6 secrets of the best managers - Part one in a series

6 secrets of the best managers - Part one in a series

Boom or bust, here is how top farm managers build a better (and more profitable) business.

Why is it that some farmers just seem to make money – even when a boom cycle goes bust?

Truth is, there’s no magic formula – and there’s no ‘secret’ to success, either. It’s all about putting in time to learn best practices that make money and keep your business running smoothly.

We’ve collected ideas from some of the leading farm and business gurus in our ongoing effort to help you sort through your toughest business challenges. Watch for more secrets coming up in this series.

1. To be more efficient, delegate.

“As our farm has grown over time we’ve had to delegate key activities just so we can focus more on the finer details, like purchasing and marketing,” says Rick Kimberley, Maxwell, IA. “Delegating to people you can depend on helps the operation run smoother.”

One of the problems with farmers is they think they have to do it all. When you delegate tasks to someone else who can do something better than you and work more hours, you boost efficiency. This requires you to think differently about working assets. Think of a big dairy – it runs 24/7, milks three times a day. It adds labor and whatever else it needs to push efficiency to peak levels. You can do that with other farm enterprises. The big thing is, you don't have to do everything yourself.

2. Join or form a peer group.

Ignorance is way different than stupidity. Ignorance is just not knowing what you don't know. You may be extremely profitable, but once you drill down into the data, there are probably areas where you can improve, and one way to discover those weak points is in a peer group. Human beings are almost unique in their ability to learn from the experiences of others, but also remarkable in their disinclination to do so. “That's why peer groups work, as long as people share,” says Texas A&M economist Danny Klinefelter. “You get some alternative points of view, some push back, and some suggestions on how to do things differently.”

3. Monitor your plan and react quickly.

It’s important to stay on top of what's going on in your business. Yet, it’s also important to react and shift gears as needed. Let’s say you put together a budget for the year based on current market and economic assumptions. Row crop farmers should review that plan monthly, while cow-calf operators may only need to review quarterly. What external factors have changed since you wrote the plan? How will those changes impact, say, your marketing plan? “The thing that separates the top 10% of farmers from the next 25% is timing – when you get in, when you reallocate resources, and when you get out,” says Klinefelter. “A lot of people think about it so long, the opportunities pass them by. Good timing separates the best from the rest.”

4. Don’t look for easy answers to complex problems.

If you track numbers, and benchmark your business performance against others, you start to get a true picture of your weak points. Once you have that information, now what? "With analysis, you need to treat causes, not symptoms,” says Klinefelter. The best managers are intuitive and decisive; they've also learned not to jump to conclusions, because every complex problem has one solution that is simple, obvious… and wrong. In industry they talk about the five whys: to get to the cause of something you will have to ask ‘why’ five times. Drill down past the excuses to see the true cause of a problem.

5. Consistently do the little things right.

Even during the farm financial crisis of the ‘80s, some farmers lived through it and never lost money. Klinefelter, who worked in the Farm Credit system in the 80s, combed through numbers for key producers in the system at that time and looked at top and bottom 25% based on increases in earned net worth. He looked at production per unit produced, costs and asset turnover ratio. He discovered that the top 25% of farmers in those categories were about 5% above average and the 25% in the bottom were about 5% below average. “And they did that over and over – so if you look at this cumulatively, there's a compounding effect,” says Klinefelter. “What it means is, it's the little things that are done consistently that make all the difference.”

6. Debrief to determine what you learned.

After every performance of the Blue Angels, the pilots sit down and have a frank and brutal debriefing to discuss what went wrong and how to improve for the next flight. In business you’re never going to eliminate problems, you just want to eliminate mistakes and repeat successes more often. Maybe you have these debriefings after harvest or planting season, to discuss why things turned out the way they did. To get the most out of a debriefing, ask your management team these questions: What did we learn? What do we need to do differently next time? Get your successors into those discussions.

Next in the series: Why it’s important to pay attention to priorities

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