Keeping Score

Phantom Ranch from Clear Creek Trail - Grand C...

Phantom Ranch from Clear Creek Trail – Grand Canyon

by Dave Pratt via Ranching for Profit

Baseball’s spring training is here.  As the players review the fundamentals and sharpen their skills, let’s do a little spring training of our own. 

RBI’s, home runs, slugging percentage, batting average with runners in scoring position and 2 outs’they record a lot of statistics in baseball. Even more, the statistics they keep are available for everyone to see. When a pitcher gives up a home run he can’t cover it up.  Whether a batter gets a hit or strikes out, it shows up in the box score printed in the morning paper, on sports center at night and is replayed from 3 angles and in slow motion on TV for everyone to see.  In baseball everyone sees exactly how everyone else is doing. The transparency of performance is complete.  Managers and coaches use the records to determine pitching match ups, to position the outfielders and decide how to pitch to each batter.

In ranching there is no transparency and most of the records we keep are a waste of time.  Records are a waste of time for two reasons. First we measure the wrong thing (productivity not profitability). Many of us know our average weaning weights and conception rates but few of us know our gross margin per unit. Some of us would be more profitable if we were less productive! It’s as though we cared more about our batting average than our winning percentage.

Our records are also a waste of time because we spend 90% or more of our time collecting the data, and 10% or less using it.  Even if we were recording the right things, what good is the data if we don’t use it?  Shouldn’t the proportions be reversed: 10% recording, 90% interpreting?

Several years ago I held a workshop for loan officers with the Royal Bank of Canada in which I introduced the participants to the Ranching For Profit profitability benchmarks.  In a discussion after the meeting with some of the loan officers, one told me that he had to tell 9 out of 10 of his clients whether or not they made a profit.  Another commented, “It’s like they are playing a game but no one is keeping score.”

The lack of transparency is just as big of an issue. When someone appears profitable we don’t know if it’s because they run an efficient business, inherited some money, went further into debt or sold some assets. Even if we keep score and track the important statistics (e.g. Asset:Turnover Ratio, Gross Margin/Unit, Gross Product/FTE), they have limited value if we can’t see how we compare to other successful businesses. 

At Ranch Management Consultants we’ve collected key performance indicators from highly profitable ranches and used this data to calculate profitability benchmarks.  Executive Link members compare their key performance indicators to these benchmarks to pinpoint their profit drivers and their weaknesses.  

It is always easier to see the solution to someone else’s problem than it is our own.  Transparency of performance is the standard in baseball but rare in ranching.  Teams use it to scout their opponent, objectively evaluate their performance and create a winning strategy. We use it in Executive Link too. Within a board the numbers are on the table for all board members to review.  Outside of the EL, the names are removed and the numbers are pooled and sorted to create profitability benchmarks.  EL boards compare the performance of each board member’s business to those benchmarks to create a winning strategy for each member’s ranch.

About Land & Livestock Interntional, Inc.

Land and Livestock International, Inc. is a leading agribusiness management firm providing a complete line of services to the range livestock industry. We believe that private property is the foundation of America. Private property and free markets go hand in hand—without property there is no freedom. We also believe that free markets, not government intervention, hold the key to natural resource conservation and environmental preservation. No government bureaucrat can (or will) understand and treat the land with as much respect as its owner. The bureaucrat simply does not have the same motives as does the owner of a capital interest in the property. Our specialty is the working livestock ranch simply because there are so many very good reasons for owning such a property. We provide educational, management and consulting services with a focus on ecologically and financially sustainable land management that will enhance natural processes (water and mineral cycles, energy flow and community dynamics) while enhancing profits and steadily building wealth.
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1 Response to Keeping Score

  1. Pingback: Money May Not Make People Happy, But Happy People Make Money | Land & Livestock International, Inc.

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