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Willow Bend Farm shares equity with employees

Progressive Dairyman Editor Jenna Hurty Published on 31 December 2014
Equity diagram

“My dad always said, ‘If you have a good man, pay him well and he will make you money,’” says George Mueller, a shared partner and one of the founders of Willow Bend Farm in Clifton Springs, New York.

Like many children, Mueller wasn’t all that impressed by his father’s advice. Over the years, however, he has come to understand the wisdom.

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Mueller has not only incorporated this philosophy into the management of Willow Bend Farms, but he has also taken the next step and made his employees shared partners in his dairy business.

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Mueller grew up in the city, but his mother was a farm girl. Every summer she sent him off to work at his aunt and uncle’s farm in upstate New York. It was then Mueller developed his love of farming.

After four years at Cornell and two years in the military, Mueller returned to the farm in 1957 as a shared partner. In 1960, the market collapsed, creating a major surplus of milk. Consequently, he and his uncle were unable to sell their 80 bred heifers for a profit.

Unabated, Mueller and his uncle decided to milk the heifers instead. For $11,000 they bought and built the necessary equipment and facilities, creating one of the biggest dairy farms in the area.

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Sharing the milk check
In 1985, Mueller began a partnership program with his employees. At the time, he was milking 322 cows. He decided to bring his herdsman and two employees who were Cornell graduates into partnership. The herdsman received 4 percent of the milk check without housing, while the other two employees received 3 percent of the milk check with housing.

By 1988, they reached 600 cows. The herd grew, the farm grew, and production increased. Giving each of the employees a share in the business gave them even more incentive to work hard and help the company prosper. Whenever they expanded, each partner was required to supply 20 percent of the cows.

Workman’s compensation was covered, but essentially each of these men was self-employed. They made their own schedule and paid their own Social Security. Eventually, they all moved on to run their own businesses. Mueller said he is proud of them and grateful he was able to give them a start in life.

Rodney Brown, who started working for Mueller in 1981 and became his herdsman in 1985, was grateful for the opportunity. While he worked for Mueller, he bought a farm down the road. The herd he built at Willow Bend Farm gave him enough equity to take out a small loan and pay the mortgage on the farm. Brown and his family still live at that farm today and milk 800 cows.

“It was a great opportunity,” Brown says. “I started working there as an employee and was given the opportunity to grow a herd. Learned a lot. Learned a lot about cows, people, business. It was a very good learning experience.”

When Mueller’s son, John, returned to the farm in 1989, the farm was in a transition period, with three employees leaving the farm to strike out on their own. Brown left in 1992 to start his own farm, taking 170 cows and almost 140 heifers with him.

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Renting cows
Mueller and John grew the herd again and added more. This time they developed a slightly different partnership system with the employees. Instead of paying them with a percentage of the milk check, employees bought into the herd.

Employees did this by either buying a heifer calf or a heifer that was due to be bred or freshened. Once the heifer was freshened, the employee was paid a rental fee for use of the cow. Employees who participated were even more careful about managing the herd. They wanted each one to have the best care possible, helping the overall herd heath and well-being.

Incorporating family
From 1991 to 1997, Mueller and his wife, Mary Lue, had a basic partnership with all five of their children. In 1997, Mueller and the four children who weren’t on the farm became limited partners. John was not a limited partner since he was the general manager.

This allowed Mueller to withdraw Social Security, and he and the other children no longer had to pay Social Security tax on farm profits. In 2003, they went into partnership with their neighbors, Kevin and Barbara Nedrow, and formed an LLC.

Today, the farm milks 3,000 cows, most of which are just down the road at Nedrow’s Spring Hope Dairy. About 1,200 head are still at Mueller’s home dairy, along with 2,300 to 2,400 heifers. They own 5,000 acres, most of which is used to grow forages. Corn and alfalfa each cover around 2,200 to 2,400 acres and are made into silage. They also grow 150 acres of wheat and a couple hundred acres of grass hay.

Future plans and bonuses
Any employee can still buy into the company today. Although prices have changed, the system is still fairly similar to the plan Mueller and John drew up in the early 1990s. It costs an employee about $335 per year to own a cow.

As long as she is either bred or milking, the farm pays the employee $50 per month or $600 per year to rent her. This means that, on average, an employee will earn $265 dollars each year for every cow he owns – in addition to the calf’s value.

Since not all of their employees choose to join the program, they have two general incentives for excellence: One is for the field crew, and one is for the barn crew. If the field crew plants all of the crops by a certain date each year, they receive a predetermined bonus.

The same goes for harvesting the crops on time. The company Willow Bend Farms ships its milk to gives two bonuses based on milk quality. If the milk qualifies for either of the bonuses, it’s divided between the entire barn crew. The farm currently qualifies for a bonus on a regular basis.

“This is generous,” Mueller says, “but we get an employee with more enthusiasm for doing a better job with our whole herd. The program is a win-win for employee and owner. We like the program.” PD

Jenna Hurty
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