This case of analysis presents two key characteristics that they allow to better evaluate the advantages and disadvantages of each system. These significant characteristics are that the tree planter job is a seasonal job, and that both sectors (workers and company) have very sharp and defined targets based on efficiency and profitability.
Piece-rate system has several advantages. The most important are related with efficiency and short term achievements of goals. In addition, in the piece-rate system the workers are compared permanently between them increasing the motivation and competitiveness. Otherwise, an advantage for the company is that usually workers are not entitled to sick pay or holiday pay, which reduces costs.
Otherwise, piece-rate payment system has several disadvantages. A piece-rate or commission pay is harder to administrate and inspect that other pay schemes, producing higher administrative and operative costs. Motivation, productivity and work environment could represent a disadvantage for long period of work or when employees depend of other people (internal or external). The characteristics of the tree planter job decreases the impact of these potential disadvantages. Lack of sick days and vacation are seen as disadvantages for the workers point of view. Quality of work represents other potential disadvantage for this payment system. In addition, workers in piece-rate compensation may ignore company rules, such as health and safety issues, trying to speed up their work.
Flat-rate system has some advantages. It compensates employees for worked hours in a minimum amount of hour per period. The work environment is not extremely competitive and could become more pleasant and motivational for workers. Also, it does not need additional administration and inspection. These two last characteristics could be important for mid or long-term jobs. This system presents for the employer the advantages or lower risks due to external factors due to the higher control and better administration of workers. If the quality of the work is a concern, this payment scheme could offer the advantage of lower pressure for workers, with more focus in quality than quantity.
Flat-rate has some disadvantages. Efficiency and lack of high level of competitiveness are the most important disadvantages of flat-rate payment. In the case of seasonal works these factors are important and the disadvantage is magnified. As conclusion, flat-rate presents a weak approach for the tree planter work.
It is not possible to have a perfect payment system, but we could design a payment system optimizing certain characteristic parameter of this particular business/job. It should maximize and promote efficiency, competitiveness, quality, and motivation, satisfaction and compensation for workers. Other considerations (e.g.: work environment, long term motivation) are not necessary to maximize because it is a seasonal work. Based on the previous discussion, it appears that piece-rate system could work very well for this seasonal work in maximizing efficiency, competitiveness, and satisfaction and compensation for workers. For flat-rate it is difficult to maximize efficiency and competitiveness, while it is possible to maximize compensation. In addition, piece-rate does not maximize quality in the sense that flat-rate do it. As conclusion, two different approaches could be considered; to work with piece-rate system and to find some mechanism to maximize quality, or to work with flat-rate system and to find some mechanism to maximize efficiency and competitiveness.
Piece-rate system with some approach to maximize quality appears to be the most effective payment mechanism for this particular case of tree planter job. This mechanism should be as simple and effective as possible. An inspection is the mechanism developed, but it has not worked very well; it is costly, not efficient and economically impossible of inspecting all trees. The natural, efficient and low cost mechanism to ensure quality is to wait a period of time and to see the growth of rate of the planted trees.
The designed compensation system has two components: the first part is similar to the current; the second part is related to the quality of the planted tree in the near future (e.g.: two years, but it depends of the soil, kind of tree, etc). The designed mechanism has the disadvantage of the lower compensation received at the moment. In opposition it has several advantages. It is attractive for the kind of workers (students) to have part of the compensation in the future; the offered compensation today looks higher that the current mechanism because the values are offered in the future value of the compensation; so, the complete pay (present plus future) looks more attractive compensation for the workers. As summary, the designed compensation is 12 to 24 cents per tree (with similar condition that Gal Contracting was working) plus 4.4 to 8.8 cents per tree with the required quality in 2 years (or 4.6 to 9.3 cents per tree in 4 years and so on)[1]. As conclusion, workers could see an increment in the compensation of between 2 and 4% face on the current scheme (16 to 32 cents per tree) in place. This mechanism for compensation will assure efficiency, quality, productivity, competitively and compensation for the workers.
The work that tree planter workers should developed in a very repetitive and with low skills requirement. In addition is a seasonal work, with short term of execution and difficult to forecast if the same people will participate in the next season. As conclusion, a cheap training plan on site should be developed and strongly oriented to efficiency, profitability, quality, health and safety.
The effective training program consists of three steps. The two first steps are an instructional-based program, specifically off-the-job training. The first step cover the general training for all those duties not directly related with the performance of the activity (e.g.: health, security, schedules, installations, supervisors, first-aid, etc) and it will be developed before to start any activity. The second step it could be developed in a continuous basis during the trip between the city and the work place, or during the breakfast[2]; it will contain permanent tips reminders (e.g.: GPS operation, map interpretation, communication system, efficiency improvement, walk optimization, health, security, camp operation, schedules). The third step is based on work-based program, specifically on-the-job training; the employee is placed in the actual work situation and is shown how to perform the tasks by a supervisor, inspector or experienced employee. Variation of situations could be shown based on the differences working with different trees, land, land distribution, etc.
Piece-rate compensation system provides a strong auto-evaluation and self correction process,
but this system has a structural problem related with quality. Performance appraisal process could decrease the impact of this system in quality, but never avoid it. Performance appraisal assists developing a global evaluation and comparison between workers to encourage other initiatives. Critical incidental methods could be implemented to encourage initiatives promoting new and innovative ideas to improve the efficiency and productivity. In addition, it should be developed ranking methods considering punctuality, cleanliness, health and safety actions, camaraderie and break of rules (e.g.: drugs, alcohol). All these rankings should have as outcome a range of action to be taken; these actions should be very demonstrative and in a very broad range, since the expulsion till allowances (e.g.: priority chosen areas, increase in piece-rate). Finally, due to the intensity of the work, to expose the result in common areas with graphics methods could help for a quick understanding and competence motivation.
Supervisors should evaluate taking samples the performance of each worker. This evaluation is a light evaluation and involves basically quality. This evaluation will be a new input for the previous ranking. The appraisal process should not be invasive for the task that the workers develop. Any waste of time for the employees in paper work or bureaucracy could discourage workers and decrease their efficiency. The only situation where it could be admitted is if the employees are moved in bus between the camp and the work area, or when a major incident occurs and the employee should be called for clarifications.
Bonner, S. & Sprinkle, G. (2002). The effects of monetary incentives on effort and task performance: theories, evidence, and a framework for research. Accounting, Organizations and Society 27. 303–345
Burchett, R. & Willoughby, J. (2004). Work productivity when knowledge of different reward systems varies: Report from an economic experiment. Journal of Economic Psychology 25. 591–600
McDonald, T., Fulton, J., Darr, M., & Gallagher, T. (2008) Evaluation of a system to spatially monitor hand planting of pine seedlings. Computers and Electronics in Agriculture 64. 173–182
Roka, F. (2009). Compensating Farm Workers through Piece Rates: Implications on Harvest Costs and Worker Earnings. University of Florida, IFAS Extension. 1-4
Toupin, D., LeBel, L., Dubeau, D., Imbeau, D., & Bouthillier, L. (2007). Measuring the productivity and physical workload of brushcutters within the context of a production-based pay system. Forest Policy and Economics 9, 1046–1055
[1] Considering 2.5% inflation and 5% acceptable rate of failed planted trees
[2] This seasonal job is usually developed in camp of workers.
