Medicine Hat, February 17, 2011Presenter: Mark Wobick

Managing the Farm of the Future &

The People Side of the Business

• What kind of changes do we need to prepare for inthe upcoming years?

• Today … things to think about in future planning andmanagement for the way farms are going to bemanaged.

• Not easy, more warm and fuzzy and lessquantitative

Management Styles - Yesterday

• Managing People … safe to say this was notnecessarily a skill set our fathers (mothers), orgrandfathers (grandmothers) thought was importantto run the family farm.

Management Styles – Tomorrow

• Imagine the Decade Ahead

• The managing people skill set could be one of thefactors that determine whether a farm succeeds ornot!

• Strong conviction that those that manage people sideof the business the best will be much better off in 5 –10 years from now!

The People Side of the Business

• Dr. Danny Kleinfelter

• Top Farm Managers – NO MAGIC SILVER BULLET!

• Do many things in key areas of their business just abit better … maybe 1-5%.

• 5% on $1 million of revenue and $1/2 million ofexpenses is $75,000!

• Many people can live off of $75,000!

Quote:

“Unless an organization is changing on the insideas fast as the industry is changing on theoutside, the end is in sight”

Jack Welch, former CEO of General Electric

My Example – ‘Using Technology Beyond theObvious’

• Dad – texting

• “hi wed am tight parkg back bumr nickd 1 corner willsee maybe call judy or den to if over my ded dad”

Farm Consolidation is occurring everywhere in Ag

• 2002 U.S. data – annual revenue higher than $1 million =1.4% of Farms = 47.5% of Revenue

• 1990-2009 – 2% of U.S. bank accounts for 74% of all bankassets

• Hog Industry in the U.S.

• In 20 years, went from 325,000 operations to approx.60,000 operations

• Of which less than 200 operations account for 64% ofmarket share

• Hog Industry in Alberta – 40% of production iscommunal based

Formula for Large Scale Successful Crop Production

• 25-30 year span = The New Crop Production Paradigm

+ Roundup 1986

+ Yield Monitors 1992

+ Roundup Ready Crops 1997

+ GPS 1999

+ AutoTrac Steering 2002

+ VRT 2002 -

+ Ability to Access Capital 2010-12 ?

+ New Traits in Crops 2012 ??

+ Driverless Equipment 2013-15 ???

Get your Management House in Order

• Increased size alone will not provide survival for anindividual operation on a long-term basis

• Using small farm management/financial conceptswill not work in large operations

• Your management house must be in order toprofitably leverage economies of scale

• Financial success challenges are different with size

Think like the Top Farm Executives / Manager

• Danny Kleinfelter

• Professor & Extension Economist (Texas A & MUniversity)

• What little things can you apply to your business?

1) Four Patterns that consistently emerge for mostsuccessful managers

Anticipate

• Able to anticipate and adapt to the changing needs of their market

Explore

• Open to exploring new ideas and consider different points of view

Network

• Recognize the importance of networking and developingrelationship across the full business chain

2) Strategic Thinker

Management

• Anticipating, driving and capitalizing on change as theirindustry is continually changing

Planning

• Strategic versus operational planning. They look at the bigpicture side of planning (30,000 feet) rather than day to day

Actions

• Doing the right things rather than just doing things right.

3) Able to objectively assess strengths andweaknesses in people, including themselves

Very strong people skills

• Will become a larger component in tomorrow’s managertoolbox

Picking the right people

• Able to assess people, pick them and then get them workingat the right position

Work together

• Getting the people to all work together towards commonteam goals will be another challenge

4) Operate in a continuous improvement mode

Try to do 100 things 1% better

• Many things need continual change, not one thing needingmajor change

Prioritize

• Long list of things that need changing, but they prioritize thelist to get the most effect from the changes

Stay ahead

• The internal rate of change has to exceed the external rateof change

5) Always attempting to push the envelope by tryingsomething new or different

Believe mistakes are synonymous with growth

• Calculated risk takers and excellent risk managers thatrealize there will be bumps in the road

Do their homework

• Consider their options and develop a strategy before anymajor undertaking to help minimize risk

Opportunistic

• Timing is everything and farm managers must be ready toact

6) Spend more time thinking about “what if” scenariosand developing contingency plans (black swan)

Do not dwell on the negative

• But consider what could go wrong and then think ofwhat has to be done if it does

Exit strategy

• Every time there is an entry strategy for a plan makesure there is an effective exit strategy as well

Evaluate

• Step back and evaluate the plan, try to think of thingsthat you need to stop doing

7) More likely to seek input and expertise fromoutside the business

Link to outside world

• Not afraid to seek advice from other successful business’even if not directly involved in farming

8) See change and challenges as opportunities anddon’t tend to view themselves as victims

Learn from setbacks

• Bumps in the road, adjust and move on

Change creates opportunities

• Opportunities only available for those who are preparedto act

• Simple as having a strong balance sheet• Proper debt structure (debt over life of an asset)

• Strong working capital (pre-buys, hold for markets, expansionopportunities)

Another Dad text …

‘hi 6 30 am in san fran tired calgary noon bye’

9) See themselves more as the head coach than asthe boss

Leadership

• You can be the boss and a poor leader. Managementhas to work with the team. Management openly admitsto being wrong

Team rule

• “We” and not “I” for better team buy-in

When is a leader great?

• Not because of power, but rather on the ability toempower others

10) Approach to management is more balancedbetween Key Performance areas

Consistently above average

• Many key performance areas get measured,management must balance the results so that not toomuch emphasis is put on any one indicator

• Understand what is important to their business and whatwill drive their success

11) Spend more time monitoring and analyzingperformance

Before it is too late

• The ability to spot problems and opportunities early andreact (e.g. use their f/s as a tool and foundation of theirbusiness)

Treat causes, not symptoms

• Concentrate more on what caused the problem ratherthan what the result is

12) Decisions based more on reason and judgment andless on emotion

Recognize and understand emotions

• Separate emotions from judgment and reason(marketing; capital purchases)

Emotional intelligence (EQ not IQ)

• Management can be very smart intellectually but haveto be able to deal with people to be successful

13) More creative in their approach to business and seekways to force themselves to think outside the box

Challenge existing paradigms

• They will continually challenge existing businessmodels or arrangements to see if there is a morecreative way to help their business succeed

Ability to adapt

• As they review or actually work through a businessmodel they have the ability to apply different elementsof one situation to another

14) Work Harder at Communication

Communicate

• One roadblock to progress is secrecy so goodcommunication skills is very important

• Another one – ‘no time’

Buy-in and commitment

• Management and the whole team needs a clearunderstanding of the business vision and they need asense of ownership

14) Work Harder at Communication

Employees and family need to know more

• Where is the business headed?

• How does it plan to get there?

• What is my role?

• What’s in it for me?

14) Work Harder at Communication

Employees and family need to know more

What am I expected to do? Job roles or job descriptions

Why am I doing something? Explanation of duties

How am I doing at my job? Performance review

How can I improve? Potential career path

Farmers are usually great at keeping up with :

- Production changes

- Equipment and technology changes

- Financial changes

- Marketing changes

What about People changes?

Questions?

Thank You!

Mark Wobick P. Ag.

Farm Management Consultant

MNP

Lethbridge, AB

403-380-1666