Kerns: Be Ready to Act

February 2, 2018 07:15 AM
 
As the owner or manager of a pork business, it’s important to address the culture of decision-making that can potentially put your operation at risk.

We previously discussed expected outcomes related to risk management, as well as the behaviors and beliefs that can restrict decision-making. Other factors related to decision-making also need to be addressed.

In our experience, if a client consistently fails to respond to recommendations, advisory relationships can be “conversation and information downloads,” and this can limit potential for value. If this is your experience, you will want to stop the carousel and address the culture of decision-making that puts you at risk. 

The questions become, “Why aren’t I taking recommendations? Why aren’t I putting into practice the risk management strategies that my advisors are telling me will protect me?”

When producers with whom we work struggle to make decisions, our team tries to focus on designing a plan that addresses the “why” so we can deliver the “what.”  We’ve learned that the “why” is characterized by specific capacities, none of which is technical competence or intelligence.

Most producers understand the “how” of risk management—educate, assess, decide, execute and adjust. However, these behaviors are transactional in nature. In other words, they’re related to the tasks associated with what we do and what result we get. 

The “doing” of risk management isn’t a problem, but specific behaviors and beliefs can collapse effective participation.

In thousands of conversations over the last 25 years, we’ve surfaced these motivating “why’s,” which can inhibit effective decision-making:

Lack of Perspective

  • Failure to understand, philosophically and practically, risk management primarily as an insurance and protection strategy. People are often frustrated when they measure their success based on cash management—margin calls and deposits. Profitability is a long outcome of deliberate practices over time. 
  • Execution-based, short-term vision that bases evaluation on immediate and current situations – for example, focus on significant margin calls that create emotional triggers and have operational impacts on cash flow. Margin call shock is probably the biggest decision-making inhibitor that is reported to us.

Handicapped Culture

  • Fear-based behaviors and anxiety ridden cultures driven by avoidance of mistakes or excessive focus on operational postmortems; or operations that compromise opportunity because of excessive demands for and assurance of proof, data, accuracy. Remember, perfection is the territory of researchers, scientists, and controlled environments. We deal with live animals, volatile markets, a diverse and sometimes challenging labor culture, disease, weather and many other factors. Unpredictable and shifting influences demand a culture of “perfecting” processes and strategies to make best decisions, NOT making perfect decisions.

Emotion-Based Practice

  • Fear-based, people-pleasing, disempowered decision-makers acting on behalf of an owner or producer. This includes those employees or advisors who are not empowered to make decisions in an opportunistic market. We encounter employees and advisors who either avoid bringing opportunity to the table or cannot respond because they anticipate aggressive or over-exacting interrogations; or advisors encumbered with a “decision by committee” process that reacts primarily to short-term impacts and evaluates independent decisions outside of a bigger context of a philosophical and strategic approach to risk management.    
  • Reactionary decision-makers who seize aggressively on trends and gut-oriented or speculative opportunities instead of maintaining a disciplined approach to an established marketing plan.

If these behaviors characterize your operation, you are likely eliminating yourselves from advisory relationships and practices that could build capacity over time.  Before choosing who will participate in your risk management team, identify who has the capacity to participate in risk management and what kind of culture you need to build to foster those people.

Editor’s Note: Karen Kerns is CEO of Kerns & Associates, a risk management firm serving agriculture in Ames, Iowa. The company employs a holistic approach to agricultural risk management, operating as an extension of clients' operations to ultimately enhance their customers’ profitability. For more information, call 515.268.8888, or go to http://www.kerns-associates.com/

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