How strategic management can help weather the storm
Most non- farm businesses have a multitude of standard operating procedures. New employees are handed an orientation manual with set vacation days, and management plans and executes a strategic direction for the business. The path to further growth is well understood and financial information is reported quarterly if not monthly to stakeholders.
Traditionally family farms have been different in this way. Many people take up farming to devote their time and energy into growing crops for the love of the lifestyle. It’s rare to hear of farmers who are energized by policies and procedure, human resources, or strategic planning.
Family farms have never been mandated to present long term goals and financial health to stakeholders in the same way other types of businesses have for many years.
This is slowly changing as many Canadian farmers are being pushed to organize themselves more strategically. In the last decade, farm size increases resulting in tighter margins and higher leverage has created greater financial risk to the family farm. Many farm managers are implementing innovative solutions to reduce risk by managing tasks, people, and priorities more strategically.
Strategic management is the planning and implementation of long-term goals, often with benchmarking and timelines for measuring progress. “Vision and commitment are central to managing resources in a strategic manner, and this starts with leadership” notes Alanna Koch. Koch spent much of her career working in the public service, first serving as the province’s longest running Deputy Minister of Agriculture and then as Deputy Minister to the Premier.
Now a full time farmer, she brings that similar strategic approach to farming. She recommends starting simple. “I really believe defining roles and how each individual on a farm fits into that vision are helpful for clarity on the farm and within any organization.”
“High-performing government agencies do have some similarities to farm businesses and managing risk to reduce impact of unforeseeable events is one of them.” Risk management is a goal that both farmers and government agencies have in common. While the term means something different to everyone, in many ways communication is the primary mechanism of managing risk.
Koch believes open dialogue is paramount to running as efficiently as possible. “Communication, communication, communication, we can’t do enough of that in our private lives, in the public service and in any business.”
There is no one universal platform or approach to on farm communication. Hebert Grain Ventures (HGV) uses a system called Entrepreneurial Operating System (EOS) to improve communication on the farm.
According to Evan Shout, “EOS takes the hierarchy out of the organization, so that no matter who or where you are at in the business, open communication can solve most problems,” Shout is the CFO at Hebert Grain Ventures, an entrepreneurial farm in south east Saskatchewan. He finds EOS is a formal process that allows growth to happen as smoothly and efficiently as possible by approaching on farm communication in a holistic way.
An accountant by trade, Shout believes the greatest underutilized resources in agriculture is people. “Typically, a hired individual has been viewed as an expense and therefore historically farmers have sought the cheapest labour they can find.” Finding good people to work is a challenge, but the mindset taken to hiring can make a difference in the type of people a business attracts.
“A person is an investment and can free up time for a manager to focus on their unique abilities.” This might mean a manager gives up tractor time to spend more time learning and planning for the businesses long term success.
Certainly this concept is a tough sell for those that go into farming to grow grain and drive tractors, not spend time on a tablet or at a white board.
Shout is aware that change can be difficult for some to accept. “Most people hate change, especially when they don’t understand what needs to change or how to do it.” Long term planning is a challenge for many businesses, especially in farming where there are many uncontrollable factors.
“Not many small farms proactively implement processes that will result in long term results. It’s most often reactive planning.” Shout points to examples where a farm grows in size and it creates problems. “In this case, the business is forced to create a plan due to the dangerous growth they’ve accumulated, which is risky and stressful for everyone.”
“The reality is that many farm businesses are no longer hundred thousand dollar businesses, they are multi-million dollar corporations. They operate at high risk, with high potential reward.”
But Shout believes things are starting to change due to influence of young farmers and their business minded approach to farming, where a growth plan and advancement opportunities are top of mind. “We need to start getting people to view agriculture as a stable career option above other options.”
Change takes time, and major changes often happen gradually, over several generations. “The status quo is a powerful barrier. Nobody moves, nobody gets hurt, nothing is done. From this, fear based management or lack of leadership often arises,” notes Koch. In an industry built on weathering the storm, strategic thinking is not something we should be afraid of.
If you would like to speak to one of our consultants about this topic contact us.