Technical background
Metrics for labour productivity
The metrics for appraising and comparing labour productivity include proportions, process measures and output measures.
Proportions refer to the split of time between the farm tasks under consideration. There are significant downsides to the use of proportions within such a varied array of farm systems as are seen within Britain. Principally, since the proportions of time will always sum to 100%, apparent efficiency in one area of a farm system will always be balanced with apparent inefficiency in another.
Process measures refer to movement of resources within the farm system, such as cows through a parlour, pigs through a farrowing unit or indeed staff employed. So, for example, the IFCN (2005) used cows/labour unit (LU) as a process measure and found that the UK, at 47 cows / labour unit, lagged just behind the US (49 cows / LU) and far behind New Zealand (110 cows / LU). Efficiency within many parts of a farm system will most easily relate to process measures, such time milking per cow, or sows/labour unit.
Process measures are particularly useful in that the comparisons are less subject to seasonal variations in productivity and they are relatively easy to understand. However, the use of process measures remains a step away from relating the costs to the returns from investment in labour and if used on their own they can direct targets away from profitability.
Output measures refer to movements of produce out of the farm system, and they therefore allow inputs to be judged in the light of actual financial returns. As such, output measures provide the most detailed and accurate means of assessing labour productivity. However, there are significant caveats that should be taken into account including:
- Outputs should relate to inputs if they are to be of any use. The outputs from certain tasks are subject to significant time lag, so that time invested in fertility, for example, will not have an immediate impact on milk yield or piglets produced.
- Outputs may vary significantly over a time period, as is seen in the seasonality of milk production within spring calving herds.
- Multiple outputs may be needed for a single farm system. For example, on a dairy unit there are "milk-sold" outputs but in addition there may be "calves-sold". On a pig unit there may be "piglets-weaned" but in addition there may be "kg liveweight gain of weaned pigs".
- Outputs can be subject to unplanned events, so that for example yield may drop due to infections.
Whilst these factors do not reduce the accuracy of output measures, they reinforce the message that all farm-metrics should be interpreted with due caution and, if possible, with suitable expertise. Within the Work-Metrics programme we use the mantra "context before content" to emphasise the fact that the figures on their own are not enough to provide a full understanding.
Dairy and pig farming are probably better suited to the use of output measures than most other farming systems, due to the regularity with which produce is moved out of the farming system and the very short time lag between labour inputs (e.g. feeding, milking etc) and product outputs (e.g. milk sold or piglets weaned).
Family or "unpaid" labour
The use of family labour on many farms across the EU presents particular problems for labour productivity monitoring. Traditionally, farm business accountants have imputed the value of family labour. Put another way, they have made a "best guess" based on very limited data. Clearly, this is of little use in terms of farm business planning. Family labour should be considered at two stages: when labour costs are being estimated, and when these costs are being put into context. Where labour costs are being estimated the following points are of note;
- Where there is any reliance on family labour, the costs of this should be included so that a "cost of production" figure can be calculated that can be budgeted against in worst-case scenarios e.g. the sudden absence of a family member.
- Hourly rates should be appropriate to the task and not necessarily to the person i.e. ask "if a replacement could be found for this person, how much would they cost?" rather than ‚"if this person were to do another job off-farm, how much would they be paid?"
When labour costs are being put into context, family labour should be treated with due sensitivity and the question should be asked whether or not the farm is dependant upon excessive levels of family labour, or whether the farm simply uses the labour that is freely available to it. In the first instance, such dependence would indicate the need to address labour productivity. In the second instance, business planning may take into account the "what if?" scenarios of family labour becoming unavailable, but with less urgency.
The Work-Metrics analysis can show the levels of activity for each individual, paid and unpaid, and so highlight were particular individuals may be struggling to keep up or, as may be the case, where they are enjoying taking their time over a job well-done!
Salaried and waged labour
Looking at labour in the round requires that we understand what motivates our staff to perform well and to high levels of productivity. Often this is not the simple reward of hourly pay, which might be received regardless of productivity, but it is the "overall employment package" – which of course includes the total financial reward, but which also includes many other ways in which labour is valued, such as inclusion in decision making, being listened to, being developed through appropriate training and being part of a team.
Providing a salary rather than a wage can reduce the need to commit hours to the business, and can work to drive efficiencies up, as labour efficiencies benefit workers as well as management. It also reduces the seasonal variations in income that are seen on many farms. Decisions on whether salaries or wages are most appropriate will of course depend on individual farm circumstances, and on what is known of the personalities and motivating influences of farm workers, but should always be taken in the context of the overall employment package that will best motivate farm staff.
Reducing input costs vs. maximising returns on investments
Very often labour is employed on a "full time" basis and cannot be employed in any other way, especially where farms are less accessible, or where time constraints are such that labour is needed intermittently throughout the day. As such, it is often not possible to reduce the total employed labour on a farm.
However, this does not mean that labour productivity cannot be increased. Spending more time on "productive" tasks and paying greater attention to detail in these can lead to significant increases in productivity. These tasks might include, for example, ensuring that levels of fertility are maintained at a high level, or working to reduce mortality and ill health in young stock.
Alternatively, some farms might choose to increase their herd size as a result of labour use analysis, where it can be shown that an equivalent number of staff, in a similar farm setup, can operate at higher levels of productivity. The choice is ultimately made by the farmer, but the knowledge and understanding to support that choice is improved through the Work-Metrics labour productivity analysis.
References
Christoffers, K. & Hemme, T. (2005) Labour costs analysis for typical dairy farms. In Hemme, Deeken et al. (2005): IFCN Dairy Report 2005, International Farm Comparison Network, Global Farm GbR, Braunschweig.
Fowler, T. (2007) 2006 Pig cost of production in selected countries. BPEX, Milton Keynes, UK.
Perrot, C., Coulomb, C., You, G. & Chatellier, V. (2007) Labour productivity and income in North-European dairy farms. Institute de l'Elevage et INRA SAE2, Nantes.
Robertson, P. & Wilson, P. (2007) Farm Business Survey 2005/06. Dairy Farming in England. Rural Business Research Unit, University of Nottingham.
