Rural Industries Research & Development Corporation

Research Compendium 1993 - 1994

Research Project

IMPROVING THE ADOPTION OF BUSINESS PLANNING AND MANAGEMENT TECHNIQUES ON FARMS

Objectives

• To classify wheat/sheep farmers into groups on the basis of their strategic approach to farm business management.
• To ascertain whether business performance varied across groups.
• To ascertain whether the use of business planning aids varied across groups and to identify approaches for increasing the use of such aids within each group.

Background

A long-standing objective of the farm management profession has been the development of decision aids for use in farm business planning. This objective has been based on the assumption that the provision of more sophisticated aids will lead to improved farm business performance. The development of better aids continues as is evidenced by the interest of the profession in computer-driven decision support systems.

This interest by members of the farm management profession in developing better planning aids appears not to be supported by the majority of farmers. In other words, while some members of the farm management profession believe farmers need better planning aids, only a minority of farmers make regular use of the aids that are already available.

The usefulness of planning aids to farmers will depend on the types of planning activities they undertake. These activities, in turn, are a function of the types of strategies farmers follow in managing their farms. The relationship between strategy, performance and use of planning aids was investigated in this study.

Research

Data on farm management strategies were gathered by means of a mail survey of farmers in the wheat/sheep zone of southern Australia. Cluster analysis was used to classify farmers into groups. Statistical analysis revealed that farm business performance (as measured by equity) and the use of planning aids differed significantly across the groups. Set correlation analysis indicated that differences in farm business performance were the result of differences in strategy.

Outcome

A major finding of the study was that, on both theoretical and empirical grounds, those farmers who followed strategies which entailed a high level of tactical planning and frequent use of decision aids were the most likely to exhibit superior business performance. These results cast considerable doubts over the usefulness of existing farm planning tools as aids in the strategic management of farm businesses.

Implications

It is hoped that the results of this project will be influential in bringing about a reorientation in the farm management profession towards the study of the strategic management approaches used on farms. An improved understanding of how and why farmers manage their businesses in the ways that they do may provide a foundation for the development of a different set of planning aids with greater application to the particular strategic approaches in use on farms.

RIRDC Project No: UNE-28A

RESEARCHER: Mr J W Lees

ORGANISATION: The Rural Development Centre

PHONE: 067 73 2220

PUBLICATIONS:

Kaine, G, Lees, J W and Sandall, J, 1994, Planning and Performance: An exploration of farm business strategy and perceptions of control. The Rural Development Centre, UNE, Armidale.

Last updated: 10 October 1996
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