Peer groups can be helpful, insightful and supportive. In fact, a good peer group can improve the business success of all those involved.
One such group, Pork Peer Group 2000, includes 15 producers from Georgia to Nebraska and Texas to Minnesota. The impetus for the group was that they all were clients of the same swine consulting veterinarian.
Peer Group 2000 met dozens of times, discussing hog health concerns, nutrition, buildings, breeding, equipment - pretty much the entire gamut of pork production. They learned from each other's successes and failures, shared their hopes and goals, and in fact, knew just about everything there was to know about each other's hog operations.
Then they decided to put their production and financial numbers into a database to develop some benchmarks. They planned to compare the production and economic performance of their hog operations and learn from each other in this way, too.
Truth is, it just didn't work out as they'd hoped.
"When we met and decided to do this, we were all enthused about it," says Dave Hinman, Jen-Rae Pork Farms, St. Ansgar, IA.
"It seemed like such a practical idea," he adds. "We wanted to establish some benchmarks so we could track progress and compare ourselves with other producers. But when it came down to it, I guess the numbers we'd decided to share were a little too personal. It was really like exposing every private part of the business to the rest of the group." Some characterize this as "getting naked in front of your friends."
Human nature, it seems, makes us cautious about being totally honest and open about business, even with noncritical peers. Not only were the group's numbers incomplete, when compared to production and financial performance information from other sources, Hinman says they just didn't make sense.
Eddie Crum, CEO of ValAdCo, a farmer-owned, 10,000-sow, farrow-to-finish cooperative near Renville, MN, says, "It's hard to find valid numbers we can use as benchmarks. I think the National Pork Producers Council's (NPPC) National Production and Financial Database will give all producers some good numbers to use as benchmarks."
He feels one reason the NPPC effort might be more successful than Hinman's peer group experience is the ability of the participants to remain anonymous.
"No one wants their fellow producers to see them as inadequate, so if the numbers can be traced back to an individual operation, producers may tend to exaggerate them. Like it or not, you could become a member of a liar's club," Crum says.
ValAdCo is part of the pilot group participating in the NPPC database project. While Crum believes a lot of good, useful information can come out of an effective benchmarking program, he wants to be sure the data he's using for benchmarking and goal setting is valid for his operation.
For this reason, ValAdCo is also looking for an impartial, outside source to summarize and analyze its production records and provide summaries of other similarly sized pork businesses for comparison.
One of the first companies often cited as being able to produce accurate and comparable benchmark information for agricultural enterprises was Agrimetrics Associates, Midlothian, VA.
Agrimetrics has been in the benchmarking business since 1965, when it began working with poultry production. They introduced a pork production monitoring program for farrow-to-finish operations in the mid-1980s.
Since accounting systems used a number of different methods to arrive at expense and income figures, Agrimetrics developed its own standardized set of costs and performance statistics so all clients could compare their operations. Agrimetrics professional analysts gather the financial and closeout data from producers (ranging in size from 5,000 breeding females up to 100,000 or more), making sure all the statistics are calculated in the same manner.
"Because our own analysts enter the information in a standardized format, companies don't have to change their recordkeeping systems to participate or profit from the knowledge, plus trends of the past 20 years," says G. Thomas Martin Jr., Agrimetrics president.
The company issues confidential reports showing deviations and rankings only to participating firms. "Each report is followed up with a personal review on location by a senior Agrimetrics staff member. There's no 'open kimono' effect," Martin says. "It's not who they are, but where they rank, that motivates our clients." Martin says confidentiality, comparability and accuracy have been the hallmarks of Agrimetrics' programs for both producers and processors.
While Agrimetrics clientele tends to be the largest producers, Martin says the company will work with producers or groups of producers of any size.
Similar information has been available from other farm advisory companies and also from university extension specialists and state farm management associations. "Most of these services have successfully masked the identity of participating producers, so data has become more reliable over the years. But the problem has always been standardization of data and results," says Alan Lash, AgriSolutions, Brighton, IL.
Lash says a big difference has been how different databases calculate profit and loss. "Some don't include office expenses and interest costs that are attributable to the swine enterprise when they calculate total costs," he says.
He expects the NPPC Production and Financial Standards to be adopted by most of the advisory services now working or seeking to work with pork producers in analyzing production and financial performance. An industry wide changeover would allow producers to compare their business performance with statistics from any other accounting/analysis service, he adds.
Martin, on the other hand, says the changeover to NPPC standards won't be as advantageous to Agrimetrics' clients. In fact, he says, the change would make it more difficult to compare current numbers to those from the past.
Hinman likes the idea of standardization of numbers, whether it is through a third party or through the NPPC database. With their production data filtered through the NPPC standardization process and their anonymity preserved, Hinman and others in his peer group will be able to see how they stack up among themselves and others in the industry without the pain of baring their businesses in front of each other.
Industry-wide adoption of the NPPC standards will allow the peer group to use an outside service to collect, analyze and summarize data from individual members and provide meaningful reports without revealing any producer's identity. These reports could break out the performance of the top five or bottom five of the group, or any other parameters they choose. And, they could compare their group or their individual operations to the NPPC database.
And, Hinman says, that means the peer group can continue to meet and discuss nutrition, health, new practices, management techniques and everything else they've always done, but with the new twist of being able to see how these might affect their bottom line. "That will be good for all of us and for all of the industry," he believes.
As the pork industry is standardizing terms, definitions and numbers, it is also important to agree on a common definition for benchmarking.
One definition suggests it is "the method by which you identify and understand successful practices of other companies and adapt them to your own situation in order to boost your competitive strength."
Another definition says benchmarking is "the process of finding, adapting and implementing outstanding practices. It involves analyzing performance data, the practices that led to the performance, and learning how those practices might fit into your current business system."
A "benchmark" is a measure of performance. It can be the average of all producers or a select group of similar producers. It can be a goal for some producers or a starting point for improvement for others. Some benchmarks will be specific to pork production. Others may be more general in nature.
Efficiencies, such as net return on investment or net income per hour of labor, may be different from one industry to the next and may even vary between different types of farming operations. If you're wondering whether you should be raising hogs, poultry, cattle or crops, comparing benchmark numbers from these different enterprises will help you decide.
NPPC's hope is to be able to collect enough accurate data that industry benchmarks can be established. For example, average pigs weaned/litter may have a different meaning on one farm than another. Pigs/sow/year is a better measurement of output, but not necessarily of profit.
>From the NPPC database, however, producers will be able to select data from farms most closely resembling their own (number of breeding females, feed sources, litters/breeding female/year, culling rates, pounds of pork sold/year, etc.).
Benchmarking has been used for years by poultry producers and probably even longer by manufacturers in non-agricultural industries.
It has been used in nearly every facet of public and private business and even in education and government. To learn more, online, start with the National Pork Producers Council Web site: www.nppc.org. The July-August 1999 "Ask The Expert" column features Earl Dotson, NPPC vice president of education, environment and research, who's responsible for the database. He'll answer producer questions at www. nppc.org/PROD/ASKEXP/main. html.
Single copies of "Production & Financial Standards for the Pork Industry," Second Edition, published by National Hog Farmer, March 1, 1999 are available by writing Jenny Felt, NPPC, P.O. Box 10383, Des Moines, IA 50306 or by e-mail: [email protected]
A technical reference manual supporting the NPPC Production & Financial Standards is scheduled for publication this summer. Those requests should also be sent to Jenny Felt at the above address.
E-Markets, Ames, IA, is responsible for creating and maintaining the NPPC National Production and Financial Database. Check them out at www.e-markets.com. The announcement that E-Markets is working with NPPC on the database can be found at www.e-markets.com/news/ 02_22_99.htm.
For more on benchmarking and a list of services from Agrimetrics Associates, look them up at www.agrimetrics.com. Or call them at (804) 744-4500.
The AgriSolutions story can be found at www.agrisolutions.com.
An Internet search for "benchmarking" + "agriculture" turned several thousand references. An informative article on benchmarking in the dairy business originally printed in Holstein World (written by Jason Karszes, Cornell University extension dairy specialist) can be found at www.hfw.com/northeastdairybusiness/track.htm.
Many of the agricultural benchmarking Internet references were from Australia, Europe and Canada.
There are a number of non-agricultural benchmarking sites, too, which help give perspective to the widespread use of benchmarking. A couple of interesting sites include The Benchmarking Exchange at www. benchnet.com and The Benchmarking Network located at www. well.com/user/benchmar/tbnhome. html.