Executive Summary
The objective of this paper is to provide evidence on causality between strategic management and success
in primary agriculture: are farms that follow strategic management processes more successful?
In some ways the whole concept of finding causality between strategic management and success is
daunting. Glancing at the list of practices defined as part of strategic management shows the complexity
of the managerial environment. Add to that the fact that agriculture is subject to uncertainty from
weather, markets and jarring changes in government policy, the task of unravelling what causes what and
how to define success presents a challenge, but also an opportunity for further exploration.
The term “Strategic Management” is used because it has a specific definition in management literature.
Strategic Management is defined as:
“The planned use of a business' resources to reach company goals and objectives. Strategic
management requires ongoing evaluation of the processes and procedures within an
organization and external factors that may impact how the company functions.”
Paraphrasing this definition, strategic management has three characteristics:
1. It starts with measurable goals and objectives,
2. It uses continuous monitoring and evaluation of internal performance data and of external
environmental data against the capacity to reach goals and objectives, and
3. It adjusts internal processes, when appropriate, in response to changes in internal or external
factors.
The processes commonly included in strategic management are complex, but are summarized as having
and using a written plan that incorporates:
The management of people
The management of operations
The management of markets and marketing
The management of finances, and
Using appropriate measures in decision making and risk taking.
One important aspect of this paper is the definition of “success”. Academic and management literature
focuses on success defined by profit, which makes sense because accounting systems can measure profit.
In reality however, farmers have many goals other than pure profit, such as maximizing production (yield
and quality), work/life balance, positive family relationships, positive mental health, and contributions to
the community and environment.
Furthermore, it makes sense that personal or non-economic goals are likely more easily achieved when a
business is not under continuous pressure to service high debt loads or operating on the edge of financial
insolvency. So, while profit maximization is not likely the only goal for most operations, more profit is
likely better than less and, at least to some degree, increasing profit is correlated with achievement of
non-economic goals.
The review of literature leads to three (3) main conclusions.
Conclusion 1: Improved Strategic Management Improves Profitability
All of the literature studied found a positive correlation between management and profits, which holds
true whether farms are categorized by type of enterprise, location or size of operation.
Conclusion 2: Strategic Managers Tend to Be More Profitable Over Time
The vast majority of farm operations remain in the same area of the profit distribution most years, and
those with higher profits apply strategic management.
Conclusion 3: Acquiring and Using Strategic Management Skills Can Lead to 100% Returns
While not many of the studies reviewed went beyond determining whether there is a causal relationship
between management processes and profits, a few actually quantified the payoff. Not only can strategic
management skills lead to 100% returns in profitability, they also lead to 100% return in terms of
operational and personal goals that define personal success.
A modest investment to improve managerial skills can have a significantimpact on economic and personal
performance in an increasingly competitive and consistently tight-margin agricultural industry.