The RMPP resource has a selection of important financial and production KPI.

KPIs: Hitting the targets

Lynda Gray

The Red Meat Profit Partnership KPI and benchmarking resources are a step in the right direction, according to southern farm consultants.

“I think well calculated, benchmarked KPI are underutilised within the sheep and beef industry, representing a significant missed opportunity for growth. The RMPP efforts are a step in the right direction,” Agribusiness farm management consultant Dean Carson says.

He thinks many farmers don’t use them because of the complexity around calculation and interpretation.

“As an example, if you want to look at productivity per stock unit, what is a stock unit? There are many standards that can be applied but subjectivity can creep in and create doubt around the KPI value.”

The RMPP resource has a selection of important financial and production KPI.

“They have selected indicators that minimise subjectivity and have strong benchmarks so once calculated farmers can compare themselves.”

‘KPI have got a bad name because the terminology sounds like corporate speak and a lot of farmers don’t want to spend time in front of a computer working them out.’

The resources are well-designed, but it will take time and patience for farmers to calculate meaningful indicators, bearing in mind that “rubbish in, equals rubbish out”.

The resulting indicators should encourage farmers to critically assess their business which could lead to more questions and answers. For this reason, he says farmers should seek help from a rural professional to interpret what was influencing or driving the KPI. In his experience farmer awareness of KPI, their value and relevant benchmarks increased when they worked with a qualified third party.

“Those that use KPI extensively without the support of a rural professional would be in the minority, in my view.”

AbacusBio consultant Simon Glennie says the RMPP resource has been well-thought because it includes a range of KPI that are powerful and could make a real difference and ranged from the easy-to-calculate to the more complex.

There’s the potential to get more technical but complexity and the terminology is what turns farmers off.

“I think that’s why KPI have got a bad name because the terminology sounds like corporate speak and a lot of farmers don’t want to spend time in front of a computer working them out.”

But it needn’t be an overly complicated concept or process. In very simple terms a KPI is a production or financially based target which could be lambing percentage, tailing percentage, net surplus, gross income/ha. These were all easily measured and if recorded consistently over time gave a good measure of progress and success.

KPI are not for everyone and it is a pointless exercise if a farmer isn’t prepared to follow up by making change.

“Older farmers with low debt levels who are comfortable with how they’re performing might say ‘what’s the point’ and I completely understand that, but the younger generation with more debt might use KPIs to help focus their priorities and effort.”

Invercargill-based Farm Plan consultant Peter Flannery, says the most important points to take on board from the KPI and benchmarking resources are to:  compare apples with apples; keep accurate records; start with what you already record; and focus on what you can most influence,

He warns against the temptation to get fixated on a single benchmark or KPI.

“You need to keep the big picture in mind and I think that’s often where farmers get stuck.”

A big picture goal might be to increase return on equity (ROE) but then it’s a matter of working back through the relevant KPIs that will help drive that.

ROE or return on assets are examples of KPIs that measure success; the second type of KPI are those that drive or influence success. They are production-based, and in Flannery’s opinion, the most important.

“If you ask the question, ‘what drives ROE?’ it will most likely stem back to income, which in turn is strongly influenced by production. You can influence production, but you have minimal influence on the prices you receive.”

He uses as an example lambing percentage.

“It’s a KPI everyone knows, but what actually drives lambing percentage?”

The weight and condition of ewes at tupping is a key influence, so the recording of ewe weights is the logical starting point. If that highlights below-par growth the next step is to look at ways of getting ewes to heavier weights by autumn.

He says that means having them fully-grown as two-tooths, so the next question is how does a farmer do that? which leads on to feeding and using the right genetics. The key point is to ask who, why, when and how questions and to keep moving back to the lowest influencer.

“Once you get that right, then move back up through the influencing chain.”

But just measuring and recording won’t change anything.

Flannery says farmers need to analyse and make decisions based on what their data is telling them.

“Remember, none of this is physically hard work.”

He says it doesn’t matter whether someone is young and enthusiastic or aged and lame.

“This is about being smarter, and paying attention to detail.”

lyndagray@xtra.co.nz