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Unformatted text preview: Decision Making in Farm Management
AAE 320 Dr. Paul D. Mitchell Goal Today Overview the decision making process, focusing on a farm manager, and how it relates to the material covered in AAE 320 Readings on course page How do I decide what is right for me? (Jones) What it take to be great (Colvin) How Do I Decide? What Is Right For Me? How Do I Decide? What Is Right For Me? What is the decision making process? What is your mission? What do you value? What gets you out of bed in the morning? So often courses, meetings, etc. focus on the process and not the motivation, when often the second question is just as, or more, important Strategic Management
1. 2. 3. 4. 5. 6. Define your mission Formulate your goals Assess your resources Survey your environment Identify and select strategies Implement and refine selected strategies Mission Statement Short description of WHO your are and WHY you exist The dream you pursue, your life's activity, the kind of person you want to be Your personal/business mission--what you are working toward Reflects your and your family's Reflects reality: economic, social, physical, and personal limits Social, religious, cultural values, special talents Mission Statement Google "Strategic Management" Google "mission statement" Many "how to" pages, academic journal Many "how to" pages Examples: companies, agencies, organizations Ford Foundation, PBS, CIA, World Bank, Campus Crusade for Christ, Kodak, etc. Dilbert mission statement generator Dairy Family Farm Example
"Our mission is to produce safe and nutritious milk at a reasonable cost, to maintain and enhance the quality of the natural resources under our control, and to contribute toward making our community a satisfying place to live." (Source: Kay, Edwards, & Duffy, p. 20) What it Takes to be Great Any of us can be great at whatever we want to (with some physical limits) Motivation key, combined with hard work, Deliberate Practice Business/farm applications Main Point: Don't be afraid to pursue excellence in your life and profession Incorporate your passion into your mission Focused and deep thinker about your world, become an expert on cows, crops, soils Formulate Goals Concrete steps you take to achieve your mission How you work to make your dream come true Goals should be: Specific, Measurable, and Have a Deadline 1) "To own 240 acres of prime farmland in Columbia County within 5 years" 2) Not "Someday I'd like to have some land" Assess your Resources Internal look at your resources 1. Physical: land, livestock, machinery, buildings, irrigation, orchards, pasture 2. Human: your own and your family's skills, talents, preferences, etc. 3. Financial: capital you have and can acquire from lenders, investors, family Survey your Environment External look at your environment 1. Available technology, genetics, production practices 2. Consumer tastes, changing markets 3. Government Regulations Livestock Producer: should be aware of new breeds and practices, consumer preferences, international markets, nutrient/manure regulations Identify and Select Strategies Identify Strategies: How you approach your mission This is the time to be creative and innovative, to dream up new ideas Worry about feasibility later Brainstorm, Think outside the box Think Big! What it Takes to be Great Can be taught, but not in this course Identify and Select Strategies Strategy Selection: Ag examples to illustrate High volume, low margin production Low volume, high value production Commodity crops and milk Integrate crop and livestock, or specialize Organic milk, farmer's market crops Form coops/alliances/contracts Dairy & crops, grains only, vegetables only Work off farm and "weekend/evening" farm Join organic dairy coop, CSA farm, contract vegetables, tie in with a specific retailer Implement and Refine Strategies Form a business plan with specific goals, work to carry them out, and see if you meet your deadlines Evaluate as you go along and refine or change your strategy--Is it working? Deliberate Practice: set time aside to assess and improve yourself and business, learn about where your world is going (new technology, new laws, market changes) Changes happen, so you may need to change your mission, your goals, and/or your strategy Strategic Management
1. 2. 3. 4. 5. 6. Define your mission Formulate your goals Assess your resources Survey your environment Identify and select strategies Implement and refine selected strategies Jones: "What Is Right For Me?" Hard questions, easy to avoid Decision Making Process Where easiest to focus effort/time and avoid the hard, "Why am I doing this?" type of questions Jones: "How Do I Decide?" Strategic Management calls this step "Tactical Decision Making" More academic, not so "navel gazing" What is the decision making process? Jones: How Do I Decide?
1. 2. 3. 4. 5. 6. 7. 8. Specify an objective or goal Identify and define the problem(s) Collect data and information Analyze various options for taking action Decide which action to take Implement the decision Monitor and evaluate the results Accept the consequences Specify an objective or goal This is Jones' version of what is called "Strategic Management" Jones has a nice 2 pages on what this means, without all the terminology See the emphasis on values, the overall meaning of your farm life and work Does not formally structure the issue and how to go about forming mission & goals Blends mission and goals together How Do I Decide? Decision Making Process Tactical Decision Making After you have your mission statement, set your goals and chosen a strategy How do I decide? "Tactical Decision Making" Tactical Decision Making
1. 2. 3. 4. 5. 6. 7. Identify and define problem/opportunity Identify alternative solutions Collect data and information Analyze alternatives and make decision Implement decision Monitor and evaluate the results Accept responsibility/consequences Deliberate Practice: where along here can you improve? Identify & define problem/opportunity Identification: How do I know I have a problem? Definition: Unlimited demands with limited resources and multiple options Sometimes it's obvious Compare your performance to others Many focus on relaxing resource constraints land, labor, (human) capital, time How choose how much of each resource to use for each option? How choose which options to pursue? Economic Problem Definition Find the mix of activities (crops, livestock) that maximize your profit/utility, subject to using only the resources you have (land, labor, capital, time) Economists express this mathematically Choose inputs to maximize profit/utility subject to your budget constraint Production functions, isoquants, production possibilities frontier This is what we will overview next section Identify alternative solutions Make a list of possible ways to deal with the problem/opportunity Some again are obvious Some are only apparent once start collecting information Brainstorm, Think Outside the Box Be creative, worry about feasibility later Can be taught, but not in this course Collect data and information University Extension/Research USDA: NRCS, FSA, AMS, RMA Farm Media: newspapers, TV, radio, farm journals/magazines Company mailings, pamphlets, brochures Agricultural Professionals: consultants, input suppliers, veterinarians, banker, lawyer, government official Collect data and information Internet Search Engines Many useful web pages Government Agencies: USDA, NOAA and National Weather Service, WI DATCP Farm DOC Center for Farm Financial Management National Risk Management Library Analyze the alternatives you identified using the information you gathered Partial and Enterprise Budgeting, Financial, Cash Flow, and Risk Analysis The "meat" of this course: economic methods to analyze farm management alternatives Work with key people to make decision: family, banker, investors, partners, etc. Analyze alternatives, make decision Implement decision Requires communicating with family, partners, employees, etc., so all buyin Make and implement your plan: negotiate contracts, acquire resources, hire builder, hire workers, etc. Set goals that are specific, measurable, and have a deadline Requires many skills: organizational, management, people skills Can be taught/learned, just not here. Monitor and evaluate results Did you meet your specific and measurable goals within your deadline? Things change and you may have to re evaluate and make changes/adjustments Keep good records and use them to see how you have done or are doing Financial Analysis: how to read and use financial statements Hire experts to assess your operation Accept responsibility Hopefully most of the results are good! Take credit when credit is due -- celebrate your successes Accept responsibility when it's your fault; don't play the blame game Learn from your mistakes -- failure can be a great teacher Sometimes it's just bad luck! Plan for the worst case or use risk management tools Summary Know (be able to explain) the difference between a mission and a goal Know (be able to explain) the difference between a strategy and a solution Know (be able to explain) deliberate practice We will focus on Tactical Decision Making Economic definition of management problem Information and data collection Analyzing alternatives Evaluating results ...
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This note was uploaded on 08/08/2008 for the course AAE 320 taught by Professor Mitchell during the Spring '08 term at University of Wisconsin.
- Spring '08