Managing the Farm of the Future
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Transcript of Managing the Farm of the Future
Medicine Hat, February 17, 2011Presenter: Mark Wobick
Managing the Farm of the Future &
The People Side of the Business
• What kind of changes do we need to prepare for inthe upcoming years?
• Today … things to think about in future planning andmanagement for the way farms are going to bemanaged.
• Not easy, more warm and fuzzy and lessquantitative
Management Styles - Yesterday
• Managing People … safe to say this was notnecessarily a skill set our fathers (mothers), orgrandfathers (grandmothers) thought was importantto run the family farm.
Management Styles – Tomorrow
• Imagine the Decade Ahead
• The managing people skill set could be one of thefactors that determine whether a farm succeeds ornot!
• Strong conviction that those that manage people sideof the business the best will be much better off in 5 –10 years from now!
The People Side of the Business
• Dr. Danny Kleinfelter
• Top Farm Managers – NO MAGIC SILVER BULLET!
• Do many things in key areas of their business just abit better … maybe 1-5%.
• 5% on $1 million of revenue and $1/2 million ofexpenses is $75,000!
• Many people can live off of $75,000!
Quote:
“Unless an organization is changing on the insideas fast as the industry is changing on theoutside, the end is in sight”
Jack Welch, former CEO of General Electric
My Example – ‘Using Technology Beyond theObvious’
• Dad – texting
• “hi wed am tight parkg back bumr nickd 1 corner willsee maybe call judy or den to if over my ded dad”
Farm Consolidation is occurring everywhere in Ag
• 2002 U.S. data – annual revenue higher than $1 million =1.4% of Farms = 47.5% of Revenue
• 1990-2009 – 2% of U.S. bank accounts for 74% of all bankassets
• Hog Industry in the U.S.
• In 20 years, went from 325,000 operations to approx.60,000 operations
• Of which less than 200 operations account for 64% ofmarket share
• Hog Industry in Alberta – 40% of production iscommunal based
Formula for Large Scale Successful Crop Production
• 25-30 year span = The New Crop Production Paradigm
+ Roundup 1986
+ Yield Monitors 1992
+ Roundup Ready Crops 1997
+ GPS 1999
+ AutoTrac Steering 2002
+ VRT 2002 -
+ Ability to Access Capital 2010-12 ?
+ New Traits in Crops 2012 ??
+ Driverless Equipment 2013-15 ???
Get your Management House in Order
• Increased size alone will not provide survival for anindividual operation on a long-term basis
• Using small farm management/financial conceptswill not work in large operations
• Your management house must be in order toprofitably leverage economies of scale
• Financial success challenges are different with size
Think like the Top Farm Executives / Manager
• Danny Kleinfelter
• Professor & Extension Economist (Texas A & MUniversity)
• What little things can you apply to your business?
1) Four Patterns that consistently emerge for mostsuccessful managers
Anticipate
• Able to anticipate and adapt to the changing needs of their market
Explore
• Open to exploring new ideas and consider different points of view
Network
• Recognize the importance of networking and developingrelationship across the full business chain
2) Strategic Thinker
Management
• Anticipating, driving and capitalizing on change as theirindustry is continually changing
Planning
• Strategic versus operational planning. They look at the bigpicture side of planning (30,000 feet) rather than day to day
Actions
• Doing the right things rather than just doing things right.
3) Able to objectively assess strengths andweaknesses in people, including themselves
Very strong people skills
• Will become a larger component in tomorrow’s managertoolbox
Picking the right people
• Able to assess people, pick them and then get them workingat the right position
Work together
• Getting the people to all work together towards commonteam goals will be another challenge
4) Operate in a continuous improvement mode
Try to do 100 things 1% better
• Many things need continual change, not one thing needingmajor change
Prioritize
• Long list of things that need changing, but they prioritize thelist to get the most effect from the changes
Stay ahead
• The internal rate of change has to exceed the external rateof change
5) Always attempting to push the envelope by tryingsomething new or different
Believe mistakes are synonymous with growth
• Calculated risk takers and excellent risk managers thatrealize there will be bumps in the road
Do their homework
• Consider their options and develop a strategy before anymajor undertaking to help minimize risk
Opportunistic
• Timing is everything and farm managers must be ready toact
6) Spend more time thinking about “what if” scenariosand developing contingency plans (black swan)
Do not dwell on the negative
• But consider what could go wrong and then think ofwhat has to be done if it does
Exit strategy
• Every time there is an entry strategy for a plan makesure there is an effective exit strategy as well
Evaluate
• Step back and evaluate the plan, try to think of thingsthat you need to stop doing
7) More likely to seek input and expertise fromoutside the business
Link to outside world
• Not afraid to seek advice from other successful business’even if not directly involved in farming
8) See change and challenges as opportunities anddon’t tend to view themselves as victims
Learn from setbacks
• Bumps in the road, adjust and move on
Change creates opportunities
• Opportunities only available for those who are preparedto act
• Simple as having a strong balance sheet• Proper debt structure (debt over life of an asset)
• Strong working capital (pre-buys, hold for markets, expansionopportunities)
Another Dad text …
‘hi 6 30 am in san fran tired calgary noon bye’
9) See themselves more as the head coach than asthe boss
Leadership
• You can be the boss and a poor leader. Managementhas to work with the team. Management openly admitsto being wrong
Team rule
• “We” and not “I” for better team buy-in
When is a leader great?
• Not because of power, but rather on the ability toempower others
10) Approach to management is more balancedbetween Key Performance areas
Consistently above average
• Many key performance areas get measured,management must balance the results so that not toomuch emphasis is put on any one indicator
• Understand what is important to their business and whatwill drive their success
11) Spend more time monitoring and analyzingperformance
Before it is too late
• The ability to spot problems and opportunities early andreact (e.g. use their f/s as a tool and foundation of theirbusiness)
Treat causes, not symptoms
• Concentrate more on what caused the problem ratherthan what the result is
12) Decisions based more on reason and judgment andless on emotion
Recognize and understand emotions
• Separate emotions from judgment and reason(marketing; capital purchases)
Emotional intelligence (EQ not IQ)
• Management can be very smart intellectually but haveto be able to deal with people to be successful
13) More creative in their approach to business and seekways to force themselves to think outside the box
Challenge existing paradigms
• They will continually challenge existing businessmodels or arrangements to see if there is a morecreative way to help their business succeed
Ability to adapt
• As they review or actually work through a businessmodel they have the ability to apply different elementsof one situation to another
14) Work Harder at Communication
Communicate
• One roadblock to progress is secrecy so goodcommunication skills is very important
• Another one – ‘no time’
Buy-in and commitment
• Management and the whole team needs a clearunderstanding of the business vision and they need asense of ownership
14) Work Harder at Communication
Employees and family need to know more
• Where is the business headed?
• How does it plan to get there?
• What is my role?
• What’s in it for me?
14) Work Harder at Communication
Employees and family need to know more
What am I expected to do? Job roles or job descriptions
Why am I doing something? Explanation of duties
How am I doing at my job? Performance review
How can I improve? Potential career path
Farmers are usually great at keeping up with :
- Production changes
- Equipment and technology changes
- Financial changes
- Marketing changes
What about People changes?
Questions?
Thank You!
Mark Wobick P. Ag.
Farm Management Consultant
MNP
Lethbridge, AB
403-380-1666