Time to Learn a New Language
You may not think of your business as having a lot in common with, say, Microsoft, yet the needed management skills are very much the same. In fact, 80% to 90% of the know-how required to remain highly competitive in your respective industries overlaps very closely.
Indeed, nearly all the organizations that touch your daily life—from industry associations to government agencies—depend on management rules that evolved from business. It is well understood that these tools allow any organization to achieve above-average results through converting risks to their advantage. On the farm, this translates to shifting your thinking from daily operations toward tomorrow's opportunities.
Your language. The other 10% to 20% of your management that doesn't overlap others is mostly technical language unique to your industry. It may surprise you to know that the term agribusiness was coined, not at Iowa State, but at Harvard University, with its publication of "A Concept of Agribusiness" in 1957. Today, many elite organizations, like Harvard, have a finger in agriculture and would now like to get their hands around it.
The language these new players in agriculture speak is business, nothing specific to ag. Your need to understand this language is driven by two choices you face: First, you can grasp your future in your own hands, deciding where you want to be within three to five years. Or you can drift and float with the market and in five years find yourself wherever the current takes you.
The language of business is built around the first option. This is the business option, where you shift risk toward outcomes favorable to you. To put this option into action, you have to ask yourself these questions:
1. What do I want to do? Many producers are not certain about what they really want to be doing tomorrow. You need to be clear about the business you are in or the one you want to be in. Do you want to be the best at producing livestock, crops or biofuels? Or do you want to be more involved in marketing what you produce? These are decisions only you can make, and the sooner, the better. Management books refer to this as core competence—what you do better than other top producers to differentiate your operation.
2. Where do I want to be? This call you'll have to make has a big impact on your family and others who rely on your decisions. Examples include: Do you want to grow your operation to twice its size within five years? Or is retirement and family succession the option you have in mind? What are the tax and other financial implications of this decision? This is your vision of the future. A business plan converts this vision into the real world.
3. How should I do it? Put it in writing. Otherwise, family relations can suffer if you aren't around when important decisions must be made and you have left no plan for guidance.
4. How should I get started? Developing a plan is like growing a crop; if you don't plant the seed there is no crop. Top Producer's Business Manager series will provide a start, and will help you get comfortable with business management language. Other sources may include your accountant, banker and other advisers.
As an owner/manager, you'll want to remain fluent in production agriculture, but your knowledge of general management—more than a narrow understanding of agribusiness—is becoming the connection between production ag and customers who ultimately buy your products, and that's where value is captured.
We are not witnessing the end of agribusiness, but experiencing a fundamental change. A transition is taking place, with producers adopting general management practices used by people who may be outside of agriculture today but expect to have a greater role in production agriculture's future. Now is a good time to adopt or strengthen these business management practices to ensure that more of the growing value of what you produce is kept down on the farm. Your farm.
Joe Prochaska, a management adviser and writer, has 30 years' experience helping companies manage change with strategic planning, business development and market assessment. To contact Joe, e-mail TopProducer@farmjournal.com.
Top Producer, Summer 2008