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Management Functions Are Essential to Successful Farm Businesses

Posted Jan. 1, 2005

Successfully managing a farm business is certainly the goal of farm owners. The quality of the decisions made by management is an important component in determining the longevity of the business.

Prudent managers are continually looking for management resources that improve the quality of their decisions. Each day, new information and technology becomes available that requires, or at least challenges, management to re-evaluate prior decisions to determine if the benefits outweigh the costs.

Managing a farm is a 24/7/365 responsibility. If managing a farm is so important, how do we define farm management? It is the decision-making process aimed at meeting the vision, mission and goals of the business. All decisions made by management are focused on the efficient allocation of the factors of production land, labor, capital and management.

There are three major functions management performs throughout the business year: planning, implementation and control. The planning function involves defining issues and collecting data, and also relates to planning for operations, strategic planning or both. Once the issues have been defined and data collected, the data is then analyzed and various options are identified. With the assistance of the internal management team and consultants, the manager selects the best alternative(s).

The implementation function involves implementing the plans created in the planning phase. It can involve arranging for the purchasing of inputs, preparing financial statements, training employees, selecting genetics and all of the other tasks related to production, financing and marketing.

The control function relates to the monitoring of the activities of the business. It involves entering data into a "management information system" (MIS). The system has many parts, and they often are not totally integrated. The MIS should consist of financial accounting, production records, regulatory records required by local, state and federal agencies and other records customized to the enterprises of the business. The data collected from the MIS must be converted into information that enhances the knowledge base of the manager. Decisions to change the business are made as a result of analyzing the information. The information is compared to prior years and to other farm businesses with similar enterprises. One major benefit of having a comprehensive MIS is that it forms the basis for creating the upcoming year's budget. Budgeting can be more precise when historical information from the business is used to create the budgets.

The functions of management are ongoing throughout the year. Planning is a continual process. Implementation plans are always being evaluated based on the current economy. Adjustments to the original plan(s) are common due to information received from the MIS. New tracking systems are being introduced monthly.

Successful managers are "functioning" continuously. They invest significant time in analyzing the opportunities and threats to their business and make adjustments so they continue to remain competitive in the marketplace.

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