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Opinion: How the imperative for business value will transform rural industry bodies

Brian Ramsay*, September 16, 2014

The Australian agricultural sector is set for a long overdue shakeout of its antiquated industry bodies.

Membership of agricultural advocacy bodies has been declining for decades; and dissatisfaction with levy funded rural R&D and marketing bodies is triggering multiple reviews.

Politically and commercially influential players including the National Farmers Federation, grassfed cattle, grains and horticulture are all in various stages of review or restructure.

Now, a Senate Committee inquiry is to examine the whole levy system. Dissatisfaction with the status quo is rising, but whether meaningful change occurs is much less certain. Most change initiatives fail to produce intended benefits.

The good news is that a subtle and powerful shift is occurring that greatly increases the odds of success.

What we are seeing now is escalating demand from the funders of industry bodies for performance. In the past, debates about industry service bodies tended to concentrate on governance, structures and blame. Value for money is the new mantra, and it’s a game changer.

To understand the nature of the changes happening, put yourself in the position of a business that funds an industry body. Their viewpoint helps strip away the complexity and distractions as to why the traditional industry body system is under pressure: businesses want a say in how their funds are spent and they expect evidence of value for money.

It’s not complicated, but on both counts farmers are getting short-changed.

For decades, the pace of change for rural industry advocacy bodies has been almost glacial, with even small changes fraught with uncertainty, competing views and delays.

As a result, traditional advocacy bodies designed to influence a political system that existed more than 30 years ago remain largely intact. This is despite the profound changes that have taken place with food and fibre markets and value chain businesses.

Yet you will still find farmers who have to join a state body if they want a say on the national and international issues driving the future of their business and industry. And you will find farmers with massive investments in their industry having the same say as a hobby farmer.

Many businesses are simply choosing to opt-out of the outdated representation system, while splinter groups proliferate.

Industry bodies rationalise these negative trends as a product of farmer apathy. However, the fundamental cause is closer to home.

Industry bodies need to speak a language that is relevant to farmers and have an agenda that connects with farmers. Rather than blaming farmers, they need to face their market.

The alternative of placing traditional industry body interests ahead of modern farmer interests has proven to be an epic own-goal.

Private sector provides clues about what needs to change

Contrast the industry advocacy body trend towards fragmentation with the trend for consolidation across commercial value chains and industry sectors. In the private sector, businesses are forming alliances, integrating and merging to create scale and value for customers. It is an important clue on what needs to change for industry bodies to succeed.

Along with industry body fragmentation has come bureaucracy. The same bodies that call for less red tape from government create proliferations of institutionalised committees and all too often populate them with aspiring agri-politicians.

While farmers contribute millions into representative bodies, this is dwarfed by around $470m in industry levies and matching government contributions that flow through the statutory levy system every year.

The rural R&D and marketing corporations and companies that invest the levy funds also struggle to demonstrate value for money. For a variety of reasons, the past tendency was to invest most effort in low-risk activities (research) and produce lots of worthy outputs (reports) rather than concentrating on fewer larger investments to orchestrate outcomes (development and extension).

Put simply, while levy-funded bodies talked R,D&E, the behaviour has been to invest in ‘R’, while farmers value ‘D&E’.

Farmers set up and fund industry bodies to create business value that they can’t capture on their own. However, as with agricultural business innovators, there is daylight between those industry bodies that are movers and shakers, and the rest of the field. The main differentiator is a relentless focus on creating value for those who pay.

Commercial markets are sending clear signals that there is no future in mediocrity in any part of the modern food and fibre value chain. The same is true for levy-funded and member-based industry bodies.

The implication is that industry service bodies increasingly confront a clear choice: accelerate change to create compelling business value, or accelerate on the path to irrelevance.

Farmers and value-chain firms would say ‘welcome to our world.’

 

* Brian Ramsay is the Managing Director of Inovact Consulting. He is an adviser on how rural industry bodies can modernise faster so that their services make a measurable difference to industry success and sustainability. His industry clients have included the National Farmers Federation and industry bodies in the cotton, meat processing, cattle, horticulture, chicken meat, wool and fishing industries. His background is unique in having set-up, wound-up, led and advised on restructuring of industry bodies. He played a leading role in the reform of pork industry bodies in 2001 and was the inaugural chief executive of Australian Pork Limited. His business also provides services to the Australian government via appointment to expert panels for industry and environment departments.

 

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