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Sunday, June 9, 2013

Dairy Farmers Spend 66% Less Than The Average NZ Business On Wages




Transcription:

G’Day, Glen Herud here again.

I’m going to carry on talking about dairy farm staff. I’ve got some statistics for you. 


Wage to Revenue Ratio

  • NZ Average                             21%
  • Dairy Farm (Owner/operator)     7%

Statistics New Zealand have released some data, and they’ve said that the average New Zealand business with a turnover, greater than $700,000 per year spends 21% of their turnover on wages. The dairy industry, on the other hand, spends 7% of turnover on wages. 

If these 2 businesses had $1 million turnover, these guys would be spending $210,000 a year on wages, and the dairy farm is spending $70,000 on wages. 

This backs up what I’ve been saying, is that the dairy industry is under-investing in staff.

I Think a 750 Cow Dairy Farm Needs To Add 2 Extra Staff

If we take our 750 cow dairy farm, which I’ve been using as an example, now we have 3 staff on there, plus the boss, so there’s 4 people on the farm. 

I reckon we actually need 5 staff plus the boss. I think we need to add an extra 2 people onto this farm. That’s not going to be cheap, that’s going to be an extra $70,000 per year on wages. If you look at that from a percentage of turnover, if they add $70,000 to their wage bill, they’re still only spending around 10% to 11% of their turnover on wages, which is about half of what the New Zealand average is. I think that’s still quite acceptable.

How Would I Staff a 750 Cow Dairy Farm


How would I setup this dairy farm so that it could attract and retain good people? This is how I would do it:

I would start with a Monday-to-Friday work week. I’d get rid of these rosters that you have, like 6 days on 2 days off, or 9 days on 3 days off; whatever like that. I’d have a work week from Monday-to-Friday. 

You’d need around 2 people to milk in the morning. That would start at 4:00 a.m. They’d have their breakfast at 8:00 a.m, after milking, they’d go through and have lunch at 1:00 p.m., and that’s the end. They’re done for the day, they’ve done 8 hours. You start early, you finish early. 

You get another 3 staff, and they’d start at 7:00 a.m. Get up, have breakfast, go to work, 7:00 a.m. Have lunch at 1:00 p.m. or maybe 12:00 p.m., and then they finish up after milking at 5:00 p.m. They’re working around a 9-hour day. That’s how I would do it.

Basically, we’ve got 3 people on the farm from 7:00 right through to 5:00. Between the hours of 9:00 a.m, through to 1:00 p.m., you’ve got 5 people on the farm. You can get a heck of a lot of work done. There’s no excuse for not having everything perfect on your farm. 

Of course, you’ve still got the boss, who’s also floating around, out here. You’ve also got to bear in mind that if you’ve got 5 staff, you’ve got to give them 4 weeks annual leave every year, so that’s around 20 weeks. For around half of the year, one of these staff members is going to be on holiday. I still think that’s quite an acceptable staffing ratio on a farm that size.

What about the weekends?


I reckon you only need 2 people to milk. Because you’ve got 2 people milking, all you want to do on the weekends, I believe, is just milk. 

On the Friday afternoon, everyone should be setting up the farm so there’s nothing else to do on the weekends but milk. The effluent irrigators moved, the brakes are moved, I’d even feed out silage on Friday. I’d feed out Saturday and Sunday’s silage on the Friday, and deal with all lame cows, all those things get done on the Friday.

On Saturday and Sunday, the 2 guys who are milking, all they’re doing is milking. Go home after breakfast; wait around under afternoon milking & milk.

Only Work Every 3rd Weekend

You’ve got 6 staff, because essentially, you’ve got 5 staff plus the 1 boss; that means you only work every third weekend. Essentially, you work Monday-to-Friday, a 40-hour week, roughly, have 2 weekends off in a row, then you work the third weekend, and then you have 2 weekends off in a row. Those are the sort of conditions that are going to be appealing and attractive to all workers. 

I think if we offer those terms and conditions, we’d be able to pick the best people and be attracting and retaining great people into the dairy industry, as opposed to scraping the bottom of the barrel, which we seem to be doing at the moment.


That sounds all wonderful though, but there’s a big but: How are you going to pay for an extra $70,000 a year? There will be farmers out there with 750 cows in Canterbury saying, “There isn’t $70,000 sitting on the bottom of my budget.” 

That’s what I’ll talk about next time.

16 comments:

  1. Doesn't silage lose nutrient value lying out in the paddock?

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    Replies
    1. Yes it does. But small price to pay in order to give your staff a manageable weekend.
      Cheers
      Glen

      Delete
    2. How small is that price?
      Does that include the pasture damage from the silage lying on it for up to two days?

      What is causing the lameness in the cows?

      Delete
    3. While and would say it is not best practice to leave silage on the ground for 2 days, I think youre pushing it to suggest that it will cause pasture damage. In all my years I have not noticed any wastage. The only left over silage had mould in it.

      The point I'm trying to make is, many people value their weekends, rightly or wrongly. The example system above is designed to give staff their weekends with the result being farmers attracting and retaining better staff and also having staff stay on for more than 6months to 12 months.

      I would rather the two staff member working on the weekend didn't have to spend 2 hours on a tractor. I would rather they were at home with their family.

      If it costs a bit on silage wastage, well so be it. A farmer will make that up 10 times by having better staff who stay for multiple seasons.

      I don't understand your point regarding lameness.
      Cheers
      Glen

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    4. "I’d feed out Saturday and Sunday’s silage on the Friday, and deal with all lame cows, all those things get done on the Friday."

      Dealing with all lame cows on a Friday sounds like a lot of work.
      It sounds also like something that is a chore on every farm every week.
      What happens with the lame cows over the weekend? (Lameness suggests pain)
      It also sounds like there is no lame cow treatment earlier in the week either.
      Is this routine on larger farms? Or any dairy farm for that matter?
      Why are so many cows routinely getting lame on NZ farms?

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    5. Oh I see what your mean. I suppose I haven't been very clear there.

      What I was referring to is if you happen to have any lame cows, these are cows that may show as having a limp or be favouring one leg etc. If a farmer notices a "lame" cow, the farmer will separate the cow during milking and then take a look at her feet after milking. There are many things that can cause lame cows. Studies have shown that 5% of a herd will have some sort of lameness during the year.

      When I referred to "dealing with the lame cows" I meant that, the farmers should ensure they were looked at during the week, rather than leaving it for the weekend.

      This does not mean that there are lots of lame cows.

      Cheers
      Glen

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    6. Yes, I see what you mean now.

      5% of 750 cows is fewer than 1 per week during the milking season. (And on a 200 cow herd maybe one a month)

      Delete
  2. I hate to say it Glen but your article reads like emotive rubbish to me at least.
    Firstly your statment about scraping the bottom of the barrel. Would you care to qualify that? Are you referring to all dairy employees or just some? If I was a dairy worker I would be highly offended by that statement.
    Secondly your preamble suggests that becasue dairy farmers spend less on labour than the average business that they are underinvesting in labour. That is a rediculous assumption. Dairy farms are different from the average business. Doesn't mean their business model is wrong. Doesnt mean they need more labour. Doesnt mean they are under investing. Just means they are different.
    Dairy farms have more money tied up in land than the average business. Are they paying too much for land. Should they not buy land.... I hope this simple analogy helps you understand my point.
    Mr E

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    Replies
    1. To make sure I'm clear, I am saying that the calibre of your average dairy farm worker is very low. Obviously there are wonderful workers in the industry too. But I wouldn't trust many dairy farm workers to look after my dog, let alone my dairy business.

      I'm happy to qualify my view. For the past 9 years I have run Mr Rentals in Invercargill. We rent TV's, fridges etc. We have lots of data collected. From 9 years of business, the people who are most likely to steal my rental equipment are dairy farm workers. It has got so bad that we turn many dairy workers away, we won't even do business with them.

      My sister is a sharemilker, she has employed 100% Filipino workers as the other applicants had criminal records, swastika tattoos &/or appalling attitudes.

      I could go on & on. I'm quite certain that dairy farmers are having to choose from "the bottom of the barrel". Virtually every dairy farmer will be able to tell you a horror story about some of their staff.

      Unfortunately the many good workers are unfairly tainted by the masses of crap workers. I told my doctor that I was going back to dairying, he replied "Isn't that what you do when you can't get any other job?".

      The percentage of revenue spent on staff is a piece of the picture, its not the whole picture & it is also an indication of the differing business models. But its a relevant KPI. So while the percentage of turnover figure by itself does not indicate an underinvestment in staff, when you combine it with the inexcusably high staff turnover on dairy farms and the high average hours of work. It contributes to the whole picture, which speaks of an underinvestment in staff on dairy farms.

      So I'm quite clear that the business model of a dairy farm is unbalanced/wrong. I think farmers are spending too much on land (expecting capital gain) which equates to higher interest payments & I think they are underinvesting in staff. But its not the percentage of turnover figure that leads me to think that, it the high turnover of staff that is the telling sign.

      I stand by everything I have said.

      Cheers
      Glen


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  3. You have every right to have an opinion. No question. But I am going to disagree with you strongly.
    New Zealand has some of the best systems in the world and these are in large part due to our people. Not just managers, or owners but people. I admire those that work in the field in all conditions. I admire the rate of growth of the dairy industry. And the performance gains of individual businesses. That performance gain is mainly due to people. And the bottom of the barrel has nothing to do with that.

    It just so happens that the Dairy industry has grown rapidly and the need for dairy workers has increased recently. That may have meant that there have been a few unsavory indivduals that have snuck in. But that is life, not e everyone is perfect.. Your suggestion that we need more labour will not help that scenario in my opinion.

    To say that the calibre of the average dairy worker is low is in my opinion wrong. Good luck winning friends in your new chosen career.

    You think farmers are spending too much on land. I call that a free market. It is what it it is. But you have returned to farming. Does that mean you own a farm? Did you buy it? Are you part of the so called problem?

    Mr E

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  4. I do appreciate you taking the time to comment. I know that my view is at odds with most dairy farmers, The reason I blog it is that I also know there are many people who agree with me, but no one ever says anything.

    I am in total agreement with you in regard to people being very important. That is why I have being doing a series on dairy farm staff.

    To summarise my view is that dairy farming is a wonderful career and I want more young people to enter the industry.

    I feel that if farmers could just invest a small amount more into staffing they can reduce the workload on staff & therefore the work hours too. I am in no doubt that if we can make dairy farm working conditions a little bit better, then we can attract & retain good people. Its also fair to say that many dairy farmers are not very pleasant employers either.

    My goal and purpose of this blog and my new dairy endeavour is to make New Zealanders proud of the dairy industry & make it an attractive industry to work in.

    Currently Fonterra & dairy farmers seem to be in the firing line from the NZ public & media. NZ appears to love shooting down the dairy industry. Much of this is unwarranted but the dairy industry is not perfect either.

    I think I have presented some pretty solid evidence to show that staffing on dairy farms is a real problem. I have used figures from the "working smarter not harder" report by Dairy NZ http://maxa.maf.govt.nz/sff/about-projects/search/05-028/technical-report.pdf

    A quote from the report says "Anecdotally, one third of staff move out of the industry every year". Many of these people are leaving the farms and end up saying bad things about their time in dairying. How can we promote a dairy as a great industry if so many people are leaving presumably feeling less than happy about their time on the dairy farm.

    I really am surprised by the response from the dairy industry. Despite the evidence, dairy farmers seem to keep saying "there is no problem" or "people just don't want to work anymore".

    To clarify I am re-entering the dairy industry with a goal to make dairy farming attractive to New Zealanders, especially young NZers. This means I won't be dairy farming in the usual way. I'm not trying to make friends with dairy farmers, I'm trying to make a little difference.

    If we carry on doing what we have been doing, we are going to keep getting what we have been getting.

    No I don't own a farm, I can't afford it. But I will own my own farm, hopefully in 10 years time.

    Cheers
    Glen

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  5. It is fair to say I don't like your generalisations Glen. Such as "Many dairy farmers are not very pleasant employers". And to be frank with you I think you may be looking at the industry through effluent coloured glasses.
    I have not formed the same dim view you have of this industry. I see it as world leading. I see the products as top notch and I see the average dairy farmer as being admirable.

    I believe the dairy industry already invests heavily in labour. Being a seasonal job it is hard to get labour supply matching demand. During winter you will find staff on farms delivering work that is often classed as farm development. Last time I looked the average New Zealand salary was $47,900 before tax. And the entry level job for dairying was $41,300. The top job -Farm managers were paid over $73,000. I call that investing well. Sure high hours. But often those hours are chosen. Many dairy farmers will tell your their hobby is the dairy farm. And they choose that. Just yesterday I asked a dairy farmer what hobbies he had. And he listed dairy farming as his main one. If you like you could call it a life style choice. Do lifestyle farmers leave the office heading home to work?

    There are people who have had bad employment experiences in the industry. I am one of them. But for my one bad experience, I can point out 5 mates who had great experiences and are now entrenched in the industry.

    One of my goals as a commenter is to stick up for the wee guy. That includes dairy farmers who are often too busy to comment and stand up for themselves. I find this factor significant in the media presentation of dairy farmers. I think the media unfairly target them, if not bully them. I feel dairy farmers don't stick up for themselves as much as they should. So I do it for them.

    If you like we possibly share common goals. Attracting people to the industry. My technique appears different to yours. I tend to stick up for the industry where I see wrongs being done. Then again you see problems I don't.

    You say farms are expensive and farmers pay too much. You want to buy one. I know farmers that think land is going too cheap. They are selling land.


    Mr E



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  6. Hi Glen
    I am writing to you because I am really frustrated with not being able to find reliable keen people out there in the dairy industry. I will give you an example; I am 30 and my husband and I have worked extremely hard to get our own farm. 6 weeks ago I had our second child, so I planned back in January we would need someone to help on our 300cow farm. I also agree that dairy farm workers should not be expected to work crazy hours, and that we should try as much as possible to make it comparable to a 'town' job. Our job was a 6am-5pm job with two 1 hour breaks and only working Monday to Friday. We also provided a house, meat, petrol money ($40 a week) and the option to keep 10heifer calves each year for themselves; at a total cost to us of over $60,000 a year. I really wanted to employ someone who actually cared about dairy farming and wanted to progress through the industry. Instead we got a young man who constantly complained we didn't pay him enough, that the fencing on our farm wasn't good enough, that he had run out of meat (after 2 months of half a beast) and we had to give him more, who since February has taken 19 days off. You get the idea. And then today he texts to let us know he is not coming back to work because he has a new job. We have had 5 cows calve so far... In the contract he was supposed to give three weeks notice but what can I do, physically go and bring him to work?
    Then when I talk to other people their experiences of trying to find good farm employees in NZ are very similar, that people here seem to think it is OK just to up and leave after racking up large power bills, to turn up to work stoned, to steal petrol. I think that the industry employment problem is not just the employers.

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    Replies
    1. Hi Jessica

      Thanks for your comment. I really feel for you.
      You are right, the employment issues are not just because of employers. Your job sounds brilliant! I have not heard of employers making heifers available to staff for ages & every weekend off is just outstanding conditions for a young farmer.

      I found myself in a similar position in 2010. My wife had our first biological child premature and both mother and baby were in hospital for over 4 weeks. Right in the middle of it my manager calls me to say he is leaving because he was going to a different job. And of course he was not going to honour his 3 weeks notice period.

      I assume you are in the north island?

      I know I'm sounding a bit negative about dairy farm employers at the moment. I know there are lots of great employers out there. But I have noticed especially in the South Island that there is a attitude of blaming the staffing issues on lack of good employees, when I think they need to take a look at how attractive their job is and whether good employees would want to work for them.

      Your job sounds great and I would hope you could attract great staff.

      Having said that I am well aware of how difficult it is to find people with good attitudes. Its not just dairy that faces this issue either. Builders, cafe's and my retail business have all had the same issues.

      I'll cover that issue in my blog shortly.

      Thanks again for sharing your experiences.

      Cheers
      Glen


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  7. Hi Glen,

    I actually currently do pretty much the same roster as you are describing with staff only doing one milking per day and either having a sleep in or the afternoon off only we give every second weekend off so slightly different and to be honest the only difference is we are less tired because we don't have to do so much with the extra staff. Staff productivity is good in the first few months but you still get the people taking advantage, who still come back 20min late from breakfast and take off 1/2 hour early and spend all day stuffing around and moaning about anything and everything. I think its more the staff attitude that needs to be addressed and encouraged more than the working hours, while it is important to not work them to the bone and to make sure that the staff aren't overworked and underpaid. Young people these days need to be educated in the opportunities farming provides for them, it is not a job, it is a lifestyle and if they want to take on a farming job they need to realise they are taking on a lifestyle and be grateful for the house and meat and income they are provided with. Yes there are bad employers that don't provide comfortable accommodation and who make you work too much for what you are paid, but the majority out there are good employers and the employees need to realise if they don't like it they can leave, no worries. But most of them don't because they know it is a good job and they are just being ungrateful.
    Attitude is the most important in my opinion.

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  8. https://www.youtube.com/watch?v=onb_v3POk5U
    Can i have this opportunity to find employer....
    Thank you'

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