Well, it is that time of year again where much of our thought is on the year ahead and beyond. As the year draws to its close, it only seems natural to reflect on the past and forecast on the future. In most places a cold chill has settled in the air, which makes this a perfect time to examine some basic foundations of management, or what some may call the four cornerstones. Specifically, the four cornerstones of management are planning, strategy, execution and monitoring.
The legendary, former UCLA basketball head coach, John Wooden, won 10 NCAA national championships with the Bruins in a 12 year period. Nicknamed the “Wizard of Westwood,” Coach Wooden was also known for his life sayings. One of his “Woodenisms” was “Failing to plan is planning to fail.” In today’s world of extreme volatility, changing markets and challenging economic margins, planning is not an option, but a requirement. Some say that due to uncertainty in the world markets business planning is an academic exercise. Well, I contend that it is an essential tool with which to navigate economic cycles, especially challenging cycles. Scenario planning with different price, cost and market expectations provides the road map and boundaries to help avoid the ditches.
Strategy is where one prioritizes the priorities. Determine the most profitable parts of the business, and then, examine resources. Strategize to efficiently allocate labor, management and capital to your top areas of profitability. It is also important to consult one’s goals as part of strategy development to ensure that priorities reflect the goals and vision. Strategies can be short-term (one year) or longer-term (three to five years).
If I was to survey all producers and ask about one of the biggest mistakes made in farming, they may indicate execution is among the top. Planning and strategy require time and thought, but execution requires a real commitment. Sometimes, in the execution phase, emotions will override the plan and decisions may not be made from on a logical basis. For example, if the marketing plan calls for selling corn at $4 per bushel, but $5 per bushel seems likely, it may be difficult to execute on the plan. Yet, sometimes this scenario ends up at $3.50 per bushel, which makes the $4 range much more appealing. Additionally, this is a cornerstone of management where a team of advisors can be useful and provide unbiased input.
In management, monitoring performance and the progression of the overall plan is critical. This cornerstone allows for tweaks and adjustments to be made, which better position the business to handle market shifts and other changing variables. In order to monitor efficiently and consistently, develop a dashboard of indicators in production, marketing and management. In other words, your dashboard can serve as the unit of measurement regarding your business success.
As you develop your business plan for 2017 think about the four cornerstones of management. Are planning, strategy, execution and monitoring part of your business review routine?
Remember that these broad topics are simply cornerstones that can be detailed out for the specifics of your business. Consider the elements that may go into each cornerstone for your business, and which areas will be most helpful in your current situation. Most importantly, keep looking forward and planning for a future full of opportunity.