Farmers’ managerial thinking and management process effectiveness as factors of financial success on Finnish dairy farms

Authors

• Heikki Mäkinen Helsingin yliopisto

DOI: https://doi.org/10.23986/afsci.8147

Keywords:

agriculture, management capacity, decision making, management skills, gross margin, operating margin, profitability, bookkeeping, structural equation model

Abstract

The objective of the study was to analyze how farmers’ managerial thinking and management process effectiveness contribute to profitability of farming. A structural equation model of these two elements of management capacity and financial performance was applied on survey data and bookkeeping results from 117 dairy farms. The model explained one-fourth of the varying profitability of sample farms. The results show that farmers’ managerial thinking is connected to farm profitability, but management process effectiveness is not. It was concluded that it is essential for good performance that the farmer has a clear vision of developing farming with business and investment plans. Successful farmers also have a firm confidence in their managerial skills, a strong emphasis on instrumental and intrinsic values, and a high appreciation of farming as occupation. They also see the farm as an entrepreneurial business unit and intend to follow the corresponding principles of management.