1. Chapter 2 Management and Decision Making
Farm Management
Chapter 2
Management and Decision Making
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Chapter Outline
Functions of Management
Strategic Farm Management
Tactical Decision Making
Characteristics of Decisions
The Decision-Making Environment in Agriculture
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Chapter Objectives
Understand the functions of management
Present the steps in developing a strategic management plan for a farm or ranch
Identify common goals of farm and ranch managers, and to explain the steps in the decision-making process
Explain the steps in decision making
Describe some unique characteristics of the decision-making environment for agriculture
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4. Table 2-1 Comparison of Low- and High-Profit Farms in Iowa
Source: Iowa Farm Costs and Returns
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5. Functions of Management
Planning
Implementation
Control
Adjustment
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Planning
Planning means choosing a course of action.
To plan, a manager must establish goals, identify resources, and allocate the resources to competing uses.
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Implementation
Once a plan is developed, it must be implemented, or set in motion.
To implement, the manager must acquire the resources needed for the plan and oversee the process. Coordinating, staffing, purchasing, and supervising fit under this function.
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Control
Control is the “feedback” function.
To control, the manager must monitor results, record information, compare results to a standard, and take corrective action as needed.
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Adjustment
If outcomes are not meeting the objectives, adjustments need to be made. Adjustment may involve fine-tuning the technology or changing enterprise. In some cases, additional information will be needed to diagnose the problem.
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10. Strategic Farm Management
Strategic management consists of charting the overall long-term course of the business
Tactical management consists of taking short-run actions that keep the business moving along that course until the destination is reached
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11. Steps in Strategic Management
Define the mission of the business
Formulate the goals for the farm and family
Assess the resources available to the business (internal scanning)
Survey the world surrounding the business (external scanning)
Identify and select appropriate strategies
Implement and refine the selected strategies
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12. Table 2-2 Common Values Among Farmers and Ranchers
Do you agree or disagree?
1. A farm is a good place to raise a family.
2. A farm or ranch should be run as a business.
3. It is acceptable for farmers to borrow money.
4. A farmer should have at least two weeks of vacation.
5. It is better to be self-employed than to work for someone else.
6. It is acceptable for a farmer to also work off the farm.
7. It is more enjoyable to work alone than with other people.
8. Farmers should strive to conserve soil and keep water and air
resources clean.
9. A family farm should be passed on to the next generation.
10. All family members should be involved in the operation.
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Goals
Goals should be written
Goals should be specific
Goals should be measurable
Goals should have a timetable
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Possible Goals
Survive, stay in business
Maximize profits
Maintain or increase standard of living
Increase equity
Maintain stable income
Pass farm to next generation
Increase free time
Increase farm size (“growth”)
Maintain or improve environmental quality
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Assessing Resources
Physical resources: land, buildings, fences, breeding livestock, machinery and equipment, established perennial crops
Human resources: skills of the operator and other employees, likes and dislikes of individuals
Financial resources: cash, other capital and available credit
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16. Surveying the Business Environment
Called “External scanning”
The major types of crops produced haven’t changed much, but their characteristics are changing
A change may provide an opportunity or a threat
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17. Identifying and Selecting Strategies
Some businesses have more potential
routes for reaching their goals than
others because resources are more
flexible. As the number of alternative uses
for resources increases, so does the
complexity of the manager’s decisions.
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18. Implementing and Refining
Manager must formulate action steps to implement the plan
Manager must decide which information to collect to evaluate the success or failure of the plan
Strategic management is an ongoing activity
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19. Tactical Decision Making
Identify and define the problem or opportunity
Identify alternative solutions
Collect data and information
Analyze the alternatives and choose one
Implement the decision
Monitor and evaluate results
Accept responsibility for the decision
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20. Characteristics of Decisions
Importance
Frequency
Imminence
Revocability
Number of alternatives
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21. The Decision-Making Environment in Agriculture
Fixed supply of land: Land base is essentially fixed, making decisions about land use, sale, or acquisition critical
Biological processes and weather: Laws of nature place limits on manager’s decisions
Small size: Often one person serves as management and labor
Perfect competition: Producers are price takers
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22. Table 2-3 Types of Farms and Ranches in the United States
Source: Census of Agriculture
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Summary
Good management means the difference between earning a profit or suffering a loss. The overall direction is defined through strategic planning. The strategic plan is carried out via a number of tactical decisions. Agricultural managers operate
in an environment that differs from that
of most other businesses.
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