Family farm business decisions - better outcomes from improved decisions

Take home messages

• Macro-manage the family business better, add structure, make plans and create common goals. This will unite the family to achieve what is best for all. By having these common goals, it is possible to create a farm culture that all employees can adhere to. Seek assistance from an experienced adviser to help the family build a business plan.
• Formalise the decision-making process and involve experienced others in this. Each member of the family must know their roles and responsibilities and be made accountable for them. These formal meetings are a place for reporting, reviewing and raising issues that may exist in a controlled environment where conflict can be managed.
• Outsource services that complement the business and fill gaps in managerial ability. Don’t settle for second best in this area. The right people in the business can provide a significant return on investment. Also, seek out training opportunities to help up-skill the workforce within the business.
• Providing an inclusive workspace for a farm office is the lynch pin of any of the management strategies discussed in this report. Create a space that can cater for the family and the workforce. This will improve the access for all members of the farming family and reduce the risk of isolating any individuals. This will be the meeting place for all things work related and will give the family and workforce a clear division between work life and home life.

Content

During a fire recovery workshop in December 2015, Dennis Hoiberg of Lessons Learnt Consulting asked, ‘Why do you do what you do?’ Dennis proposed that if you cannot answer this in three seconds you are psychologically exposed; you lack resilience, which is your ability to bounce forward and thrive through change and challenge. ‘Understanding the WHY in your life gives great direction and overrides the negative stresses with positive resilience’. (Dennis Hoiberg, 2015).

The main purpose of this paper is to examine what growers are doing to ensure good decisions are being made to help them manage risk and to thrive. Resilience is one of the desired outcomes of having a reliable decision-making process. A resilient family farming business will thrive rather than just survive after adversity.

The experience with the Pinery fire highlighted that a decision-making process can be vulnerable to mistakes if not structured well. There were many decisions that needed to be made at the early stage of recovery. The priorities of the business had quickly shifted and there was an increased level of stress, fatigue, workload and grief to deal with. To not learn a lesson from this experience would be negligent on a personal and professional level.

During a meeting in Canada with Reg Shandro, Farmacist Advisory Service he said: ‘First time you’re a victim, second time you’re a volunteer.’

This sentiment clarified that every effort must be made so that the next time the unexpected occurs, the team and the business is in a position to manage or capitalise on the situation. Bearing in mind the unexpected does not have to be a bad or a negative happening. It may well be an opportunity that if responded to properly, will grow the business.

For the purpose of this paper the strength of a family farming business is described by its sustainability, resilience and responsiveness (Figure 1). These are the desired outcomes of a strong structure for making decisions within a family farm business.

Sustainability — environmental, financial and generational continuity.

Resilience — management of adversity.

Responsiveness — the ability to capitalise on opportunity. In order to achieve this outcome, family farming businesses need to consider how they manage and resource the business.

Figure 1 illustrates the components that need to be considered and developed in order to improve the decision-making process and to lead to actions that achieve the desired outcome of sustainable, resilient and responsive businesses.

Figure 1. The components that need to be considered and developed in order to improve the decision-making process.

The informal manner in which business is carried out in many family farming businesses may make it vulnerable to conflict and failure. Formal structures and processes will help achieve a more inclusive function for the wider family as well as assisting with being more prepared, professional and competitive in a global supply chain. For change to happen there will need to be a shift in focus for some family farm managers.

There are many structures and processes available to assist with decision making. For example, Boards of Directors, Advisory Panels or other forms of formalised decision making. Whichever process a family choose to implement, they essentially address the same issue; that is the addition of experience and knowledge to the forming of a decision.

But without doubt, those with the authority to make important decisions on behalf of a family farm business cannot do so without the adequate supply of accurate data. Preparation of records and reporting on issues accurately is imperative to the quality of any decision. This was particularly the case during the recovery phase of the Pinery fire. Many locally affected growers stated that the 18 months following the fire was said to be the busiest of their lives. Finding time to introduce an appropriate method of financial analysis in order to make key decisions under those circumstances is difficult. Neglecting the macro management of the business can be easy to do when day-to-day activities are demanding time. Proactively introducing an improved decision-making process will position a business to better manage the unexpected as well as the foreseeable.

Also important is the type and quality of the people and service providers chosen to assist the farm manager in making decisions. An opportunity exists in the selection of these people to fill gaps in the farmer’s managerial abilities.

Knowing that there are a vast range of services available should give confidence to those family farms that are unsure that they have the ability within the family to grow the business. Being resourceful by outsourcing these services is of great value to small and medium family farms that do not have the capacity to employ fulltime specialty staff to carry out these tasks.

Whether or not the grower believes they are running a successful business or not, it is important at times to take a step back and have a look at the business from the outside, avoiding the distraction of lush green crops and shiny new machinery.

The outcome to a sound decision-making process is improved risk management and an increased ability to respond to opportunity. A family farm that has a common focus and shared goals can achieve more and will work better together to make them a reality.

The challenge facing a family farm that is operating under informal decision-making processes that chooses to formalise this structure could be less than those challenges they face if they remain the same.

As far as changes made on my own farm it’s currently a case of ‘steady as she goes’. At the beginning of my Nuffield experience I was given strong advice to be very considered in making changes to my own business because it would take some time to process what I have learnt. Additionally, that it is important that changes that could disrupt the workplace are not made too soon. During this time I have been able to refine my thought around those changes and even dull them down to only a few.

Those changes are based around financial recording and reporting, roles and responsibilities and more regular formal meetings. With the desired result of there being more financial transparency and personal financial freedom, improved farm performance understanding and more opportunity to discuss issues that commonly cause problems on family farms.

But without doubt the most important values that are required are a team mentality and some considered leadership.

Useful resources

Derek Tiller’s complete report can be found on the Nuffield website

Contact details

Derek Tiller
Pinery Grain Grower Pty Ltd
Pinery, SA
0438 272 100
Derek.pgg@gmail.com