10 Chapters
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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.

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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.

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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,

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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.

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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.

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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.

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