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Expand Your Thinking, Expand Your Business

Jun 08, 2012

Growing your dairy might mean transitioning your management style.

 
Mark Brady
By Mark A. Brady, CPA, CVA, Partner
Cooper Norman Certified Public Accountants
 
One of the most enjoyable and outstanding characteristics one will notice when working with dairy operations is they generally are not afraid of taking risks to be successful.
 
This has been demonstrated numerous times over the years as different operations have completed major expansions. It is worth noting that the success of these expansions was largely successful due to the strength of the operations management. This has generally been limited to the dominant characteristics of the operations owner/operator.

 


Mark Brady will speak at Dairy Today’s 2012 Elite Producer Business Conference Nov. 6 in Las Vegas. Click here to learn more.


 
Given today’s dairy environment, we believe it makes sense to address the thought of expansion and planning from a different angle than from what the traditional expansion of adding cows, land, and facilities would entail. Instead, let’s look at it from a management perspective. 
 
As stated earlier, the old approach to management consisted of one person making all the decisions. The owner/operator was this person, and we like to term this approach to management the “superstar model.” This model depends heavily on the key “superstar” having extraordinary capabilities, commitment, aggressiveness, entrepreneurship and stamina.
 
We would like to introduce what we call the “operator model,” which is quite different from the standard model seen being used. This model depends heavily on extraordinary systems, processes, procedures and methodology (infrastructure) of the operation to maximize the potential of the people working within it. Having confidence in the incoming leadership is less about finding the right people and more about the structure these new leaders will inherit.
 
When trying to identify the current model being used in an operation so one can determine the changes needing to be strengthened, start by reviewing the current leadership philosophies. If management believe the success of the operation is highly dependent on having a natural leader, it is the “superstar model.” If management believes the success of the operation is less about the leader and more about a strong infrastructure, it is the “operator model.
 
The value of the “operator model” in today’s dairy business environment is the ability for management to rely on defined roles and responsibilities in dealing with financial, legal and tax issues. One of the key points of this model relates the fact that the more people working toward a common goal, the greater the likelihood of its achievement. These people would include owners, operators (herdsmen), bankers, attorneys, consultants and accountants.
 
Dairy operations today are required to have business plans, forecasts and other related reports that are written, continuously monitored and frequently adjusted. With each passing day, the environment is changing and may change dramatically in an extremely short period of time, requiring continual adjustments to more accurately match approximate outcomes.  Being an operation that functions using the “operator model” rather than the “superstar model” will result in processes being in place that can react and respond to market changes in a systematic, more responsive, real-time manner.
 
The only constant that currently exists in the dairy industry is that of change. With all the potential for change in an operation today, the more reliance placed on processes, procedures and value-adding systems, the more likelihood of success. The change from the older, more traditional "superstar model" to the "operator model" will allow management to meet the higher level of financial requirements and also make more timely, informed, strategic decisions.
 
Based in Idaho, Mark Brady is a partner with the firm of Cooper Norman Certified Public Accountants. Brady is a Certified Public Accountant (CPA) and a Certified Valuation Analyst (CVA). He grew up on a Montana dairy. Contact him at 208-733-6581 or mbrady@coopernorman.com.
 

 

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