Increasing the size of any business has immediate and long-term impacts on a producer’s bottom-line. Although motivations for increasing operational capacity differ between business owners based on their goals, we can be sure that producers who decide to expand, believe that it will help them reach those goals.
When considering expansion, managers ask themselves how much money is needed to expand and what products, resources, or services will be required during and after the expansion. These types of questions are critical when considering expanding a grazing livestock operation.
Forage availability — or animal unit months (AUM) — is a key factor when assessing if additional capacity is needed for grazing livestock. Actions to improving forage availability and quality or obtaining larger grazing areas require capital. These questions can be answered on the back of a napkin with some cowboy math at the local café.
However, producers need to consider the unintended consequences of herd expansion and ask themselves what other benefits or challenges could arise. A positive consequence of expansion is increased return on investment from more livestock sales. On the other hand, supplemental feed costs may increase because of a dry spring after herd expansion.
These two examples are important but only scratch the surface of the potential consequences related to herd expansion.
This type of thinking can lead producers into a capability trap. Within a business context, capability traps are situations where management leads to profit losses and an inability to fix the problem causing the failure.
For instance, managing livestock requires a given amount of time and effort per animal. A producer who decides to expand their herd may have neglected to account for the time and effort necessary for breeding or calving.
This type of situation is where the problems begin to compound. First, the managers can always burn the midnight oil and work harder. This strategy has worked for many managers before and is frankly needed from time to time. However, people can only burn the midnight oil so many times as this strategy leads to burnout.
Burnout can cause poor management of livestock and typically spills over into other areas of life. Stress from burnout can hurt family relationships. Maintaining healthy family relationships is vital for personal well-being and cooperation since many South Dakota ranches are family owned and operated.
The challenge in identifying these potential consequences of reduced livestock performance or lack of family cooperation is that they do not happen overnight. In other words, there is a time delay between management actions and the unintended consequences. Equipping producers with a new tool to account for delayed consequences from decisions like herd expansion will help them avoid capability traps.
Systems Thinking is a tool that enables business managers to think about the unintended consequences of their decisions. This article’s diagram shows two relationships: a reinforcing relationship (R) and a balancing relationship (B). The “Grazing Operation Expansion” reinforcing loop indicates that as the herd size increases, so do the management requirements for maintaining livestock, such as handling more calves during calving.
If management requirements are met, then it is expected that the herd will thrive and continue to grow. Failure to anticipate the time and effort required for management sets a capability trap as the herd grows. The “Management Capability Trap” balancing loop illustrates declining management capabilities.
The management requirements exceed the available time and effort a manager can put forth. The burning the midnight oil strategy may offset declining herd size or performance. Still, eventually, burnout and lack of family cooperation will prevent growth or cause the operation to fail. The graph shows the relationship of herd expansion relative to management requirements. Notice there is a delay between herd expansion and when management capabilities begin to decline.
Avoid capability traps by applying Systems Thinking when considering herd expansion. Look out for subsequent articles in this Systems Thinking for livestock grazing challenges series.