The Steps For Setting of Business Objectives
Setting of Business Objectives in Agriculture is very important.
The first move of the farm manager is to establish the goals and objectives of the business. Whoever owns the business sets the goals and objectives. If it is a business that is jointly owned, the owners set the goals and objectives.
Without goals there is no way to measure the results of management decisions or make proper decisions. Goals provide the guidelines for decision-making.
The major objective of the farm is profit maximization and others may be attaining a particular output level or business size, reserving some time for leisure activities, ‘business growth, business survival, and maintaining a stable income over time.
Each of the above goals may be of primary importance to some individuals, depending upon the time and circumstances. The objective may be in line with the social norms of a place e.g. a Moslem cannot produce pigs. The objective may be for satisfaction or for social security.
Some farmers who have risk aversion tendencies fear innovation e.g. introduction of new crops. This is in most cases the problem of the small-scale farmer who is afraid of the risk of starvation. He always takes to those
crops that yield best under the worst conditions while the commerce farmers take to the crops that give the highest yield under the best condition.
The decision maker must also consider the short and long run before stating his objectives. Therefore most people do not always make their objective those of profit maximization rather try at satisfying profit.
The Decision Making Process
Decision-making selects one or more alternatives that will maximize the objective. A manager is judged by his/her ability to take better decision: There are systematic steps in taking decisions, which can be formalized into a logical and orderly series of steps. The important steps in the decision-making process are:
- Identification and definition of problem.
- Collection of relevant data arid information.
- Identification and analysis of alternative solutions.
- Making the decision i.e. selecting the best, alternative.
- Implementing the decision.
- Observing the results and bearing responsibility for the outcome.
(i) Identifying and Defining the Problem
This may essentially entail deciding how much to produce, how to produce, what to produce and when to produce. These are basic problems faced by all managers. Problems also result from identifying something that is not as it should be. Good problem definition will minimize the time required to complete the steps of the decision making process.
(2) Collecting Relevant Data and Information
Once the problem has been identified and property defined, the next step is to gather data, information and facts and to make observations, which pertain to the specific problem. Data as distinct from information could be defined as “an unorganized collection of facts and numbers which has not been subjected to analysis. To be useful, these data need to be organized, sorted, and analyzed and some calculations made using appropriate analytical tools. Information can be thought of as the final product obtained. We can also use cash flow budget, partial budget, investment appraisal and other methods as our tools. The relevant figures are estimates of what will happen in future.
(3) Identifying and Analyzing Alternative Solutions
Once relevant information is available, the manager can begin listing alternatives, which can be potential solutions to the problem. Each
alternative should be analyzed in a logical and organized manner to ensure accuracy and to prevent some things being overlooked. The qualitative effects of each likely solution e.g. political decisions should also be evaluated.
(4) Making the Decision
Choosing the best alternative solution to the problem is not always an easy task nor is the best solution always obvious. Some times the best alternative solution may be to do nothing or to go back to redefine the problem and go through the decision making steps again. After deciding the best solution, it is also, important to consider the most important constraint to the solution. Often the one showing the greatest increase in expected profit would normally be selected.
(5) Implementing the Decision
Selecting the best alternative will not give the desired result unless the decision is correctly and promptly implemented. Doing nothing may be a correct decision but not until the manager has done enough analysis of the problem. As a manager, any decision taken has to be communicated to the subordinates. He also has to take control action. Apart from communicating the decision, other functions that have to be carried out here include organizing, coordinating, directing and supervising.
(6) Observing and Bearing Responsibilities:
Responsibility for the outcome of a decision rests with the decision maker. A reluctance to bear responsibility may explain why some individuals find it so difficult to make decisions. However, since it is difficult for managers to avoid decision-making, it follows that they must bear responsibility, it goes along with the job of management. Careful observations and analysis will result in additional information, allow corrections to be made, and improve future decisions. Managers should always try to learn from their past mistakes. Two important aspects of this control stage are monitoring and evaluation.
Classification of Decisions
The decisions made by farm managers can be classified as either organizational or operational decisions.
- Organizational Decisions: These are decisions that are most likely to be taken by a management board or group of people involved in the running of a farm firm. The decisions do not come frequently, involve high cost and are long-term decisions. Example of such decision is the decision on the type of tractor to buy.
- Operational Decisions: These are made more frequently than organizational decisions and relates to many details necessary to implement the farm business plan. They may be made on a daily, weekly, or monthly basis and are repeated more often than organizational decisions. The-follow the routine and cycles of agricultural production. Examples are selecting fertilizer and seeding rate for the given year, making changes i livestock ration, marketing decision and daily work schedules. There are also a number of characteristics by which a decision can b-described and classified, which include:
- (a) Importance
- (b) Frequency
- (c) Imminence
- (d) Revocability
- (e) Number of Available Alternatives
(a) Importance: Some management decisions may be more important the others. Importance can be measured in several ways but the most cornmon would be in terms of the amount of money involved in implementing the decision or the size of the potential gain or loss. Decisions involving Ian amounts of money are less frequently made e.g. purchasing of addition land, establishing an irrigation system etc while those that are taken frequently are less important e.g. buying foods for the livestock.
(b) Frequency: Some decisions may be taken only once in lifetime, such as decision to choose farming as an occupation. Other decisions must be made at least daily, such as livestock feeding times, milking times, and the amount of feed to be fed each day. Such frequently made decisions could be based on some rule of thumb or other predetermined method,
(c) Imminence; A manager is often faced with making decisions before a certain deadline or very quickly to avoid a potential loss e.g. When to plant crops and treatment of livestock diseases are all imminent decisions that requires urgent attention otherwise the manager pays dearly for it. Other decisions may have no deadline, and there may be little or no penalty for delaying the decision until more information is obtained and more time spent analyzing the alternatives.
(d) Revocability: Some decisions can be easily reversed or changed if observation indicates that the first decision was not correct- An example would be a livestock feed ration, which could be changed rather quickly and easily as long as the change is not so abrupt so as to upset the livestock. Some other decisions may not be reversible or can be changed only at a very high cost e.g. decision to construct a new building, decision to kill the sick chickens when they could be cured; buying the wrong breed of animals. Though some can be reversed but it is always at a high cost.
(e) Number of Alternatives: Some decisions have only two possible alternatives. They are of the yes or no and buy or do not buy type. The manager usually finds these decisions easier and less time consuming than others with large number of alternative solutions.