Performance-Based Pay and Other Incentive Schemes on Dairy Farms in Germany

23 Pages Posted: 12 Oct 2016

See all articles by Agnes Przewozny

Agnes Przewozny

Humboldt-Universität zu Berlin

Vera Bitsch

Technische Universität München (TUM)

K.J. Peters

Humboldt University of Berlin - Department of Crop and Animal Sciences

Date Written: February 11, 2016

Abstract

Performance-based pay is a common tool to improve workers' motivation and performance outcomes. It is frequently used in dairy farms with hired labor. This study investigates the effects of performance-based pay and other incentives for dairy farm workers on milk performance characteristics. In 2007, comprehensive face-to-face interviews with farmers were conducted by the author in 84 East German dairy farms. Herd performance data was compiled from records of milk performance testing of the same year. Data on different incentive schemes were analyzed regarding their relationship to 305-daymilk yield and Somatic Cell Count (SCC). Approaches to motivate farm workers through in kind, non-monetary incentives or by delegating responsibility to workers and emphasizing good communication were related to a higher milk yield than performance-based pay alone. The difference between means amounted to 1000 kg milk/305 days. We conclude that milk yield is not suitable to measure the work quality of employees, and therefore, not an appropriate criterion for incentive systems. Moreover, this criterion is potentially perceived as unfair by workers, and thus may have negative effects on worker motivation and farm outcomes.

Keywords: Motivation, Incentive Schemes, Performance-Based Pay, Milk Yield

JEL Classification: D22, J33, J43, M12, M52, Q00

Suggested Citation

Przewozny, Agnes and Bitsch, Vera and Peters, K.J., Performance-Based Pay and Other Incentive Schemes on Dairy Farms in Germany (February 11, 2016). Available at SSRN: https://ssrn.com/abstract=2851082 or http://dx.doi.org/10.2139/ssrn.2851082

Agnes Przewozny (Contact Author)

Humboldt-Universität zu Berlin ( email )

Unter den Linden 6
Berlin, AK 10099
Germany

Vera Bitsch

Technische Universität München (TUM) ( email )

Arcisstrasse 21
Munich, 80333
Germany

K.J. Peters

Humboldt University of Berlin - Department of Crop and Animal Sciences ( email )

Invalidenstr. 42
Berlin, D-10115
Germany

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