By John Ellsworth
As you proceed through a new year in 2010, it will be beneficial to change the way you approach your dairy operation. Most producers will be excited about changing the way they look at their business, particularly following the brutal results achieved in 2009.
However, the first step to attaining different results will be to change the way we think. In their book entitled, “Change the Way you See Everything,” authors Kathryn Cramer and Hank Wasiak remind us that we need to “Leap out of bed with your vision turned on! The difference between a person who is vitally engaged in life and someone who is merely going through the motions is a vision fueled by passion.”
They go on to describe some of the “side effects” of this passion: enthusiasm, confidence, optimism and unbridled conviction. Sounds like a wonderful change after 2009, doesn’t it?
The ‘how to’ of it all
So, how do we get there? How do we increase our passion levels for the dairy business? To start, I believe it is beneficial to review what one of my favorite economists of all time had to say. The Italian economist Vilfredo Pareto stated that: “Increased productivity comes from continually identifying areas where you can achieve 80% of your results from 20% of your efforts.”
You know this as Pareto’s Law or the 80/20 Rule. Can this work on your dairy business? I believe so. However, this is not an invitation to take shortcuts. Rather, it is an opportunity to identify those areas with the greatest payback for your efforts and to spend your time on those specific areas to produce the most optimal results!
So what are those areas that will produce the most optimal results? Only you can answer that question. However, as usual, I am happy to provide you with a couple examples.
I work with a client with whom I hold management team meetings once per month. During a recent meeting, one of the partners mentioned to me, in private, that his brother was not spending as much time as he was “out with the cows.” While I recognized this, I believe it is important that we apply Pareto’s 80/20 Law here. The same partner who was not spending as much time with the dairy herd had just completed a negotiation with one of their vendors that provided them with a savings of $40,000! Could your operation have benefited from an extra $40,000 in 2009? That result appeared to me to be an excellent example of applying Pareto’s Law.
A second example that comes to mind was with a client whose son was also not spending as much time with the cows as his dad would have liked. However, the son had managed, through the use of some fixed price contracting, some “Put Options” and several “Call Options,” to achieve an overall milk price of nearly $14/cwt for all of 2009.
Was this smart?
Absolutely! Can he pull this off every year? Probably not. However, his actions in 2009 provided their business with a substantial benefit at a very crucial point. Management guru Peter Drucker stated that “the business enterprise has two basic functions – marketing and innovation. The rest are all costs.” Managing this producer’s margin is an excellent example of how using innovation, in conjunction with Pareto’s 80/20 Law, can provide your business with solid benefits.
What are the areas within which you need to focus more of your efforts? What activities will provide you with the largest return on your investment of time? Is it your milk marketing? How about your overall business planning and goals for 2010? How about making sure that your business is positioned for maximum success this year?
Phone on ‘silent’
I don’t know what will be the best area for you to focus on. However, I do know that if you put your phone on “silent” for 60 minutes and give this issue some thought, you will come up with the right answer.
As a result, you will likely find that you stay on track and hit your business objectives more often. In particular, this becomes more likely just because you have developed an improved process, centered on your desired outcome. Give it a try. I think you’ll be glad you did!
“Wherever you see a successful business, someone once made a courageous decision.”
~ Peter Drucker
■ John Ellsworth of Modesto, Calif., is a consultant with the financial and strategic consulting firm Success Strategies. He can be reached at 209-988-8960, or by e-mail: email@example.com.