Editor's note: This item appeared in the Dec. 30 edition of Dairy Exec newsletter, publishined by Dairy Herd Management.

Measurement is one of the critical success factors for managing a business. And while your bottom-line profitability is the ultimate measurement, there are other important measurements used by managers to gauge performance.

Measuring employee productivity, raw material costs and milk-to-feed ratio are just a few.

Regarding employee productivity, respecting and trusting your management team with more responsibility can help improve performance. Get creative with measuring — and rewarding — performance of these employees. Consider paying a spot bonus for herd performance. For example, a dairy operation was experiencing a 10 to 12 percent cull rate from 0 to 60 days in milk. Because the fresh cow period is critical to overall dairy performance, the owner instituted a bonus plan for his fresh cow managers.

Every percentage point they’re under 10, he pays a certain dollar amount bonus. After a few years of this, they have decreased the cull rate to 5 percent. The bonus is essentially based on how well they’re taking care of the cows during this critical time.

Another tip is being mentally disciplined when looking at your books. Control costs by believing you’re getting half the price for your milk than what the market is telling you. It’s a mental game but one that can pay dividends.

No matter what path you take to get to a profitable bottomline, it’s important to set up measurements along the way, because you can’t improve what you don’t measure.