How to stay on top
Saying No so you can say Yes
It's been said that staying on top is harder than getting on top. As a result, many farms at the top don't feel like they are on top. It's still a struggle. But the struggles change as they grow. Farmers have told me it's hard to keep an edge on top and not let success lull them into complacency.
It's easy to see that these professionalized farms are successful. The homes are often a little nicer than their neighbors. When there is a land auction, these farms can buy. The shops are state of the art, and the livestock operations are modern. Most of the equipment has shiny new paint as well.
Progression through Levels.
Over the years, these farms have moved through the other levels of farming, from Expert to Manager then onto Professional. Over the years, Professional farms have met the challenges at each previous level and found solutions that worked for them.
For example, these farms are considered a great place to work, and it isn't as difficult to find good entry-level workers. Middle managers are taking the daily strain off the owners. This means the owners can spend more time working on the business to think about executing the strategy.
On professionalized farms, some things are still the same.
Time is more precious than ever, but instead of employee interruptions, there are more interruptions from sales personnel. It seems like the farm is a "key account" for every chemical, equipment, and genetics company. Every day, sometimes several times a day, the phone rings with a new pitch on something. There are also administration interruptions from the copier not working to a missing signature on a bank deposit. These small items chip away at the time available to really lead the company.
In addition to production sales pitches, there is a never-ending stream of business deals, opportunities, and boards to serve on. While the farm is profitable, more doors are opening to invest money and time into new ventures. One owner quipped that "We could go broke with all the opportunities we have." Some farms have gotten into deals and partnerships with no easy way out. Capital calls, lawsuits, and sometimes bankruptcies happen in business. These events take focus, time, and money away from growing the farm. Sometimes needed farm capital expenditures are delayed as money is diverted elsewhere.
Often these professionalized farms are several generations old, and multiple families are all farming together. In many cases, this next generation is ready and capable of someday running the farm.
But more often than not, there are a couple of taboo topics that aren't discussed. Typically, it involves family members who want to come back or are already back on the farm. Yet deep down in the private recesses of the owners' minds, they realize some of the next generation aren't cut out to lead the farm. They either don't have the skills, or they don't have the same drive as everyone else. It sounds harsh, and it's hard to face as a father and mother. But not everyone is equally capable of being an owner and leader of a large-scale operation. So, what can be done?
Sometimes the next generation is hard-working, and they want to come back. They are "all in" when it comes to farming. Yet, the skills that are needed have shifted as the farm moved from a Manager level to a professional level. Instead of a tractor driver, the farm needs middle managers. The farm might need someone with an accounting degree or someone who is good at human resources. Some of these skills are not agriculture skills as they are business skills.
How to stay on top?
Solutions: Saying No so you can say Yes
One of the challenges of the Professional farm is the desire to say yes to everything and everyone. As a result, it becomes increasingly hard to stay focused. Below are some of the solutions that have come from members of our peer group, the Executive Farmer Network.
One way to manage time is to delegate as much as possible to the lowest possible employee. Delegate not only the tasks but also decision making. Large dairy and livestock farms are increasingly empowering their employees, even the lowest on the totem pole, to make decisions. This is strategic, planned, and not done haphazardly. We have seen farms even delegate chemical, seed, and equipment purchasing decisions to key employees.
For example, on large dairy farms, the owners are not making the pre-purchasing comparison among equipment options. That is being done by the employees who are actually using the equipment every day. Of course, the owners have the final say, but select employees do the research, sales meetings, and quoting.
Meetings are important to keep everyone aligned and moving forward, but meetings can get out of hand. They can run too long, become unfocused and not get enough accomplished. If this happens, the meetings will eventually go away because people will not see the value.
Professionalized farmers have specific meetings that are consistent and tightly run. Meetings fall apart when too much is on the agenda (or not having an agenda at all). Long meetings are draining, so have them more often and make them shorter. Don't wait until the perfect time to have them; the perfect time may not ever come. Finally, set a specific start and stop time. It will force everyone to stay focused and moving forward.
One last solution on time. Use shared online calendars to schedule meetings and keep everyone apprised of where everyone will be throughout the day. Online shared calendars, via people's phones, dramatically reduce confusion and wasted time organizing meetings or calls. In addition, they help to get everyone showing up at the right time and place.
There are plenty of opportunities, and they might all sound good. But how do you sort them out, so the farm isn't going in too many directions? A good way to sort them out is with a long-term strategic plan. Strategic planning is proactive planning versus a reactionary process to allocating money and time. While this slows down the investment process, farms have found it gives them better decisions because they do more thorough research and number crunching before investing. In addition, strategic planning ensures that any investment fits into the farm's long and short-term goals. This keeps the farm owners aligned and keeps them from chasing too many opportunities at once.
Know the Financials
A key part of keeping a strategic plan on track is access to accurate and near real-time data of the farm's performance. This means that financials are often accrual and created each month. For example, one of our members has a goal of completed accrual financials ready by the second business day of the month. While this might seem extreme, they have been able to make bold but timely marketing decisions because they had intimate knowledge of their data in real-time.
It may be tempting to invest money into assets that others manage. In some cases, this can be the right choice but with a couple of significant drawbacks. One is the lack of control over the project. We have seen farms spend so much capital on outside projects they give up control and the lion's share of the profits. So, whenever possible, try to remain in control of the investment.
This last suggestion comes from the school of hard knocks. Several farms have made investments in outside businesses where they had no experience. It was assumed that because they were successful in farming, they could run other businesses. We work with a lot of really smart farmers. Intelligence and drive are not lacking. But, their own post mortem advice is to know what you don't know and tread carefully into new business ventures.
Related Article: Three Questions to ask of every business venture.
Formalizing the Family
Some assume that working with family doesn't require formality because, after all, you are all family. Yet farms are increasingly moving toward more formality in key areas to ensure the current and future owners are aligned in their goals and skills. Unfortunately, there are too many instances of friends and neighbors' farms imploding not to notice.
Farms are moving toward formal agreements for entering the operation as well as setting minimum standards in order to become an owner. This often is a written document that lists out the minimum requirements to work on the farm, became a manager, and finally became an owner.
Agreements on perks are usually part of these farm's family governance. These agreements cover vacation, housing, and vehicles, to name a few. Many of these perks are informal on smaller farms, but the larger farms, with multiple generations, need agreements to keep the peace. In summary, these farms have found the benefits outweigh the negatives when it comes to crafting these agreements and working with family.
Related article: Perks and pay can derail your transition plan
Keeping the Leadership Edge: Education
Staying on top often means letting go, saying no, to what's worked in the past. It's an art form to know what management practices to keep, what to throw out, and when to do it.
Education and training of the next generation are more important than ever because at this level, the stakes are very high. The required skills for the future could be very different from what Grandpa or Dad needed. Off-farm education via college or business short courses such as TEPAP are becoming necessary as roles on the large scale farms shift and become more "business" oriented. While still somewhat rare, several farms in our peer groups are run by owners with advanced college degrees in business management and graduate degrees in agronomy and animal science.
The farms with expertise in accounting, finance, and human resources seem to have an edge. For example, they have written complex loan proposals and analysis which has convinced lenders to support some very unique growth proposals.
Many farms believe the next generation should work off the farm, at another large farm, before coming back. By doing this, they have found the new generation has a better appreciation for the family farm while also returning with good ideas.
Saying No leaves room for Yes
Staying on top means staying focused with a smart use of time and money. Staying on top really means saying no. Saying no to making all the decisions that others can make. Saying no to things that waste time in meetings or coordination. Saying no to informal family practices. Saying no to opportunities that take away focus. Saying No will leave time and money for Focusing on what matters as you move to the next level.
As a top producer, you are managing a complex business. You need a solid team around you. You need to grow, motivate employees and work with family. You need to understand your finances at a deep level. The stakes are high.
Learn from the Pros, Farmers like you
Farms at the Professional level often have few local peers to look to for new ideas. In many respects, these professionalized farms are the ones that other local farmers try to copy. Learning new ways to manage large-scale farms is hard when there are so few local farms to bounce ideas off. That's why formal and informal networks of like-minded farmers are so important. Great things happen when farmers travel across the country and get a behind-the-scenes look at other highly successful farm operations. Participants find value in bouncing ideas off one another, learning from each other’s successes and failures, and solving problems as a team.
It’s like having a smart, experienced, successful team of advisors at your back.