Decision Making

Successful Ag Operation Requires Decision Making

Decision making in agriculture enterprises is complicated by the numerous variables that are inherent in the industry. The type of soil, the weather, the distance to markets, available labor, world supply and demand, and fluctuating prices all make the day-to-day decision making process complicated. Whether you are a producer, a processor, or a retailer one input influences all the others in the production stream. Unfortunately because there are so many closely tied factors, making timely and accurate decisions is an ongoing event. Supply and demand can change quickly. This makes an Ag related enterprise seem risky to the potential investor or lender (or to anyone else reading it). If information gets bogged down in a complicated bureaucratic maze the risk that the venture will make ill-timed strategic decisions is very high – adding to the overall risk of the venture. To mitigate some of this risk it is important to describe the enterprise structure, the management, the decision makers and the role of any investors or strategic partners.

Who makes the decisions is important. An autocratic owner can make decisions quickly with no input from anyone else. This is fast, but the quality of the decision is closely tied to the information the decision maker has and their ability to discern the correct strategy. Decisions made by committee are usually a consensus of several viewpoints. The information gathered and analyzed is typically good, but the output is ordinary a compromise of competing interests and does not usually represent the optimum solution. Somewhere in between these two extremes is the right mix, but it is often hard to find. Typically the answer is a blend of the two. For day-to-day decision making a competent owner/manager can do a good job. For mid and long-range planning a blending of skills is usually better. Finance and marketing experts are typically added to the mix with production supervisors. The more complicated the enterprise the more specialists are often needed. At some point a good mix of production and supervision can usually be found. Enterprises that have not found the correct blend are often operating at less than profitable levels.