Relationship of Dairy Producer Management Styles to Overall Return on Assets

Introduction

Today's dairy businesses involve more than just the basic functions of milking cows and producing crops. Dairy producers are business and human resource managers. Nationally, herd size per farm has increased from 73 cows in 1997 to 99 cows in 2002 (USDA-NASS, 2002).

With the increase in average dairy herd sizes, the need for a larger workforce results in the need for highly skilled managers to ensure that the operation is running smoothly. Management ability has been indicated as an important factor in financial strength of dairy businesses (Ford & Shonkwiler, 1994). However, information about specific management styles and the relationship to overall profitability has not been examined. For Extension educators developing farm management educational program, understanding the relationship between style and potential impact on farm level profitability could be beneficial.

Purpose and Objectives

The purpose of this study was to evaluate the relationship between the preferred management style of the dairy producers and overall dairy farm profitability, as measured by return on assets. The objective was to assess the linkage between management style and farm profitability.

Methods and Procedures

Nomination of Farms

Using an existing database of nearly 250 agribusiness representatives, a request was mailed for nominations of farms that had exemplary management and above-average profitability to participate in a research survey. Agribusiness representatives were individuals who had knowledge of the dairies and worked with the owners and managers on a regular basis. No formal measure of profitability was used as a criterion for nominations.

Nearly 100 farms were nominated, and, with duplications removed, 63 farms were added to the project list. Additionally, all farms that participated in the Business Planning Assistance Program (n=29) administered by the Pennsylvania Dairy Stakeholders were included in the project list. A total of 92 farms were contacted by phone to participate in this research project, and 88 farms agreed to participate. Preliminary data was gathered by one interviewer via a 15-minute phone conversation with the primary business owner. At this stage, general farm demographic data was gathered.

On-Farm Data Collection

On-farm interviews were used to collect detailed information for various aspects of the dairy farm business. Farms were visited a total of three times over 9 months. An Interpersonal Styles Booklet was distributed at the second farm visit, and the completed booklet was collected either at the third farm visit or by mail. The interpersonal style survey instrument included a management "inventory" that the producers used to describe how they viewed themselves for 15 different word sets. These "management" styles are various combinations of word choices that allow for determination of producers' basic strengths and weaknesses (Littauer, 1993). There were two dimensions of interpersonal communication style, assertiveness and expressiveness, that were analyzed by the survey instrument.

Assertiveness describes the extent to which an individual is assertive, direct, and action-oriented in interacting with others (Management Development, 2000). There are two types of assertiveness, more and less assertive. More assertive people are the ones who tend to move quickly in response to problems or opportunities and to be open in telling others what they prefer and how things should be done (Management Development, 2000). Words such as "tell," "act," and "initiate" apply to more assertive people, whereas words like "ask," "consider," and "reflect" apply to less assertive people. Less assertive people are more deliberate in decision-making and taking action; they are less inclined to exert control over others and are comfortable listening to and supporting the ideas and preferences of others (Management Development, 2000).

Expressiveness, the extent to which a person displays and expresses emotions while interacting with others or solving problems, is the other dimension of interpersonal style (Management Development, 2000). Expressiveness is composed of two types, controlled and expressive. People who are controlled keep their feelings to themselves and do not reveal much of their feelings through verbal or nonverbal messages. They appear restrained and have a calm demeanor at all times (Management Development, 2000), whereas people who are expressive are very comfortable showing their feelings to others. They are animated and spontaneous.

Following completion of the word sets within the survey instrument, the results for each column were tallied and plotted on a two-dimensional grid. The points of the grid were connected to make a rectangle that was used to determine interpersonal style. The portion of the grid with the largest area of the rectangle was the primary style, and the portion with the second largest amount of the rectangle was the secondary style, and so on. The variables expressing preferred interpersonal style were calculated mathematically based on the area of the rectangle. The specific interpersonal styles identified by the combination of dimensions in the survey instrument are illustrated in Figure 1.

Figure 1.
Specific Interpersonal Styles Identified by the Combination of Dimensions

To measure the level of profitability of the farms, return on assets (ROA) for the dairy farm business was determined. ROA was defined as:

ROA = NFIO* + interest expense– return to owner & unpaid labor & management
Average Total Farm Assets

* where NFIO = net farm income from operations

The financial data for the farm was from 2001, and survey data was obtained in 2002. ROA accounted for the use of debt financing and farm size. It more accurately measured the returns as a percentage of all assets, both debt and equity, invested in the farm business. The use of ROA rather than other profitability measures provided a more straightforward interpretation of differences in farm performance regardless of farm size.

Data Analysis

Descriptive statistics were used to describe the data (Table 1). To determine the extent of the relationship between ROA and interpersonal style, correlation coefficients were examined (Table 3). Statistical significance was set at a 0.05 level.

Table 1.
Characteristics of Dairy Farms in Study

	Farms in Study (n=56)		Average PA farm
	Mean	Standard Deviation
Age of Respondents	46	7.32	NA*
Number of dairy cows	252.61	145.10	61.431
Milk per cow (kg)	9,675	887	9,1461
Acreage of the farm (acres)	325.95	234.88	1331
Labor units per farm2	5.72	3.78	NA*
* Non-applicable, 1 USDA-NASS, 2 Full-time worker equivalent (40 hours per week)

Results

Seventy-nine of the 90 survey instruments were completed and returned (87.8%) from respondents. Fifty-six of the surveys could be used; the remainder lacked complete financial data.

The percentage of producers who were Analyzers, Drivers, Energizers, and Harmonizers for primary and secondary styles is presented in Table 2. The largest percentage of producers had Drivers (33.9%) as their primary interpersonal style and Energizer (26.8%) as the secondary style.

Table 2.
Primary and Secondary Interpersonal Styles for Producers (n=56)

Interpersonal Style	Primary Style	Secondary Style
Analyzer	25.0%	3.7%
Driver	33.9%	21.4%
Energizer	10.7%	26.8%
Harmonizer	30.4%	14.3%

Objective 1

A Pearson product moment correlation (R) (Mendenhall, 1983) was used to measure the relationship between primary interpersonal styles and ROA (Table 3). Correlation coefficient is a measure of the degree of linear relationship between two variables (Ott & Longnecker, 2001). Correlations range from -1 to 1, with -1 being a perfectly negative linear relationship and +1 being a perfectly positive linear relationship (Ott & Longnecker, 2001). None of the four interpersonal styles were statistically significant in relation to ROA. Drivers and Energizers had positive relationships with ROA (0.205 and 0.659, respectively). Analyzers and Harmonizers had negative relationships with ROA (-0.003 and -0.355, respectively).

Table 3.
Pearson Product Moment Correlation Coefficient (R) Between ROA and Interpersonal Styles (n=56)

Interpersonal Style	ROA
	R	P
Analyzer	-0.003	0.990
Driver	0.205	0.361
Energizer	0.659	0.107
Harmonizer	-0.355	0.162

Pearson product moment correlation (R) was used to measure the relationship between primary interpersonal style and herd size (Table 4). None of the four interpersonal styles were significantly related to herd size. Driver was the only interpersonal style that resulted in a positive relationship with herd size (0.179).

Table 4.
Pearson Product Moment Correlation Coefficient (R) Between Herd Size and Interpersonal Styles (n=56)

Interpersonal Style	Herd Size
	R	P
Analyzer	-0.063	0.785
Driver	0.179	0.425
Energizer	-0.138	0.768
Harmonizer	-0.140	0.591

Discussion

The four interpersonal styles were not statistically significant in relation to ROA. However, in terms of positive correlation, Energizer has the highest positive correlation. Characteristics that Energizers have that may explain the correlation to ROA is that Energizers find new ways to do things. Energizers think flexibly, generating several ideas or solutions rather than locking in on one; they respond quickly to problems; and they are willing to take risks to try out new ideas and approaches (Management Development, 2000). Energizers also develop relationships with people and communicate with others. All of these characteristics may be attributed to the positive correlation between Energizers and ROA.

Drivers also exhibited a positive relationship with ROA. This can be attributed to the fact that Drivers make decisions quickly and efficiently and are aggressive in pursuing goals (Management Development, 2000). Harmonizers had the lowest correlation in relation to ROA (- 0.355). This can be attributed to the fact that Harmonizers fail to act in a timely manner and can refuse to deviate from their plan and resist even needed changes (Management Development, 2000). Harmonizers also can be "wishy-washy," lacking convictions or opinions, or be too conforming (Management Development, 2000).

Correlation between herd size and interpersonal style was also evaluated. There was no significant correlation between herd size and interpersonal style; therefore, interpersonal style has no direct relationship on the size of the herd.

Conclusion

Overall farm profitability is the result of many different factors, including production practices, markets, weather, milk prices, herd size, and numerous other factors. The lack of significance between interpersonal style and ROA indicated in this study suggests that management factors and "style" of the manager are likely minimal influencing factors for overall return on assets of a dairy. Differences between positive and negative correlation with various styles should be noted, and farm financial management education should be conducted to meet the needs of a broad range of styles.

References

Ford, S. A., & Shonkwiler, J. S. (1994). The effect of managerial ability on farm financial success. Agrc. and Resource Ec. Review. Oct.:151.

Littauer, F. (1993). Personality plus. Fleming H. Revell: Grand Rapids, MI

Management Development Programs and Services. (2000). Interpersonal style profile: Analysis and interpretation. The Penn State University: University Park, PA.

Mendenhall, W. (1983). Introduction to probability and statistics. Sixth Edition. Duxbury Press, Boston, MA. Pp. 433-437.

Ott, R. L., & Longnecker, L. (2001). An introduction to statistical methods and data analysis. 5th Edition. Duxbury: Pacific Grove, CA.

USDA-NASS. (2002 & 2002). Census of Agriculture. Available at: http://www.nass.usda.gov/Census_of_Agriculture/index.asp