This seems like a simple question. Most of us know what hat we are wearing at any given time. However, if we need a refresher, looking in the mirror is easy enough. It is not that simple when it comes to separating the different roles people fill when running a small/medium business.

John Grape

It’s easy for the lines to blur and gaps to occur.

In large businesses, the sheer volume of work to be done requires these roles be separate and filled by different people, all of whom bring their unique perspectives and goals to decisions. So in a small business, the question is: “Am I wearing the right hat at the right time for the right length of time?” First, let’s take a look at the different hats in a business.

Front line hat

Individuals wearing these hats make sure that the product gets made and shipped on time. (The cows get milked and fed.) Without them, the company can’t function. They understand what it takes to do what the company does and why things work the way they do. Increasing output, controlling costs and gaining efficiencies can’t be done without the knowledge and commitment of this group.

Manager hat

With this hat on, a person needs to coordinate all the front line hats to run the business in a manner that gains the most efficiencies and profit possible. Wearing a manager’s hat requires a working knowledge of the various areas and concentrating that knowledge into a constantly evolving plan. This plan can’t be generated by the front line hats due to the logistical issues of not knowing enough about other areas and time restraints.

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CEO or captain’s hat

Wearing the captain’s hat requires that person to set the vision or direction for the company. With the help of others in the company, the CEO looks ahead to see what the weather (business environment) will likely be and makes plans to capture the most benefit for the company in the expected environment.

He or she also makes plans for known or unexpected storms (obstacles). The personality and culture of the business is created by the CEO, and they are responsible for the performance of the employees of the company.

Board of directors hat

Besides selecting and evaluating the performance of the CEO, most boards’ main purpose is to protect the interests of the owners. Simply put, is the investment into the company being used correctly and generating the maximum return? Are the goals of the investors being met? This may be at odds with the other “hats” in the company.

The right ratio

While there’s no perfect recipe, and each operation is different, there are some rules of thumb to think about when dividing up responsibilities. Generally speaking, my colleagues and I see a breakdown of hat wearing by dairy farm owners on farms larger than 750 cows as follows:

  • Front line hat: 25 to 30 percent
  • Manager hat: 50 to 60 percent
  • CEO/owner hat: 10 to 25 percent

The above mix, although better than 10 years ago, does not reflect the modern needs of a dairy in our fast-paced world to stay competitive, not only with its peers, but against competing interests outside the industry.

The CEO hat needs worn more, maybe 50 percent or higher depending on the size of the business. Then once a plan is created, making sure the plan is executed as well as monitored for needed changes.

An effective CEO makes the difference between good and great

One example of a CEO role that often fails to get completed is development of staff and other middle managers. One of the skill sets many farm CEOs struggle with is the soft skills of people management and growth. CEOs not only need to make sure they have the people skills to keep and attract employees but also to engage and retain their middle managers.

Middle managers often come from the front line hats and need the skills to effectively communicate with the employees they lead. Too many middle managers focus on task management and not people management.

Remember that the CEO sets the culture of the business and, with the help of the middle managers, spreads it throughout the business. This can mean the difference being considered a “great” place to work versus an undesirable place to work.

Likewise, it can set apart a farm which seldom needs new employees and one that is in constant need, or a business where the work is done correctly and consistently versus sloppy and uneven.

In a competitive industry where cents per hundredweight make a difference, employee satisfaction and engagement could mean dollars per hundredweight. The bottom line? The CEO needs to spend time developing great middle managers.

Another example of a CEO role being left undone or partially done is succession planning. Many farms started expanding 20 years ago and are now looking to pass on their dairies, be it to a relative or a third party.

A CEO should be planning for this well in advance. The first task that comes to mind is to make sure the business can financially fulfill any “reasonable” or “expected” succession plan.

Many farms find themselves in a position that transition plans must be put off years because of other obligations taken on without considering succession. Or the succession goes ahead anyway but greatly reduces the chances of future success, effectively crippling the business. Just as critical, do the next CEO and middle managers have the skills and experience to operate the business?

The CEO should have identified likely candidates for leading and managing the farm well in advance. This gives all parties time to learn, grow and be sure this position is right for them and the business.

In the previous succession plan example, the board of directors or owners hats have a big role to play. This is an example of this hat setting the goals of the investment in the business.

Is the goal growth? Profit? Non-profit (community-focused)? Preparation for a sale (succession)? It is unfortunate when obligations to grow the business are made (loans) and, shortly after, the owner decides to retire, but there simply isn’t enough cash available to do it. Planning matters.

The best mix

So what’s the best mix of hats for an owner/manager of a dairy farm? Of course, there is no one right answer because it depends on many factors, such as size, skill set, goals, business environment, etc. However, the following time allotment is a great place to start:

  • CEO hat: 40 percent
  • Manager hat: 40 percent
  • Board of directors hat: 10 percent
  • Laborer hat: 10 percent

It is not hard to imagine how different hats can be at odds with one another depending on timing and circumstances. If one or more of these hats are wore by one person, it can be easy for that person to ignore or inappropriately discount the other hat’s needs when making decisions.

If you wear multiple hats, take time – or better yet, schedule time – to wear each hat long enough to fulfill the duties required of each. One way to keep the roles separate and fulfilled is to list what you expect from each role.

Periodically check to see if you are completing what you think you should. If you do, you will find your time wearing your different hats much more satisfying and fulfilling.  end mark

For more insights from John and other AgStar experts, check out agstaredge.com, where you’ll find livestock and grain industry news, legislative happenings and financial preparedness guidance.

John Grape is a senior business consultant at AgStar Financial Services. John is an accredited agricultural consultant from ASFMRA and is a certified farm succession coordinator. He has worked in various departments in AgStar, including credit and is currently one of the members of AgStar’s Consulting.