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Farm Business Management: The Human Factor, 2nd Edition

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The underlying economic factors that affect primary production are frequently studied and written about - soil quality, animal health, climate, machinery - but this is the first book to explore the role of the decision psychology of the manager running the farm business, the person responsible for staff, strategic and operational decisions and the success or failure of financial and other objective outcomes. This second edition addresses fundamental questions such as the process of decision making, personal skills, and methods to improve managerial ability. It is an essential reference for farm managers and students in farm economics and management. This is the first farm business management book published worldwide focused on human factors and decision making in primary production
The second edition introduces two new chapters covering the key decision method, intuition and its enhancement, and the importance of human characteristics in a range of decision topics and areas.

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1 Introduction

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1

Introduction

General Overview

Most production economists refer to the production factors as land, labour and capital. While ‘labour’ might embody the managerial decision-making input as well as physical labour, it is clearer to separate management as a fourth factor of production. The decisions on how to use the production inputs and resources, and the implementation of the plans, are the responsibility of this fourth factor – management. In that the quality of the decisions gives rise to the success of the operation, this managerial skill is clearly absolutely critical to efficiency and profit. However, no texts and courses include the management factor in any depth. This book sets this situation to rights.

Texts on production economics cover the optimal allocation of resources.

However, they largely assume that man is a rational being with near-perfect information. The reality is quite different. Managers are human. This means they react in an emotion-determined way. People observe the world around them and come to a conclusion about the current situation. Their mind, perhaps with the aid of calculations, comes to a decision over what actions should be taken. Thus, cues are observed that trigger action, or possibly inaction in some situations. This observation–decision–action process is something that varies with different individuals, and needs to be understood if a farm manager is to improve the decisions aimed at achieving the farm’s objectives.

 

2 What Defines Management Ability?

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2

What Defines Management

Ability?

Introduction

Anyone can be a manager – but they may not be particularly good at achieving their objectives. The desire to be a manager is relevant in success. Some farmers acquire their status due to tradition and the handing over of assets rather than a keen desire to make a career from managing primary production. On the other hand, some who want to be farm owners and managers find it is impos­ sible due to the resources required. Whatever the case, an ability to take and accept the responsibility of making and carrying out decisions is an important precursor, but whether a person can in fact make good decisions relevant to a particular farm (for each is unique) depends on whether they have the required attributes and experience. Abilities such as making sure that the jobs are carried out in a timely manner (e.g. spraying weeds before they are too mature; get­ ting supplies delivered before it is too late to complete the job; marketing the product before the prices drop, and so on) are crucial and probably relate to a person’s degree of conscientiousness as well as an understanding of the biology involved. Conscientiousness is a personality trait. Similar examples exist for the other attributes so a manager’s personality impacts on their likely success as a manager.

 

3 The Origins of Managerial Ability

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3

The Origins of Managerial

Ability

Introduction

Chapter 2 introduced a range of factors likely to be involved in creating a farmer’s managerial skill. It is known that a wide range of skill levels exists in any community. This variability can be used to relate these factors to outcomes achieved by using the data from any particular group of farmers. The importance of each factor may depend on the environment, but to assess this would require many sets of observations. This chapter, however, contains a discussion on the results of quantifying the relationship between the basic factors and outcomes for a large sample of all types in a wide range of environments, thus providing a generalized relationship. The farmers in the sample are relatively sophisticated with approximately a third having some form of formal tertiary education, and certainly all have at least three years secondary education. The farms are relatively large in terms of the number of people fully employed relative to worldwide averages, and in terms of the output per person employed.

 

4 Decision Processes and Goals

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4

Decision Processes and Goals

Introduction

While each farmer will have his own particular way of making decisions, there are some common themes. Understanding the possibilities assists in following why a farmer makes a specific decision, and in discussing how the decision process might be improved.

Generally, a farmer observes factors from the surrounding environment, processes this information, and comes to a conclusion about what actions to take, one of which might be to do nothing just yet. Thus the following sequence occurs on a daily basis, irrespective of whether the decision horizon is a few hours or several years.

Stimuli→sensory systems→short-term memory→long-term memory

conscious processing←retrieval

subconscious processing←retrieval

Many of the stimuli being received are acted on automatically, so, for example, we avoid stepping in a hole in the road without realizing we have sorted this little problem. Other stimuli require conscious thought (e.g. a bad storm is forecast) with the information being processed to provide a conclusion to, say, take positive action (e.g. shift the lambing mob of ewes into a sheltered area; immediately start harvesting as much as possible of a ‘ready’ crop). Some stimuli get considered, and then sent to long-term memory if sufficiently important.

 

5 Skills Required

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5

Skills Required

Introduction

Any farmer must have as a minimum certain skills, but for excellence the farmer must be good at the complete list of competencies, or skills, necessary to operate a farm. There are various opinions on the skills that make up the list, and no doubt this varies to a certain extent with the type of farming, but there is certainly a core set common to all situations. You can probably quickly come up with a list of what is necessary after some thought. A successful farmer must have, first:

●●

good technical skills as without them the jobs will not be successfully

­completed.

Similarly,

●●

a good knowledge of the technology of farming is essential.

For example, understanding how pasture might respond to fertilizer application is essential for correct decisions. There is a myriad of such technical ‘facts, figures and relationships’ that are a prerequisite to good decision making, as is the ability to apply the decisions.

 

6 Biases and Stress

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6

Biases and Stress

Introduction

The majority of farmers do not get it right on all occasions. Mistakes are made in one or more of the attributes or skills that are involved in a good decision.

These skills were listed in the last chapter (Chapter 5). If, however, a farmer is consistently wrong in some of the skills, then his decision making can be said to be biased. For improvement, the bias must be recognized, and the error of the farmer’s ways corrected, so that in future mistakes are only random in contrast to consistent. This chapter contains a description of the more common biases, and provides comments on their recognition and correction. Of course, in many respects the full list of potential biases has already been given in that a consistent aberration in any of the skills required is a bias. However, it is still useful to highlight the common biases that researchers have particularly noted.

Then there is the problem of stress. Primary production involves considerable risk and uncertainty and, consequently, gives rise to considerable stress.

 

7 Intuition

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7

Intuition

Introduction

There is little doubt most management decisions are made by managers using their intuition. The resulting conclusion is their mind’s answer to resolving the issue to hand. This process might be almost instantaneous, or the mind might come to an answer after a little time and reflection. Whichever the case, the decision does not involve formal and recorded analysis.

It is thought by some that 95% of decision making is based on intuition

(Croskerry et al., 2013) though others might not put an exact figure on the proportion but are sure intuition is the dominant decision system (Ohlmer, 2001;

McCown et al., 2012; Nuthall, 2012).

The discussion in Chapter 3 on the results of modelling managerial ability shows how important experience is as a factor in ability. Indeed, the data shows experience is about four times as important as all other factors such as management style and intelligence. This knowledge, however, begs the question, what is the exact meaning of ‘experience’, and how can it be improved as a factor in managerial ability? This is an important human factor question and is explored in this chapter.

 

8 The Influence of Farmers’ Personal Characteristics on a Range of Issues in Management

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8

The Influence of Farmers’

Personal Characteristics on a Range of Issues in

Management

Introduction

The thesis behind this book is that the human factor has an enormous influence on the life and times of any primary producing property. The information presented in the previous chapters makes this clear in a general sense. This chapter contains material that puts more flesh on the assertion by reviewing a number of studies covering a sample of aspects impacting on primary production. It is also important to realize that the ‘human factor’ is part and parcel of all Homo sapiens involved in the life of farms right from the new farm labourer through to the owners who may or may not directly contribute to the day-to-day running of the property.

In this chapter it is the manager whose human factor is brought further to the fore, but in so doing it should be remembered that her or his interactions with all the other humans involved in a farm may be influenced by the characteristics of each and every one of the participants. A farm operates not only by the planning decisions taken by the humans, but also by how successfully they carry out what has been decided. And the whole process is dynamic as people, risk and uncertainty unfold.

 

9 More on Objectives: Family Influences, Origins and Modification

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9

More on Objectives:

Family Influences, Origins and Modification

Introduction

A farmer’s objectives strongly impact on the decisions made. This is one of the reasons why the outcomes from every farm tend to be different as each farmer’s objectives will be unique. Also important to decisions is the farm family including a spouse. Thus, objectives and families are further considered in this chapter.

Part of comprehending a manager is the understanding of his or her objectives, and the origins of these objectives. So, one of the first steps in helping a farmer is determining whether his objectives are correctly stated. Progress cannot be measured without these yardsticks. But, while determining the objectives

(perhaps using the questionnaire listed earlier, or through careful observation) is important, of even greater value is the understanding why the farmer holds the particular set. Possibly the farmer has concluded incorrectly and so discussion and assessment may lead to modifications. To this end one of the sections in this chapter contains a discussion on the objectives and the influence of the family. Similarly, as a farmer’s locus of control (LOC) may be important in constricting progress, factors which give rise to a particular attitude are considered with a view to understanding a farmer’s LOC, and what might be done about improving the situation.

 

10 Methods of Improving Managerial Ability

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10

Methods of Improving

Managerial Ability

Introduction

The main reason for studying managerial ability is to consider ways of ­improving the farmer’s managerial skill, though an understanding can also be useful when considering the impact of agricultural policy initiatives. The purpose of this chapter is, therefore, to consider the techniques that will improve a manager’s skill no matter at what level they start.

As every manager currently exhibits a particular level of ability, a set of methods that can initiate improvement in all situations is required, and is highly desirable. Some farmers will improve more than others both due to their starting point and inherent ability. Each starts with a certain potential as defined by their genotype, and their early environment and experiences.

While the genotype is fixed, additional training of various kinds can change and improve the impact of their experiences. Fortunate farmers will have an appropriate genotype (intelligence, personality, etc.), and appropriate early experiences in the form of family life, education, challenging situations, encouragement and training courses. These all lead to skill, curiosity, confidence and self-esteem. Farmers without these advantages must work at compensating their situation with the support of all the facilities that are available.

 

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