What’s on your to-do list today? If you’re like most dairy farmers, the list includes a healthy dose of tasks geared toward making milk, feeding and breeding cows, equipment repairs and the like. But don’t forget to include items that contribute to knowledge about your business and the outside factors that impact it. You still need to manage the day-to-day duties on your dairy; those items are critically important. But honing your business skills has become vitally important, as well.
Results of a research project conducted in Pennsylvania several years ago indicated that owners of profitable dairy businesses had better-quality records and spent more hours per week managing their businesses than owners of unprofitable dairy businesses. Therefore, if you are not acting as the chief executive of your business, you should be, especially given the current state of the industry.
Here’s why you need to change your management focus from tasks to knowledge.
With many farm businesses now multi-million dollar operations, and the operating risk in agriculture increasing, farmers need to spend more time on the managerial and financial sides of their business, notes Mike Boehlje, agricultural economist at Purdue University. You’ve got to be thinking about things like profitability, capital structure and debt service, size and growth, risk and financial documentation and creating value for your shareholders (who are usually family members).
Your skills and talents need to match the needs of your business. This means you need to approach the size and growth of your business from more than just a capital position, he adds. “You also have to worry about your managerial skill set,” he notes. “You have to continually focus on the right way to grow, as well as make sure the resource base is there to grow successfully.”
Strategy vs. tactics
If you plan to be a long-term player in the dairy business, you must think in terms of the organizational focus of your business, or in other words, the drivers of your daily and long-term decision-making.
All decisions are not created equally, but all must be carefully analyzed, maintains Brad Hilty, Penn State Dairy Alliance information management specialist. These are the to-do list items than stretch your management skills and get you headed on the path of a business executive.
For example, good managers know whether a decision is tactical or strategic in nature.
Strategic decisions are those that focus on doing the right things for your business to achieve long-term goals like improving profitability, improving cash flow or building a retirement fund, he explains. There are different levels of strategic decisions, but all are focused on doing the right things. Decisions of this nature include expansion plans, whether to hire a custom operator or even the implementation of a synchronized breeding program.