Long has spent the past six years developing a practical guide to assist growers with effective decision-making as part of an innovative research investment by the Grains Research and Development Corporation (GRDC).
She said effective decision making was a skill and like all skills, could be improved with practice.
“It is often said the only difference between the top 20 per cent of profitable grain growers and the rest of the industry is their ability to make the right decision at the right time,” Ms Long said.
“But there is a real difference between a ‘good’ decision and a ‘right’ decision that growers need to understand to begin to improve their decision-making ability.”
She said a ‘good’ decision was an informed decision where growers could:
- Appreciate the consequences of their actions.
- Have minimal regret if things did not go according to plan.
- Had increased chances of a favourable outcome by planning, research, preparation and action in a timely manner.
“A right decision can only be judged in hindsight. So, we have to accept that decisions we make today, may be different to what we would do tomorrow, given information and conditions change quickly,” Ms Long said.
“We all know the hardest thing about decisions is that they have to be made without hindsight, before the consequences or benefits are known. But the fact, organisations like GRDC have had the foresight to recognise, is we can improve the processes we use to make decisions.”
WEIGHING UP THE RISKS
She said farming was a complex business, involving the interaction of multiple factors like the weather, production issues and operational management, with few certainties.
“For the past six years, as part of GRDC’s Grain and Graze project we explored how growers could make more better decisions to optimise their business and production risk,” Ms Long said.
“Risk is from the Greek word ‘dare’ and has both negative and positive implications upon a decision.”
For example, the business risk of the cropping enterprise is the possibility of making a large profit (positive risk), as well as the risk of losing money if the season fails (negative risk).
The skill as a grower is to manage this risk so as to minimise the ‘losses’, whilst maintaining the opportunity for the ‘wins’.
“For each of us, the decision we make on business and production risk will be different. This is because we all come from different families, are at different stages of our business, have different personalities and different experiences.”
WHAT IS A DECISION?
Farming is a mix of decisions. A decision is simply a conclusion or resolution reached after consideration. It is the result of processing a situation and deciding what action to take.
Choosing to do nothing is a decision, and may be a good decision given the circumstances.
“We make decisions all the time, and generally they work out. Most of us do not spend time thinking about how we make decisions, and what might be influencing our decisions, but there are considerable factors that shape the final decision we make,” she said.
“Just as you invest in inputs and machinery to grow and harvest crops, it is equally important to invest in and service the people who are making the decisions in your farm business. Faulty decision making is as damaging to a farm business as faulty and dysfunctional equipment.
“Decision making is a skill. This means it needs to be practised and refined. It is a learnt behaviour that can be improved over time.”
TYPES OF DECISIONS
There are three types of decisions in farming – 1) simple; 2) complicated; and 3) complex. Simple decisions are the easiest decisions. There are few variables and there is a clear right or wrong answer.
Complicated decisions are when several variables are involved, but the relationships between variables are clear and well documented — for example, deciding on how much nitrogen to apply to a wheat crop. There is generally a ‘right’ answer.
Complex decisions are when a number of complicated decisions come together and interact, and the variables and trade-offs are hard to weigh up against each other— for example, deciding on whether to take on a lease block. You need to consider everything from machinery capacity, to labour, cash flow implications, crop rotations, personal motivation and your family situation.
“When a decision is complex, we need to think beyond the logical analysis and use the heart and gut considerations when informing and making a decision,” Ms Long explained.
WHAT IS A GOOD DECISION?
A good decision is when the head, heart and gut align. If something does not feel right — then it probably is not.
“Due to the nature of complex decisions – where there are multiple interacting issues, with no one clear answer (for example, establishing a cropping rotation) – we cannot rely solely on logical analysis, we need to explore the intuitive and emotional aspects as well,” Ms Long said.
“I realise some growers may be a little uncomfortable with this concept, but we do need to recognise that with both values and intuition, a lot of emotions are wrapped up in these parts of the decision. And this is okay if you know what sits behind the emotion.
“It is important to explore these emotions, to look at your past experiences and family values, to work out if it is right to listen to your intuition and values at this stage or if they are helping or hindering the process.”
FACTORS THAT INFLUENCE OUR DECISIONS
The head
The head refers to the step-by-step logical and orderly approach to analysing and solving a problem. It is also referred to as the analytical approach. This is the logical, rational processing of information, the calculations and some realities we can face such as a financial position, age or health.
A significant number of agricultural decisions are based on information derived from using the ‘head’ approach. These logical factors are the result of the countless budgets, strategic plans, cropping systems trials, fertiliser and yield response data that we use to guide our decision making on-farm. These analytical approaches allow us to make an objective comparison between different options.
But what about the human factors that influence decisions?
The heart
This is the emotional influence on the decision. It is based on our values.
We all have our own values, beliefs and attitudes that we have developed throughout our lives. Values are principles, standards or qualities that guide the way we live our lives and the decisions we make.
The heart – captures the emotional aspects of a decision. They are value based and include a grower’s goals, beliefs and preferences. Put simply, they are a guidance system for decision making.
They tend to be acquired early in life and are like attitudes, but more ingrained and permanent. They differ among individuals (even from husband and wife), and govern our perceptions and behaviour. They act as a guidance system for decision making.
The gut
When you talk about ‘gut feel’, this is your intuition, your experiences and knowledge kicking-in and helping you make a decision. The gut is intuition, shaped through experiences and knowledge. It allows us to make quicker decisions because it bypasses rational processes by linking past experiences and knowledge (both good and bad) with the present. Intuitive decisions are usually right if they ‘feel’ right.
Intuition is influenced by several factors. Some of the key influences in farming are:
- Past experience with a similar situation – over several different seasons, where no two seasons are the same, you will build up experiences on how to manage the same situation (like a dry winter). These experiences will all influence the decisions you make, rightly or wrongly, about how to handle it this year.
- Education – during university, we are trained to become analytical thinkers, to disregard any influences intuition or values may play in a decision. While this type of thinking suits research or economic analysis, it generally does not provide the whole picture in a complex environment such as a family farm.
- Stage of life, stage of business lifecycle – at different stages of life, or at different stages of your business, you will need to make different decisions based on business or investment risk, cash flow limitations, personal motivations, or family needs. All of these will influence your intuition, or what ‘feels right’.
- Stress levels – during times of stress (seeding, harvest), your body produces cortisol. In short bursts, cortisol helps to improve the brain function, however, over long periods of chronic stress it will eventually impair the decision making process, sometimes to the point of inaction. During times of chronic stress, the ability to think and rationalise is reduced, leading to poorer decisions.
“While these factors will influence your intuition, none of them are bad if you recognise that they exist, and are influencing your decisions. If you are unsure about how much they are influencing an important decision, talk to a trusted adviser or family member before you decide,” Ms Long said.
But she said doing your research, assessing the risk, and evaluating the potential positive and negative outcomes was critical for effective decision making.
“Farming involves so much complex decision making that while we can rely on logic and analysis to guide us, growers should not be afraid of utilising their intuition and ‘how they feel’ to assist in the process,” she said.
“If you are losing sleep over a potential decision, or it makes you feel ‘sick in your guts’ maybe you need to give yourself permission to reassess it.”
This work was a joint effort by Jeanette Long, Bill Long, Cam Nicholson and Danielle England as part of the Grain and Graze 3 project.
GRDC Project Code: FGI00010
More information
Jeanette Long, Ag Consulting Company
Useful resources:
Some great tips and tricks on managing intuitive and value-based decisions can be found HERE.
