Friday, March 29, 2024

Incentives loopholes … and stoppers

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There are 101 ways to do it wrong when it comes to incentive pay, University of California, Davis, labour management specialist Gregorio Billikopf said.
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Linking incentive payments to things the staff member can’t fully control is number one. Production bonuses are a great example because the farm manager or staff member can have an influence to only a certain extent. In any one season it’s the climate that will likely have an equal or bigger effect.

Instead, the incentive has to be linked to an aspect of production the staff member does have control over such as limiting the number of cows in the penicillin herd.

“If you’re paying more money as an incentive, as a motivator then it has to mean it’s being paid for doing something better, otherwise where’s the motivation?”

If their key performance indicator (KPI) is impacted heavily by other factors outside their control people soon work this out.

Some will be discouraged and some will just ride with it taking the good years as they come.

They’ll be happy to cream off the bonuses in the peaks and might just put up with the troughs but either way they’ll have learned nothing and the bonus is effectively wasted.

Also beware the incentive doesn’t actually encourage poor behaviour.

Billikopf said he’d been told of a farmer who had caught an employee killing a calf that was less than a day old. The farmer had a bonus scheme that related to calf survival rate but the scheme started once calves were a day old. The farmer thought he was being fair to staff because if calves were going to die of something beyond their control it was most likely to happen in the first 24 hours.

“So the staff member saw the calf was sickly but it looked like it would survive past the 24 hour point,” he said.

“After that there was still a reasonable chance it would die so he killed it to avoid losing the bonus.”

Similar problems could be encountered with bonuses related to mating. Staff could be putting cows up for mating they weren’t really sure were on heat if the incentive wasn’t structured correctly.

“For every loophole there’s a loophole stopper.”

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