Efficiency is the key to any business, and all of America’s pig farmers know that is quite true for their individual operation regardless of its scope or scale.
The Maschhoffs, based in Carlyle, Ill., is in the top five pork production companies in the country and top 10 in the world, and has an operational footprint over nine states. Bradley Wolter, president of The Maschhoffs, says the company experienced 20% compounded growth over the past decade, and as the company grew, “we learned that we were making too many decisions for the pig, too far removed from the pig. That was the big starting point that we have to do something different.”
With that in mind, management started asking themselves what the proper size and scope in terms of organizational design allowed “us to get decisions closer to the pig, and yet allow us to leverage the economies of scale with the respect of having experienced management in position to fully develop people and make the best decisions for the pigs.”
Optimization of performance was not being achieved in The Maschhoffs system, and Wolter says management took notice “that we weren’t getting the same level of performance as an organization either biologically or financially, and management had to say, ‘What’s changing?’”
In The Maschhoffs’ situation, it was 10 years of exponential growth. “We were centralized with a lot of decisions,” he says. “We were making local decisions from a central point of view. It wasn’t a grand design, it was an outcropping of very rapid growth and not thinking about, ‘How do we scale the growth in a way that reflects more of what we did in our early days that enabled us to grow?’ In the end, it got down to making informed decisions for the pigs at the pig level because that’s the most-informed decision to make.”
Wolter has a lot of experience in raising pigs, but “what it takes to raise a pig in my facilities in southern Illinois doesn’t apply perfectly to facilities and a system in western Nebraska. … the principles still apply.”
With those vagaries between different locations, Wolter believes it is imperative to empower and enable the animal caregiver, “so the pig will get the best care when its animal caregiver feels fully empowered and enabled to do what they know is best for the animal. At an organization scale, you tend to centralize a lot of decision-making to attempt to capture the economics of scale,” he says. “The real trick is, how do you design a system and operate a system to capture economies of scale while enabling the local animal caregiver to perform at the best of their ability?”
To accomplish that, three years ago The Maschhoffs management started an evolution to the company’s operational foothold, dividing the company’s footprint into five regions. Four of the regions focus on commercial hog production. The fifth region, Technical Operations, provides replacement breeding animals for the four production regions.
Central Prairie Region
With farms in western Illinois and eastern Iowa, the Central Prairie Region is a farrow-to-finish system that is headquartered in Pittsfield, Ill. Paul Wettstein, who grew up on a fourth-generation livestock farm in central Illinois, is the region’s general manager. He has more than 25 years’ experience in the pig industry.
Great Plains Region
This region has farms in Nebraska, western Iowa and northern Missouri, and is a farrow-to-finish system headquartered in Columbus, Neb. Beau Peterson joined The Maschhoffs in 2008, and after being director of Research and Development and senior director of Supply Chain Planning and Operations, he has assumed the role of regional general manager.
Great South Region
The Great South Region is a farrow-to-finish system that is headquartered in both Carlyle, Ill., and Hinton, Okla., with farms in Oklahoma, Georgia, southern Illinois and northern Missouri. Sam DeHaas leads the Great South team as general manager, after working his way up from an animal caretaker.
With farms in Iowa, the Heartland Region serves primarily as a commercial finishing region with an annual production of approximately 2 million market hogs. The region has several company-managed farms, but is predominately comprised of production partner farms and relationships spread across northern, western and central portions of the state. Josh Linde is general manager of the Heartland Region, and started with The Maschhoffs in 2009. Prior to his role as general manager, Linde was the director of Production for the Heartland Region.
Technical Operations Region
The Technical Operations Region is a functional-based region focused on the growth and development of replacement breeding animals with farms in Nebraska, Illinois and Indiana. This region is responsible for creating genetic improvement within The Maschhoffs’ proprietary genetic animal lines. Tech Ops accomplishes this by capturing genetic data and following strict research principles. Tech Ops also conducts a variety of research operations within the region. The team is headquartered in Carlyle, Ill., and Scott Stehlik is this region’s general manager.
Josh Flint, associate director of communications, says a side benefit of decisions now being made at the regional level is that the time to make those decisions has been shortened. “It puts the ownership at a pig level where we can address issues more quickly. That was the true intent and that’s where we have seen a lot of the success come from,” he says. “Today, let’s say a production manager would work with a partner who received pigs, and the partner says they have problems with the pigs. They’ll call their supervisor or an associate director, and say, ‘We just got these pigs in and some don’t look so good, I think we’ve got some problems with them.’” That associate director will also oversee the breed-to-wean farm where the pigs originated, so “they can work with the breed-to-wean farm to get the right pigs to the farm,” and a solution that used to take days to resolve can now be handled in a matter of hours, Flint says.
Regionalization also brings about a greater sense of ownership through the entire production chain. “It wasn’t just about stripping out layers, it was also about giving each region its own separate profit/loss statement, so each region basically operates as a ‘franchise’ of The Maschhoffs. They each have their own financial metrics sheet that is scoped solely to the regional performance,” he says.
Flint uses the Central Prairie Region as an example, saying that the general manager is going to have responsibility for that region’s P/L statement, which is carved up into individual portfolios that will then become the responsibilities of directors and associate directors who report to the general manager. “By driving that P/L ownership through the regional model, people see the financial metrics, they see what their performance is, so they understand and know why it’s put upon us to get a full-grown market hog to the packing plant at a Grade A level.”
Today, each sow farm also has its own P/L statement, so each of these farms can track performance on a weekly, monthly and annual basis. Just like most U.S. pig production systems, The Maschhoffs has a bonus system for its employees, but Flint admits that in a past attempt to simplify the bonus system, “we maybe incentivized the wrong production numbers. … Before, we may have incentivized how many Grade A market hogs they can get out the door. So, if you’re in a finishing farm, and you know you’re getting paid for how many market hogs you get to the packer, you’re probably going to throw everything you can at that lot of pigs to get them out the door, and some of those moves may not have made financial sense.”
The fine-tuned P/L statements give everyone on every level of the production chain the full picture of the production figures, as well as what it takes financially to get the market hogs out the door.
Wolter admits that this regional model was not a knee-jerk reaction, adding that it’s constantly evolving. “Business changes, so these will have to change with the pace of business, but I don’t see the principles changing.” Geographic borders may change of individual regions, “but you try not to do that too often, because then you lose the integrity of it.”
For other systems contemplating a similar move, Wolter stresses to not tread into it lightly. “You don’t go into this faint of heart,” he says. “This is a big commitment. It is important that the definitions be carefully crafted and support resources from accounting through to human resources, and all of the above are set to evolve with it, or it will fail. … You go full-in, and you plan big and execute small.
“You don’t go into this thinking, ‘Hey, we’ll try this.’ If you do that, you’re setting yourself up to fail.”
This regional model has brought with it a competition of sorts between the regions, all for the betterment of the company as a whole, and of course for the pigs. “We reward outcompeting our peers in the industry, but rewards are not set up to pit regions against one another,” he says. “That said, we have selected leaders that are competitive by nature, so there is a level of competition. Nobody is playing for second place.”