As commercial farms become larger, more capital intensive, and more regulated, the management style of the past — one person handling most of the business management decisions, with help from a bookkeeper and good employees — “just isn’t going to cut it,” says Danny Klinefelter.
“As the rate of change and level of market volatility increase, this type of farm will need a CEO with more specialized management expertise, as opposed to a general manager,” he said at the annual meeting of the Mississippi Agricultural Economics Association.
Klinefelter, who is Honors Professor, Regents Fellow, and Extension Economist at Texas A&M University, says, “He or she should be a leader, not just an operations manager. A CEO has to be more of an environmental scanner, looking outside his commodity or outside agriculture, and being the business contact with the outside world.”
A CEO has four main duties, he says: Setting the operation’s strategy and vision; building the company’s culture; team building and picking the right people; and capital allocation — where are we going to invest in the future?
He quoted oil billionaire J. Paul Getty: “It doesn’t’ make much difference how smart an executive is, or how much knowledge or experience he possesses, if he is unable to achieve results through people, he is worthless as an executive.”
A successful farm CEO should be a strategic manager, Klinefelter says, “someone who anticipates, adapts to, creates or drives, and capitalizes on change. The most dangerous phrase in the world of business is ‘because we’ve always done it this way.’ Each of us sees things through filters; the objective is to make sure your filters aren’t creating too many blind spots.
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“The economic reality is that for your business to succeed and continue successfully beyond you, management must learn, adapt, and continuously improve at the rate set by the leading edge of the competition — and not by your comfort zone.”
Four consistent patterns of success
In his 25 years with the Texas A&M Executive Program for Agricultural Producers (TEPAP), there are four patterns that consistently emerged with the most successful CEOs, Klinefelter says.
“They anticipate and adapt to the changing needs of their markets, recognizing that the future will always belong to those who see the possibilities before they become obvious to the average producer. They are open to exploring new ideas and considering different points of view. They operate more as resource managers than as producers. And they recognize the importance of networking and developing alliances across the value chain.”
Communication is an important attribute of a successful CEO, he says. “Communication problems stem from several common behaviors: secrecy, when someone can’t admit being wrong, dictatorship, unresolved conflict, and unfair fighting. Employees and family members need to know, clearly and on a regular basis, what they’re expected to do, and how; why they’re doing it; how they are doing; how they can improve; where the business is headed (vision); how it plans to get there; what their role is; and, importantly, what’s in it for them.”
It’s important, Klinefelter says, to “recognize and acknowledge the contributions of the people who work for you — the strength of any organization is its people, a team working together to make the whole greater than the sum of its parts.”
Change and challenges should be seen as opportunities, he says. “Everyone has problems — learn from them, make adjustments, and move on. Mistakes can be learning opportunities. The difficulty isn’t so much in developing new ideas as in escaping from the old ones.”
The main difference between the top 10 percent and the rest of the top 25 percent, he says, is timing — when to enter, expand, cut back, or get out and redeploy, whether it’s an investment, a marketing decision, or a business activity. “The best organizations spend as much time analyzing what they need to stop doing as they do evaluating new opportunities.”
Successful farm CEOs recognize the importance of operating in a continuous improvement mode, Klinefelter says. “Continuous improvement requires implementing management systems, understanding processes, developing standard operating procedures, having appropriate incentives, delegating responsibility and authority, and demanding accountability. One of the biggest problems most people have is implementation, follow-through, and follow-up.”
Peer advisory groups are useful, he says, in learning from mistakes and successes — “not just from your own experience, but also those of other members in the group.”
A convergence of forces
It’s important, he says, to understand macro issues, domestic and global, and their potential impact on the farm business. “This includes economic, political, social, cultural, and weather issues. Successful CEOs are interested in identifying and understanding leading indicators that can help them spot changes that are likely to occur in time to react. They’ve also learned that most major changes occur not just because of one thing, but the result of the convergence of several forces.”
Most college undergrads, Klinefelter says, aren’t taking, or aren’t being taught, many of the subjects that will be important to them after graduation: human resource management/development, operations management and process improvement, alternative business arrangements, entrepreneurship, macro — domestic and global, how the political process actually works and the ability to separate reality from rhetoric, practical cost/managerial accounting, negotiation skills, risk management strategies and decision tools, and creative thinking/innovation.
“The best CEOs tend to be more aware of their strengths and weaknesses, and work harder at identifying, filling in, or compensating for the gaps. They try to eliminate biases and blind spots. They recognize the importance of ‘what if’ scenarios and developing contingency plans. Being prepared and having options is half the battle.”
And Klinefelter says, they acknowledge the need to spend more time on monitoring, analysis, and controls. “Their objective is to identify causes, so they’re not treating symptoms — to correct problems before they grow, to capitalize on windows of opportunity and to adjust future plans in light of new information and changes in the basis for their initial assumptions.
“They also seek out ways to use technology to gather information in real time and to integrate information from different sources. They’ve learned to turn data into information into knowledge. They’re learned to rely on their gut, but they don’t jump to conclusions because they’ve learned that every complex problem has at least one solution that is simple, obvious — and wrong.”
Best managers prioritize priorities
It’s important, he says, to prioritize time, effort, dollars, and priorities. “Most people never achieve their long term objectives because they’re usually doing second things first — things they like to do, know how to do, can be completed quickly, or are most urgent. The best managers have learned not just to prioritize, but to prioritize priorities, to delegate, to outsource, or to form alliances.”
Being a successful negotiator is a valuable attribute of a CEO, Klinefelter says. “The ability to negotiate affects almost every facet of a business, whether it’s dealing with suppliers, buyers, employees, or working with family members. The success of negotiations affects prices paid and received, the acquisition of resources, relationships, and terms of arrangements.
“Every successful CEO I’ve met is growth-oriented, but they define what growth and success are. Growth isn’t just about size; it is just as much about growing knowledge and adopting best management practices. Not all large operators are successful; size alone doesn’t denote success. The best CEOs realize its important to get better before they get bigger.”
The most satisfied and successful farm CEOs enjoy and take pride in developing their business’ future leaders, Klinefelter says. “Succession is one of the key responsibilities of leadership. Yet, it’s one that the fewest leaders seem to have learned. Many businesses have flourished under one CEO and floundered or failed under the next, because the new management wasn’t properly prepared, or the wrong person was selected as the next CEO.
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“Family farms that have been successful over time have several common characteristics. They don’t take the interests and desires of the next generation for granted. Too many business failures and personal tragedies have occurred because the next generation came into the business, or assumed management responsibility, simply to avoid disappointing their parents — a path of least resistance — or to avoid being disinherited.
“Successful businesses have established a clear basis for successor selection. This includes the future needs of the business, the type and style of management needed, the necessary skills and attributes, and a performance evaluation process that provides the ongoing feedback and assessment that’s needed.”
And Klinefelter says, “They develop a plan for what the current CEO will do next, and what the opportunities will be for those not selected to assume the top management role.
“Without something meaningful to go to, many incumbent CEOs either can’t or won’t leave their position. It’s also important that the business doesn’t lose the talents and experience of unsuccessful candidates, that relationship problems don’t develop, and that those who stay don’t lose their motivation.”