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Have you ever hit a ceiling in your dairy business? Here’s how to break through

Bruce Vande Steeg for Progressive Dairy Published on 07 October 2021

Casually walking into the bank one day a few years ago, I bumped into a dairyman I have known since 2006. We caught up about our kids and life. Then he described a situation he was in that is a common one I find in my consulting work with dairies.

This is a true story and the name used has been changed to protect the client. However, I received his permission to share his experience.

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His concern: The growth of his business was plateauing off, and he didn’t have the same joy about going to work as he used to.

First, you need to know a bit of history about his two decades of experience in business. By and large, he has been successful. Yes, there have been ups and downs, but his trajectory has been an upward one for the most part. Think about the dairy industry over the last 20 years and how expansion, expansion, expansion has been the name of the game. By all outward appearances, my friend was a successful businessman. Since he started the business, he built buildings, added employees and grew profits.

About five years ago, his business went into a major growth phase, not just in income but in vision. However, he was feeling like he had hit a ceiling. The growth phase was plateauing. The business was still profitable, although not like it had been. That’s just part of his concern. The other side of the coin was: He was just not enjoying work like he used to. This is not saying he did not like his business or that he wanted to get out. He just didn’t have the same joy when he woke up in the morning and thought about going to work. He knew something was up. He was just not sure what it was, nor what he should do about it. He still had energy and knew there was more opportunity in his business. He was just not sure how to break through the ceiling.

Does this dairy owner sound like you at all?

The challenge presented to me was: Can you assist me in figuring out what my ceiling is? What will it take to break through or remove that ceiling?

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I love being presented with a seemingly large, worthwhile challenge. It looked like work worth doing. When a question like this is posed, the inquirer and the one being asked see the question from different perspectives. The inquirer (my friend) wants a solution soon and would prefer an answer in the moment. The one being asked the question (me) wants to answer the question right away but knows a question of such magnitude requires more thoughtful investigation. We met twice, over lunch, as food is a great elixir for life. After hearing more about his operation and the outcome he was looking for, I was able to write up a proposal. The proposal included five areas I felt we should address and that would enlighten him about his situation, provide tools to solve his concerns and put him and his team on a different path.

Here were those five areas, the questions we asked in each area and the results we discovered after asking those questions. Perhaps they can be helpful to you as well.

1. Results and the business organizational structure

What is the organizational structure? What should it look like to move the business into the future? What are the current roles in the organization? Are they the proper roles? What about staff? Are each of them in the roles that best fit their skill set? What might be the roles he was best fit to fill to achieve the outcome he was looking for? What should his role as the owner be? What were his strengths, and where could his skill set best be used? Do managers understand what key results are sought? Do they understand what is expected of them?

What we found

Results are always an interesting area to write about. Many business owners focus entirely on the monetary aspect of success. Some have expectations on their quality of life. The outcome the owner desires will determine what they value. In this case, the owner was after both financial success and quality of life. I am a firm believer that both are obtainable. The ratio of what is successful will be different in each case. What is true for each outcome is: It takes considerable effort – a commitment for the long haul. This owner was committed to the business.

His management team and staff did not really understand what results he was looking for. By the way, more money or more milk does not compute for the staff. We developed metrics for each department so the management and the staff knew what the target was in their area and how their targets fit into the overall goals of the dairy. They needed to be able to see the goal posts and a pathway to get there.

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There was an organizational structure, but it was not known by staff, nor was it meeting the current needs of the business. It also was not the structure to take the business into the future. In each of the three departments, there were roles that needed to be realigned, new seats that needed to be created, people who needed to be in different roles or not in the organization anymore and a lack of supervisory roles below the senior management level.

2. Determine the right people, right seats

In order to understand if you have the right people in the right seats, an organization needs to know where it is going (its why or purpose) and its core values. So determining this was a part of this area we worked on. To understand who was on the team and if they were in the right seat, I interviewed each team member. I asked questions aimed at determining their role as they saw it. I also wanted to understand why they were working for the owner. This information was used to work with the management team in the context of building the organization chart.

What we found

It was determined, after several months, that one of the managers did not want to manage. He wanted his pay and status. He did not and would not manage as was needed. The owner and this manager came to an agreement and, in time, the manager left on good terms on both sides. The manager moved into a position in a different company he was better suited for. A right seat problem remedied. Time was then spent determining what role was truly needed now and for the next three to five years. A new management role was created. Along with it, a recruiting, hiring and onboarding plan was created. (Note: This person has now been in the role for one year and is crushing it.)

A new role was created to assist a different manager who was overwhelmed and not able to succeed. It took off his plate duties he was not good at and put him in roles he could excel in. The new hire was recruited intentionally for the specific role that was created. This position has been filled for over a year and the department has increased efficiency by 16%. We discovered another employee had a role, but no one really knew what the person did all day. The person contributed, but not up to expectations. This person, after being asked to step up, decided to retire.

It further came to light that the business needed to add another position if it were to continue to grow. The problem was: In the short term, it increased labor costs without any associated income. This situation was put through the process and determined to be a wise investment. Again, we sought the right person and the right seat. Six months later, revenue is up and gross margin (a metric this business uses) is growing.

3. SWOT analysis and the Four Perspectives

These tools were used to assist the owner and senior managers in determining the strengths, weaknesses and opportunities of the business. It also brought to life what was broken, missing, working and confusing (the four perspectives) in the organization. Both are great tools with quite different objectives and outcomes.

What we found

What did we gain from working through these two exercises? We determined we had a problem with the culture of the company. There were definite areas to grow the business and, despite the culture problem, people genuinely liked working there and for the owner. We had a good foundation to build from.

The senior managers (two from the existing team and a new hire) were committed to driving results and a positive culture. They even determined that their habit of being sarcastic with each other was not a positive contribution to a motivational environment. They committed to quit. Managers approached team members with opportunities for growth along with clear expectations, and they responded. Gross income rose and, as stated earlier, the departments’ efficiency increased. Initially, turnover increased as staff who did not want to be part of the new culture and expectations left. However, now the team is stable. The only change is new people being added because the business is growing (currently 30 team members and interviewing for the 31st).

4. Cash flow

What drives cash flow? This was a dive into how this business made money and what caused it to lose money. What were all the factors? Did they have metrics around these to measure the outcomes, know if they were on track or off track and know it sooner rather than later?

What we found

Will you predict improvement in the cash flow outcome if I work with you? As a consultant, this can make me a bit apprehensive. Initially, I know I can. However, improving people’s attitudes, engagement, business strategy and focus is what drives cash flow. Those things require buy-in. I remind my clients so often and they now remind me, “Trust the process.” It took nearly a year at this business, but gross sales are up 15% over budget, and the owner asked for 10% increase over the previous budget. That is 25% growth year-over-year. The owner uses gross margin as a key metric (basically income less costs needed to produce but not including administration costs). This metric is now $37,000 more per month, comparing year-over-year. That will equate to quite a year if the trend continues.

5. Meetings

Yes, meetings. A plan was laid out on the proper type of meetings to fit the needs of the business. Why? A well-laid-out, prepared for, succinct meeting can convey much information and clarity to a team in a short period of time. Communication in this business was a lacking area. The goal for this area was to drive results, inspire staff and create unity. This requires communication, both the structure of it and the content.

What we found

Three key meeting types were developed for this business. The morning standup, weekly tactical/issues meeting and a quarterly goals/strategy meeting. One of the quarterly meetings is an annual strategy, vision, goals meeting. It is in addition to the daily/weekly rhythm. The standup is a short – a five- to 10-minute meeting. Everyone stands. It’s a “What is going on today?” type meeting. The staff are now more informed and acting like a team instead of a bunch of individuals. The weekly meeting is for senior management to review weekly metrics they must meet, celebrate wins, bring up issues, prioritize them and have candid debate to find solutions.

The quarterly meeting is where the senior management team holds each other accountable to accomplishing items that are not part of the everyday rhythm but are big rocks that, if accomplished, will move the business forward. The result has been a management team that deals with conflict where they did not in the past. Trust is one of the results of this meeting. They are responsible for meeting expectations and driving results. They are working together to build a culture based on the owner’s core values.

Now, almost two years after that first initial contact, what would the owner say about his business? They have broken through the ceiling. He sees a vision for growth and opportunity for his business and team. He is paying the bills and making money. He has no worries that his staff is going to show up, nor about their quality of work. He can do what he needs to do because his team does what they are supposed to do. He is freed up to do what an owner can only do. He is taking time to enjoy activities with his family and pursue a personal dream. What do I see? An owner at peace.

You may find yourself in this same spot. You do not need to stay there.

In the words of John Maxwell, “No one with a successful business will state that they just woke up one morning, amazed that their business was so successful. It took hard work, and it was uphill all the way.”  end mark

Bruce J. Vande Steeg

‘No fun dairying’ case study details

The owner: In his mid- to late 40s. Married. Three children. Started his dairy basically from scratch, now has 27 employees. He did not get into business to have employees but to do what he loved – be around cows.

Staff: He has nine managers, what he calls his senior managers. Each of them oversees their own department. They range in tenure from five to 10 years of service. Each of them manages from three to nine people. There are a few staff members who do not seem to be reporting to a manager and loosely report to the owner.

Team: Tenures range from weeks on the job to 15 years. Most are full time and there are two to three part-timers. The owner loves giving high schoolers a chance to learn how to work. And it lowers his labor cost. The longer-tenured employees have good skill sets and institutional memory. The less tenured have holes in their skill sets and need additional training.

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