Another popular piece rate game is simply not telling employees how much they are earning until after the job is done. Piece-rate paid cucumber pickers at one farm did not find out what the pay per bucket was until the end of each day.  When I question farm employers about this practice, their immediate retort is, “My workers trust me.” This notion that the workers trust management in setting a fair piece rate after the work is done is, of course, a fallacy. A worker thinning peaches expressed frustration at not knowing what the piece rate was, “If I knew how much I was getting paid per tree, I would have already finished this long row and would be on my way back.” His employer had given me the same line I had heard so often.  

So, why do farm employers in such widely different areas as Russia, California and Chile—despite the cultural, ideological and language differences—use the very same expression (i.e., “My workers trust me”) when defending the notion of not telling employees the exact piece rate until after the work is done? Farm employers reason something like this: “It is hard to set a piece rate because field conditions are different every day. When workers are paid by the piece they perform, on the average, 40% faster than hourly paid workers. So, I will calculate the cost per piece making sure my average employee makes 40% more than when he is paid by the hour.” Crew workers understand perfectly well that the faster the crew works the less they are paid per effort (i.e., plant thinned, bucket picked, vine pruned).

Likewise, employees know that farm employers often ask crews to work first on an hourly basis until the standard is set. During such trial periods, workers may be motivated to look busy by being inefficient. Employees realize that high performance during the trial will result in lower wages once the piece rate is fixed.

Cost of Living Raises

When producers are moved to increase general wages by either 1) cost of living raises or 2) changes in the minimum wage, they often reason: “Hey, my piece-rate paid crews are already earning well above the minimum wage (or above what our hourly paid people make), so why should I raise my piece-rate?” Such farmers often feel pressured to maintain a competitive posture. By not raising their piece rate to reflect cost of living and minimum wage increases they are surrendering to a form of wage compression between piece rate and hourly paid jobs.

When a piece rate is first established, the difference in effort required by the piece rate is acknowledged by a corresponding difference in pay. Over time, however, when hourly wages go up but piece-rate pay levels stay constant, this pay differential is slowly eliminated. Workers become increasingly suspicious and unmotivated. On the other hand, proportionately elevating piece rates under these circumstances gives workers a clear signal about how their efforts are valued.

Eliminating Piece Rates

Two different types of games are played here. One of them consists of eliminating the piece rate when employees are “earning too much money,” and while paying people an hourly wage expecting them to have a minimum work quota, “now that we know how much they can produce.”

Another frequent tactic is finding a reason to eliminate an incentive, based on some other factor that is no way related to the work. While it makes sense that employees who are not as quality conscious not earn a quality bonus, eliminating the quality bonus for unrelated reasons (e.g., because people arrived late) is not appropriate. Such tactics risk 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.

Hourly Effort and Piece Rate Pay

Crew workers tell me that growers would like nothing more than to have them slow down to an hourly speed and look at quality when paid by the piece; and hurry up their efforts to piece rate speeds when paid by the hour.

Hourly Pay plus Piece Rate Bonus

Man’s creativity knows no bounds, but that is not always a good thing. Growers reason that if hourly pay yields better quality work and piece rate generates higher productivity, why not combine both and get the best of two worlds? When utilizing such an approach, nevertheless, growers end up rewarding workers in an inverse order to their performance level. In other words, the greater the worker productivity, the less the pay received per effort (i.e., per vine pruned, fruit tree thinned, box picked or pound processed). The faster workers, then, subsidize the slow ones. (By the way, this also happens when a grower has piece-rate paid workers who are not making the minimum wage.)

Few employers have done the math, and even fewer have designed such pay schemes on purpose: to try and punish their best employees. Crew workers are dissatisfied with the hourly pay plus piece rate design, even though they might find it difficult to verbalize the exact reason for their discontent. In an on-going research project we have successfully made the switch from such a system to a straight piece rate approach, with great benefits to both the worker and grower.

Over the years I have known numerous farm employers who have implemented an hourly pay system plus a piece rate bonus. The long term results tend to be disastrous.  

A California grower shared with me a letter he received from employees that essentially stated, “Please remove the weight from off our shoulders and change the way you pay.” The letter was signed by all employees. This grower kindly permitted me to share some of the details of his pay system. The base pay at the time was $7.25 an hour for up to 75 pounds of produce handled per hour. The bonus was that of $0.055 per pound for every pound over this 75 pound base.

Table 1.

Table 1 shows that workers who process 130 pounds per hour earn $10.28 per hour in contrast to, say, someone earning $7.25 and handling 50 pounds. What may not be immediately evident in these numbers is that the pay per effort (pounds processed) diminishes with increasing performance levels.
 
Figure 1 represents dollars earned per effort (pound processed) shown in the Y axis, and pounds processed in the X axis. This is a graphic representation of the diminishing earnings per effort made.

Most farm workers do not need to pull out their calculators or computer spreadsheets to intuitively realize that added effort is not compensated evenly. A straight piece rate is much more motivating to workers.

Figure 2 is a variation on the hourly pay plus piece rate approach previously mentioned. In this example (pink line), workers earn $5 per hour plus an additional bonus of $0.75 per tray picked. The blue line represents a straight piece rate paid at $1.50 per tray picked. In contrast to the straight piece rate we see that the slower workers are overpaid and the fast ones underpaid for their efforts. We may say that the faster workers are paying for the slower ones.

Differential Piece Rate Designs

When growers see the numbers—and get the message about the detrimental effects of hourly pay plus a piece rate bonus—they often ask about differential piece rate designs. How about paying a straight piece rate up to minimum wage (or some such standard), followed by a greater piece rate after that (often called the Frederick W. Taylor approach)? Or, how about a more elegant tactic: a lower piece rate for the slow workers, an average piece rate for the average employee, and a high piece rate for the most productive ones (known as the Dwight Merrick method)? Would these differential piece rates not motivate worker performance in the right direction? Perhaps doubly encourage slow workers to step up to the plate and be more productive? In reality, this system also punishes employees. 

Figure 3 shows the pay per effort in a Taylor-style differential piece rate. We have a $3/unit piece rate up to 3 units. After that, the pay per unit goes up to $4 per unit. Note that the departure from the $3 / hour line is sharp and then the curve begins to taper off as it approaches $4/ unit. Taylor's approach has a minimum standard required for individuals to begin earning the additional pay per unit. Here the slow worker is helping to pay for the bonus earned by the fast one.

Figure 4 represents the Merrick differential piece rate. Here there are three different scales. No bonus for the slow workers, a medium bonus for the average worker, and a higher bonus for the most productive employees. In this graph we use an example of individuals being paid $1.50 / unit up to 5 units. Beginning unit 6 employees earn an additional $1 / unit. Beginning with unit 12 employees earn $2.5 / unit more than the slow workers, and $1.5 / unit more compared to the average ones. Note the same pattern of the curve lines tapering off as in Figure 3. This refinement does nothing to make the system fairer for that slow worker. Once again, slower workers help pay for the bonus of the fast ones.

A grower regrettably credited a conversation we had on the hourly-pay plus piece rate bonus as a trigger to implement a differential piece rate approach. I am grateful for this grower’s willingness to have me share the details, so we could analyze this case and reason together. He paid employees who were crushing and packing walnuts a straight piece rate until they reached the minimum wage—and a piece rate that was 33% higher for any production over that. This producer reported great success and happy employees who, said he, “thought it was only fair to get paid a little extra for the additional effort.” Thirty-five percent of the employees at the packing shed were making at least some amount of their earnings at the higher piece rate level. 

Despite the workers initial enthusiasm, may I suggest that the differential piece rate—based on worker productivity—is flawed? (This is not the case for many other types of variable piece rates, as we shall see, such as those based on achieving a quality goal, staying until of the end of the season, or accounting for tasks that require different amounts of effort.)

A differential piece rate, if it did not lower worker morale, would only have a minor disadvantage for the employer. It is a little harder to calculate actual costs, in contrast to a straight piece rate. Worker morale, nevertheless, does suffer:

1) All workers, regardless of productivity level, are paid less for working up to the higher cutoff piece rate. Workers may come to feel that they are being taxed for the right to earn more. Simplicity and clarity is valued, and it certainly is more transparent for the grower to pay a fair, straight piece rate.

2) Slow workers subsidize the wages of the most productive ones. This is the most fundamental defect of a differential piece rate. While the literature on differential piece rates often suggests that employees are motivated by this system to reach higher levels of productivity, it obscures the fact that great differences in ability exist among workers. Slow workers are simply not capable of performing at the speed of the fast ones. Gladly, David W. Belcher (1955) speaks against the unfair nature of the differential piece rate: "Perhaps these early selective plans are in part responsible for the widespread distaste for piecework."

Besides the departures from a straight piece rate proposed by Taylor and Merrick, there are many others of a similar nature (e.g., Bedeaux, Emerson, Hayne, Rowan, Gantt, etc.) They either punish the slow worker or penalize the fast one. Any departure from a straight piece rate—other than to consider difficulty levels or to reward quality of work—is constructed on faulty foundations. (These comments are not intended to undervalue time-based incentive programs that assign pay to completion of unique tasks requiring widely different amounts of effort.) 

To summarize, just because crew workers may not immediately know how to verbalize their dislike for a poorly designed piece rate system, it does not mean that they like it. Piece rate designs where some workers subsidize the earnings of others are demoralizing to employees.

Fear of Workers Quitting Early

When workers are paid by the piece, they are often free to leave when they wish. Some farmer employers have hypothesized that workers have a certain earnings goal for the day. Once this goal is achieved, they reason, workers will go home. Under such conditions, a pay increase may result in workers reducing their hours.

Economists would explain this phenomenon as the income effect: increases in income allow those in the work force to take more time for leisure activities. But economists also speak of the substitution effect: the greater the wages, the more a worker has to forfeit by engaging in leisure time. These two forces compete, and other mediating factors, including worker preferences, can also affect results.

I carried out a study to explore worker feelings and agricultural conditions that may affect a worker's decision to leave early when paid a piece rate. A total of 448 piece-rate paid seasonal farm workers in 15 crews in various commodities were interviewed. Indeed, there were some workers who would leave early when making their wage goal for the day. But these accounted for a mere 3% (n = 14) of the subjects.

An additional 11% (n = 49) of the respondents also had left early, either from time to time or regularly, but for altogether different reasons. Two key motives offered for leaving early were (1) getting overly hot or tired and (2) not making a sufficient wage (for example, low wages per unit of work performed or not enough to pick). In either case, these workers were generally willing to stay longer if the earning opportunities were greater.

The data from this study indicate that those who hire farm workers may generally increase piece-rate wages (or shift from hourly to piece-rate pay) without fear of having workers leave early because they are making too much money. It appears that the substitution effect plays a greater role in seasonal farm worker motivation than the income effect. Perhaps the most obvious reason for this phenomenon is that farm workers need to maximize their earning opportunities when they can be fully employed. For most crew workers, leisure time is a luxury that they cannot afford to take until a time of year when there is no work.

One might add, then, that the greater the need for income the greater the force of the substitution effect over that of the income effect. That is, increased wage-earning potential among low-income farm workers is not only unlikely to lead workers to seek less work, but actually may motivate them to work even longer hours.

Farm workers who collect unemployment insurance benefits when off work will also profit from high earnings when they do work. Generally, the greater the worker income received during work periods, the greater the benefits received when unemployed.

Chance Incentives

Chance incentives use luck (e.g., a chance at winning a television, car, trip, or other coveted reward) to foment specific worker behaviors or results. These are sometimes used in conjunction with piece rate. Often those who are poor are especially attracted to gambling, hoping for things they have reason to believe they will never achieve unless they get lucky. Employers who use chance incentives are gambling with the employees’ money.

While chance incentives tend to motivate a flurry of activity the first year, by the third year bad feelings about such incentives are common. Chance incentives are unfair to the employees because some workers—or most, depending on the design—do not get any benefit from their effort. Such pay schemes are often used to obscure a needed pay raise.

Hiring too many Workers

Employees are likely to slow down when they realize that keeping up a higher pace will mean working themselves out of a job. When time frames are not critical, it is often preferable to hire fewer, better qualified people to do the job. You can manage to save money while providing a longer season and higher pay rates for employees. 

Protect Long Term Employees

Sooner or later farmers need to deal with long time employees who are no longer in their prime. Many farmers rightfully feel a sense of responsibility for these workers, and often find less strenuous tasks for them. For instance, some growers employ older workers on an hourly basis to sort or check for fruit missed during the harvest. It is not uncommon for senior workers to outdo younger ones, of course, and assumptions about worker capabilities based on age are often unfounded.

Ergonomic Measures

The hard pace of piece rate may increase back or other work-related strains and injuries (Sandoval 1990). Farmers will want to consider ergonomic measures to facilitate, to the greatest extent possible, a work environment free of injury and illness.

In one of our research projects members of management participated in the study. One of them explained that his back almost fell off and was much more sympathetic to the needs of the packing shed employees. He immediately thought of several ergonomic measures that could be taken to reduce strains and stress and facilitate a more comfortable working environment.  

Injuries at the beginning of the season when workers may have had long periods of inactivity need to be guarded against, also. Employers may want to go to an occupational medicine facility to design an appropriate warm-up or stretching exercise program for workers. Effective employee selection (including a post-offer-pre-employment medical),  training, and supervision can also do much to reduce injuries. Along with such measures, encouraging employees to take breaks when paying by the piece is a critical point.  

Rest Periods

One grower is providing a sandwich for workers in the morning and a juice in the afternoon, and has found that employees really appreciate and enjoy that. These workers were previously working straight through the day except for their lunch break. Another is shutting down the packing equipment and thus forcing all employees to stop for a short break in the morning and afternoon. These are positive steps, but employees need to be paid for that time.

When employees are paid by the hour and take a rest period, it is the employer who finances the break. When working by the piece, it is the worker who finances his own break period. I would suggest that growers determine the equivalent pay for a morning and afternoon break, in terms of how much would a worker produce during that time period, and have workers stop for a break, and yet be paid as if they had continued to work right through the rest period. The ideal would be to individualize the pay break rate if it is not too hard to compute. I suspect that worker productivity will increase and injuries will diminish such that both employer and worker will benefit, but have not carried out a study in this area as of this writing.

Heat Stress

Workers performing under piece rate require higher intake of liquids, compared to those who are paid by the hour. Howard Rosenberg of the University of California, Berkeley, has done much work in the area of hydration of field workers. The idea is that workers, like athletes, need the liquids before they get thirsty, else the corresponding effects of dehydration will take their toll. Rosenberg has been experimenting with the use of water backpacks. Along with the convenience of a backpack, I suspect that workers are more likely to drink if the water has a small amount of lemon in it to give it some flavor. If workers drink more, they will need to use the restroom more often, and these have to be kept nearby.

Variable Pay for Effort

The producer first determines what the ideal conditions are for the work involved. For instance, during harvest the ideal conditions for the picker are plants loaded with vegetables, berries, or fruit. Such a loose definition needs to be translated into a specific minimum number of pounds per feet, per tree, etc.

When there is fewer fruit to pick the piece rate is increased. Some pickers will consistently outperform others. For any given picker, however, equivalence in effort should result in uniform pay, regardless of whether the plant is loaded or almost barren. Workers do not control fruit density any more than they control profits.

Effort in other types of piece-rate work such as thinning, pruning and other tasks can also be rated in terms of difficulty and paid accordingly.

Good Years / Bad Years

One of the realities of agriculture is the fact that there are good and bad years. Crew workers do not control the market price for crops or specific varieties. It is the employer who takes the full risk in planting any given crop. Workers should not be rewarded or punished because of fluctuations in the market value for these. Instead, employees should be rewarded for their productivity and the effort required.

Part of managing any type of incentive, including piece rate, is for the employer to realize that some of the money from good years—that on the surface appears to be profits—needs to be set aside to fill in the holes created by bad years.

Piece of the Cake

Employers generally set a certain amount of money to pay for labor. There are circumstances when a farm employer may pay more than what the effort seems to call for. Two examples include: 1) the grower has a cherry or raspberry crop that will be ruined if it is not harvested before an impending rain; and 2) a crop will loose value in the market for every day that it is not harvested. During such circumstances a farm employer may need to pay more than merely on a worker skill and effort basis. Under these circumstances the farm employer pays more by sharing with the crew workers a greater percentage of the crop value, in order to either avoid loosing the crop altogether or maximizing its market value. Such extra pay may be applied as either added hours of work (e.g., overtime) or an increased workforce. Workers need to be told the reason for the pay increase.

Reward Extra Effort Required

Some jobs require extra effort while others mean extra time (e.g., time spent improving quality). Incentives should compensate employees for the extra amount of time required to accomplish a job. For instance, if piece rate employees produce fifteen percent less in order to meet an increase in quality requirements, the pay rate ought to pay at least the equivalent amount. (Also see below, under requiring good quality.)

End of Season Bonus

Two types of bonuses that combine particularly well with piece rate pay are an end-of-season bonus and a quality bonus. An end of season bonus can be given to reward employees for not leaving for another job in mid-season. When this bonus is given on a per-piece basis, the most productive employees are rewarded the most, which makes sense. Some employers have matched the end-of-season bonus for employees who show up at the beginning of the next season.

Establish Standards

An important first step in establishing standards involves clarifying expected performance. Does a vine pruned include removing suckers? Clearing cuttings from the bottom of the vines? Tying canes to the wire? Sawing off dead wood? How full must picked boysenberry boxes be? How will the number of stemless, pitted, bruised, or low color cherries per sample affect quality grade?

There may be a point where improvements beyond a certain level require a substantially greater effort but yields less significant results. Efforts may be better directed elsewhere. 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 farm enterprise. In these cases growers need to create a reward structure with a ceiling beyond which no additional pay increments are obtained. Some work may just have to be done on an hourly basis.

The best way to establish standards is by keeping and studying past records. If no historical performance data exists for making sound pay decisions, growers may want to execute the work themselves—or ask trusted others to do it. A decent alternative is to hire a temporary crew at a highly elevated piece rate, with the express purpose of establishing standards. In no case should the people who will eventually do the work, or someone who has a vested interest in the results (e.g., foreman with relatives in the crew), perform the trial. A grower I know understands that his best effort is usually one third of the average crew worker performance at this operation. Knowing this permits him to set standards.

When standards can be translated into more scientific measures, this is very helpful. In one study, for instance, we found that vine vigor, variety, spacing, and other variables were all subsumed by the weight of the pruning wood within a specific type of vine training. Setting an expected range of crop weights per fruit tree, or per linear foot, can also be very helpful for alternate bearing orchards as well as other types of crop variables.

Technological Change

If new machinery, technology, or methods are being contemplated, growers would do well to postpone introduction of new piece rate programs until after such changes have been made and their effectiveness evaluated. Otherwise, the producer will not be sure whether it was the technological change or the incentive pay which brought about results. Workers may either be blamed or paid for something over which they had little control. In those cases where new technology does greatly facilitate worker production, the grower would end up paying for the technology twice: once in terms of the equipment that has been paid for, and once again for higher labor costs when workers are more efficient. Any changes in technology have the potential for a change in standard, and can lead to distrust if not handled properly.

Requiring Good Quality

One of the dangers inherent in piece-rate pay is the potential for poor quality, or the neglect of other non-measured desired outcomes. Research has shown, however, that piece rate does not automatically result in poorer quality than work paid by the hour. Furthermore, there are specific steps that can be taken to safeguard quality while paying by the piece. Two of these are contra productive: the use of an hourly base pay plus a piece rate bonus; and a speed limit.

The greater the proportion of pay going toward hourly pay, the less importance given to speed of work. These growers may not be getting their money’s worth, however. Hourly-paid vineyard crews are substantially slower than piece rate ones without obtaining sizable improvements in quality. Furthermore, as we saw above, this piece rate design is quite demoralizing to employees.

It is true that 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.

A systematic approach towards quality improvement involves a number of steps:

1. Testing and calibrating the judgments of management and quality control personnel so that all are evaluating quality with the same eyes. Top personnel can be asked to independently make evaluative decisions (e.g., to pack or discard fruit) which are then compared against the decisions of others. This team discusses differences in opinions and further clarifies required quality standards. The process is repeated again until two or more persons are scoring a 92% agreement rate. A trusted quality specialist may have to confirm the accuracy of the quality evaluations, also.
2. Other quality control personnel and workers are trained on quality standards and then evaluated on their ability to make quality determinations.
3. Applicants and employees are selected on the basis of their skills in understanding quality determinations.
4. Determinations are made on how to sample for quality control purposes using random inspections.
5. A required range of standards is developed for quality, in terms of what constitutes expected minimum quality, high quality, or below minimum quality. More categories may be created as needed. 
6. Employees need to prove through a test or performance appraisals (step 3) that they can do the job. With new employees it may be necessary to have an hourly paid crew for workers who are in the process of proving their knowledge and understanding of quality factors. Only workers who prove to the grower that they understand quality can move to piece-rate paid crews.   
7. A feedback mechanism is designed so workers know how they are doing and where they can improve. A card with a score broken down into areas that the employee is doing well or can improve is very helpful.
8. Require minimum quality through a combination of effective selection, training, and a disciplinary process with consequences for non-compliance.
9. Reward high quality through an additional bonus. Quality achievements are often obtained in incremental steps. For instance, a cherry farmer may pay $3 per box picked with a potential multiplier of 1.084 for good quality or 1.25 for superior quality (about 25 or 75 cents per box, respectively). Three workers picking 24 boxes each in a day would earn $72 (no bonus), $78.05 for good work, and $90 for superior work. The quality bonus has to be high enough as to provide greater rewards to the careful employee over the one who picks more boxes. The grower will want to balance quality and speed considerations, as both are important. Once employees have attained the highest quality levels of a step, and have shown that they consistently attain the highest level without fluctuation, it is possible to eliminate the steps that served as training wheels, or safety nets, to reach the high standard. This is not true if quality levels fluctuate widely. 
10. Make sure that those who are evaluating quality are rewarded for good quality. When farm labor contractors, supervisors, or crew leaders are paid in proportion to worker earnings, farmers may inadvertently be encouraging less attention to quality. That is, unless worker earnings are already tied to quality.       

Choosing Teams

We mentioned earlier that individual piece rates motivate workers more than group piece rates. Often, the fastest piece-rate paid individuals slow down considerably when paid on a team piece rate. Smaller teams are more effective than larger ones. For the longest time, I thought that permitting employees to choose their own teams was one of the cardinal rules of piece rate design. In one study, nevertheless, we found that women preferred that management take the blame for changing the teams, as their relationship with the other women was more important than their earnings. Over time, the women became more comfortable making their own decisions, however, and resembled a male crew.     

Communicate with Workers

At minimum, all workers need to know what is expected of them and how their performance will translate into pay. Better yet, the piece-rate plan should be presented to workers for review and comments before implementation. I like to work with a team of employees to examine possible exceptions to normal procedures, and analyze instances where the piece rate plan may not be fair to them. Because employees are doing the job from day to day, the often have concerns that members of the management team or an outside compensation consultant may not have thought about. These matters can be included in the piece rate design. Not only might personnel spot not so obvious shortcomings or obstacles, but also they are more likely to accept the performance challenge when they are involved. This takes us back to the idea of “walking the course” together with employees.

When it comes time to announce the piece rate system to all the workers, it is important to be realistic. If an expectation is set that employees can easily make the top incentive goal (e.g., for improving quality), the incentive may act as a demotivator. Instead, growers should encourage employees to try their best and not assume they will reach the highest goal right away; if the accomplishment exceeds the workers’ expectations, all the better. A simple program will help build trust.

Negotiation Skills
Some negotiation on pay rates may be traditional. When a grape grower announced he was paying $0.24 per vine, crew members protested. They could not afford to work for this small amount, they argued. It appeared workers would refuse to work. The grower stood cool and firm and soon the workers smiled and said the wage was just fine, in fact, half a cent better than the previous year.

A grower bragged that when crew workers refused to prune grapevines at so many cents per vine, he then offered them the work at so many dollars per row. They readily accepted. What the grower did not tell the crew workers is that he arrived at the dollar amount per row by multiplying the number of vines times the same amount per vine he had quoted to the employees earlier. While the grower got the crew to work for him for the same price he had wanted to offer, these sorts of gimmicks, when discovered by the employees, will reduce trust for future interactions.

Another grower encountered stiff resistance from crew members after announcing the pay rate. They pointed out the neighbor’s higher wages. The farmer aggressively told workers they could look for work elsewhere if they did not like the rates. This situation ended up in a labor dispute as workers felt they had been constructively discharged (i.e., forced to quit).

Instead, this farm employer could have calmly explained how he arrived at the pay level, and told employees he hoped they would be able to work for him at this wage. Perhaps the neighbor pays more but keeps employees for a shorter season, or does not provide as many benefits. While listening to workers may work best in one case, it may falsely encourage and disappoint them in another.

Not everyone can handle the high pressures of negotiating with a crew. I would prefer to post wages—including incentives—where they are readily seen by all applicants. The farmer avoids (1) surprising workers, (2) haggling with the crew, often several times during the season or (3) taking a chance on a confrontation that may get ugly and out of hand.

In terms of negotiation skills, growers often ask if they should begin working on blocks that are more difficult and require more effort, and have the situation get easier from then on—or do the opposite. When employees are paid considering the effort required, it really does not matter where crews begin their work.
 
Feedback

Growers need to provide frequent feedback to employees regardless of the usual pay interval. For instance, crew workers may be paid on a weekly basis but receive daily performance feedback. Feedback may be given in person, or posted if worker anonymity may be safeguarded. When posting, replace the employee name with a number of symbol that only the worker, or work team, knows. If workers decide to share their number with others, that is their decision. But the grower should not post results with employees’ names.

While hopefully few adjustments are needed in the future, it is important to listen to employee complaints and suggestions for improvement. At one operation, the packers paid on a team piece rate complained that the grower was cheating them. This farm manager decided to select four packers at random and show how in each case they were earning higher wages than before.  

Periodically Review the Program

Record keeping and statistical analysis are critical to determine the success of a piece-rate program. Good controls are crucial so incentive pay results can be isolated and correctly attributed to the pay system. If a farmer introduces other changes simultaneously, she may never know the impact of the incentive program. There are a number of statistical tools that may be used to analyze results. Your computer spreadsheet may already allow you easy access to these tools. You may want to consult with a statistician, labor specialist, farm advisor or county agent on what statistical tools to use.

Growers can benefit from keeping records even if they are not paying by the piece. These records can help establish base lines essential for establishing standards for future performance. In some cases incentive programs are dropped too soon, without giving the systems sufficient time to change.

Conclusions

The message of this article is that for piece rates to be able to survive as a motivating force, they must protect the interests of both the farm employer and employee, so when viewed from that angle, every design issue is of importance to both.

Growers mistakenly focus on worker earnings per hour (by mentally translating piece-rate costs into hourly wages). Crew workers who are capable of doing much more, however, learn that sooner or later they will be punished for their outstanding performance. Picking, grafting, pruning or producing more units today will mean that the price per unit will be reduced tomorrow, or sometime after. Through negative reinforcement top workers learn that it does not pay to perform much faster than the slowest crew member.
 
The message is simple enough. A grower can reduce total labor costs and pay crew workers more in an effectively designed piece-rate system. A farm employer who caught on to this message approached me with a twinkle in his eye. He was delighted because one of his farm employees was consistently earning five times the minimum wage. This employer is likely to attract and retain workers, and be at a competitive advantage over his neighbors here or across the ocean. Those interested in applying these principles to their farm operation may contact the author at gebillikopf@ucdavis.edu

References

Belcher, D. W. 1974. P. 316. Compensation Administration. Formerly published as Wage and Salary Administration, 1955. Prentice-Hall, Inc., Englewood Cliffs, New Jersey.

Billikopf, G. E. 1985. Response to Incentive Pay among Vineyard Workers. California Agriculture. Vol. 39-7. 13-14. July-August. (Click on research link, top of page.)

Billikopf, G. E. 1988. Agricultural Employment Testing: Opportunities for Increased Worker Performance, Giannini Foundation Special Report No. 88-1, pp. 17-18. (Click on research link, top of page.)

Billikopf, G. E., & Kissler, J. 1988. Hourly Versus Piece-Rate Paid Vineyard Pruners. Cited in Billikopf, G.E.  Agricultural Employment Testing: Opportunities for Increased Worker Performance. Giannini Foundation Special Report 88-1. Oakland, Calif.: Giannini Foundation of Agricultural Economics, University of California. (Click on research link, top of page.)
 
Billikopf, G. E. & L. Sandoval, L. 1991. A Systematic Approach to Employee Selection. Video. University of California. (Click on selection video under Instructor’s Corner, top of page.)

Billikopf, G. E. & Norton, M. V. 1992. Pay Method Affects Vineyard Pruner Performance. California Agriculture. Vol. 46-5. 12-13. September-October. (Click on research link, top of page.)
 
Billikopf, G. E. 1994. Labor Management in Agriculture: Cultivating Personnel Productivity, University of California, Stanislaus County. (See 2nd Edition, 2003, click on Labor Management Book, top of page.)

Billikopf, G. E. 1995. High Piece-Rate Wages do not Reduce Hours Worked. California Agriculture. Vol. 49-1. 17-18. January-February. (Click on research link, top of page.)

Billikopf, G. E. 1996. Crew workers split between hourly and piece rate pay. California Agriculture, November-December, pp. 5-8. (Click on research link, top of page.)

Billikopf, G. E. 2003. Labor Management in Agriculture: Cultivating Personnel Productivity. Agricultural Issues Center, University of California, ANR Publication 3417. (Click on Labor Management Book, top of page.)

Billikopf E., G. 2004, “Hourly Pay plus Piece Rate Bonus,” (click on Articles link, top of page), or “Deciding how to pay workers means no compromises,” Vegetable Growers News, October 2004, p. 37.

Billikopf E. G. 2006. “Effective piece rate design: issues of framing and reframing.” (click on Articles link, top of page) or “Piece-rate design in a tight labor market.” California Fresh Fruit and Raisin News, October 2006, p. 26.

Billikopf, G. 2006. “Minimum wage increases affect piece-rate.” “Minimum wage increases affect piece-rate.” Greenhouse Grower. March 2007, p. 42.

Billikopf, G. 2007. “Crew workers sometimes don’t buy piece rate.” California Fresh Fruit, April 2007, p. 39.

Billikopf, G. E. and Lemus, C. 2007. Unpublished research paper.

Billikopf, G.; Pons, M., Grant, J.H., Muñoz, P. 2007. Unpublished research paper.

Milkovich, G. T.; & Newman, J. M. (6th Ed, 1999). Compensation. Irwin McGraw-Hill.

Pons, M. 2007 Personal conversations.

Sandoval, L. 1990. Agricultural Workers’ Health Center. Interview with author.

Shukla, M. C. (18th Revised Ed.) Business Organisation and Management, S. Chand & Company, Delhi.

Taylor, F. W. & Alifas, N. P. 1921, “Scientific Shop Management,” in J. R. Commons (Ed.), Trade unionism and labor problems (New York, NY): 141. p. 148. Quoted in J.-C. Spender, Frederick W. Taylor and John R. Commons: Two Views of Scientific Management, 2006. p. 11, emphasis added. http://www.jcspender.com/uploads/Taylor___Commons_n29.pdf

(c) 2008 Regents of the University of California. Copies may be made and distributed as long as author and University of California are credited.

30 January 2008

Agricultural Labor Management

E-mail: gebillikopf@ucdavis.edu

Gregorio Billikopf Encina
University of California
(209) 525-6800