Farming: We hear you when it comes to complexity
07 Jun 2019
I meet monthly with a diverse group of 10 to 15 rural professionals for breakfast where we share stories from our contact with farmers.
Recently one of the rural bankers talked about a meeting with a farmer who was obviously over-whelmed with the complexity of being a farmer today. Our banker colleague took some extra time to ask his client how he was coping. They got talking about the real problems of being a farmer.
The point was made that, as rural professionals, we deal with just one aspect of farmers’ lives. We can specialise in our area while farmers must deal with everything. We can drill down into the issues we are interested in because we live and breath it. (The danger is we make it more complex than it need be for our client and if that happens, we literally become a pest and the farmer may have been better off never having met us.)
Farmers don’t have the luxury of being a specialist.
To get a feel for the complexity of the modern farmer’s lot, let’s see what part of a list we can create of the issues modern farmers have to deal with:
- Stock wellbeing including feed, water and shelter
- Stock health, diseases and the vet
- Animal breeding
- Stock transport
- Animal welfare
- Grass and crops. Planning feed usage and carrying capacity
- Weather and seasons, forecasting the impact on feed and operations
- Fencing, walkways, tracks and roads
- Buildings: cleaning, maintenance and construction
- Power & phone in often isolated places
- Building consents and Resource Management Act
- Machinery: operation, purchase, storage and maintenance
- Accounting: GST, tax, budgets, structures, ownership & succession (along with the lawyer)
- Technology: Xero, email, internet, intranet, Wifi, Bluetooth, solar power
- Banking: debt repayment, budgets, communication
- Legal: wills, enduring powers of attorney, family trusts
- Health and safety including creating and maintaining a Health & Safety Audit for the farm
- Insurances: farm, life & disability
- Human Resources: employing people, keeping them happy, contracts of employment
- Family: relationships with partner, children and in-laws
- Farm advisers: genetics, crops,
- Environment: Farm Plan and implementation, water quality, native insects, fish and birds
- Marketing: getting closer to the end consumer, knowing what they want and getting it to them efficiently
- Distribution of the farm’s products to the end consumer
- Planning for the future
- Isolation and the difficulty of maintaining an active social life
- Communication with family and all stakeholders
- Mind health: having the hard conversations with loved ones, asking for help, going to the doctor
- Physical health and fitness: sleep, exercise and going to the doctor
- Reading to keep up to date with the business of farming
- Science and engineering
- Economics including the exchange rate
- Regulations affecting farming, local and national
- Exit planning for a life after farming
Where does it end? You will find many gaps missing in my list which is probably endless.
Complex v complicated systems
So, by all agreement, farming is a complex system. How is that different to a ‘complicated’ system?
The Harvard Business Review in its Learning to Live with Complexity article from 2011 has a good look at this subject and provides some guidelines for managing complex systems which I have quoted from below.
The difference between a complex system like farming and a complicated one like piloting a commercial jet airliner makes a big difference in how the system is managed.
“Piloting a jet airliner – there are thousands of operations going on all the time on a commercial airliner while transporting 500 people through the atmosphere; complicated, but predictable. Flic this switch and that will happen (the wheels will lower), and so on. The predictable nature of flying has made it astonishingly safe, despite its complicated nature.
“With complicated systems you can usually predict the outcome given the starting position.
A farm is a good example of a complex system. “Every time you do something you potentially get a different result. There may be a pattern, but those patterns are constantly changing. Complex systems have (1) elements that are dependent on each other, where (2) there are lots of elements interacting with each other, and (3) those elements are diverse. Think of the interactions of such diverse farming elements as: weather, animal health, people management, contracts, politics, information technology, mind health and so on. Numerous, diverse elements interacting with one another.
“There are two problems commonly faced by managers of complex systems:
- Unintended consequences, and
- Difficulty making sense of a situation.
“It is very difficult, if not impossible, for an individual decision maker (a farmer) to see the entire complex system from any one location.
“And we know that focusing on one thing can prevent us from seeing others. A recent study documented substantial “blindness” when subjects who had been instructed to concentrate on a task failed even to notice dramatic events going on around them.
The Harvard article posed some helpful answers for managers of complex systems -
1. Use three types of predictive information.
“We advise managers of complex systems to be clear about what they think will be applicable from past experience and what might be different this time around. One way to do this is to divide the data you have about the business among three buckets:
- Lagging: data about what has already happened. Most financial data and key performance indicators fall into this bucket.
- Current: data about where you stand right now. Your pipeline of opportunities might be in this bucket.
- Leading: data about where things could go and how the system might respond to a range of possibilities.
“If the bulk of your information is in the lagging bucket, that’s a warning sign. Basing decisions mainly on lagging indicators is essentially betting that the future will be like the past. At least some of your information should be in the leading bucket. This information will be fuzzy and subjective by definition: The future hasn’t happened yet. But without it, you’re apt to be blindsided by change.
“Rare events pose problems for those trying to make sense of complex systems, because they don’t repeat themselves often enough for us to learn how they will affect the system.” In the financial world they are known as “black swans”, a term used to describe the problem that Europeans had in believing that all swans were white, until, one day, they ventured to Australia, where all the swans were black.
Two researchers, “Pierpaolo Andriani and Bill McKelvey, observed that 16,000 minor earthquakes occur in California every year, but a really big one happens only once every 150 or 200 years.” Probably quite similar to the New Zealand experience. “The average earthquake, then, is not very dangerous. It would be foolhardy, though, to base building codes on the average quake when what matters most is the big one. So, too, in business: What matters most may be the extreme but rare possibility, not the most likely one.”
2. Ensure diversity of thought.
“What kinds of decisions might you make if you realized you were dealing with a complex system rather than a merely complicated one? Complicated systems are like machines; above all, you need to minimize friction. Complex systems are organic; you need to make sure your organization contains enough diverse thinkers to deal with the changes and variations that will inevitably occur.
“Who in your company regularly talks to people you might not interact with yourself, comes up with things that are a little off the beaten track, and is attuned to underlying risks and trends that your other managers might overlook?
In a complex system, finding the right people for the job means seeking out a wide range of thinkers.
3. Invest in a wide range of options.
“This means making relatively small investments in a wide range of options that give you the ability to make further investments later when the scene is clearer. Many of your small investments will not be relevant once the future dawns, but you had a wide range of bases covered, including the couple that really paid off. The goal is to limit your downside while maximizing the value you can capture on the upside.
Gradually building a portfolio of small investments keeps the stakes low until you’re able to reduce the most significant uncertainties you face. The idea isn’t to avoid making mistakes but to make them cheaply and early, learning from them and increasing your understanding as you go.
4. Decouple one element from another.
“Sometimes elements of a complex system can be separated from one another to decrease the consequences if something goes wrong.
5. Limit or even eliminate the need for accurate predictions.
“In an unpredictable world, sometimes the best investments are those that minimize the importance of predictions.”
A farming strategy that is dependent upon the latest long-range forecast from the NZ Met Service is a high-risk strategy that would be best to avoid. Perhaps providing for several weather scenarios will be a safer bet, rather having all your eggs in one basket.
This is true of our world too, the world of investment, another good example of a complex system. An underlying tenant of our investment philosophy is to prohibit short- and medium-term forecasting acknowledging that the economic short-to-medium term future is unpredictable.
Getting back to our breakfast group of rural professionals, each one of us understands how great the task is for many farmers today dealing with the complexity of farming. In most cases, we know we couldn’t do it and we’ve chosen to specialise. At that last breakfast we held, we were left with a deep appreciation of the complexity farmers face today. There was a genuine commitment to farmers and farming around the table and everyone wants to help where we can.
Reducing complexity for our farming clients is and will always be a big part of our job.
Keep asking great questions …
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