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Revealing The Truth

Production and Financial Standards will be adopted in the pork industry when "apples to apples" comparisons are valuable to all participants.(Editor's Note: Commitment is the major challenge facing the adoption of the "Production & Financial Standards for the Pork Industry" first introduced in a National Hog Farmer Special Report published March 1, 1997. National Pork Producers Council task force

Production and Financial Standards will be adopted in the pork industry when "apples to apples" comparisons are valuable to all participants.

(Editor's Note: Commitment is the major challenge facing the adoption of the "Production & Financial Standards for the Pork Industry" first introduced in a National Hog Farmer Special Report published March 1, 1997. National Pork Producers Council task force members have spent the past several months checking and double-checking the proposed standards and formulas. A two-year program of education and training involving all facets of the pork industry will begin about mid-year, includes a national satellite broadcast in October, 1998, and wide distribution of the "unabridged" production and financial standards about a year from now. But, the first step toward capturing the wealth of information the "Standards" offer is a commitment by those responsible for keeping the records that drive them. Canadian Farm Management Specialist Charles Grant offers an "outsiders" thoughts on that challenge.)

It will take three keys to unlock the potential of the industry-wide Production and Financial Standards for the Pork Industry introduced nearly a year ago:

* Adoption of a solid foundation of common terminology, chart of accounts and reports;

* A five star software product; and

* A convincing presentation to the users.

Number one has been nicely looked after by the task force called Joint Committee on Industry Standards assembled by the National Pork Producers Council (NPPC). The foundational work was published in National Hog Farmer's March 1, 1997 Special Report.

Numbers 2 and 3 are the challenges that remain.

The best place to get started meeting those challenges is to identifying the users, describe the benefits the Standards offer, then outline how the Standards deliver those benefits.

The beneficiaries of the Standards will be those who use them - barn workers, production managers, consultants, financial managers, investors and bankers.

The "Rock" And "Engine" Barn workers are, in static terms, the "rock" on which to build the program or, in dynamic terms, the production data-collection "engine" that drives the program. Without their day-to day, disciplined data collection, implementation of the Standards, at any site, is destined for failure.

Recognize up front that it is tough to convince barn workers to adopt a rigorous data collection procedure solely to make the accountants' jobs easier.

But, if it makes it easier for them to accomplish their production goals, they will likely buy into it.

There is an age-old frustration of frontline workers - management does not understand or appreciate their daily struggle to get the job done well, on time and within budget. Most often, the problem lies in their ability to communicate.

The Standards will help barn workers and production managers communicate better. Now they can speak the same language, use the same terms, and discuss production issues within a common analysis framework.

Before the Standards, a young female pig was loosely referred to as a gilt.

Now, using the Standards' definitions, she is either a gilt (a female pig kept for purposes other than breeding), or a "prospective breeding female" (a female pig kept for future entry into the breeding herd), or an "unmated breeding female" (a female pig entered into the breeding herd but not yet mated).

These tighter terms lead to clearer instructions for barn workers and smoother production flow.

Often, the hardest thing about doing something right is knowing what to do. Now, using standardized terms, instructions to barn workers can sound like this: "Eartag 20 prospective breeding females in pen #10. Use the red ear tags starting at number 40. Reclassify the prospective breeding females as unmated breeding females and move them to pen #6."

Contrast that with the instructions using the old, loose definitions: "Move the 20 gilts, ready to be bred, from the end pen to the pen across the alley and up three. Identify them with the red ear tags. Start with number 40. Change their classification in the records to show they are now part of the gilt pool and ready for breeding."

The difference is not all that revolutionary but the Standards do make the communication system more efficient.

The Standards also enhance bilateral accountability - barn workers accountable to management, management accountable to barn workers.

So, if the barn worker analyzes the enhanced data and clearly shows management that a current, low breeding herd replacement rate and an aging set of breeding females are driving down farm profitability, plus chewing into their production bonuses, the management should listen.

The message to management: "Find the money to get some younger breeding females into the barn."

If the Standards help deliver those messages, barn workers will support use of the Standards.

Clear, daily "to do" lists and week-to-date, month-to-date, and year-to-date progress reports enhance barn worker productivity and confidence. The software introduced with the Standards can provide these detailed lists and reports.

Production activities are largely time-driven. Once an activity is completed and recorded the timing of future activities is set.

Daily activity lists can be generated complete with checkoff boxes to show their completion. Barn workers pick up their lists when they start their shift, know exactly what activities they are expected to complete during their workday. The daily activity list comes complete with a progress report from the previous day. The details of production bonus calculations are clear.

Activity lists can only be generated when data is collected, recorded and processed daily. Yes, it requires more attention from the barn staff, but in such a complex biological system, human memory quickly becomes a limiting factor. Data gaps may be quickly filled with human memory records but any time delay will make the gaps permanent.

The "Sprinkler Of Sand" There is an old story about a prosperous farm family who, generation after generation, maintained a tradition of sprinkling sand at all four corners of their vast vineyard, every day. The family believed that the sand-sprinkling tradition was magical and brought them great luck. Their vineyard was beautifully managed by their laborers and they enjoyed bountiful harvests.

A closer look would likely show the bountiful harvests had more to do with the daily patrol of the vineyard and observance of the laborers' work than the act of sprinkling the magical sand.

The tradition was an early version of "management by wandering around" - a concept many modern business strategists advocate.

A five-star computer program developed with the Standards as its foundation can facilitate the electronic sprinkling of sand by the production manager at all corners of the barn. As herd events are recorded, daily, with more precision, the production manager knows what to expect before inspecting any room.

Audits of record accuracy and barn performances become routine. Barn workers know "big brother" is watching with an intelligent eye, trying to catch them doing something right. When they do, they'll pay the bonuses they deserve.

The Standards sharpen communication lines among production managers, nutritionists, veterinarians and engineers who share information. Integrated production and financial data encourages bottom line decision-making by quantifying how specific changes in production practices affect profits.

Robust software with the Standards as its base can be flexible enough to facilitate the management of the biological system and all its quirks, yet rigid enough to facilitate the full integration of the production and financial systems. It can be simple enough for ease and accuracy of data entry yet complex enough to handle the most rigorous of analyses.

There is a soccer term with the acronym t.o.d. (technique on demand). It refers to a player's arsenal of techniques, largely hidden, which can be called into service at any instant to deal with a certain field situation. Sometimes a simple groundstroke is all that is required; other times it's a bicycle kick off a corner cross. Powerful software is like that. One moment it generates a simple report on the past performance of a particular sow. The next, it is addressing the complex question: "If we reduce farrowing room temperature by 15 degrees, yet provide a warm micro-climate for the piglets, how will it impact growth rate, mortality, feed consumption, and hydro (electrical) usage?"

Software applications of the Standards enhance communication between the production manager and upper management too. Ready measures of productivity and profitability provide a focal point for discussion and an opportunity to get the bosses involved in decision-making.

Systematic campaigns armed with facts will help production managers acquire the resources needed by their production team to chase and capture production bonuses. They may even be able to convince the management to buy those young breeding females the barn workers have been asking for.

Profits Beyond Consultant's Bill. Consultants love to sell their services using the argument that their advice leads to greater profits.

The overriding message of the Standards is that they are designed to reveal the truth. They raise the level of accountability of all players, including consultants, by measuring efficiency, productivity and profitability of the various profit centers. Presented in the form of benchmarks, an "apples to apples" comparison becomes possible.

The profitability affects of acting on the consultants' advice becomes transparent with the comparisons and the value of their advice can be assessed.

The effectiveness of the consultants should also be enhanced along with their opportunity to prove their worth. Production and financial data at the stroke of a key is a dream come true for consulting nutritionists, veterinarians and engineers. In-barn research projects are facilitated by the system so that energies can be concentrated on investigative thinking rather than the mechanics of data assembly.

Music To A Financial Manager's Ears Too long left in the dark, integrated production and financial records can now show financial managers what's happening in the barns. And, finally, they are able to assign costs to the respective profit centers and measure profitability by location. In-barn economic studies are facilitated with test-group procedures to weigh one alternative against another. Accurate across-barn comparisons become possible when Standards are used in multiple locations.

Financial managers can approach meetings with bankers and investors prepared to address any questions that might be posed on financial performance of the barn. The Standards and the related software give them the power to look back at past performance, measure their present position and forecast future performance. An early warning system sounds the alarms when returns below breakeven levels threaten. Solid information helps ensure appropriate action.

The Standards also raise the level of accountability of all participants in the barn. Farm suppliers are monitored, matching invoiced quantity and price against actual delivered quantity and price - before any checks are issued. Hog numbers are quantified daily. Barn audits investigate mysterious disappearances.

The Standards allow financial and production managers to analyze the same data set, knowing they're using the same terms of reference. The views of the data may be different from the financial and production sides, but they are viewing the same data.

In this way, the software engine is a little like the moon as it is viewed by people at different earthly locations. Their eyes are pleased with what they see and they really don't care about the view from the other side.

If the concept of integrated production and financial records is music to the ears of financial managers it is ecstasy to bankers and investors. Finally they are able to review their accounts with the facts presented in a standardized way. It's a system that promises no unwelcome surprises. The acceptance of the Standards will flow more capital to the industry.

Easier To Do Excellent Job Here's the guiding principle that will drive implementation of the Production and Financial Standards for the Pork Industry - it will be implemented in earnest:

* If they make it easier for all participants in the production and financial system to do an excellent job, and

* If they can enjoy the glory that comes with operating in the upper echelon of their peer group.

When a new polymeric pole allows an athlete to consistently clear the 20-ft. mark in the pole vault event, all other participants must either have one or remove themselves from the competition.

When the players in the production and financial hog systems see the Production and Financial Standards for the Pork Industry and its related software as the new polymeric pole, the implementation hurdle will be cleared.

(The author acknowledges the contributions of ideas by John Maltman, swine specialist and Erik Wallace, management software expert.)