Who is the CEO of your dairy?
Who is the CEO of your dairy? I often ask dairy producers this question and the typical first reaction is a puzzled look like they really haven't thought about it; then a common response is "I am, I guess." One of the main duties of the CEO is to provide leadership to the business. Many small business owners confuse management with leadership. On most of our farms the owner is the CEO as well as the person providing the majority of the management. The simplest way to describe the difference between leadership and management is that leadership is externally focused and management is internally focused. Leadership is about developing a strategy of doing the right thing for the business while management is about doing things right.
Leadership is associated with developing the vision to take a business into the future by looking for and exploiting business opportunities. Leaders must constantly be scanning global, national and the local environment for trends and how they might be affecting the business future. Great leaders use these trends to identify opportunities and threats. In our fast-moving world, it is more important than ever for farmers to spend adequate time focusing on leadership activities. Leadership is about constantly challenging assumptions and conventional wisdom.
Some issues that farm leadership need to question:
- Will the margin compression of the past 20 years continue and how will my business deal with shrinking margins?
- Will the elimination of European Union quota affect my business?
- How will the growing middle class in Asia affect the demand for U.S. milk?
- How is the best way to position my business for the increasing volatility in feed costs and milk prices?
- How will the changing farm structure within the U.S. influence my business?
- How can I position my business with the explosion in new technology? What technologies make sense for my business?
- Are there opportunities within the local food movement?
Management refers to successfully executing the plan. This includes developing budgets, setting goals, monitoring results, and adjusting the plan. Management is harvesting high quality forage, keeping the SCC low, getting cows bred on time, and having a successful transition cow program. Most farmers enjoy management activities and are very good managers. It is satisfying to see the rewards of effective management. There are many educational seminars that one can attend to learn more about management, and most consultants are experts on improving management.
I am not suggesting that management is less important than leadership to the success of the business. Long term sustainable businesses will require excellent management as well as leadership. We can all think of businesses that were extremely efficient and successful, but leadership did not adapt to the changing business environment. Remember when Kodak was a leader in photography? Kodak had the premier color film, Kodachrome, as well as the first easy load instamatic camera. They did not recognize and adapt to digital photography rapidly enough and are currently a minor player in the photography industry. Another example is Blockbuster Video. The video rental giant did not anticipate and adapt to the changing industry and was forced to file bankruptcy. Compare that to Netflix who built their business model on mailing movies to customers but anticipated the rapid growth in broadband and successfully transitioned to also offering streaming movies on demand.
Leadership activities take time. This can be a challenge when there are cows to milk, feed and breed. But dairy farms of the future will require visionary leaders that are nimble and can adapt to the rapidly changing world.
Here are some ideas that might be helpful in developing leadership potential:
- Every morning you need to be thinking about the future of the business.
- Accept that change is normal and it is coming faster and faster.
- View change as an opportunity that can be capitalized on with the right strategy.
- Hold an annual leadership team meeting that focuses on the future direction of the business.
- Invite industry leaders to provide honest opinions on the threats and opportunities in your business; this may be a different group than your management team.
- Attend conferences that focus on macro trends in agriculture and the dairy industry. There are several excellent newsletters to help develop leadership skills and learn about trends. I subscribe to a free newsletter from Harvard Business Review.
The New Year is coming soon. Make a resolution to improve your leadership skills and develop a plan to lead your business to future success.