This chapter discusses farm management and decision making. It covers the key functions of management: planning, implementation, and control. Strategic farm management involves defining goals and missions, assessing resources, analyzing the business environment, and selecting strategies. Tactical decision making follows a process of identifying problems/opportunities, considering alternatives, analyzing data, choosing a solution, implementing it, and evaluating results. Agricultural decisions have unique characteristics due to factors like fixed land supply, biological processes, small farm sizes, and perfect competition in markets. Good management is critical for farm profitability.

1. FARM MANAGEMENT
A N D D E C I S I O N M A K I N G
B Y
I S M A I L I B R A H I M
Chapter 5

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3. Chapter Outline
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 Functions of Management
 Strategic Farm Management
 Tactical Decision Making
 Characteristics of Decisions
 The Decision-Making Environment in
Agriculture

4. Chapter Objectives
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1. To understand the functions of management
2. To present the steps in developing a strategic
management plan for a farm or ranch
3. To identify common goals of farm and ranch
managers, and to explain the steps in the
decision-making process
4. To explain the steps in decision making
5. To describe some unique characteristics of
the decision-making environment for
agriculture

5. Functions of Management
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Planning
Implementation
Control

6. Planning
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Planning means choosing a course of
action.
To plan, a manager must establish
goals, identify resources, and allocate
the resources to competing uses.

7. Implementation
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Once a plan is developed, it must be
implemented, or set in motion.
To implement, the manager must
acquire the resources needed for the
plan and oversee the process.
Coordinating, staffing, purchasing, and
supervising fit under this function.

8. Control
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Control is the “feedback” function.
To control, the manager must monitor
results, record information, compare
results to a standard, and take
corrective action as needed.

9. Management flow chart based on three functions
of management
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11. Farm Management
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 farm management, making and implementing of
the decisions involved in organizing and operating a
farm for maximum production and profit

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 Farm management draws on agricultural economics
for information on:
 prices,
 markets
 agricultural policy
 and economic institutions such as leasing and credit.

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 It also draws on plant and animal sciences for
information on soils, seed, and fertilizer, on control
of weeds, insects, and disease, and on rations and
breeding; on agricultural engineering for
information on farm buildings, machinery,
irrigation, crop drying, drainage, and erosion control
systems; and on psychology and sociology for
information on human behavior.

14. Strategic Farm Management
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 Strategic management consists of charting
the overall long-term course of the business
 Tactical management consists of taking
short-run actions that keep the business
moving along that course until the
destination is reached

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16. Steps in Strategic Management
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1. Define the mission of the business
2. Formulate the goals for the farm and
family
3. Assess the resources available to the
business (internal scanning)
4. Survey the world surrounding the
business (external scanning)
5. Identify and select appropriate strategies
6. Implement and refine the selected
strategies

17. Do you agree or disagree?
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1. A farm is a good place to raise a family.
2. A farm or ranch should be run as a business.
3. It is acceptable for farmers to borrow money.
4. A farmer should have at least two weeks of vacation.
5. It is better to be self-employed than to work for someone else.
6. It is acceptable for a farmer to also work of the farm.
7. It is more enjoyable to work alone than with other people.
8. Farmers should strive to conserve soil and keep water and air
resources clean.
9. A family farm should be passed on to the next generation.
10. All family members should be involved in the operation.

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19. Goals
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 Goals should be written
 Goals should be specific
 Goals should be measurable
 Goals should have a timetable

20. Possible Goals
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 Survive, stay in business
 Maximize profits
 Maintain or increase standard of living
 Increase equity
 Maintain stable income
 Pass farm to next generation
 Increase free time
 Increase farm size (“growth”)
 Maintain or improve environmental
quality

21. Assessing Resources
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 Physical resources: land, buildings, fences,
breeding livestock, machinery and
equipment, established perennial crops
 Human resources: skills of the operator and
other employees, likes and dislikes of
individuals
 Financial resources: cash, other capital and
available credit

22. Surveying the Business Environment
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 Called “External scanning”
 The major types of crops produced haven’t
changed much, but their characteristics are
changing
 A change may provide an opportunity or a
threat

23. Identifying and Selecting Strategies
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Some businesses have more potential
routes for reaching their goals than
others because resources are more
flexible. As the number of alternative uses
for resources increases, so does the
complexity of the manager’s decisions.

24. Implementing and Refining
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 Manager must formulate action steps to
implement the plan
 Manager must decide which information to
collect to evaluate the success or failure of
the plan
 Strategic management is an ongoing activity

25. Tactical Decision Making
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1. Identify and define the problem or
opportunity
2. Identify alternative solutions
3. Collect data and information
4. Analyze the alternatives and choose one
5. Implement the decision
6. Monitor and evaluate results
7. Accept responsibility for the decision

26. Characteristics of Decisions
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 Importance
 Frequency
 Imminence
 Revocability
 Number of alternatives

27. The Decision-Making Environment
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 Fixed supply of land: Land base is
essentially fixed, making decisions
about land use, sale, or acquisition
critical
 Biological processes and weather:
Laws of nature place limits on
manager’s decisions
 Small size: Often one person serves as
management and labor
 Perfect competition: Producers are
price takers

28. Summary
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Good management means the
difference between earning a profit or
suffering a loss. The overall direction
is defined through strategic planning.
The strategic plan is carried out via a
number of tactical decisions.
Agricultural managers operate
in an environment that differs from that
of most other businesses.

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