AME Management: Focusing on the management practices of successful farm owners and managers
In our CTEAM program and other activities, we get to meet a range of Canadian farmers, and often we have the opportunity to assess their success both financially and personally, in terms of their ability to meet or exceed personal and family goals.
Several characteristics of these successful people become obvious rather quickly. Not all participants will have each of these characteristics, but the majority will have most.
1. Successful managers pursue continuous learning
This is not only our observation. It was also found to be correlated with profitability in a 2015 study sponsored by Farm Management Canada (FMC) and the Agricultural Management Institute (AMI).
Participants who continuously seek knowledge through courses, travel, conferences and formal mentoring processes, or who read a wide variety of materials, are exposed to new ideas and new opportunities.
Whether the ideas are in management or production, they provide perspective, and this can be used by farmers to differentiate their operations. One new idea or customer resulting from a course or conference can make a lifetime of difference in profits and satisfaction.
2. Successful managers treat their businesses as businesses and have a positive attitude
Successful farmers don’t focus on what they can’t or haven’t done. Instead, they focus on why they have done well and will do well in the future.
A defining characteristic of CTEAM is the pride and optimism of the participants; they’ve had successes and assume success in the future.
Farmers have extremely strong values about farming, family and community. The successful ones know that to manifest these values is to have a successful rural business that contributes to the community, makes it attractive for family to come back, and for others to work there.
Therefore, they strive to be as professional as possible in searching out and taking advantage of opportunities for their businesses.
This may seem obvious, but it isn’t. In any field, positivity and professionalism separate the best from the rest.
3. Successful managers have written plans that include performance measures — their goals, and their performance against those goals
Having written plans has several advantages and gives focus to your operation:
• Writing it down makes you decide what’s important.
• Being clear about what’s important focuses your work.
• Being clear about what’s important keeps you from wasting time on what’s not.
“Written” doesn’t mean long. We see business plans prepared for farmers that are 50 and 60 pages long. These rarely get used. Most successful farmers can describe the strategic aspects of their plan — vision, value proposition, strategic intents and mission — in less than a page. In fact, getting to this stage helps with focus.
4. Successful managers use their plan to make decisions and manage — it’s not a tome that’s bound on six sides!
A focused strategic plan must get translated into actions. For example, if a farm has a strategic intent to improve human resource management and labour productivity, it will have an operating plan detailing the actions that will be taken. The operating plan will designate who is responsible to take what action, and it will set out timelines for when it will be done, resources required to do it, and measures of success.
But there will also be a management process (usually regular management meetings) to ensure actions are taken and deadlines met, as well as a process to make changes in the operating plan as learning occurs.
5. Successful managers understand and use their financial statements to make decisions
In the past, my columns in Country Guide have addressed what can be learned about improving operations and making investments based on analysis from and with financial information. We’ve seen this in our CTEAM experience, but this past winter — with additional experience from our Advanced CTEAM, Machinery Management courses and a project that’s being done with BDO nationally —this is becoming even clearer.
Farmers who measure their performance on categories of costs and revenue diagnose and resolve problems in operations, and farmers who know and understand their debt and investment ratios make good strategic capital investment decisions.
Those with good numbers on field operations make good decisions on what equipment to acquire and whether to buy, lease, rent or share.
In addition, it is very apparent that farmers who understand their financial performance and incorporate that into their plans have a huge advantage in access to capital.
6. Successful managers treat their people as strategic assets, not as costs
These farmers understand and practise the elements of strategic human resource management — recruiting, retention, compensation. As a result, they find creative ways to attract, keep and improve good people through:
• Performance bonuses
• Concepts such as phantom shares
7. Successful managers understand and benefit from good marketing management — both for differentiated and “commodity” products
Commodity producers understand cash, forward, futures, basis, and options instruments. They then develop strategies that incorporate them, and follow them with discipline. Farmers with either commodities or differentiated products understand the first lessons of marketing are that value is created by understanding what attributes customers want or can benefit from, and they then deliver those attributes consistently. Providing value provides premiums.
8. Successful managers deal with succession before they have to
Succession has three components, all of which need to be planned:
• Transition of management
• Transition of ownership
• Financing the transfer of ownership
They are separate yet related issues which, if not planned for clearly, create more family anguish, more lost family farms, and more needless tax paid than any other cause.
Farms that address these three issues head-on in their plans not only avoid needless distraction, cost and loss, they will also have a leg up on preparing the next generation for both ownership and management.
Larry Martin, PhD, is a partner in Agri-Food Management Excellence, Inc.