Cornhusker Economics May 2, 2018Smart Choices in Agriculture

Smart Choices in Agriculture (Figure 1) is a process designed to provide agricultural producers with a solid foundation for consistently making good decisions in a very challenging environment. Besides operating in the presence of an incredible amount of uncertainty, farmers and ranchers typically make decisions with multiple short-term and long-term objectives in mind. They have a lot of things they are trying to accomplish with the choices they make on a regular basis. Sorting through information to arrive at the best choice can be a bit of a challenge when information is deep and time to process seems short. It has been proven that people can learn to make better decisions (Spetzler, et al.). Smart Choices in Agriculture presents an opportunity for agricultural producers to build those skills so they can consistently implement the best decisions for their operation.

People make thousands of decisions every day. Very few of them require in-depth analysis but all of them are made to accomplish something. When I want to quench my thirst, I usually get a drink of water. I don’t need to think about it but the reality is I have several choices I could make to accomplish the objective of quenching my thirst. Given the time of day, the fact that I do not want to drink my calories, and there is a good safe source of water nearby, it is an easy choice to make most of the time. Not all decisions are this easy but they all have the same fundamental components: (1) the opportunity to make a choice; (2) a context in which to make it; (3) the opportunity to generate more alternatives if I want to consider them; and, (4) at least some opportunity to assess those alternatives more deeply if desired. In the end, a choice is made and we move on to experience the consequences.

The Smart Choices in Agriculture decision making process combines the fundamental PrOACT decision steps (Problem, Objectives, Alternatives, Consequences, and Tradeoffs) introduced by Hammond, et al. together with the components of two risk management processes (Hoag and Parsons; ISO 31000:2009) to provide a robust framework for making good choices in agriculture. The process looks like a series of steps but two important components are the pillars on either side (Figure 1) representing a free flow of information and a willingness to learn and adapt or update each step at any point to lead to a better decision.

Components for making smart choices

Identify Decision Opportunity. The process of making a decision starts with the recognition of an opportunity to make a choice. Having choices is a good thing. Recognizing that opportunity early can make the decision more difficult because many choices may be available and the future may be filled with a lot of uncertainty. However, waiting until the uncertainty goes away can result in a lot fewer and potentially a lot less rewarding choices remaining. Keeping yourself focused on what you are trying to achieve and training yourself to recognize opportunities to make choices that help you achieve it is a tremendous competitive advantage in the business of agriculture.

Establish the Context. Establishing the context in which you are making the decision lays the foundation for making a smart choice. It also provides a solid foundation for making more smart choices in the future. It consists of four main components: (1) identifying the objectives you are trying to accomplish by making the decision; (2) clarifying the internal context in which you are trying to make the decision; (3) clarifying the external context in which you are trying to make the decision; and, (4) identifying the risk and uncertainties involved in the making the decision.

Generate Alternatives. The choice you make can only be as good as the alternatives you consider. Therefore, it is important to generate a creative and complete list of alternatives to choose from before making the decision.

Assessment. Assessment of the alternatives consists of: (1) evaluating how well each alternative helps you accomplish your objectives; (2) analyzing the risk and uncertainties involved with each alternative; and, (3) evaluating tradeoffs between the alternatives. This assessment can become quite quantitative if the data exists. However, don’t let the lack of data hold you back from using sound judgement to decide how well each alternative helps you accomplish your goals and objectives.

Make the Decision. Eventually, you need to make a choice. It is important to remember that not making a choice is making a choice to let the opportunity pass you by.

Implementation. After the choice is made it is important to commit to implement it effectively.

Communication & Consultation. Communication and consultation with people inside and outside your organization is important because it provides you with the information you need to make smart choices.

Review, Measure & Revise. As you go through the process of making decisions, it is important to review and revise what you have done to make sure it reflects the most complete and accurate information. This includes iterating back to update previous steps as you learn more about the situation. Some of the best choices people make involve choosing an alternative that wasn’t originally on their list or clarifying an objective they were not originally aware of until they started to assess their choices

Results

This process was presented in public for the first time in a workshop at the 32^nd Annual Nebraska Women in Agriculture Conference in February 2017. In a post workshop survey, all attendees agreed that the workshop helped them and 83% of attendees rated it a six or seven on a seven point scale in terms of helpfulness. Since then, the process has also been taught in the 2017-18 Nebraska Ranch Practicum and in an advanced farm management course at the University of Nebraska-Lincoln with similar results.

Good decisions drive value creation in a farm or ranch business. Even small, simple decisions can turn out to be extremely important. Deciding what to plant in a particular field, who to hire for summer help, or whether or not to attend a particular producer meeting can seem routine after a while but these choices should all be made in agreement to best move you in the direction you want to go. Having a process to help you make difficult decisions provides a foundation for all decision making that keeps the choices you make more consistently producing the outcomes you desire.

References

Hammond, John S., Ralph L. Keeney, and Howard Raiffa. (1999). Smart Choices: A Practical Guide to Making Better Life Decisions. New York: Broadway Books.

Hoag, D. L. K., and Parsons, J. (2010). Risk Navigator SRM: an applied risk management tool. Journal of Probability and Statistics, vol. 2010, Article ID 214358. doi:10.1155/2010/214358.

ISO 31000:2009. Risk Management Principles and Guidelines. Geneva, Switzerland: International Organization for Standardization (ISO), 2009.

Spetzler, Carl, Hannah Winter, and Jennifer Myer. (2016). Decision Quality: Value Creation from Better Business Decisions. Hoboken, New Jersey: Wiley & Sons.

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Jay Parsons
Associate Professor
University of Nebraska-Lincoln
jparsons4@unl.edu