Desired future, reality must align

There are two futures for farms and farm families.

One is the future that is defined by what will happen, simply as a matter of course, year by year.

The other is the future that is defined by what farm families set out to purposefully work to accomplish.

One isn’t necessarily any better than the other, but they are quite different approaches. I think it depends on how farm families think about their businesses and their situations.

I have no statistics upon which to base this opinion, but I think most people would prefer the future that they could try to make happen as opposed to accepting the future that was “dealt” to them.

The inherent challenge is that individual family members will each have ideas and opinions about the future that they would like to see. That, in part, is what makes the process of working within family to define a desired future difficult not impossible, but difficult. I think it’s worth the effort.

There are rewards in situations where a future has been defined and where progress toward it has been made. Farm families can celebrate successes when a plan comes together.

There will often be changes associated with the defined future. The more substantive the changes required, the greater the need for planning.

The planning should keep three important components in alignment: business direction, financial performance and management structure.

Business direction

This alignment consideration is about strategic direction. Farm families should have written statements that provide longer-term direction. They define what farm families are working toward: vision and goals and a common purpose. Consensus on purpose is an extremely important part of the planning process.

Financial performance

All farms have a financial direction. The reality is that they are headed somewhere financially.

For most farmers, this is a reactive function, meaning that their financial position in the future — say five years from now — will be an outcome of what will happen over that time frame.

The preferred approach is to define what they want, or need, their financial position to be, and then determine what needs to be done to achieve it. It can be thought of as being a financial vision and should include financial management goals and targets.

There is a business adage that says you can’t manage what you can’t measure. How do you know if you are moving to where you want to be financially if you haven’t defined the goal?

Logically, there should be a significant degree of alignment between a business vision and a financial vision. I find myself in discussions with farm families where there sometimes is a disconnect between their ideas of where they want their farm to be in the future and their ability to get there financially.

Having a dream and then after a time realizing you can’t afford it can be discouraging.

Management structure

The importance of understanding a farm’s management structure as farms get bigger and straddle generations has never been greater.

The basic management functions on a farm are mostly unchanged, but what’s involved in attending to those functions has changed and is changing. For many farms, this is a new and evolving reality.

Simply stated, what does the management structure of a farm need to look like five years from now so that it is appropriately aligned with the stated financial and business vision?

Putting some structure around the management functions on a farm can be a very powerful exercise and doesn’t have to be overly complex.

Start by drawing an organizational chart that best represents how the business is being managed. Determine who has responsibility for operations, marketing and financial and human resource management. Next, define what the tasks are in each of those management areas and then repeat the process that best represents the management structure that will be required five years from now.

Successful outcomes correlating to a desired future will be positively affected by keeping the three planning components outlined above in alignment.

Terry Betker is a farm management consultant based in Winnipeg. He can be reached at 204-782-8200 or terry.betker@backswath.com.

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