Rewards for all in number crunching
I THINK I will purposely avoid talking about the weather for now. Hopefully by the time my next article comes round it will have sorted itself out and we will all be in a happier place – and can look back and laugh.
I thought I would focus this time on my role with discussion groups and benchmarking. As I will explain, I have become increasingly involved in facilitating benchmarking for a number of di erent discussion groups. It is taking up more and more of my time, but it is rewarding that people see value in it and that it helps them improve their businesses.
Being open about financial figures is not something that culturally we tend to be comfortable with. However, I saw on my Nueld Scholarship travels how well the New Zealanders and the Irish benchmarked – and I realised that we badly needed to up our game if we were going to keep up.
I am a big believer that you have to give a bit to gain a bit. I am happy to share what has worked for me because I am likely to pick up an idea from someone else that might help me improve my business. Rarely do we encounter a problem that someone else hasn’t already come up against and worked through. It is about drawing on that combined knowledge within the group.
Not many of us can claim to have the job cracked. There is always scope to do things better. Benchmarking gives us the opportunity to understand how we are performing relative to comparable businesses and identify the key areas to work on.
I accept that not everything in life starts with a pound sign. We are all motivated to farm for a variety of reasons. However, the job is much more enjoyable if our businesses are profitable and we have choices around what we want to do with the surplus. If we are not cash positive it is a much more dicult place and choices are limited.
Facilitating benchmarking is something that evolved unintentionally. I have always been focused on the numbers side of farming and had previously developed Excel spreadsheets to analyse our own business performance. We had been part of a dairy discussion group that had been running quite successfully for a number of years, but had just struggled to find an e ective way to benchmark.
I volunteered to try to adapt what I had been doing at home to create something that might work for comparing our businesses. The system I developed seemed to hit the spot. It took members’ understanding of their own businesses to a new level and transformed the quality of conversations we had as a group.
From there, another group we are involved with adopted it. I was then invited to help a couple of young groups benchmark. Then in the last two years another two groups have taken shape. So that is now six groups with around 50 cracking businesses.
There is no magic formula to what we do. But there are a few things that I think are important in making things work e ectively.
Firstly, everyone is responsible for putting in their own numbers. We also put in actual numbers and don’t try to be too clever by trying to separate out di erent enterprises. Importantly, the spreadsheet gives a rolling 12-month result immediately you update each month’s figures. This gives an instant reward for the e ort, keeps numbers fresh and relevant, and straight away highlights business performance trends.
How group benchmarking works is every six months everyone emails me their updated spreadsheets. I check and copy and paste all the numbers onto the group spreadsheets that have everyone’s numbers on it.
I try to get these back out to everyone a couple of days ahead of us meeting so there is time to digest the results.
When we meet, we take turns to talk through our recent numbers, what insight we have gained from seeing them against others, and what that means we are going to do going forward. The real power is in having everyone chipping in with questions and suggestions. When a group has established the right dynamic and trust, it is awesome to see the challenge and the camaraderie in equal measures.
One of the key benefits is that it keeps us focused on the bottom line and what drives it. It is easy to get distracted by yield, or shiny things, or salesman talk. But if you are watching the profit every month it helps remind you what the important things are. It is also a fair motivator in itself knowing that every six months you are going to be sharing your numbers with your peers.
I find that when people get a handle on their numbers it gives them much more confidence in their business. It is especially rewarding to see this in younger group members. It certainly helps with succession, enhances their credibility with the bank manager and the likes, and I’m sure they don’t get drawn down by the doommongering our industry can be good at.
There are no silver bullets to delivering a good profit. It is also not all about milk price. Cost of production would be much more strongly correlated to profitability than would output. There are a few very important metrics such as feed eciency or fertility, but mostly it is about marginal gain, chipping away at costs from top to bottom. It is amazing how even a small dierence in a number of areas can accumulate to a big dierence in the bottom line.
What comes through is that no production system is better than any other. All can be very profitable, all are capable of not being. What makes the dierence at the end of the day are the people running the businesses. In particular, their hunger to improve and their focus on delivering the management rigour that drives profit for their system.
Last year we had a day conference that brought all the groups together to hear four fascinating speakers. It seemed to go down well, so we are repeating the exercise this coming week.
It will be great to get everyone together for a bit of stimulation, crack, and hopefully a right good dose of positivity.