Medicine Hat, February 17, 2011 Presenter: Mark Wobick
Managing the Farm of the Future & The People Side of the Business • What kind of changes do we need to prepare for in the upcoming years? • Today … things to think about in future planning and management for the way farms are going to be managed. • Not easy, more warm and fuzzy and less quantitative
Management Styles - Yesterday • Managing People ‌ safe to say this was not necessarily a skill set our fathers (mothers), or grandfathers (grandmothers) thought was important to run the family farm.
Management Styles – Tomorrow • Imagine the Decade Ahead • The managing people skill set could be one of the factors that determine whether a farm succeeds or not! • Strong conviction that those that manage people side of 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 a bit better … maybe 1-5%. • 5% on $1 million of revenue and $1/2 million of expenses is $75,000! • Many people can live off of $75,000!
Quote: “Unless an organization is changing on the inside as fast as the industry is changing on the outside, the end is in sight� Jack Welch, former CEO of General Electric
My Example – ‘Using Technology Beyond the Obvious’ • Dad – texting • “hi wed am tight parkg back bumr nickd 1 corner will see 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 bank assets
• 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% of market share
• Hog Industry in Alberta – 40% of production is communal based
Formula for Large Scale Successful Crop Production • 25-30 year span = The New Crop Production Paradigm
+ Roundup + Yield Monitors + Roundup Ready Crops + GPS + AutoTrac Steering + VRT + Ability to Access Capital + New Traits in Crops + Driverless Equipment
1986 1992 1997 1999 2002 2002 2010-12 ? 2012 ?? 2013-15 ???
Get your Management House in Order • Increased size alone will not provide survival for an individual operation on a long-term basis • Using small farm management/financial concepts will not work in large operations • Your management house must be in order to profitably 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 & M University)
• What little things can you apply to your business?
1) Four Patterns that consistently emerge for most successful 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 developing relationship across the full business chain
2) Strategic Thinker Management • Anticipating, driving and capitalizing on change as their industry is continually changing Planning • Strategic versus operational planning. They look at the big picture 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 and weaknesses in people, including themselves Very strong people skills • Will become a larger component in tomorrow’s manager toolbox Picking the right people • Able to assess people, pick them and then get them working at the right position Work together • Getting the people to all work together towards common team 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 needing major change Prioritize • Long list of things that need changing, but they prioritize the list to get the most effect from the changes Stay ahead • The internal rate of change has to exceed the external rate of change
5) Always attempting to push the envelope by trying something new or different Believe mistakes are synonymous with growth • Calculated risk takers and excellent risk managers that realize there will be bumps in the road Do their homework • Consider their options and develop a strategy before any major undertaking to help minimize risk Opportunistic • Timing is everything and farm managers must be ready to act
6) Spend more time thinking about “what if” scenarios and developing contingency plans (black swan) Do not dwell on the negative • But consider what could go wrong and then think of what has to be done if it does Exit strategy • Every time there is an entry strategy for a plan make sure there is an effective exit strategy as well Evaluate • Step back and evaluate the plan, try to think of things that you need to stop doing
7) More likely to seek input and expertise from outside 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 and don’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 prepared to 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, expansion opportunities)
Another Dad text … ‘hi 6 30 am in san fran tired calgary noon bye’
9) See themselves more as the head coach than as the boss Leadership • You can be the boss and a poor leader. Management has to work with the team. Management openly admits to 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 to empower others
10) Approach to management is more balanced between Key Performance areas Consistently above average • Many key performance areas get measured, management must balance the results so that not too much emphasis is put on any one indicator • Understand what is important to their business and what will drive their success
11) Spend more time monitoring and analyzing performance Before it is too late • The ability to spot problems and opportunities early and react (e.g. use their f/s as a tool and foundation of their business) Treat causes, not symptoms • Concentrate more on what caused the problem rather than what the result is
12) Decisions based more on reason and judgment and less 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 have to be able to deal with people to be successful
13) More creative in their approach to business and seek ways to force themselves to think outside the box Challenge existing paradigms • They will continually challenge existing business models or arrangements to see if there is a more creative way to help their business succeed Ability to adapt • As they review or actually work through a business model they have the ability to apply different elements of one situation to another
14) Work Harder at Communication Communicate • One roadblock to progress is secrecy so good communication skills is very important • Another one – ‘no time’ Buy-in and commitment • Management and the whole team needs a clear understanding of the business vision and they need a sense 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? Why am I doing something? How am I doing at my job? How can I improve?
Job roles or job descriptions Explanation of duties Performance review 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