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Characteristics of exceptional farm organizations

Calvin Covington Published on 11 September 2015

Farm organizations began developing in the 19th century as agricultural societies. Gradually, they developed into general farm organizations.

Then, as farmers became more specialized, farm organizations as we know them today came into existence, including milk cooperatives, farm supply cooperatives, Dairy Herd Improvement (DHI) associations, farm credit, A.I. cooperatives, breed associations, milk promotion groups, Farm Bureau and various local, state and national dairy associations.

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Almost all of the nation’s dairy farmers having memberships in multiple farm organizations shows their widespread acceptance. As Edward Wiest, in his history of farm organizations, points out, “Agricultural organizations were necessary in order to bring to the farming community a full taste of the educational, economic, social and political advantages enjoyed by those living in the cities.”

My connection with farm organizations spans my entire life. My parents owned and operated a dealership for a regional farm supply cooperative as well as a dairy farm with several farm organization memberships.

During my college years, I worked part-time as a DHI supervisor. My graduate studies focused on farm organizations. My full-time working career was first spent working for a breed association, then a milk cooperative. In retirement, I continue to consult with dairy and farm organizations.

I often ask: What makes an exceptional farm organization? Why do some organizations prosper while others struggle to survive or, in some cases, fail? Based on my experience and observations, exceptional farm organizations demonstrate the following eight characteristics:

1. Operate like a business. Even though most farm organizations are organized as “not for profit,” the exceptional ones operate like a “for-profit” business. They follow sound and prudent business principles, which include maintaining a strong balance sheet with adequate working capital, operating efficiently, generating a reasonable return on assets, having good credit and banking relationships, ending each fiscal year with revenue exceeding expense, and receiving a “clean” annual audit.

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2. Members receive measurable economic benefits. The primary reason farmers join an organization is to receive an economic benefit. The benefits vary depending upon the type of organization.

For example, a milk cooperative provides a market for a dairy farmer’s milk production – hopefully at a better price compared to being an independent. DHI provides information to improve a dairy herd’s profits. Membership in Farm Bureau may provide insurance and a voice in influencing legislation.

Exceptional farm organizations provide measurable and quantitative economic benefits to their members. And members clearly see and understand the benefits. Successful farm organizations continually ask themselves the question: Are we providing our members measurable economic benefits?

3. Harmonious leadership who understands their roles. Exceptional organizations have a board of directors and executive management in harmony with each other. Each, without reservation, supports the other. They understand their roles and responsibilities and allow the other to do its job without interference.

The board establishes policy, provides fiduciary oversight, monitors performance and sees that the organization remains true to its mission. Executive management carries out board policy and direction, manages the operation of the organization and provides recommendations as needed to the board.

4. Stable and dedicated workforce. Just like top-tier dairy farms, exceptional farm organizations experience little turnover among key employees. When employees are hired for key positions, they stay and remain dedicated to the organization. As a legendary football coach said, “You win with people.” The same is true with exceptional farm organizations.

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5. Two-way and transparent communication. Members of organizations expect to be kept informed about their organization, both the good and bad. Plus, they want a forum in which they can communicate with the leadership. Let me share an example. A dairy cooperative of which I am familiar holds area meetings each year prior to its annual meeting.

The cooperative president attends the meetings and gives all members the opportunity to ask him questions and provide their input. At the most recent area meeting, he told members the pay price would be lower in the coming months due to surplus milk production and provided the reasons why.

After the meeting, a member came up and said they did not like the news about the lower pay price but appreciated him being transparent and communicating the not-so-good news to them. Plus, they appreciated his willingness to get out among the membership and directly receive their input.

Most organizations do a commendable job of communicating the positive news from the organization to the member. However, it takes effort, determination and patience on the part of the leadership to share the less-than-positive news and receive direct communication from the member. Exceptional farm organizations find a way to accomplish this.

6. Members treated equitably. As the size of farms and dairy herds becomes more polarized, how farm organizations establish their fees, charges and participation continues to be a challenge. Exceptional organizations go the extra mile to ensure all of their programs, policies and services are equitable (not necessarily equal) to all members. Plus, they make the time and effort to explain to membership why they are equitable.

7. Plan for the future. It is easy for an organization to only focus on today, and let tomorrow take care of itself – to take short-term gains today and give up significant long-term gains in the future. One can look at today’s exceptional farm organizations and see that they have and continue to plan for the future.

As the saying goes, failing to plan is planning to fail. Granted, no one knows for sure what the future holds, but exceptional organizations do their best today to be prepared for tomorrow. Yes, planning for the future is not always popular among the membership.

For example, it may require holding a dime back from the milk check to provide the investment that will produce an additional quarter in the milk check down the road. Exceptional farm organizations are always looking and planning ahead.

8. Balance. Balance may not seem important, but exceptional farm organizations keep the above seven characteristics in the proper balance. Let me provide some examples. As stated above, exceptional farm organizations operate like a business.

However, if a dairy cooperative focuses solely on generating large earnings each year to show a large net income at the end of the year, instead of investing or returning some of those earnings in the milk check, it is not serving its members. On the opposite side, a dairy cooperative may return all of its earnings each month in the milk check to show an impressive milk price.

However, this may weaken the organization’s financial position and make it difficult for the cooperative to invest for the future. Exceptional organizations find the proper balance between the two extremes. A board of directors that constantly tries to manage the organization, or a CEO who wants a board that rubber-stamps his or her actions, does not make an organization exceptional.

There must be balance between the board and executive management. Exceptional organizations are open and transparent to their members, but they draw the line if the openness and transparency may negatively impact business decisions. There must be a balance.

The bottom line: Exceptional farm organizations master all of the above, and they do so in the proper balance.  PD

Calvin Covington is a retired dairy cooperative CEO and now does some farming, consulting, writing and public speaking.

Calvin Covington
  • Calvin Covington

  • Retired Dairy Cooperative CEO
  • Email Calvin Covington

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