Seed World

Is Hourly Pay the Enemy of Efficiency?

Gro Alliance

A third-generation seedsman, Jim Schweigert grew up in the family seed business and was exposed to industry issues at an early age. He earned a Bachelor of Arts in public relations from the University of Minnesota and worked for corporate public relations firms in Minneapolis, Chicago and Atlanta before joining the family business full time in 2003. He has since been active in the American Seed Trade Association, the Independent Professional Seed Association and earned his master’s in seed technology and business from Iowa State University. As president, Schweigert manages client contracts and crop planning, as well as business development and new market opportunities. His unique background and experience make him one of the seed industry’s leaders in innovation. As such, he was honored as Seed World’s 2009 Future Giant and currently serves as chair of the board of directors for Seed Programs International.

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Motivating employees is hard! The challenge is to ensure that the employees’ goals and the company’s goals are in line. One area where this is especially difficult is the tug-of-war between company efficiency and hourly wage earners.

The peaks and valleys of activities during a typical season in the seed business present one of the most complicated labor management challenges of any industry. This is further complicated by the need for technically skilled workers in mostly rural areas. Seed companies need employees that are competent in diverse activities from field production to running high-tech conditioning and packaging equipment. Employees who fit this profile can be hard to find and retain.

Most businesses with cyclical activity levels tend to prefer to pay on an hourly basis. Workers get rewarded for the hours in the busy periods, and the company gets a cost benefit during the slower times. While this approach makes sense, it can also put the employee and company at odds when it comes to driving efficiency.

Employees see the benefit of extra hours at the end of each pay period, so they are motivated to work the hours needed. The company, however, is usually searching for ways to reduce overtime through driving efficiency. In many companies, the very employees who are responsible for the efficiency improvements are benefiting from the extra hours.

The challenge becomes motivating hourly employees to get more work done in less time while knowing that the increase in efficiency will mean they miss out on overtime pay. This is further complicated if hourly employees have come to rely on the overtime hours. In some cases, their personal financial situation may even be built around those extra hours. 

My suggestion is to pay key field leads and key operators on a salaried basis. This will help match the employee goals to the company goals. When converting hourly employees to salaried, make sure to take the historical earnings including overtime into consideration. Setting the salary should take into account the majority of the overtime hours that an employee has historically earned. This change won’t automatically drive efficiency, but it will at least ensure that, when it comes to efficiency, both the company and employee benefit when results are achieved. 

As for how this may create new challenges when salaried employees are required to work extra overtime. I will cover that in a future article!