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The peer-to-peer choice

Why are more farmers joining peer-to-peer farm management and benchmarking clubs? Because it pays

Farmers are hearing more and more about peer farming groups. Maybe you even know someone personally who’s a member. That wouldn’t be surprising as these farm business management groups are growing in number across the country.

They come in many shapes and sizes, but have some traits in common as well, and all share the main goal: better business decision-making.

Do they deliver?

Much of the evolution of today’s peer groups for farming is centred in the West, but we have to start with Quebec, which has a surprising number of farm management groups all stemming from the original in 1968 that had 50 members under one advisor who had been hired collectively by the farmers to provide individual help.

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Over the years, the number of Quebec groups has grown to about 70, says Johanne van Rossum, administrator at VIA (the organization that now encompasses all farm management, environment and business transfer groups in the province).

In the early days, the advisors focused on helping farmers analyze production costs and compare profit margins across various crops. “Then around the year 1990, farmers wanted to compare themselves with other farms,” says van Rossum. “Now, out of about 29,000 farms in the province, about 1,500 voluntarily belong to about 20 farm management/benchmarking groups, which range from about 25 to 300 members.”

Each member of a group pays a basic fee (which varies among the groups), although about half is covered by the provincial government. And the groups work by having members submit confidential financial information to the advisor, after which they can access the group’s collective standardized benchmarking data to make comparisons.

For the membership fee, farmers also get basic individual consultation with the advisor. Further analysis is also possible on specific issues, and members can pay a subsidized fee to get additional consulting and research hours from their advisor to help with a big financial decision such as a farm expansion.

Members can also talk to each other at group presentations, mostly given by their group advisor but also sometimes by guest speakers. Presentation topics can range from whether to sell grain at harvest or store, whether to invest in or sell quota, whether to build a barn or rent, or whether to look at organic.

Over the last 20 years, the number of farmers in the management groups has stayed roughly the same, at 1,500, says van Rossum, who believes the groups are very important for keeping farmers updated and to keep them competitive.

In Quebec, bigger may be better

There has been a shift over the last few years to making Quebec’s farm management groups larger and more regional instead of smaller and local. “This means then that advisors can fill in for each other when one is away, ill or on parental leave — there is always a second advisor available,” says van Rossum. “This has been a big issue. It’s also allowing us to create teams of specialized advisors, so that there is more of a network of advisors available. And actually, with the internet, a farmer anywhere in the province can now access the right specialized advisor to help them meet their needs.”

VIA, she says, is doing its best to keep advisors up to date on software developments and other new farming advances through seminars and other means so they can help farmers as much as possible.

It seems to be working. VIA research shows members of management groups for a number of years have a 43 per cent higher operating profit, 2.2 per cent higher return on assets and a higher net worth.

The power of small

There’s another breed of farm business management group out there, however, and it takes the form of a small number of farmers who have close ongoing contact with each other. These groups are also facilitated by a professional such as Terry Betker, president and CEO at Backswath Management in Manitoba.

Betker runs two groups, one started about five years ago and one about a year ago, each with about 10 members. Each group meets in person regularly and members also communicate with each other in between meetings in different ways. Betker says you need the face-to-face interaction in order to establish the relationships and keep them strong, but that technology is also useful after relationships have solid footing.

He has set up the groups so members come from a relatively broad geographic area, but there are no other restrictions in terms of things like agricultural sector, age or farm size. Each group creates its own charter that outlines the group’s values and how it will function. Betker says this is an important step in members taking control of the group.

With Betker’s assistance, group members begin to identify what they want to talk and learn about (for example, human resources management on the farm) and Betker arranges for outside experts to provide answers. The groups have also done some formal and informal benchmarking of their management practices in areas such as HR (pay scales), professional fees and costs of production.

Betker points out that while not everyone wants to share their balance sheets, there must be a willingness to share some information in farming peer groups — a mutuality in the discussions — or there is no point to getting together. Commonly, for example, group members present and share annual farm plans. Members then report on progress during periodic check-ins.

Better together

Other farm management groups are mainly focused on figuring out together where to go next with their individual farm businesses. That’s the case with the 10-member group Leo Kosokowsky, owner of Saskatoon-based consulting firm AgMPower, started 14 year ago. “In 2004, it was how to survive,” Kosokowsky explains. “By 2006, we saw the prices improving and the group determined it was time to expand before land, inputs and machinery prices increased. Starting in 2012, profits and expansion were pushing everyone into corporate tax strategies that would try to keep small business tax rates lower. Around 2016, equipment inflation and infrastructure management seemed to dominate. It’s evolving now into next-generation support (how to include, train, motivate), tax management issues and mentoring for younger farmers.”

A similar group that just started up in June 2018 is run by Larry Martin, principal of Agri-Food Management Excellence, a consulting firm with offices in Alberta and Ontario. It consists of six couples, all graduates of the firm’s “CTEAM” mini-MBA program (Canadian Total Excellence in Agricultural Management), who requested that Martin facilitate the group. “To finish CTEAM, you must develop a strategic operating plan for your farm, and some of the participants of a recent class heard that a CTEAM grad out west wanted to get together with peers twice a year to check in on their strategic plans, so they wanted to do the same thing,” he explains. “They also want to learn about other topics, such as how to effectively manage employees and build teams, how to train a person who can completely look after things if there is an emergency or they want to go on holiday. We may do some informal benchmarking… They drive the agenda themselves.”

Other groups strive for high-level accountability, such as the one set up in 2016 by Manitoba-based Global Ag Advisors. Group members meet in person regularly to share benchmarking information confidentially, to discuss ideas with the group, and to hold them to their individual farm goals. The members also communicate with each other through a cellphone app called What’s App about financial issues, technical farm equipment questions and much more.

“It’s so important to have another person look at your operation,” says group advisor and owner of Global Ag Advisors Joerg Zimmermann. “The accountability is also important because farmers are their own bosses of independent businesses, and they can decide what they want to tackle and what they don’t. Being in this group makes them set goals and make progress with tasks that should be tackled. There is always something that’s a pain in the butt but has to be done, or that’s not generally required by the bank but should be done, like strategy, budgeting and forecasting. This is the ultimate value of a peer group — the peer pressure.”

Zimmermann’s group actually consists of farmers from Manitoba and North Dakota (and he’s currently starting a global peer group). “They grow pretty similar crops, but having members from two different countries means they learn how things are run in the other country, how politics and different currency values and different banking systems affect your operation,” he explains. “There might not be immediate benefits to learning a certain thing, but it broadens the horizons and promotes strategic long-term thinking. For example, it leads to a better long-term understanding of when to sell crops across the border. There are also sometimes differences in input prices in the two countries and we think we’ll do more investigation into why and to see if there can be some benefits.” Group members, with their families, also do fun group activities together, from BBQs to a recent trip to Germany.

The attraction of group interaction

For Heather Watson, executive director at the Canadian Farm Business Management Council, the attraction of peer groups is simple. “I believe many farmers are looking to connect with other farmers in a more meaningful, productive way in order to share insights and tackle issues and opportunities,” she says. “Groups provide the means to have a sounding board, where you feel safe to throw your thoughts and ideas out there and, with the collective knowledge and experience of your peers, gain significant insight into improving management decisions.”

Watson adds that while farmers are used to working with advisors, and she believes those advisors are providing excellent expertise, fellow farmers are walking the walk in real time and need to also interact with each other. “We often tell farm managers to do their best and hire the rest,” she notes. “This means concentrating on the things you’re good at (your strengths), and surrounding yourself with the people (farm advisors, staff, etc.) who can fulfil the skills needed to run a successful farm. This idea then extends to the concept of the farm management club/peer advisory group — an opportunity for farmers to look beyond their expertise to learn from others.”

And while Watson believes that it can be a challenge to divulge details and expose yourself to judgment, progressive farmers see the advantage of working together.

“Imagine the benefit of having a mechanism to talk to others who totally ‘get it,’ where conversations can go far beyond the weather to how your new approach to handling tardy employees is going, or how your farm transition planning is going, or whether you found a way to increase that profit margin,” she observes. “Farmers meeting up with other farmers to share knowledge, experience and expertise is not new. Just look around any coffee shop, trade show or industry meeting. However, making a concerted effort to come together to share insights towards joint strategizing, problem-solving and general improvement is unique… The members recognize that by sharing insights and working together, they have a greater pool of resources from which to draw, quite literally.”

Betker has observed in his two groups that as time goes on and members get to know each other, they form a critical level of trust and the group creates its own identity. “You can feel the group solidifying over time, and the discussions change as more specific challenges are shared.”

Zimmermann notes that all members benefit from hearing about each others’ risks, which helps them in mitigating their own. They get better, too, at watching out for future unknowns.

Critical for success?

As beneficial as these groups can be, none of these experts believe farmers must belong to one to have a chance to be successful. “There are so many different ways you can be successful and you can’t put everyone in one mould,” says Martin.

However, he thinks “farmers who are progressive managers of their businesses are looking for peer interaction. I think being in my group has meant for some of them that they have done things that they would not have done otherwise on their farms. So the group raises the bar a little bit for each member.”

Kosokowsky’s view is similar. He believes the farmers in his group would have been successful no matter what, but that having the group sounding board may have enabled them to go forward with growth and expansion plans that they might not otherwise have pursued.

Although he strongly believes there are many ways farmers can be successful, Martin does think there is a correlation between more perspective in managing one’s farm — in drilling down into things and critically looking at how and why one does things — and being more successful as time goes on.

“The same old, same old will not necessarily win the day, and farmers are interested in how to do things differently,” he says. “One of the ways they learn about this is by being in a group.”

Watson agrees completely that what got farmers to where they are today is no guarantee for future success. “I think if you’re not taking farm business management seriously and investing in your management skills, you will struggle to succeed going forward,” she says. “Investing in farm business management is Canada’s only sustainable long-term competitive advantage. Innovation isn’t limited to production and equipment, innovation applies to the way in which we manage our farms — the strategies and tools we use to succeed. This includes using new management mechanisms such as farm management groups to gain new perspectives for growth and profitability.”

Martin and Betker are getting calls to form more groups, and Watson anecdotally reports an increase in farmers interested in forming or joining a group.

There are limits, though. Zimmermann, for instance, believes only a small proportion of farmers would join a peer group. Most farmers are focused elsewhere.

For his part, Martin observes that farmers who want to be part of a group have two characteristics: they want to learn, and they don’t mind sharing information.

Farm Management Canada has an online resource called Farmers Working with Farmers: The Power of Groups available at www.FMC-GAC.com, and Watson believes it’s a good place to start. “It includes ideas for working in groups, different groups across Canada — their structure, mandate, membership, etc., and tools for working in groups including choosing group members, running effective meetings and building consensus.”

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