Farm business governance - is it THE answer?

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Posted by Brendon Walsh on 7 November 2017

Governance meeting 1

In recent years, many farmers in the sheep and beef sector have set up governance or advisory boards. Governance allows a real business overview and a focus on steering the business towards desired goals over the longer term. But is it THE answer to poor results in our farming businesses?

I am all for governance because with it comes a strategic focus. It allows a balance of perspective rather than only focusing on day to day operations, which as we all know is vital to moving forward. I applaud this rebalancing of perspective - it is necessary to provide higher chances of going to where we want to go in business.

However, if governance is accepted (by farmers and their business professionals) as THE answer to moving forward much more profitably after past poor results, then that is a real concern. It doesn’t necessarily provide change to how farm operations have been carried out prior to now - just a more balanced perspective and being better prepared for the major steps. If a farmer has been unprofitable then the actions taken haven't been conducive to generating profit. Chances are they are not aware of how to run a consistently profitable sheep and beef farm business, hence the results.

A governance board will point out to farmers that they may not be very profitable that year much earlier than they would have in the past (when the accountant’s report pointed this out some months after the end of the financial year). This is valuable of course! Yes, other expertise may be brought in on the governance board and that may help, but usually the governance function is a steering function, not a “doing” or operational function. A balance between these two functions is vital. The right direction and major business steps must be delivered on!

Governance teams meet regularly but they don’t meet often. Making operational changes that drive the results that deliver on the strategic decisions takes a separate process with a different level of focus, application and learning. There are operational profit principles to understand and apply. There is new knowledge and new systems to get to grips with, let alone implementing them under changing conditions. There are stakeholders to lead and co-ordinate on a daily basis. Creating lasting changes in results takes a structured process over time to achieve. This is the development of business operational literacy that I have referred to in recent blogs. Keep in mind that new habits and leveraged actions may be decided upon with a strategic focus, but they are not built that way.

As mentioned, there is generally very little understanding about the system for generating consistently profitable outcomes, and sheep and beef farmers must turn this around. If not, they can end up governing and setting goals and policies but still achieve pretty average results. They can spend extra time for a better strategic focus, but at a higher cost and for variable results, not necessarily vastly improved results.

If a farmer does get some understanding about profit and implements profitable actions, as well as using a governance function, then awesome! They will likely do very well. But, as THE answer to turning results around, governance on its own is not it! There has to be some understanding about generating consistent profitability in the business, or what value is the governance function really adding? Likely it won’t be much, and despondency can easily set in after just a few governance meetings.

So, if you are a sheep and beef farmer who really needs to know how to turn your profitability around, you want to develop confidence in doing that, and you need great support to get it done, then please get in touch here. The GrowFARM® System nicely compliments the governance function and helps you as a sheep and beef farmer to deliver on your strategic plans. GrowFARM® provides you with the tools and support you need to take control of your businesses and unlock your potential. I look forward to speaking with you! 

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Comments

  • Governance can be compared to climate change. Profitability is like weather, and those running the farm on a day to day basis need to know how to make profits whichever way the wind is blowing or the rain falling or the grass growing, or not. And make the right decisions while it is happening. If you don't know this stuff, and can act like a small motor boat, then having help to steer the liner could well be too slow and too late.

    Posted by Sue Edmonds, 08/11/2017 8:32am (21 months ago)