November 6, 2008
Clay Center, NE
Barry Dunn
Executive Director
King Ranch Institute of Ranch Management
Texas A&M Kingsville


“Advocacy vs. Inquiry”
Examples:

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Decline in “Choice” cattle caused by X, Y, and Z!
Ethanol is good energy policy!
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Inter-enterprise transfers should be at market because of opportunity cost.
?
?
Shouldn’t calve in the ________.
Genomics are better than EPD’s.
Manure samples are a good predictor of diet quality and can be used in determining supplementation program

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“Advocacy vs. Inquiry”
Where we see it:

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A dvocating Status Quo

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Enterprise analysis vs. managerial accounting
Production systems
Advocating self interest

$


Status
Career
Misuse of information

Stupidity

Negligence

Strategic

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“Advocacy vs. Inquiry”
Insidious problem in management!
Why:
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Nature of who we are:

Bold

Decisive
Information age:

Lots of it!

Wide skill set needed to interpret.
Reward systems value decisive leaders who can support decision with data

“Advocacy vs. Inquiry”
Factors that affect % of choice cattle in the market place.

“Advocacy vs. Inquiry”
Inadequate understanding of statistics!

“Advocacy vs. Inquiry”
I know the best time to calve the cows!

Actual Results for King Ranch Calving Season
Wean Wt, lb
PG %
Cow Cost/hd, $
Net Income, $
Spring
Calving
Lowest
Lowest
Highest
?
Fall
Calving
Highest
Highest
Low
?
Dual
Calving
Medium
Medium
Lowest
?

Actual Results for King Ranch Calving Season
Wean Wt, lb
PG %
Cow Cost/hd, $
Net Income, $
Spring
Calving
Lowest
Lowest
Highest
Should be
Lowest
Fall
Calving
Highest
Highest
Low
Should be High
Dual
Calving
Medium
Medium
Low
Should be
Medium

Prediction Model Results for King Ranch Calving Season
Wean Wt, lb
PG %
Cow Cost/hd, $
Net Income,$
Spring
Calving
Lowest
Lowest
Highest
Lowest
Fall
Calving
Highest
Highest
Low
High +
Dual
Calving
Medium
Medium
Low
High

Prediction Model Results for King Ranch Calving Season
Payne et al, 2008
Wean Wt, lb
Spring
Calving
Lowest
Fall
Calving
High
Dual
Calving
Medium
PG % Lowest Highest Medium
Cow Cost/hd, $
Net Income,$
Highest
Lowest
Low
High +
Low
High
Investment,$ Highest High Very Low

Prediction Model Results for King Ranch Calving Season
Payne et al, 2008
Wean Wt, lb
Spring
Calving
Lowest
Fall
Calving
High
Dual
Calving
Medium
PG % Lowest Highest Medium
Cow Cost/hd, $
Net Income,$
Highest
Lowest
Low
High +
Low
High
Investment,$ Highest
ROI Lowest
High
High
Very Low
High +

Prediction Model Results for King Ranch Calving Season
Payne et al, 2008
Wean Wt, lb
Spring
Calving
Lowest
Fall
Calving
Highest
Dual
Calving
Medium
PG % Lowest Highest Medium
Cow Cost/hd, $
Net Income,$
Variability NI
Investment,$
Highest
Lowest
High
Highest
Low
High
High
High
Low
High
Very Low
Very Low
Variability Invt.
ROI
Variability, ROI
Very High
Lowest
High
High
High
Very High
Very Low
Highest
Very Low

Prediction Model Results for King Ranch Calving Season
Payne et al, 2008
Wean Wt, lb
Spring
Calving
Lowest
Fall
Calving
Highest
Dual
Calving
Medium
PG %
Cow Cost/hd, $
Net Income,$
Lowest
Highest
Lowest
Highest
Low
High
Medium
Low
High
Variability NI
Investment,$
High
Highest
High
High
Very Low
Very Low
Variability Invt.
ROI
Variability, ROI
Very High
Lowest
High
High
High
Very High
Very Low
Highest
Very Low

“Advocacy vs. Inquiry”
We don’t analyze deep enough!

“Advocacy vs. Inquiry”
Cow Efficiency:
Big cows are less efficient than little cows!

Efficiency
Energy
High Bio Prod Cows
Low Bio Prod Cows
Jenkins and Ferrill, JAS 1993

Don’t know and understand the literature!

Cow productivity is increasing!
My cow’s calves weaning weights are going up!


Avg. Weaning Weights of South Dakota
Calves:

Data collected from 497 ranches, 1978-79= 484lbs
Dooley et al., 1982

8 years of Farm Mgt. data, 1986-93 = 496 lbs.
Hoyt & Odekoven, 1994

45 SPA herds 1996-99 = 487 lbs.
Dunn, 2000

“Advocacy vs. Inquiry”
Anecdotes form foundation of our beliefs leading to inappropriate (and irrelevant) conclusions!

1.
2.
3.
4.
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
Don’t know and understand principles of statistics
If you are going to give a “Mean,” you better give the “Range” and “Variance”!
If you say two numbers are different, better know the confidence interval!
Don’t dig deep!
Don’t know literature!
Based on anecdotes, opinions become facts!

Other than who’s right, what’s the problem?

Advocacy without w/o appropriate inquiry leads to failure in management!
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Problem #1, Misuse of statistics
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Misunderstand reality
Problem #2, Not going deep

Draw misleading conclusions
Problem #3, Don’t know the literature

Repeat past mistakes
Problem #4, Anecdotes

Incomplete info leads to wrong path

Failure in management results in:
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Inappropriate investment of scarce resources.
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Inappropriate communication throughout “system” (company).
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Irresponsible decisions.
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Failure
(in ag, long delays mask responsibility)

Take action
Adopt beliefs
Draw
Conclusions
Make assumptions
Add meaning from background
Select data from what we observe
Observable data and experience
Ladder of Inference
Senge et al, 1994

Take action
Adopt beliefs
Draw
Conclusions
Make assumptions
Add meaning from background
Select data from what we observe
Observable data and experience
Ladder of Inference
Senge et al, 1994
Our beliefs affect the data we select and reinforces our belief systems and biases

Adopted from
Senge et al, 1994
LOW
By-Standing
Discuss
Explain
Assert
Politicking
HIGH

HIGH
Literature Statistics
Test
Trends
Sensing
Stories
Anecdotes
INQUIRY
LOW
Adopted from
Senge et al, 1994

LOW
HIGH
Literature Statistics
Adopted from
Senge et al, 1994
Test
Trends
By-Standing
Discuss
Explain
Sensing
Stories
Anecdotes
Assert
Politicking
HIGH
INQUIRY
LOW

LOW
HIGH
Literature Statistics
Adopted from
Senge et al, 1994
Test
Trends
By-Standing
Discuss
Sensing
Explain
Assert
Politicking
HIGH
Stories
Anecdotes
INQUIRY
LOW

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Literature
Statistics
Evaluation tools
Systems thinking
Systems dynamics

st

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Dollars and Cents
Investment
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Marketing
Production
Expenses
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Pts of Diminishing
Returns
Strategic Mgt.
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Strategic Planning
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Scenario Planning
Balanced Scorecard
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Why should you use them
How do they work

Investment
Production
Marketing
Expenses

Dunn, 2000 n=148
Low Medium High lbs. weaned/Cow exposed
413 455 455
Investment, $/Cow 1538 g
2308 h
1397 g
Total exp., $/Cow
Total rev., $/Cow
638 d
390 g
387
423 e g
270
495 f h
Net Income, $/Cow -247 a
36 b
225 c abc
Means with uncommon superscripts differ (P<.01) def gh
Means with uncommon superscripts differ (P<.05)
Means with uncommon superscripts differ (P<.10)

1.
2.
3.
What are the Characteristics of High Profit
Producers?
Large operators
Older
Inherited wealth
4.
5.
6.
Operate on Federal land
Retain ownership
Operated in the western rangelands

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When compared to Low or Medium, High profit enterprises have:
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Higher weaning %
No differences in:
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Weaning weight
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Death loss
Pregnancy %
Replacement rate
Calving distribution
No differences in size of operation or region.

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High profit ranches have:
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Lower Investment (High & Low vs. Medium)
Lower Total costs
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Lower Vet Med (High & Medium vs. Low)
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Lower Depreciation
Lower Inventory Adjustments (High & Medium vs.
Low)
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Lower Breakeven (UCOP)
Greater Revenue
Greater Net Income

Profit is a Set of Relationships
Investment in assets
(Land, Cattle,
Equipment)
Production System
Annual
Expenses
Value in the
Market
Place

Investment
Production
Marketing
Expenses

Outputs
Inputs
Rational Business
Behavior
Case & Fair, 1996

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Part of a management process designed to increase success
Widely used in businesses of all types, and sizes, all over the world
Relatively new to ranching
Not hard, but requires discipline

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Part of a management process designed to increase success
Relatively new in business, but used in all types, sizes, all over the world
Very new to ranching
Not hard, but requires dedication

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Designed to tie strategy to performance
Much like a report card
Build it top down
Works bottom up
Assigns specific metrics to measure success
Assigns responsibility

Combining Strategic Planning and
Scenario Planning and the Balanced Scorecard

A new concept in business that combines the positive forces of planning and reporting processes to help improve the success of your ranch

Because the business of ranching is facing a period of unparalleled levels of change in the core aspects of its business!
•
Marketplace
Demand
Price
Costs
Access
Exports
• Volatility
Feed
Fuel
Cattle
• Policy
Ethanol
Tax
Trade


Stage 1: Charting the course

Stage 2: Strategies to achieve vision

Stage 3: Scenario planning for the ranch
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Stage 4: Merging the 2 planning processes
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Stage 5: Putting the plan into action and measuring success

Charting the Course

Step 1: Assess the situation and inventory resources:

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Financial
Natural resources
Physical resources
Human Resources
Goal is to get a handle on the entire picture in terms of #s and condition

Charting the Course

Step 2: Conduct SWOT analysis
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S trengths
W eaknesses
O pportunities
T hreats

Strengths
Weaknesses
Opportunities Threats

SWOT
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Can be used on the whole ranch or part
Proactive: used before action is taken
Helps in objectivity
Creates discussion
It helps develop an objective inventory of realistic “potential”
Balances “half full” vs. “half empty”

Charting the Course

Step 3: Establish a Vision

Should include:

Values and reason for being
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Envisioned future
Recognition of how it serves its stakeholders

Owners


Employees
Customers

Charting the Course

Step 3: Establish a Vision

Should address

Time: 5-10 years


Energy: Through language , a vision statement should inspire
Cooperation: should encourage cooperation and creativity

Charting the Course

Step 3: Establish a Vision
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The process:

Allow yourself to dream

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Everyone should be involved
Shared
Comments from outsiders
Key questions:


“What do we want?”
“What are we willing to commit to?”

“We progressively realize multigenerational goals in a fun, challenging, encouraging environment and continually improve people, products, services, the ranch, our community, and the ecosystem while sustaining a net profit.”

Stage 2: Determining Strategies to
Achieve Vision

Determining Strategies to Achieve
Vision

Step 4: GAP Analysis
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Vision vs. current state
How does vision fit with resources?
How does business measure up?
How different is current culture compared to what is needed?

Determining Strategies to Achieve
Vision

Step 5: Strategies to close GAP
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Find new resources
Reallocate resources
Lengthen time
Modify size or scope

Stage 3: Scenario Planning for the
Ranch

Technology Continues To Improve
U.S. Corn Yield
170
160
150
140
130
120
110
100
90
80
70
60
2004 Yield = 160 bu./ac
2005 Yield= 148 bu./ac
2006 Yield= 149.1 bu./ac
2007 Yield = 154.7 bu./ac.
2008 Trend Yield = 156.7 bu./ac.
70 75 80
Source: USDA & K-State Ag. Econ.
WASDE Report: 10.12.07
85 90
Harvest Year
95
Actual Yield
Trend Yield
00 05
KSU Dept. of Ag Econ www.agmanager.info

WHERE WE WANT TO BE
Reactive
PLAN
REACTIVE
WHERE WE ARE
Past Now Future
Ackoff, 1999

WHERE WE WANT TO BE
Preactive
PLAN
Set Objectives
PREACTIVE
WHERE WE ARE
Past
Predict
Now Future Akcoff, 1999

Questions for 2009:
What will commodity prices do?
Will beef demand keep cattle prices up?
What will be new administrations policy towards _____?

Corn Usage Estimates
(Millions of Bushels)
USDA/WASDE est.
USDA/WASDE
2006/07 2007/08
Feed and Residual
Ethanol for Fuel
Exports
Ending Stocks
Total Usage
(+16%)
5,600
2,115
2,125
1,304
11,210
5,700 1
(+2%)
3,200
(+51%)
2,350
(+11%)
1,997
(+53%)
12,640
1 Assumes DDGS retain 30% of the feed value of corn and are included in the feed and residual category by the
USDA.

Interactive
WHERE WE WANT TO BE
INTERACTIVE
Idealized Design
PLAN
WHERE WE ARE
Past Now Future
Akcoff, 1999


Step 6: Describe Multiple Scenarios
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
List “what ifs” that relate to your ranch
6 to 10
A scenario is not:

“Peace in the Middle East.”

“Global warming will raise sea levels.”
A scenario is:

“The price of oil will rise”

“The price of hunting leases will level off.”

Stage 3: Scenario Planning for the
Ranch

Step 7: Select and evaluate the most probable

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


Choose 2-4
These can be tied to a SWOT analysis
These can be tied to GAP
Collect objective information
Flesh out each with a paragraph

Stage 4: Merging Strategies and
Scenario Planning


Merging Strategies and Scenario
Planning
Step 8: Determine strategies with highest likely hood of success
Production
Strategy 1
Strategy 2
Financial
Strategy 1
Strategy 2
Lifestyle
Strategy 1
Strategy 2
Scenario 1:
High feed $
Scenario 2:
Good Beef
Demand
Scenario 3
High Oil $
+
0
-
+
+
+
+
-
0
0
+
0
+
-
+
+
+
-
Scenario 4
?
-
+
-
0
+
-

Stage 5: Putting the Plan into
Action and Measuring Success

Putting the Plan into Action and
Measuring Success

Step 9: Implementation of the plan


Two critical components

Commitment

Communication
Develop tactical and operational plans

Who




What
When
Where
How

Putting the Plan into Action and
Measuring Success

Step 10: Monitoring performance and measuring success

Balanced Scorecard


Identify perspectives
Copy strategies




Set realistic goals
Decide on when you will measure
Decide how you will measure
Report out

Perspectives with Strategic
Objectives for BOD
Quality of Life
Financial
Customer
Production
Natural Resources
Leaning and Growth
Goal
+ 3 rd Gen
10% ROE
OCB +
500 Lbs/
Female
+ Trend
CSU
Workshop
Actual
Yes
10%
Yes
550
Yes
Yes

Perspectives with Strategic
Objectives for BOD
Quality of Life
Financial
Customer
Production
Natural Resources
Leaning and Growth
Goal
+ 3 rd Gen
10% ROE
OCB +
500 Lbs/
Female
+ Trend
CSU
Workshop
Actual
Yes
10%
Yes
550
Yes
Yes




You must put the puzzle together!
This is the time for strategic management!



Strategic planning
Scenario planning
Balanced Scorecard
Both are doable!

“We educate the leaders that make a difference in Ranching”
• Graduate education
• Outreach
• Lectureships
• Symposia
• Certificate program

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Course work

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Business
Animal Science
Wildlife Management
Range Management
2 Internships
Extra curricular
Problem solving

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Statistics
Systems
Range Livestock
Production
Ranch Planning and
Analysis
Ruminant Nutrition
Rangeland
Measurements

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Genetics
Managerial
Accounting
Finance
Marketing
Student Choice

Soils

Big Game

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Summer
Last Semester
Goals:

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Work under mentor
Different geography
Analyze

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Lectureships
Symposiums

Co-author article
Certificates

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UT in Business Process Mgt.
K-State MAST
Short courses


Quail Mgt.
“Bud Williams”

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Should I plant farm ground back to grass?
Should I sell part of my ranch?
Economic selection index for my ranch?
How should I develop my heifers?
How should I manage my ranch?
Should I close my feedlot and sell calves and grain?
Apply Balanced Scorecard to ranch.
Should I change time of calving?

Strategic
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Cover weaknesses
Dynamic
Endowed
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10 Topics
Prescribed Burning
Managerial Accounting
Strategic Management
Equine Management
GIS
Grazing Management
Systems
Oil and Gas
Current issues
Law


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Just held 5 th

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16 States
5 Foreign Countries
Topics are about management
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Strategic management
Balanced Scorecard
Transitioning ranch ownership
HR
Adopting Technology
Last Thursday and Friday of October

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“Commit to Life Long Learning”
Umbrella over:


Lectureships
Symposia
2 Symposiums and 4 Lectureships in
3 years
CE Credits
Net working

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7 graduates
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4 in management positions on ranches
1 Faculty member at Univ. MO
1 area range conservationist with NRCS
1 liaison between Texas Parks and Wildlife and 140 ranchers
8 students currently

2 have interviewed
Recruiting more

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$10.6 million endowment
Line Item Funding from Legislature
Degree Program Approved
1 Certificate Awarded
Created a “Buzz”
Building partnerships

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TNC
NCBA
Ranches across the west

http://krirm.tamuk.edu/