This past month I had the honor of being on the faculty of The Executive Program for Agricultural Producers (TEPAP) held in Austin, TX. This program completed its 15th year and has graduated more than 900 agricultural producers from all over the U.S. and several foreign countries. This is the top and perhaps only program of this nature and quality in America. Danny Klinefelter of Texas A&M University heads the program and does a commendable job.
I facilitated the discussion on human capital management. Most CFOs might question if human resources can be considered capital. I think people are some of the most valuable assets we have. If you buy a business and record good will as an asset, a portion of that good will might be a result of the talented people in that organization.
In the last issue of Riskwise I wrote about the intrinsic value of your operation vs. the market value. Much of the intrinsic value of a highly profitable farm can be attributed to its human resource talent, even though we don't often view it that way.
An example I often use is if you purchased a new tractor, where would you put it — on your balance sheet or income statement? That's simple. It's an asset on the balance sheet.
Where do we put our people? Most of us view our people as a cost on the income and expense statement. That perception may be why we have problems managing people.
Getting the right people in the right place at the right time, with the right set of skills, doing the right things is a continual challenge in production agriculture and it will continue to require the best skills available.
At the TEPAP conference, it was exciting to hear actual examples shared by producers who have made great strides in human capital management. These are operations that are growing explosively because the other resources of money, equipment and land come more easily when people are as productive as they can be.
The best tools and concepts available in human capital management need to be used to help people become all they can be. With the industrialization of agriculture continuing at an ever-accelerating pace, managing people may be the most important job of the farm CEO.
Terry Betker, director of practice development, primary producers, from Meyers Norris Penny LLP, shared this chart on financial health vs. people happiness of a company (above).
I believe there is a cause and effect relationship between a company's financial health and people's happiness. Over time it's difficult to have a financially healthy company with unhappy people, and the company may likely end up in financial trouble. Conversely, a financially unhealthy company has a far better chance of success if it has happy people.
Things can change if the organization is committed to a transformation. We've observed real situations where operations have moved from Q4 to Q1 in as short as 2½ years. It took a change in ownership of the business, which included radical changes in management practice. Remarkable results were obtained with basically the same people.
‘Bell Cow Employees’
In Jim Collin's book Good to Great, he indicates that one of the characteristics of companies that had a transformation from good to great was they “got the right people on the bus and the wrong people off the bus” before they decided vision and strategy. They addressed the question of “who” before “what” in making their companies great.
Nearly 20 years ago I had the pleasure of spending a day with a turn-around artist. His career consisted of managing companies in trouble and turning them around for the owners. He was extremely successful.
He shared a story with me about how he made sure he had the right people on the bus and how he got the wrong people off the bus.
He would personally interview each employee and ask him or her, “If you had my job in turning this company, which two or three people in the organization would you ask to help you?”
After he interviewed everyone, the people listed most often were the “bell cow employees.” People wanted to follow them. He would subsequently put them in positions of leadership.
Those that were never mentioned got off the bus.
Moe Russell is president of Russell Consulting Group, Panora, IA. Russell provides risk management advice to clients in 24 states. For more risk management tips, check his Web site (www.russellconsultinggroup.net) or call toll-free 877-333-6135.