Why investing in your people pays off on the farm

Introduction

Most farmers will spend months weighing up the purchase of some new plant and equipment. They’ll compare dealers, run the numbers, talk to the neighbours and then sleep on it more than once.

Very few put the same thought into the people who’ll be sitting in the cab or how best to invest in the knowledge and skills of their workforce. One of the key drivers of growth in a business is determined by your access to good people. Significant improvements in productivity can also be achieved by having a systems approach to decision making and workflow planning, creating a strong culture that is aligned to your strategy and having an open, constructive and effective communication system across the business.

Thirty cents in the dollar

In the 2010s, a GRDC-backed project benchmarked² more than 300 grain businesses across the country. The top 20 per cent kept around 30 cents of every dollar of turnover as profit. The average was 10 cents.

For once, weather didn’t explain the gap, and neither did commodity prices or scale. The common themes across the top performers were that they optimised their gross margins through disciplined variable cost control and enterprise selection, focussed on developing a low cost business model, had a proactive approach to people and management and were active risk managers when it came to reducing income variability and the impact of seasonal or commodity price fluctuations.

You can’t hire your way out

Recruiter Agricultural Appointments^1, drawing on Seek data, found that agricultural job ads in January 2023 were more than five times their 2013 level. Research by Emeritus Professor Jim Pratley shows Australian universities produce only a few hundred agriculture graduates a year, against industry demand for more than 4,000.

If the right person isn’t out there, you’ll have to work towards a system that you can grow them yourself.

The most undervalued asset on the farm

A GRDC Update paper made a point that stuck with me. People are essential to a successful farm business, yet they’re often the most undervalued part of it. That applies whether you employ ten staff or it’s just you, your partner and the kids.

A few years ago I sat down with a mixed farming family where the father had run the books for 30 years. Everything lived in his head and an old ledger. His daughter had returned home after uni and was the best stock person on the place, but she’d never seen a cash flow budget. Then he had a health scare, and suddenly she had to front the bank on her own.

We spent the next 18 months working through the numbers with her. Eventually, she completed a financial literacy course and joined a local discussion group. Today she runs the budgets, leads the bank meetings and has a much clearer view of where the business is heading than anyone did before. Her dad will tell you the best money they spent in that period wasn’t on the farm, it was investing in the financial and business management knowledge and skills of his daughter.

Not every family gets that warning. Plenty of families pass on control to the next generation without anyone showing them how to run a team or read a balance sheet or understand a profit and loss, and the business pays for it.

Where to start?

You don’t need a corporate training budget. Start with a few honest questions:

Who in the business will need to step up in the next five years?
How can we prepare the business and the people of the business for transition?
What knowledge and skills do they need to opportunity ready?
If a key person left tomorrow, what knowledge would walk out the gate with them and how can the business work towards mitigating that risk?

After you have asked yourself the right questions, then get busy doing something about it. Field days, discussion groups, short courses, a mentor, time off-farm or a session with your adviser going through the figures all count.

The best farmers I know have never stopped learning. They apply that to the business as well as the paddock.

Your machinery depreciates. Your people don’t have to.

Investing in knowledge grows a more profitable farming business

Our agribusiness team has supported hundreds of farming businesses through one-on-one coaching and support or group facilitated training. We work with families to build the business management, financial literacy, leadership and people skills that sit alongside good farming.

To talk about what this could look like for your business, contact us.