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Pay your Millennials right

Too much? Too little? What’s the right compensation for the kids coming back to the farm?

Figuring how to compensate Millennials can be like driving through a snowstorm. You can’t see what’s ahead, there’s a very real possibility that you’ll hit the ditch. And yet you’ve got to get there.

Country Guide caught up with New Brunswick farmer and consultant Cedric MacLeod as he was driving home through a snowstorm. At 40, MacLeod helps both young and old generations through farm transitions and financial management, so he has deep understanding about the mindset of younger farmers, including their expectations. He also remembers when margins were terrible, and he admires the struggles and sacrifices of older farmers.

To solve the compensation conundrum, MacLeod suggests farmers start by creating a household budget for both generations.

After farming for a lifetime, some folks don’t understand what it costs to live in town, and how many living costs are shared when you run a home-based business. And the younger generation needs to get a clear picture of what it would take to care for themselves as independent adults. “Everyone needs to understand what they all need to live reasonably,” says MacLeod. “Reality is that today people can’t live off $15 per hour.”

According to the U.S. Census Bureau in 2015, the Millennials, the largest generation in today’s workforce, are making substantially less than the U.S. national average for workers between 35 and 65 years old. Even though they get blamed for being the “entitlement generation,” they are actually making about 20 per cent less in adjusted dollars than the Baby Boomers did at the same age. Plus they generally have more education and carry extra debt.

In Canada in 2013 young people aged 15 to 24 years old made up only seven per cent of the entire Canadian workforce, but 29 per cent of farm workers. Although this had declined by 10 per cent in 15 years, young people are proportionally more likely to work as hired labour on farms than in other sectors.

The Millennials’ impact on agriculture is remarkable, and it is growing. Statistics Canada has identified the average age of a farm operator at 55 years, but 9.1 per cent of farm operators were under 35 years of age, an increase of 3.0 per cent from 2011 to 2016. This was the first time the under-35 category increased since 1991 despite the total number of operators continuing to decrease.

According to the Canadian Agricultural Human Resources Council’s (CAHRC) June 2017 Labour Force Survey for all occupations in production agriculture, the average wage for paid employees is $17 to $19 per hour. At a labour level, the average wage for general farm workers for all types of production agriculture was $16 to $18 per hour. However, this varied based on sectors, geographies and the jobs. For example, grain and oilseed farms paid an average of $17 to $21.50 per hour for general farm workers versus $13 to $17 per hour for harvesting labourers. “The range is wide for these seasonal jobs because the jobs vary widely in the skill level needed,” says Debra Hauer, who manages agricultural labour market information at CAHRC.

For hired managers in agriculture, the wage range is $19 to $36 per hour. “We have seen a big jump in the wages for hired managers in the past 12 months,” says Hauer.

Sometimes older farmers simply don’t grasp paying today’s competitive wages to labour, or they justify paying low wages to family with the added promise of giving them land. However, the younger generation might look at time, liquidity and land ownership quite differently than their parents. Maybe they don’t want to own land, preferring to rent instead, says MacLeod.

With land values so high, some Millennials might see only how long it would take to pay it back, or how long they have to wait to acquire it, by which time it will be almost time to turn it over to their children. “Maybe they’d rather have the cash to contribute to their personal pension? It’s more liquid,” says MacLeod.

When working with families, MacLeod often asks the next generation what additional benefits and revenues they are bringing to the farm, and he tries to get them to quantify their contributions compared to their draws.

“If your target is to earn $50,000 a year, then what are you doing to make the farm earn more?” MacLeod asks. “A good rule of thumb is the additional person should generate a 20 per cent return, so in this case the farm has to net $250,000 more a year.”

Valuing contribution can be complicated and subjective. In some sectors and areas, strong prices and good yields took financial statements to unprecedented levels for a few years, and it’s difficult to create realistically sustainable draws and contributions based on those budgets. On the positive side, those years encouraged a whole new generation of farmers to breathe life back into family farms.

It also has caused some valuation problems. MacLeod says there’s a real disconnect between actual long-term average farm budgets over the last 10 years, and how much farms can afford to pay. Also there’s a disconnect with how much the younger generation can make off the farm, especially in the trades or the oilfield.

The Millennials have a much-talked about reputation for feeling they deserve high pay, yet that’s not always the case. When Maureen Geddes, human resource management instructor at the University of Guelph Ridgetown Campus, surveyed her students, mostly in their late teens, she found quite the opposite, especially if they were planning to work on their family farm, or someone else’s farm.

The majority of her 122 students expected to earn $25,000 to $50,000 a year. Those who planned to work on farms had even lower average expectations, with one in five students who were planning to work on someone else’s farm expecting to earn less than $25,000 per year.

The students not planning to farm for their own family or work on someone else’s farm on average had higher wage expectations, although only 22 per cent of the students were planning to go directly home to the family farm to work, about the same as were planning to work for another farm. One-third indicated they planned to work somewhere else and then head home, and this group had the highest expectations of wages, but fewer than 10 per cent expected to earn $50,000 to $100,000, and none higher than that.

Almost all of the students (94 per cent) either identified land ownership as a primary goal or thought it would be one in the future. Yet the group was very unstructured in their responses to valuing non-wage benefits like cellphone, vehicles, and room and board, and some didn’t respond at all.

This isn’t surprising considering the shift in how benefits are potentially perceived after a time with good cash flow. In the last decade, everyone involved in the farm has also become used to higher quality and more benefits, such as fancy three-quarter tons instead of a rusty old farm pickup, says MacLeod. He finds that it helps to have a real conversation about understanding non-salary benefits. He suggests creating a spreadsheet to add up, track and understand the extras that often come with farm jobs, such as housing, a vehicle, phone, or barn/feed for horses.

(You can see a template worksheet created by Idaho consultant and farmer Dick Wittman or buy Wittman’s guidebook for managing the human resources of family farms called Building Effective Farm Management Systems which includes this spreadsheet.)

MacLeod finds it helps to understand how different generations look at financing, benefits and cash flow. For example, he says older farmers tend to buy vehicles outright, and complain later about having a tight cash flow, whereas the younger generation is more likely to finance a new truck for three or four years with zero per cent financing.

“Generally Millennials have a hard time understanding money,” says MacLeod. “We tend to teach our kids how to grow peas and oats or how to breed a cow, not how to run multi-million dollar businesses.”

MacLeod suggests that the younger generation be given the responsibility of calculating cost of production and budget analysis as soon as possible. “They need to get used to running the numbers or find someone to help them do it,” says MacLeod.

They need to understand the numbers behind the decisions and their wages before they start making decisions. The ongoing trend is that there will be fewer farmers dealing with more and more land and livestock, and the farms will have higher risk profiles. “They’ll have to be willing and able to take over that risk and manage it accordingly,” says MacLeod.

Value

The older generation needs to understand the value of having someone who can operate new technology but who can also analyze and leverage that data. For example, with robotic milking, staff should be compensated for the skill and knowledge it takes to keep the robots operating smoothly. Then, the pay level should also recognize if the staff is also taking the data that the robot collected and spending hours in the office doing analytics to help manage the herd better.

Increasingly, farmers need operators who are comfortable operating high levels of technology, and they are only going to grow more valuable. “For example, one man could harvest 1,000 to 2,000 acres with a JD 9600 combine and now that same one person can do about six times that with a 680,” says MacLeod.

That person must operate and maintain the machine, but becomes more valuable if they also know how to use the data generated by the yield monitor. (Be aware, too, that such skills are also very valuable off the farm, and low supply/high demand for skilled labour is bumping up these wages. )

Understanding and communicating roles and responsibilities along with job descriptions can go a long way to figuring out compensation. The Canadian Agricultural Human Resources Council has a toolkit with a module and online templates for setting up compensation packages.

Included in the toolkit is a section on worker performance. MacLeod says doing performance evaluation tied to tasks and goals allows for increases according to increased values and responsibilities. It formalizes the process, which is helpful for family too. A performance evaluation is also a way to increase communication and connection, a key need of Millennials.


What millennials want

Having trouble understanding the Millennials? Read on.

Today it’s not uncommon to have three different generations working on one farm. Yet the culture in which we were raised, live and work in does have an impact on behaviour and how we view leadership and compensation.

Adjunct professor at Dalhousie University and CEO of Donohue Learning Mary Donohue has done research into understanding some generalities about the differences in perspective between the three working generations, namely Boomers before 1960, Gen X between 1960 to 1980 and Gen Y and the Millennials born between 1980 and 2000. “Understanding how generations process and use information differently can be the key to improving revenue,” says Donohue. “The more people understand, the more productive they are and the more innovative they become. Families and farms that can diffuse generational conflict with clear communication will sustain a strong and prosperous farm.”

The chart below can help you understand other age groups, and also your own generational biases.

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