When it comes to farm management, take a cue from No. 99.
“Wayne Gretzky said, ‘I’m not bigger, stronger or faster than the players I’m up against. What I’ve realized is that the only real difference is that they always go to where the puck was, whereas I try to go to where it’s going to be,’” said Danny Klinefelter.
“That’s strategic management.”
When it comes to farm management, the best tool is constant evaluation and improvement, said the professor at Texas A & M University and internationally renowned expert on farm management.
“If it ain’t broke, you haven’t looked hard enough,” said Klinefelter. “There’s always a way to improve and prioritize.”
And the little stuff counts, he told attendees at a farm management seminar put on by the Alberta Canola Producers Commission.
Klinefelter is an ardent proponent of the ‘five per cent rule.’
Instead of doing one thing 100 per cent better, producers will see bigger gains on the farm if they do about 20 things five per cent better. The effects are cumulative, compound, and cause the farm to grow exponentially.
Five per cent rule
Choosing to use a five per cent approach to improvement means that a producer is always looking at the numbers and making small adjustments.
“The most dangerous language in agriculture is, ‘because we’ve always done it this way,’” he said.
Studies of farm profitability have found the best operations generally do about five per cent better than average, and the worst farms are about five per cent below average.
“Successful farms are always a little better than average, and they stay there,” he said.
One of the ways that good farms become great is by adopting strategic management, which means anticipating and capitalizing on change. These producers learn, build, and adapt faster than the competition, said Klinefelter.
Leading farmers spot opportunity way before others, but Klinefelter recommends producers spend as much time looking at what they are already doing as they spend searching for new opportunities.
Another management tip is to break the annual budget into monthly segments, examine the projected budget, and compare it to reality.
“Move away from the symptoms and get to the root cause. Correct it as soon as possible,” he said.
Nailing down costs
Producers need to use an accounting system that allows them to know their cost of production. And they want to be able to break out those numbers in a host of ways so they can look at overall farm costs, but also zero in on every enterprise, every acre, and every bushel.
They also need to be able to measure how every change impacts the overall business.
Klinefelter is a firm believer in the value of peer groups and benchmarking.
Benchmarking isn’t just looking at the financial health of the farm, but involves examining strengths, weaknesses, and ways to improve. If producers prepare their information the same way, and then share it with a peer group, they can offer each other suggestions on how to improve and share ways to solve problems.
“To have new ideas, you need someone from outside without a vested interest,” he said.
Peer groups can feed off of each other, network, and learn together.
Another management trick is to prioritize tasks and initiatives, and then make changes that will have the most impact on the business.
“Don’t stick to tradition or accept that this is the way we’ve always done it,” said Klinefelter. “Just because you’ve always done it that way doesn’t mean it can’t be done differently.”