Set your own standards of performance

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I cannot think of anyone who does not periodically want to see how they "stack up" against their peers. This need to see if we are as good as the next guy is quite natural and somewhat beneficial in that it pushes us to strive for improvement and excellence. We cannot, however, let the actions and activities of others be our sole motivator or performance standard.

For many years, some land-grant universities, farm organizations, and other institutions have tabulated farm record data and published selected financial performance statistics based on farm size, dominant enterprises, location or income levels. These have become standards or benchmarks for judging whether a particular dairy is performing satisfactorily.

However, such farm-to-farm comparisons can give you a false sense of security. Even if you are performing above average, you may not be performing as well as possible.

Use historic records
Instead of spending too much time looking at data from other producers, I think it is better to compare your own past and present performance.
This type of analysis is more meaningful and useful because it's specific to your own business.

Differences in production cost or income over the years are evidence that a farm business' performance has changed. By identifying these changes, you can determine whether improvements in performance have been achieved.

As you compare current-year records with historical records, be honest and recognize where the changes are coming from. Increases in income or declines in cost may be due to favorable mailbox or feed prices – not management. And, you must be willing to admit that poor decisions on your part could result in financial losses.

Review business plan
In addition, use the income and expenditure data to prepare your annual business plan.

At regular intervals in the operating year, such as monthly, bi-monthly or quarterly, you should compare actual income and expenses with budget projections to see if and where differences exist. For example, you should compare income from milk sales with budgeted milk sales in order to determine if changes in milk prices or milk production could result in income shortfalls.

Identifying differences between budgeted performance and actual performance in a timely manner will give you time to correct the problem. The quicker producers identify cost over-runs or income short-falls, the better their chances of correcting the problem or adjusting their profit projections for the year.

Each of us can gain insight into our performance by comparing ourselves to others. However, it is important not to lose sight of the fact that the most meaningful performance measures are those you set for yourself.

Check to see how your own performance has improved over time, and whether it is meeting your expectations for the future. That, in turn, will help ensure that you reach your full potential and achieve goals that are more ambitious than those of "average" people.

Bruce Jones is Director of the Center for Dairy Profitability at the University of Wisconsin  



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