As harvest winds down, now might be a good time to take a look at your operation to measure progress and plan necessary adjustments. Begin by grading your performance in the past year. After careful consideration, begin setting goals for next year.
Farmers have a bit of a disadvantage in evaluating their performances, compared to some other businesses. One farmer explained his difficulty as “wishing his life away.” In his view, from the time he made an important decision until he could see the outcome took almost a year. In today's fast-paced on-demand business environment, waiting to see how things pan out can be stressful.
Which comes first, the goals or the performance? Both are required. Goals are useless until they are gauged to measure performance. Likewise, performance is best when seen as relative to a goal.
A search of management books, magazines and the Internet can provide a vast amount of information relating to goals and goal-setting. Advice books by successful business people are often top sellers. In them are recurring themes that relate to goals. Though this article is limited to only five themes, this is not a complete list.
Goals should be written. This seems to be the most common advice. It requires the person setting the goals to give a great deal of thought to the future of the business. Writing the goals allows a clear objective for efforts and a check to grade performance.
Place the list so it is seen at least daily. Experts differ on the length of the list, but all recommend it be written. As a constant reminder, one manager set his list as the screensaver on his desktop computer.
Goals should be reasonable. Reasonable in this context means that the goals should be attainable. Reasonable does not necessarily mean easy. Aiming high is a worthwhile pursuit, but aiming unreasonably high could result in disappointment.
Another condition of reasonable goals is that they should pertain to things over which you have influence. Some examples of this would be reducing breakeven costs by a certain amount or setting targets for more efficient marketing.
Goals should be specific. Writing a list of goals that are too general makes them difficult to accomplish. General goals also prove a difficult standard by which to measure success. Set small steps to accomplish each specific goal.
An area rich in specific goals is financial ratios. Lenders have specific benchmarks to denote healthy businesses. Discussing your position as it relates to these benchmarks can benefit your business and your lender. More information on ratios can be found at http://www.farmdoc.uiuc.edu/finance/benchmarks.html.
Goals should be shared. The purpose of this step for goal setting is to allow for team support and individual accountability. Many farmers don't have this team outlook, but for many their team includes spouses, family members, employees, lenders, and input suppliers. Post some goals so others can see them in the shop or office.
Goals should have terms and conditions. Not unlike financing and rental agreements, there should be a set of long-term and short-term goals. Generally, short-term goals would involve goals that could reasonably be accomplished within one year. Long-term goals should focus on two to five years.
Reducing expenses on repairs and upgrading equipment are examples of short-term goals. Debt reduction or expansion plans are examples of long-term goals.
As the time approaches to check your progress each year, determine how close you came to your objective — not simply did you achieve the goal. Determine what prevented the success and how conditions can be altered to realize success.
Scott Stiles, James Marshall, Rob Hogan, and Kelly Bryant are University of Arkansas Extension economists. Comments or questions? Call 870-460-1091 or e-mail [email protected].