By Bob Milligan, Dairy Strategies
Perhaps the greatest challenge for owners of small businesses – farms, agribusinesses, golf courses – is the changing role and priorities of their position within the business.
Historically, the priority has been production (and marketing for those beyond the production sector). Today, the leadership roles are becoming as important, if not more so, than the management roles.
A small business in most cases cannot have individual fulltime positions for chief executive officer (CEO), chief financial officer (CFO), and one or more chief operations officers (COO). Each of these roles has become vital to the success of farms, agribusinesses and other small businesses.
This means the owners/leaders of the farm or other small business must identify the team, internal and external, who will work synergistically together to lead the business out of the hole that has been created and into a successful future. Every member of the team must accept that only excellence in decision-making and execution will enable the business to succeed.
This month, we look at the key leadership roles of CEO and CFO. They are the new roles to most of you.
The Chief Financial Officer Role
The individual assuming this role must completely understand the current financial condition of the business and find every opportunity to reduce financing costs and maintain/improve relationship with lenders and creditors.
Without sufficient priority in this role, many dairies, agribusinesses and other businesses were not --- and even today may not be -- aware of the severity of the current financial situation.
The following are recommendations for the CFO position:
· The individual given this role – internal or external – must understand financial and managerial accounting and analysis. He or she must:
a) continually monitor and assess the financial situations;
b) execute financial transactions and debt payments to minimize interest and transaction costs;
c) constantly communicate with lenders and creditors to maintain and enhance the relationship.
· The magnitude in numbers and dollars of the loans and accounts payable in businesses today is unprecedented. The person in this role must search for and capitalize on opportunities for cost savings by strategically allocating the available dollars.
· This person must communicate the current financial situation and what each person can do to improve the situation.
· This individual must routinely make realistic projections into an increasingly uncertain future and share them with other owners.
The Chief Executive Officer Role
This individual must develop and communicate the vision for how the business will return to financial stability and succeed in the future and lead the team to fulfill that vision.
This is the key leadership role of the business and its absence has been devastating to many dairies, agribusinesses and other small businesses during these troubled times.
The specific responsibilities of the CEO are:
· Identify the leadership team and the roles each member will play (Good to Great – who is on the bus and what seats are they in).
· Establish the operating rules for the team and develop a culture of synergy, collaboration and excellence.
· Communicate to every member of the business the magnitude of the current challenge and enlist their support and extra effort to succeed.
· Establish collaboratively the expected performance for all members of the leadership team and hold them accountable for achieving those performance levels.
· The CEO must always:
ü Understand the external environment – dairy industry and business environment.
ü Seek and capitalize on opportunities to enhance income and/or reduce risk by contracting product and/or inputs.
ü Ensure that performance management programs are in place and being utilized to ensure that every employee is performing to their potential.
ü Ensure that recruitment and selection procedure are in place and being used to attract the best possible candidates to open positions.
ü Ensure that world class production and marketing procedures are in place.
· Provide leadership in designing and implementing the operational plans and procedures that will take the business to a higher performance and cost control standard.
The CFO and CEO Roles Must Be Given Priority
The business that you lead likely does not need a fulltime CFO or CEO. That presents an immense challenge as the critical tasks in these positions are usually important but not urgent. The person in these roles, while also being very involved in day to day operations, must give these roles priority.
We can assist you in performing the CEO and CFO roles in your business.
You can become the leader your business desperately needs and we can help.
Dr. Bob Milligan is Senior Consultant with Dairy Strategies, LLC and Professor Emeritus, Cornell University. His insights come from 35 years of working with farm businesses. He also was an award-winning teacher in the fifth-ranked undergraduate business program in the country. Bob lives in St. Paul, Minnesota. Contact him at 651 647-0495 or [email protected]. Visit his Web site at www.dairystrategies.com or www.aLearningEdge.com.