When asked what they value about farming, many farmers say they like being their own boss.
In the past, good production management was a crucial part of that role, but today being the boss means more than being an above average producer.
A successful farm is now equally dependant on other management functions, such as financial, marketing and human resources.
Farmers must come to value the ever-growing importance of management performance evaluation.
The human resource area of performance management is a new territory for most farmers. Not that long ago they struggled to identify the importance of human resources, but that is changing. Recruiting and retaining employees is now regularly identified as a major issue facing farmers.
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Some farmers try to keep the size and complexity of their operation to a point where the farm family can cover most of the work. However, the situation changes when the farm tries to keep employees on a permanent, full-time basis.
Experts advise that farmers can improve employee recruitment and retention by formalizing the process. They can do this by setting performance goals, regularly conducting performance reviews and tying compensation to performance. It is not a common practice in farming yet, but it is becoming more popular.
But what about your own management performance – your own human resource?
Farmers do not typically have a structured process that tells them how well they are managing.
What are the options?
Lenders form an opinion on a farmer’s management performance but don’t usually formally share it with the farmer. However, even if they do, the opinion cannot completely be separated from bias.
An accountant could also provide input on total management performance, but it would likely be heavily or completely oriented toward financial quantification.
Farmers also have the difficult task of filling both the chief executive officer and ownership function in their business.
In many large businesses, there is a clear distinction between ownership and management. The CEO’s performance is evaluated by the owner, while the owner’s performance is evaluated by a board of directors.
Farmers can often receive a measure of performance evaluation from within a formal or informal peer-to-peer network.
Performance evaluation in this scenario is likely not a formalized process. While it is better than having no evaluation at all, a peer-to-peer network will include an element of farmer bias. As well, the feedback will only be as good as the peer network.
Ad hoc feedback from other farmers, lenders and accountants is not an ideal evaluation process but can be used when a farmer is facing major issues.
Given that most farmers cannot justify a true board of directors, another option is to formalize an advisory board. Similar to a true board, an advisory board can provide unbiased and professional input on management performance, while avoiding the cost and some of the legal implications associated with a true board of directors.
Terry Betker is a partner with Meyers Norris Penny LLP, working out of the Winnipeg office. He is director of practice development in agriculture, government and industry. He can be reached at 204-782-8200.
