ARL01626 Business Management

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Farm and Ranch Business

Management Functions

Curriculum GuideI. Goals and Objectives

A. Learn the basic concepts of the following three functions of management:

organizing, staffing and directing, and controlling.

B. Learn the interrelationship between these functions.

C. Learn how to utilize these concepts in the management of your business.

II. Description/Highlights

A. Management functions include organizing, staffing and directing, controlling, andplanning. The planning function, while not discussed in this set of materials, is discussed

in RM3-19.0, Managing Your Farm and Ranch Operation. The organizing function is

the management process of identifying or establishing jobs, positions and chain of

command. Organization should facilitate the communication needed to make good

decisions at all levels of the operation. Organizing is also inventorying physical and

financial resources, identifying skills and talents among employees, and physically

arraying these resources for efficient use.

B. How the business is organized is fundamental to communication within the business, the

delegation of authority, the risk management plan of the overall business, and the processof supporting good decisions. The whole point of organization and organizational charts is

to make the operation run smoothly and efficiently.

C. Every decision made by any manager is based on information. The business organization

provides for information flow. Figures 1, 2 and 3 illustrate various communication and

information flows (who answers to whom). Note that in each example there is a two way

flow. Review Figures 1, 2, and 3.

D. Lead the group in developing an organizational chart for their businesses. Starting at the

top of a page, draw in each position; list the person or position to whom the position

reports to; list the person(s) who are supervised by the position, and list the responsibilities

of each position including the manager.

E. Staffing and directing is personnel management. Staffing is the process of identifying and

placing people in positions, while directing involves identifying employee strengths and

weaknesses, and matching positions with the most suitable personnel. Directing is also

training, evaluating, firing employees, communicating to employees what is expected of

them, telling employees how they are doing (rewarding), and providing conditions and

opportunities for advancement.


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F. Effective staffing begins by filling each position with the best person available. A

manager must thoroughly understand the responsibilities of each position. The job

description is critical.

G. Treating employees with respect will bring about improvement in employee morale,

productivity, and appreciation for the work performed. Adequate training and continuing

education are important in keeping workers productive and loyal. Employees who feel

good about where they work are likely to believe that the better the business does, thebetter they do.

H. The controlling function is the process of measuring a firms progress and involves

collecting information that can help you track the business health and progress towards

attaining goals. There are many farm and ranch financial and production management

measures that can help in decision making.

I. Lead the group in developing the 10 most important financial and production management

measures for their business.

J. The controlling function is very much the measurement of management - measuring the

attainment of your goals. If you have been successful, set the next goal. If unsuccessful,identify what must be changed to reach you goal.

III. Potential Speakers

A. Extension economists

B. Management consultant

IV. Review Questions

1. Why is it important to have a well organized business?

Answer: The whole point of having a well organized business is to make the

operation run smoothly. When a business is well organized, everyone understand

their duties and responsibilities. The lines of communication move information to

the decision-makers or managers and allows for making better and more timely

decisions.

VI. For More Details

Drucker, Peter F., The Effective Executive. Harper Collins Publishers, Inc. 1985.

See publication RM3-20.0, Farm and Ranch Business Management Functions in this series

for additional reading.


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Four Functions of Management

+ Organizing

+ Staffing and Directing

+ Controlling

+ Planning

Organizing Function

+ A management process

+ Identifying and establishing jobs, positions, and

chain of command

+

Facilitate communication

+ Identifying skills employees

+ Arraying physical, financial, and human

resources for efficient use

+ Provides for information flow

+ Goal is to make business run smoothly


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Paul

Manager/

OwnerHerdsmanJack

Manager/

Owner

Herdsman

Jack Paul

Paul

Manager/

OwnerHerdsmanJack

Figure 1 - Organizational Chart




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Developing an Organizational Chart for Your Operation

Action: Draw an organizational chart of your operation, drawing in each position.

Does your organizational chart represent what is really occurring?

Example Position Description Responsibilities

Position: Herdsmen 1. Herd health

Reports to: Manager 2. Milking/quality

Supervises: the milkers, Jack and Paul 3. Milking equipment

4. Herd nutrition

5. Dry cow maintenance6. Replacement herd care


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Staffing and Directing Function

Staffing and directing is personnel management.

Staffing

! Identifying and placing people in positions

!

Filling positions with the best person available! Understand the responsibilities of each position

! Job description is critical

Directing

! Identifying employee strengths and weaknesses

! Matching positions to most suitable personnel! Training, evaluation, firing

! Communicating expectations

! Rewarding

! Providing opportunities for advancement

L Treat employees with respectL Training and education

L Employees need to feel good about where

they work


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Controlling Function

+ Measuring a business progress

+ Collecting necessary information

+ Determining what management measures to use;

financial and production measures

Farm and Ranch Production Measures

Financial Measures (Ex. Cow-Calf Operation)1) current Ratio 1) pregnancy percent

2) debt to assets ratio 2) calving percent

3) acid test ratio 3) calf death loss

percent

4) leverage ratio 4) weaning percent

5) debt to equity ratio 5) average weaning weight

6) rate of return on total farm capital 6) pounds weaned per

exposed female

! What financial and production measures do you use?

! What measures do other successful businesses use?

! Does your present accounting or record system

provide you this information?

! What benchmarks can you compare your measures

with to help set your goals?


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Financial Production

Measures Measures

Developing Financial and Production Measures for your Operation

Action: List the 10 most important financial management measures for your farm

business.

Action: List production management measures you like to use on your farm or

ranch.

ARL01626 Business Management

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