1. AGEC 407 Management Theory How do you measure “management”?

2. AGEC 407 Management Theory A definition of management: –Judicious use of means to accomplish an end What is an end? –A goal What are means? –Resources –Land, Labor, and Capital What is judicious? –Characterized by sound judgment

3. AGEC 407 Management Theory The three major components of management: –Planning –Implementation –Control

4. AGEC 407 Planning Selecting a strategy that best meets the farm’s goals Planning can be: –selecting a long-term strategy –solving a problem –responding to an opportunity

5. AGEC 407 Setting goals –Essential part of the planning process –As a consultant you must know the goals of your client *Provides criteria for decision making* Planning

6. AGEC 407 Examples of farm business goals..... –Maximize current farm profit –Maintain or increase family standard of living –Increase net worth –Reduce debt –Provide a stable family income (reduce risk) –Provide an environment for adequate family time Planning

7. AGEC 407 Setting Goals –Should be specific and measurable –Clearly thought out and stated –Not to be confused with methods –If farming is a family business, farm goals may be family goals *Gives you some criteria to base decisions on* Planning

8. AGEC 407 Setting Goals –Multiple goals are often conflicting Profit maximization vs. Risk avoidance Could be “maximize profits while minimizing the possibility of incurring a loss” –“If you do not have goals for your farm, there are one-thousand people that have a goal for you” –Without goals you have aimlessness Planning

9. AGEC 407 Determining Resources –Physical resources Land, buildings, machinery, livestock –Human resources Availability, strengths/weaknesses –Financial resources Thorough financial statements Necessary for borrowing Planning

10. AGEC 407 Formulate alternative plans –Feasible? –Profitable? –Achieve goals? Select best plan Projected budgets/plans give you standards to measure performance Planning

11. AGEC 407 Implementation Put the plan into action Acquire the necessary resources –rent vs. purchase –full-time vs. part-time labor Organize and direct the activities

12. AGEC 407 Control Measure actual performance Relies on good recordkeeping Compare actual outcome with projected outcome from planning process

13. AGEC 407 Control If performance is suboptimal: –need to be able to find the cause –need to implement a remedy Records on aggregate farm performance is insufficient Must have detailed information for each enterprise –costs and returns –labor and machinery utilization –performance ratios

14. AGEC 407 Management Theory Farm management requires information: Economic Theory Finance Principles Biological Science Psychology/Human Relations Math and Statistics

15. AGEC 407 Management Theory Strategic vs. Tactical Management Strategic management – Planning the overall long-term course for the business Tactical Management – Shorter-term decisions that keep the business on course

16. AGEC 407 Management Theory Strategic management 1.Set goals 2.Assess resource availability 3.Analyze industry environment 4.Identify best feasible strategies 5.Select best strategy 6.Implement strategy 7.Monitor results

17. AGEC 407 Management Theory Tactical management 1.Clearly identify problem/opportunity 2.Propose feasible solutions 3.Collect data 4.Analyze feasible solutions 5.Implement best solution 6.Monitor results