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FORAGE AND NUTRITION Guide 2017
FORA
GE AND NUTRITION
Guide 20
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interesting statistic is that businesses that have written goals
and plans are, on average, 10 times more profitable than those
that don't (McCormack, 1986).
Building a resilient farm business
Price volatility is no longer an exceptional event; it is, and
will continue to be, part and parcel of Irish farming. E cient
and resilient businesses will prosper in this type of trading
environment. The following is an outline of some measures that
can help build a more resilient farming business.
1) Simple system with clarity on delegation of decisions
As outlined earlier, farm systems that are stable and minimise
complexity are a common trait among high-performing
farm businesses. It is imperative that there is clarity among
management on what decisions can be made routinely
and what decisions need consultation with others. Blenko
et al (2010) identifies two types of decisions that a ect
organisations. The first involves significant one-o decisions
that, individually, have a significant impact on the business.
These decisions will involve a substantial level of analysis
before a final decision is arrived at. Secondly, small, routine
decisions that cumulatively have a significant impact. On their
own, these decisions have minimal impact, however, the quality
of the decisions made and the capacity of your management
team to get more of these right, can have a significant long-
term impact on your business.
2) Standard operating procedures
The use of standard operating procedure (SOP) guidelines can
significantly help improve and speed up the decision-making
process on farms. For example, an SOP guideline on grassland
management involving a decision tree on factors such as
weather and soil-type of paddocks can help farm sta make
better decisions on grazing during di cult weather conditions.
3) Labour productivity
Farms, by their nature, have a very uneven daily labour
requirement throughout the year. A recent study completed
at the Carbery/Teagasc Shinagh dairy research farm found
that 50 per cent of the annual labour requirement on the farm
occurred during the February-April period. Building a resilient
business means reducing stress on all parts of the operation.
This needs to include the farm workforce during the spring
period which, if not addressed, will lead to a decrease in
farm performance during a critical period and increased sta
turnover.
4) Focus on process more than outcome
With output price as volatile as it has been in recent years,
it is questionable whether any form of profit targets should
be used in measuring financial performance. Would it be of
more benefit to utilise cost categories such as variable costs
or the overall break-even price of the business when setting
business goals? The implementation of good farm practices will
inevitably lead to a more e cient and profitable business.
5) E ciency insulates best against volatility
There are several mechanisms that can help a farmer deal with
volatility, which mainly revolve around the use of fixed output
prices (e.g. forward selling or fixed price schemes) or fixed
input prices (eg. fixed interest rates). However, by far the best
business insulator to volatility is high e ciency.
Conclusion
Financial planning and measurement is an imperative for
any business seeking to achieve its full potential. Its benefits
include benchmarking your business, proper investment
appraisal and keeping track of the overall progress of your
business. For financial planning to be e ective, it must be an
easy process to complete and should incorporate both on-farm
and o -farm expenditure.
Aligned with financial management is the development of a
resilient farming operation. A resilient business is a low-cost,
high-e ciency operation that has a framework that fosters good
decision making at all levels. It also focuses on reducing stress
on all parts of the business, particularly the workforce. In the
volatile times we live in, e ciency is, by far, our best insulator.
Summary
The variance in farm performance or profitability cannot necessarily be explained by size, land type or location in isolation.
A simplified farm system allows more attention to detail as it reduces other distractions.
Strong financial management is consistently evident among the more e cient operators.
Financial assessment should focus more on specific cost categories than overall farm performance.
For sustainable farm businesses, it is vital that priority is given at all times to investing in appreciating assets.
References
Blenko, M.W., Mankins, M.C., and Rogers, P. (2010). "The decision-driven organization." Harvard Business Review 88 (6): 54-62.
McCormack, M. (1986). `What they don't teach you at Harvard Business School'. Bantam Books.