Dairy farmers have a solid business lesson to learn from a recent article in the Wall Street Journal written by Jeb Bush, governor of Florida, in which he discussed his state’s efforts to reform education and how difficult the process really has been. He stated, “The reality of reform is vastly different from the theory, and change is a lot harder than it looks. But there are a few rules for real reform that makes it possible.” I realized many of the same rules apply to making certain we have our dairy operations “reformed,” especially after prosperous years like 2007 and 2008.
“The first rule is that when you run for office, you need to say what you’re going to do and then do what you said you would.” The same rule applies at your dairy when you need to make necessary changes for three reasons: Your survival may depend on it. Your management team is counting on it. The implementation of the changes you’ve discussed with your team can only improve your results if they are actually carried out. Your banker is expecting it. These points become even more crucial if milk prices soften. It is quite common for high milk prices such as we have seen this past year to lead us to increase our expenses because “we can afford it.” When milk prices drop, we need to be careful that expenses are still in line with lower revenues.
“The second rule of reform is that if you don’t measure it, you don’t care.” While, on one hand, this might sound harsh, it really is true. If you are not using your accountant (CPA) to develop sound financial statements on a regular basis, you can’t be concerned with your results. I suggest you should outline your plan for what you will do to improve the weaker areas and implement changes to make more positive financial returns.
“The third rule is that big reforms require long-term commitment.” This is also true on the part of the dairy operator and his banker(s). I was asked an interesting question at a conference where I was speaking recently. My presentation was entitled, “Taking Your Dairy to the Next Level.” I presented a case study of one dairy’s financial turnaround that we had successfully completed. A member of the audience asked how long it took to complete the client’s financial recovery process. I explained that the complete process took more than two years. We need to exhibit great patience while completing two tasks – planning our work and working our plan. Just be certain that you have a clearly defined plan!
“Another rule – the fourth – is to communicate what you’re doing…” This needs to not only explain what you are doing but also why you are doing it. It is essential that this communication extends to your management team, banker(s), CPA, employees, vendors, and family. Increased communication yields greater commitment from each of your key players and will be crucial to your continued success.
“The fifth rule is that success is never final and reform is never finished.” This is true not only in a financial turnaround process but with everything we do. You either get better or worse, because we are not operating in a static environment. Many things are changing so we need to adjust our course to stay on track. What worked just five years ago might fall short today.
Since the challenges in any industry arrive at our doorstep often without prior warning, use your professionals and your team to your fullest advantage. Follow their lead and “stay the course” to further success. You’ll be glad you did!
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