Farmland Industries Inc. Essay, Research Paper
Introduction
Today, when we hear the slogans "better farming, better food," or "proud to
be farmer owned" one company comes to mind, Farmland Industries. We may
think of this of this fortune 500 company as a leading agricultural
powerhouse, which it is, however, it was not always that way.
Background
Farmland Industries Inc. was founded by Howard A. Cowden, who was born and
raised in Southwestern Missouri. Cowden started young in the cooperative
business by working for the Missouri Farmers Association (MFA). However; in
October of 1927, he had resigned from the position of secretary for the MFA
and started out on his own. Immediately following, Cowden received the MFA
oil contract that previously had been held with Standard Oil Company, and
Cowden was now in the wholesale oil business. On January 27, 1928, Cowden
Oil Company was founded. This business was moved to Kansas City, Missouri
in late 1928.
In January of 1929, Cowden Oil Company was dissolved and Union Oil Company
(Cooperative) was formed. It was clear that Cowden had planned to do more
than just buy and sell oil to local cooperatives. A board of directors was
created to run the company, yet Cowden retained full control over the
company that he had created. Cowden started recruiting smaller companies to
join their cooperative by signing contracts to sell certain amounts of
Union?s products. In 1929, Union Oil Company had purchased its first land.
"The Two Car Garage," as it is referred to, was the building that they had
purchase to become their new home.
In 1935, Union Oil Company changed its name to Consumers Cooperative
Association (CCA). CO-OP was decided to be its official logo. In October
of 1956, CCA moved to their new home on North Oak Trafficway, in Kansas
City, and the company was ready for major business. In June of 1961, Howard
A. Cowden retired as President of CCA and Homer Young stepped in to fill
his shoes.
In early to mid 1966, CCA changed its name again. This time to Farmland
Industries, Inc., however; they still kept that CO-OP symbol for a
trademark. CCA now emphasized much of its business to fertilizer, petroleum
and commercial feed. This business only grew and grew for them. "By 1967,
Farmland Industries had manufacturing facilities for various kinds of
fertilizer at Lawrence, Kansas; Hastings, Nebraska; Green Bay, Florida; Fort
Dodge, Iowa; Joplin, Missouri, and a plant under construction in Dodge City"
(Fite 281).
From here, Farmland Industries only increased its size, sales, and
dividends, not to mention popularity. Some of the major lines include:
Food Marketing, Feed, Crop Production, Grain, Beef, and Pork. Of course,
there are many, many other lines that the company has produced throughout
the years. Some of these things include: Ful-O-Pep (Union Oil Company?s
"Antiknock" gas designed to compete with ethyl), CO-OP tires, Batteries,
Groceries, Canning and Dehydration, Tractors, Paint, Twine, Steel buildings,
and many other successful ventures, along with many other flops.
"We?ve been working to improve margins-by lowering costs, by implementing
shared margin programs, by offering prebooking, and contracting programs in
fuel, crop production, products, & feed-and by increasing our emphasis on
providing timely information and other services" (Annual 94 2).
Organizational Culture
Today, Farmland is the largest farmer-owned agricultural input cooperative
in the United States. Its mission is: To be a producer-driven,
customer-focused and profitable "ag supply to consumer foods" cooperative
system (The Farmland Cooperative System 6). The people of Farmland
Industries believe in American agriculture. They believe that everyone
involved in progressive agriculture in America today is entitled to a return
on their investments.
Farmland?s world headquarters are located in Kansas City, Missouri. The
city is located on the banks of the Missouri river in western Missouri. The
metropolitan area itself includes four counties in the state of Kansas which
helps make up its population of 1.65 million people (U.S. Bureau of the
Census 1). According to the U.S. Census Bureau, 82.2 percent of this
population are White, 12.7 percent are Black, 3.1 percent are Hispanic, and
1.9 percent include various other Races (1). In 1995, the estimated Kansas
City median household income was $37,841. Thirty-eight percent of the
households in the metro area have an effective buying power (this is the
discretionary income households have after paying off all debts) of more
than $50,000 per year (U.S. Bureau of the Census). Kansas City also boasts
one of the lowest cost of living in major metropolitan areas. It ranked
third among 25 cities with populations above 1.5 million people (U.S. Bureau
of the Census).
There are many exciting things to do once you?re in Kansas City. If
gambling is what you are looking for, the metro area offers five river boat
gambling establishments (Alm 61). In addition to the casinos, year-around
dog racing and seasonal horse racing is offered at The Woodlands in Kansas
City, KS. Kansas City also offers sporting excitement. The Kansas City
Blades for the hockey fans, the Kansas City Royals, a major league baseball
team and the Kansas City Chiefs, a professional football team, in which
Farmland Industries is a major supporter.
Approximately 500,000 farmers and ranchers across the Midwest own the
Farmland Cooperative system. The cooperative system was built to serve
these people. Their economic benefit is why it continues to exist and evolve
(The Farmland Cooperative System 1).
These producers own more than 1,400 farmer-cooperative associations which,
in turn, own Farmland Industries, Inc., their regional agricultural
cooperative (The Farmland Cooperative System 17). More than 13,000
livestock producers also own the regional co-op directly, since it is
through this entity that they market and add value to their hogs and cattle.
It is this network of farmers, farmer-cooperatives and regional?and the many
people who work for them–that make up the Farmland Cooperative System.
Each member of this network has important roles in ensuring its total,
long-term profitability.
Farmland is the largest farmer-owned regional co-op in America, with sales
in 1995, totaling $7.3 billion and it does business in all 50 states and
over 70 countries (The Farmland Cooperative System 17). Its owners, who
represent 22 Midwestern states account for 80% of U.S. grain and livestock
production, set the policies and direction for their regional through
elected representatives to their local association and regional boards of
directors (The Farmland Cooperative System 17). Their locally based
farmer-cooperative associations function as central links between the farmer
and their regional in designing the system?s products, services, and
information to meet their individual needs. The flexibility and
responsiveness of these associations give them an advantage over other
agricultural input suppliers (The Farmland Cooperative System 12).
Farmland and the thousands of people it employs are compelled by one common
purpose: to help its farmer-owners accomplish long-term success in
agriculture by positioning them and their system as competitive forces in
global agribusiness.
To be competitive in the world marketplace, the system?s producer-owners
must continue to find ways to lower their unit production costs, increase
their market access, and secure higher returns from their farm products?that
is, increase their revenues from the "farm gate to consumer" sector of the
food chain. Helping them do that is the primary focus of their locally
based and regional cooperatives.
Lowering their production costs, increasing markets for their farm
products, and improving the quality of their grains and livestock through
technology are key functions their Cooperative system performs for its
owners to help them improve their profitability. Expanded markets and
better quality often translate into higher prices for their farm commodities.
Naturally, the successes Farmland has enjoyed and the products and
services they provide their patrons have not come overnight or by reckless
leadership. It has been a long process led by men and women dedicated to
the advancement of agriculture.
Management Style
As with any major corporation, a competent management staff is critical to
the well being of the company. The management staff acts as the
infrastructure of the company, making sure that orders are handed down and
initiated.
Farmland Industries Inc. is governed by 21 Board of Directors that consist
of "prominent farmers, ranchers, and managers of farmer co-ops throughout
the Midwest" (Tolley 1). Each of the members of the Board of Directors is
elected to a three-year term (Farmland 23). President and chief executive
officer Harry Cleberg is the leader of the Farmland team and is also a
member of the Board of Directors. He has been with the company for 37 years
and named CEO in April 1991 and recently been named Agri-Marketer of the
year (Hartke C).
As CEO, Cleberg must create a motivational factor for Farmland?s employees.
He does not do this by sitting in his office all day as one would think, but
he actually goes into the work areas and meets with many of the 14,000
employees (Hartke C). He enjoys making unannounced visits to various areas,
and even sits in "small-group meetings that he calls ?listening posts,?"
covering all 22 state trade areas every 18 months. (Hartke C). These
listening posts which Cleberg speaks with consist of employees and managers
ranging in size from 10 to 100 people.
According to Harry Cleberg, he spends about 70 percent of his time outside
his office actively communicating with other people in their offices (Hartke
D). He has a seven member senior management staff that he meets with for
about four hours once a week. The senior management staff and council "are
made up of highly skilled individuals" (Farmland 23). In addition to this,
he also meets with staff directors every week for about three hours (Hartke
D). This man did not get to the top if Kansas City?s largest private
company (Kansas City Business Journal 20) by sitting in board rooms and
talking on the telephone, but he makes it a point to communicate one on one
with the employees and manager
Farmland has a traditional management style, with three Executive Vice
Presidents directly under Cleberg that are responsible for a major core
business area. There are well-defined lines of authority and ordinary
layers of management (Tolley 1). Farmland evokes a "family feeling" by
implicating the use of teams in decision making processes (Tolley 1).
According to Warren Tolley, Director of Employee and Organizational
Development, "It is not unusual to find employees that have been here 20 to
30 years, and most of them with Agricultural roots" (1).
Farmland focuses on employee satisfaction, making employee feedback
necessary if improvements are to be initiated. According to Cleberg, "If
you don?t have some form of regularly scheduled communication, you?ll
communicate just after you should have communicated" (Hartke D). By this
statement, Farmland?s CEO stresses the importance of employees? appropriate
communication within an organization.
At Farmland management focus on "total utilization of all assets of the
division" (Farmland 16). Their main focus is to generate higher margins,
reduce costs, and improve the competitive position. In today?s market,
management plays a bigger role than it has in the past. Competition is
greater, meaning that having current information, better and more advanced
management skills, and access to financing are very critical to the bottom
line of the company (Farmland 16).
Education & Training
Early into Farmland’s history, few educational meetings had been held.
However, they suddenly realized how important the education process was for
the cooperation movement. Sessions held for managers and other officials
affiliated with what was then Union Oil company, were held as far north as
Aberdeen, South Dakota, and as far south as McPherson, Kansas. According to
Homer Young, "Education is the chief problem of the cooperative movement"
(Fite 104).
In 1936-37, Farmland cooperated with Kansas State college to offer a seven
week training course to train Farmland?s leaders. They immediately hired
four of the thirty students that graduated from the course. By the 1970?s
Farmland had several training techniques. Some of these were located at the
School of Cooperation, named the Farmland Training Center in 1975, while
others were carried on out in the fields. By 1977 the center had 18
professional instructors on staff. There were training programs for
cooperative members, board members, sales representatives, cooperative
accountants, those handling special products such as petroleum and other
chemicals, and many others (Fite 105).
Today, there is a tremendous amount of training going on at Farmland.
"Each year, through an agreement with Rockhurst College in Kansas City,
about 12 of the top executives are nominated and sent to an Executive MBA
program, which lasts two years, with classes held on alternate Fridays and
Saturdays" (Tolley 2). "When they are through," says John Eller, director
of IS Planning, "these employees can pretty much write their own career
tickets" (Computerworld 43). Each and every employee gets to go through
training, not just top executives. Everyone takes classes on such things as
time-management, problem solving, sexual harassment, and even team-building
assignments.
International
As stated earlier, Farmland Industries Inc. does business in over 70
countries around the world. The largest international office is in Mexico
City, Mexico. This branch office is used in this section as an example of
an international office.
In the Mexico City office, all of the Farmland employees are trained so they
have an idea of the size of the company and how each section of the company
works. By allowing employees to understand this process, potential
customers can be brought to the company and referred to the pertinent
departments. During the training, all the personnel are taught about the
cooperative decision making process. Consequently, they will learn about
the philosophy and operational process of each division (Cabrera).
The Farmland office in Mexico City is a subsidiary for the offices in
Kansas City. Their function is to introduce Farmland into the Latin
American countries, look for investors, find new distributors, learn about
other countries? credit system, laws and regulation from their departments
of agriculture, and most important of all, learn about the cultures and
identify all products that will be successful in their market (Cabrera).
Farmland is selling feed, meat, and pet food to the Mexican and Latin
American consumers. Also, they are beginning to introduce oil in form of
lubricants, gasoline, and other oil based products. They have products
being sold in some European countries and Asian countries. All offices in
these countries are considered distributors for Farmland, therefore; they
the capacity to import and make sales separately from the Kansas City
offices. On the contrary, the office in Mexico is in charge of developing
new customers for the cooperative and making the sales. All orders are send
back to Kansas City where they will take care of delivering the products.
In Mexico city, Farmland has about 100 customers and at least one or two in
each Latin American country.
Farmland is a cooperative that tries to maintain a cultural diversity. In
most cases, the personnel working abroad are originally from the country
where Farmland or the subsidiary is based. Although being native of the
country is not a requirement, it is important to be fluent with that
particular language and know the customs of the country (Cabrera).
If we look at the Farmland office in Mexico City, we see that the sales
personnel must have a good understanding of the Latin American culture, how
well they accept new product ideas, what is their lifestyle like, credit
system, and most important of all, how is the business environment like
(Cabrera).
One big problem a salesperson faces in Latin American countries is the
credit issue. Considering that Farmland has been working abroad for over a
decade, it has not fully developed trust on the foreign economies. In Latin
American countries, credit is very difficult to obtain and even if you get
the credit approved by a bank or other entities, Farmland acts rather
conservatively and makes this process difficult for some companies. This is
one of the problems salespeople encounter as they seek potential customers.
The salaries that Farmland offers abroad are very competitive, and they
basically match the salaries offered by other leading companies. Income is
also based on education and experience. There are two different ways you
will be paid when working for Farmland in a foreign country. If you are
working in the US. and then you are transfer to a foreign country, your
salary will not change once you are in the other office. In addition to
regular salary, you will be given a percentage extra on the currency of the
country where you are going to live called expatriation allowance. This
money is supposed to help pay bills, such as house, food, and other basic
necessities (Cabrera).
The other way you can get paid is in 100% the currency of the country you
are living in. This case is only applicable to the people who have been
hired by the subsidiary in a specific country (Cabrera).
As part of the training, we let people know performance will be measured in
a yearly bases. When you are hired, you are requested to set some
performance goals, where you will distribute your time given to the
company, given to the customers and to yourself. At the end of the year you
will meet with the supervisor for your division, and you both will analyze
your performance and determine how productive you have been for the company
(Cabrera).
When the Mexico City office has people coming from the Kansas City office,
they try to explain some cultural differences such as business, lunch hours,
and working hours. In the business aspect, people must understand that the
Latin Americans rely a lot in the relationship that is developed between the
salesperson and the buyer. A written contract is not as valuable as the
trust that emerges from knowing one another as individuals. In Mexico,
people work from 9am. to 6pm., and their lunch break is around 4:00pm. In
some cases, people working in Mexico are suggested to start the day a little
bit earlier, because in this way they will be able to contact everyone in
Mexico and Kansas City. From Monday trough Thursday, all people are
required to dress suit and tie, and Fridays everyone can dress more informal
(Cabrera).
These are some of the problems and experiences that Farmland must face to
do business abroad. This is just one example of the cultural diversity, and
every country will have different situations.
Conclusion
In the agriculture industry today, just as anything else, things change
rapidly. The American farmer and rancher need somebody to inform them of
the changes that need to be made, then help them implement the changes. They
also need not only to market his/her product on a local or national level,
but on a global scale to remain competitive. The American consumer as well
as the international consumer needs to be confident that they are getting
excellent product at a competitive price. Farmland Industries is the
crucial link between these two segments of the market. It is a system that
has proven strong for many decades and promises to be strong for many more.
Alm, Rick. "Gamblin? on the River." The Kansas City Star Almanac. 1996.
Cabrera, Mario. Telephone interview. 20 Nov. 1996.
Fite, Gilbert C. Beyond the Fence Rows. University of Missouri Press,
Columbia, Missouri, 1978.
Fite, Gilbert C. Farm to Factory. University of Missouri Press, Columbia,
Missouri, 1965.
Hartke, Debby. "Farmland?s Harry Cleberg: Agri-marketer of the year."
Agri Marketing June 1996: A-D.
Tolley, Warren D. E-mail to the author. 8 October, 1996.
"Top 125 Area Private Companies-Part I." Kansas City Business Journal 14
June 1996: 20-24.
Appendix
1992 Annual Report. The Farmland Cooperative System, 1993.
1994 Annual Report. The Farmland Cooperative System, 1995.
1995 Annual Report. The Farmland Cooperative System, 1996.
"We Bring Quality to the Table" The Farmland Cooperative System. 1996: 61
U.S. Bureau of the Census 1995.