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 managers of Farmland.

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.