Managing with a business orientation

Contact: Ken Bolton, 715-877-1420 Kenneth.bolton@ces.uwex.edu

Much has been written about management research and philosophy since WW II. It is likely safe to say such concepts contributed significantly to the rapid advancement of the United Sates economy to prominent world leader. The application of modern business management techniques has been somewhat more recent in agriculture and still holds great promise.

The work of Edward Deming, Stephen Covey and others are often referenced in business management articles both within and outside of agriculture. The bulk of this work addresses a process of information gathering, evaluation and decision making followed by implementation, reevaluation and if needed redirection. A recipe if you will, for documentable, systematic management with accountability.

It has been observed that the lack of a decision is a decision. In such cases, decisions are made by default versus intentionally. The decision maker behaves as though, if not actually believes, they are at the mercy of circumstances all of which are beyond their control. The proactive decision maker, while realizing they are most effective in acting on what they can control also understands they may affect the outcome of things they do not have total control over. Additional information about this is available from Covey’s “Areas of Concern vs. Influence”.

Farm business decisions are often made by the manager either alone within a closed- system with little outside information, or with the benefit of perspective from outside the farm business. While both approaches typically call upon the experience of the decision maker, those utilizing modern process skills often call on the expertise and experience of others as well.

The interesting thing to me in this area is, at least initially, successful business mangers didn’t become successful by following developed, identified theory but rather the “theory” was developed by Deming and others by observing successful managers. They literally “learned by walking around”, via observation. Today, the information is readily available for anyone to take advantage of.

I will address two main tenants of these concepts as they relate to farm management; the Comprehensive Strategic Management Model (CSMM) and the on-farm management advisory team.

The CSMM, proposed by Fred David, http://www.leesweblog.com/2009/08/01/getting-started-in-strategic-management combines several strategic planning/thinking concepts in one model or strategy. It is based on the business mission, objectives, policies and resources available to produce desired results. It puts into action the concept of SMART objectives i.e., Specific, Measurable, Achievable, Realistic and Time-bound but is preceded by both an internal and external appraisal of business conditions. The model then directs us to generate, evaluate, select and implement strategy to achieve management objectives culminating in an evaluation of results. The model is not linear but rather continuous. Once impact results are in hand, the process restarts.

Within the context of the CSMM are opportunities to include concepts such as “Critical Success Factors”, those things which must go well in order for your business to succeed. This thought process directs the manager beyond operational tasks towards issues which are strategic (critical) to business success. The use of priority setting logic (Urgent vs. Iimportant) further strengthens the process by examining management activities. Ask yourself; “How did I spend my day yesterday?” Was the bulk of my day devoted to the Important or the Urgent?

The model is action and results oriented. Integral to any action-oriented strategic process is the Tactical Plan. Tactical Plans identify “What” is to be done, “Who” is going to do it, “How” it is to be accomplished, “Where” it is to occur and “When” the results are expected.

Earlier I referenced the above processes as a continuum. Consider the following example. A dairy farm manager is concerned about not being able to pay bills in a timely fashion. He evaluates his Dairy Herd Improvement Association (DHIA) records finding not only Days In Milk (DIM) values higher than he would like but also a greater number of days to first service than his peers. Realizing he isn’t milking the number of cows and is feeding more dry cows than he had when cash flow was strong and creditors weren’t calling asking for payments, he consults with his veterinarian who confirms his diagnosis. Cows aren’t being introduced to semen within the goal of 100 DIM.

Mr. Dairyman calls together his on-farm management advisory team consisting (examples only) of his veterinarian, nutritionist, AI representative, milk plant field representative, lender and UW-Extension county agricultural agent whom he asks to facilitate the team discussion. Although perhaps not specifically identified, the CSMM process is utilized and a Tactical Plan is developed to address getting cows bred.

— Task to be accomplished: Breed cows by first heat after 60 DIM.
— Process: Catch cows in heat by improving heat detection/synchronization program compliance.
— System: A comprehensive reproduction management program.
— Results: Improved reproduction efficiency, reduced days to first service and days to conception, more calves, more cows in milk, more milk sold, lower expenses and improved cash flow position.
— Both the process and improvement is continuous!

So why involve an on-farm management advisory team? Because few persons in agriculture are top performers in all enterprises. If you’re good at crop production you may not be an excellent dairy producer. There are exceptions. Perhaps one of the best arguments for team input is “you’re already getting input from these folks individually so, why not get them together and avoid the confusion?” Get beyond the differences of opinion, identify and obtain needed additional information, define a Purpose, develop Consensus, an Action Plan and produce desired Results.

On-farm management advisory teams are very much like the Packard automobile company slogan of yesteryear, “Ask the man who drives one.” You will be impressed. In addition to reproductive performance, management advisory teams have been utilized with great success with issues of milk quality, feeding, modernization planning, financial opportunities and challenges, business planning, human resource management and others.

Additional information on these topics is available from the University of Wisconsin-Extension, Center For Dairy Profitability (CDP) at http://cdp.wisc.edu/AgVentures.htm select “Building A Vision” and your county UW-Extension agricultural agent.

While you’re at the CDP website be certain to check out the other farm management resources including budgets, benchmarks, papers, software and decision- making tools including the “Working Capital Decision Support System” suite of cash flow management tools.

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