Farm and Ranch Business Management Functions

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Gervais Patrick
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1 Curriculum Guide I. Goals and Objectives A. Learn the basic concepts of the following three functions of management: organizing, staffing and directing, and controlling. B. Learn the interrelationship between these functions. C. Learn how to utilize these concepts in the management of your business. II. Description/Highlights A. Management functions include organizing, staffing and directing, controlling, and planning. The planning function, while not discussed in this set of materials, is discussed in RM3-19.0, Managing Your Farm and Ranch Operation. The organizing function is the management process of identifying or establishing jobs, positions and chain of command. Organization should facilitate the communication needed to make good decisions at all levels of the operation. Organizing is also inventorying physical and financial resources, identifying skills and talents among employees, and physically arraying these resources for efficient use. B. How the business is organized is fundamental to communication within the business, the delegation of authority, the risk management plan of the overall business, and the process of supporting good decisions. The whole point of organization and organizational charts is to make the operation run smoothly and efficiently. C. Every decision made by any manager is based on information. The business organization provides for information flow. Figures 1, 2 and 3 illustrate various communication and information flows (who answers to whom). Note that in each example there is a two way flow. Review Figures 1, 2, and 3. D. Lead the group in developing an organizational chart for their businesses. Starting at the top of a page, draw in each position; list the person or position to whom the position reports to; list the person(s) who are supervised by the position, and list the responsibilities of each position including the manager. E. Staffing and directing is personnel management. Staffing is the process of identifying and placing people in positions, while directing involves identifying employee strengths and weaknesses, and matching positions with the most suitable personnel. Directing is also training, evaluating, firing employees, communicating to employees what is expected of them, telling employees how they are doing (rewarding), and providing conditions and opportunities for advancement Page 1

Management functions include organizing, staffing and directing, controlling, and planning. The planning function, while not discussed in this set of materials, is discussed in RM3-19.

2 F. Effective staffing begins by filling each position with the best person available. A manager must thoroughly understand the responsibilities of each position. The job description is critical. G. Treating employees with respect will bring about improvement in employee morale, productivity, and appreciation for the work performed. Adequate training and continuing education are important in keeping workers productive and loyal. Employees who feel good about where they work are likely to believe that the better the business does, the better they do. H. The controlling function is the process of measuring a firm s progress and involves collecting information that can help you track the business health and progress towards attaining goals. There are many farm and ranch financial and production management measures that can help in decision making. I. Lead the group in developing the 10 most important financial and production management measures for their business. J. The controlling function is very much the measurement of management - measuring the attainment of your goals. If you have been successful, set the next goal. If unsuccessful, identify what must be changed to reach you goal. III. Potential Speakers A. Extension economists B. Management consultant IV. Review Questions 1. Why is it important to have a well organized business? Answer: The whole point of having a well organized business is to make the operation run smoothly. When a business is well organized, everyone understand their duties and responsibilities. The lines of communication move information to the decision-makers or managers and allows for making better and more timely decisions. VI. For More Details Drucker, Peter F., The Effective Executive. Harper Collins Publishers, Inc See publication, Farm and Ranch Business in this series for additional reading Page 2

Adequate training and continuing education are important in keeping workers productive and loyal.

3 Four Functions of Management Organizing Staffing and Directing Controlling Planning Organizing Function A management process Identifying and establishing jobs, positions, and chain of command Facilitate communication Identifying skills employees Arraying physical, financial, and human resources for efficient use Provides for information flow Goal is to make business run smoothly 9-99 Page 1

Facilitate communication Identifying skills employees Arraying physical, financial, and human

4 Figure 1 - Organizational Chart Paul Jack Manager/ Owner Herdsman Figure 2 - Organizational Chart Manager/ Owner Herdsman Jack Paul Figure 3 - Organizational Chart Paul Jack Manager/ Owner Herdsman 9-99 Page 2

5 Developing an Organizational Chart for Your Operation Action: Draw an organizational chart of your operation, drawing in each position. Does your organizational chart represent what is really occurring? Example Position Description Position: Herdsmen Reports to: Manager Supervises: the milkers, Jack and Paul Responsibilities 1. Herd health 2. Milking/quality 3. Milking equipment 4. Herd nutrition 5. Dry cow maintenance 6. Replacement herd care 9-99 Page 3

Example Position Description Position: Herdsmen Reports to: Manager Supervises: the milkers, Jack and Paul

6 Staffing and Directing Function Staffing and directing is personnel management. Staffing! Identifying and placing people in positions! Filling positions with the best person available! Understand the responsibilities of each position! Job description is critical Directing! Identifying employee strengths and weaknesses! Matching positions to most suitable personnel! Training, evaluation, firing! Communicating expectations! Rewarding! Providing opportunities for advancement L Treat employees with respect L Training and education L Employees need to feel good about where they work 9-99 Page 4

Identifying employee strengths and weaknesses! Matching positions to most suitable personnel! Training, evaluation, firing!

7 Controlling Function Measuring a business progress Collecting necessary information Determining what management measures to use; financial and production measures Farm and Ranch Production Measures Financial Measures (Ex. Cow-Calf Operation) 1) current Ratio 1) pregnancy percent 2) debt to assets ratio 2) calving percent 3) acid test ratio 3) calf death loss percent 4) leverage ratio 4) weaning percent 5) debt to equity ratio 5) average weaning weight 6) rate of return on total farm capital 6) pounds weaned per exposed female! What financial and production measures do you use?! What measures do other successful businesses use?! Does your present accounting or record system provide you this information?! What benchmarks can you compare your measures with to help set your goals? 9-99 Page 5

Cow-Calf Operation) 1) current Ratio 1) pregnancy percent 2) debt to assets ratio 2) calving percent 3) acid test ratio 3) calf death loss percent 4) leverage ratio 4) weaning percent 5) debt to

8 Developing Financial and Production Measures for your Operation Action: List the 10 most important financial management measures for your farm business. Action: List production management measures you like to use on your farm or ranch. Financial Measures Production Measures 9-99 Page 6

BREAK-EVEN COSTS FOR COW/CALF PRODUCERS

L-5220 9/98 BREAK-EVEN COSTS FOR COW/CALF PRODUCERS L.R. Sprott* CALCULATING BREAK-EVEN COSTS of production can help cow/calf producers make better management decisions for the current year or for the