People and relationships are integral to running an effective and profitable business. The foundation to this effectiveness is the relationships formed by employers and their employees.
In a family ranching operation this is especially so. Increased profits will never materialize if all family members are not on the same page and working together.
"You don't have a business to provide jobs. You have a business to produce results," says Dave Pratt of Ranching Profit. On Nov. 7 I attended a half day seminar with Pratt at the Lewis & Clark Conservation District in Montana, where he discussed the challenges ranch families face in maintaining effective business relationships and loving family relationships together.
"The bottom line," says Pratt, "is your ranch isn't sustainable unless the people there have fun and work together effectively."
He described the structure of a ranching business as a three-legged kettle. Each leg on the kettle represents the three important components to ranching – money, production (livestock), and ecology (land).
Inside the kettle are the people -- your employees. Cultivating effective relationships with the people in your business is the recipe for success and increased profits. To do this Pratt offered up a few suggestions for questions you should ask yourself about your business.
First, do you have the right people on your team and is everyone in the right positions? Many times business owners pick the wrong people or just put the people in the wrong jobs for their abilities. Even when business owners realize these mistakes, many times they will continue on without change for fear of evoking negative emotions or because of feelings of obligation to provide family members with employment.
Such inability to own up to reality can lead to increased stress for the business owners and will generally make your working environment one people would rather not be a part of. In the end, Pratt says businesses really only have three choices:
- Continue to ignore it.
- Change/improve the situation.
- Get out (meaning to fire someone).
The second question Pratt says you should ask is, "Why do you farm or ranch?"
Once that is understood, defining the business's purpose is next.
"The purpose of business is to serve a customer," Pratt says. "Having a purpose beyond profit makes companies more profitable."
Next, he says you should determine your ideal customer. In the majority of ranchers cases this customer is the cattle buyer and their product is cattle. This will differ slightly if the operation is direct marketing their own beef. It's also important to consider what makes your product unique and what passions you want to satisfy and foster in both your customers and employees. What is the highest good you can envision your business achieving?
Next Pratt suggests looking inward and examining what it is you want for both your business and yourself
"Be specific," he says. "Describe what you want, not what you don't want." A good way to word this might be, "In a perfect world, what do we want this place to look like in five years?"
He also recommends separating positions from interests. State an interest, not a position. A position is a statement of what you want. An interest is a statement of what you need. To determine if there is an interest underlying a position one must ask why you want it to begin with.
Once the who, why and what of your business is answered, it's time to ask how and to develop a strategy. How will things get done? How will employees work together? How will they be held accountable?
Consider the things that motivate your employees. Also consider the results you expect of your employees.
In this case, its important to remember what Ranching for Profit founder, Stan Parsons, once says:
"You can buy someone's hands but you can't buy their heart. That's where loyalty comes from. Nor can you buy their mind. That's where creativity comes from."
Pratt has been known to say that many ranches are nothing more than a collection of assets and a pile of jobs. It's up to the people on those ranches to take that collection of assets and pile of jobs and turn them into a business. This starts with building effective business relationships with all those involved, especially family.
If you'd like to learn more about Pratt's outlook on ranch profitability and effective relationships in family businesses, I suggest you check out his upcoming book, Healthy Land, Happy Families and Profitable Businesses. Books can be ordered on Ranching for Profit's website. I know I can't wait to read it.
In addition, complete information on Pratt's Ranching for Profit School also can be found on his website.