Farm management: Sound management gives a business the edge


By Digital team | 10 May 2018
bookkeeping; management
Office time is part of farm management and keeps the business running smoothly.

What makes one farmer more successful than another? This can be debated endlessly, but in the end it all comes down to farm management.

There are many definitions for farm management, but if we combine them, they all come, more or less, down to farm management being “the efficient employment of all resources, human and physical, to achieve the aims of the farming business.”

The human and physical resources, mentioned in the definition, are:
1. Management – which consists of 4 tasks:

  • Planning (what to do, how to do it, and when to do it),
  • Organising (who will do what, when will it be done and where will it be done),
  • Implementing (physically doing what was planned and organised)
  • Controlling (to evaluate what was done and compare it with the original plan and to seek reasons for deviations on which can be improved in future).

2. Labour – represents all employees.

3. Land – represents the physical land (soil, vegetation, grazing and water).

5. Capital – the term used for tangible money and immovable assets such as buildings, fencing, kraals, sheds and so forth and movable assets such as vehicles, implements, tractors, breeding livestock, and production inputs.

While applying management tasks the farmer/manager must be the leader and he must take decisions, communicate internally and externally, delegate work, co-ordinate sections, motivate his people and maintain discipline, both informally and formally.

BUSINESS GOAL

A bit theoretical some would say, but let’s analyse the definition, beginning at the aims or objectives of a farming business.

The most important aim would be to make a sustainable profit. Yes, there could be additional objectives such as to improve the standard of your living, to produce a product consumers would prefer, among them.

All additional objectives can only be achieved if a profit is made.

In financial terms, the objective would be a good return on investment.

In its most basic form, profit (P) or loss (L) is determined by Income (I) minus Expenditures (E). (P or L = I – E).

To be in a position to make a sustainable profit and achieve all objectives a farming business has to produce a product that meets the needs of customers in terms of quality, quantity, specific time of and/or consistent delivery, place of delivery, and packaging.

Also read: Learn more about planning and money matters

TAKING RESPONSIBILITY

The term “farm management” could therefore be explained as planning, organising, implementing and controlling employees, land, all immovable and movable assets (including production inputs) by leading, taking decisions, communicating, delegating, co-ordinating, motivating and maintaining discipline to deliver products customers need – and all at a profit.

The questions asked at the start can now be rephrased:

  • Do you plan, organise, implement and control to take care of your livestock properly?
  • Do you plan, organise, implement and control your grazing system properly?
  • Is the production of a crop properly planned, organised, implemented and controlled, including (for instance) such aspects as soil analyses?

As an example, the 4 management tasks could be seen as the wheels of a vehicle. Each wheel must be inflated correctly if the vehicle is to move forward efficiently. The same applies to a business – should one of the management tasks not be executed properly, your business could still make a profit but sooner or later it would grind to a halt.

And that is also the challenge for the future – if your management doesn’t improve every year, your business will eventually come to a halt – that is, there is no longer any profit. One cannot simply do things the same way, year after year. One has to improve by increasing income and/or controlling expenditure.

Income can be increased, for instance, by increasing prices, higher production per unit, improved production plans (precision farming), increased productivity, a change or diversification of enterprises.

Costs can be limited by, for instance, bargaining for lower input prices and/or improved production plans, and/or reducing costs (such as reducing staff and/or controlling costs by implementing budgets and/or higher productivity).

AREAS OF MANAGEMENT

In every farming business, the owner/manager has to manage:

  • Production (physical production of products).
  • Purchasing (buying production inputs and assets).
  • Marketing (selling products).
  • Finances (including taxes, estate planning, risk and uncertainty).
  • Administration (office and records).
  • Human resources (personnel).
  • Public relations (relationships and communication).
  • Assets (control, maintenance and selling of assets) and stock management (Control of production inputs).
  • General (aspects such as occupational health and safety, fire control, farm safety).

Although the areas are mentioned separately, they are interrelated; so, even though you may be busy managing (planning, organising implementing or controlling) one area, you’ll probably also be managing one or more of the others.

VALUE OF INFORMATION

The task cannot be carried out without external and internal information. So as much information as possible needs to be gathered, by reading, listening, observing and recording – if you don’t compare, you cannot manage.

Also read:
Learn how to do proper record keeping on your farm (part 1)
Farm management needs good record keeping (part 2)

If you don’t know that the calving percentage of your beef herd is only 60%, what are you going to “manage” to improve the calving percentage? So you start recording and then gathering information about what causes the calving percentage to be low and how to improve on the percentage or rectify the possible causes.

The same principle applies to your crops, milk production, the production of wool or the growth rate of your broiler chickens.

Lastly, as farm managers, we have also to remember that it’s part of our responsibility to bear in mind the conservation of the environment by applying sound agricultural practices. Land is one of our most valuable resources; without it, we wouldn’t be able to farm.