Trying to measure management

Published 6:43 pm Tuesday, July 30, 2019


Ag Notes

The four factors of production for agricultural businesses are often described as land, labor, capital and management. You can quantity the first three of these in specific units (acres, hours, dollars), and you can acquire additional quantities if you need them.

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However, you can’t quantify management; it does not have units. While you can hire managers, you can’t buy management. In many surveys of farm and agribusiness owners, when asked what they need help with, they will often reply, management.

While you can’t count or measure the level of management, you can observe traits that are common to top managers. The following describes a few of the most important traits.

First, good managers know their cost of production. They know what it costs to produce a bushel of corn, a certain level of milk, a ton of hay or a feeder calf. While balance sheets and income statements are necessary indicators of the overall financial health of the business, it’s important to know the relative profitability of different enterprises or commodities. Good managers, regardless of the industry, want to know the costs of producing their product. Good managers know the difference between the market price and their cost of production is the profit that will make the business sustainable.

Another trait common to top managers is that they set goals based on a clearly defined mission statement. The mission statement answers the question, “Why are we doing this?” and the good manager understands that everyone in the business, employees, family members, and partners understand and agree with the answer to that question.

Finally, goals are specific statements about what needs to happen to fulfill the mission.  These goals should be SMART. In this case SMART is an acronym to help us remember that goals should be specific, measurable, attainable, relevant and timed.  Good managers often post their mission statements and goals so that everyone in the business knows the direction the business is headed.

For more information on agribusiness management, contact the Boyle County Cooperative Extension Service.

Jerry Little is the county extension agent for agriculture/natural resources.