February 28, 2016

Many owners of large companies in Ukraine prefer micromanagement. I know one trading company, where the owner decides on everything. If he fails to delegate tasks to his top-managers, he has to do everything on his own. Yet, when a company grows bigger, such management style results in the decreased speed of management and ultimately thwarts the company’s development. Moreover, owners often tend to take emotional decisions, whereas top managers rely on facts, such as financial indicators. As a rule, owners in the West rest upon financials, as well as the strategy, mission and vision they outlined for the company in the long run.

There are well-structured holdings in Ukraine, yet many of them don’t have a strategy. Owners and managers of these holdings do not see what their company will be like, let’s say, in two years. They follow the principle “let’s hold on for a couple of months and see how it goes”. Such companies won’t last in the market. Strategy development and implementation is especially crucial for agricultural holdings. For example, we have a long production cycle which is why reasonable crop rotation is necessary to maintain a good balance of nutrients in the soil and to protect it from water and wind erosion. This has a direct impact on the quality of our production. When the companies have only short-term considerations, they keep on sowing sunflower until the soil is completely exhausted.

A board of directors is usually established to control the fulfillment of strategic tasks, whereas the tactics of their fulfillment lies in the hands of the company’s chief executive officer. He shapes the team. Ukrainian top managers need to realize that they not only have to build a team of professionals, but they also should delegate responsibility down to all management levels. The more employees take on responsibility, the better it is to manage the company. At the same time, people need to be interested in their responsibility: when a worker achieves key indicators, he/she must be rewarded. What kind of a reward this may be? Compensation, of course. Though, top managers may also be rewarded with company’s stocks. This is how the loyalty of employees is built. Foreign top management is no cure-all solution, so one shouldn’t rely on it only. Oftentimes these people don’t understand the Ukrainian market, language and its specifics.

Management needs a board of directors to provide support and authority. At AgroGeneration we report to the Board of Directors; we have financial controls in place, a security service that operates at all farms. Some holdings even have an internal anti-corruption committee. As President Ronald Reagan once said: “Trust, but verify”.

When Harmelia and AgroGeneration merged, the first thing we did was getting all processes under control. We also appointed a financial director to continually monitor all farms, created the security service and set up a dispatcher service for round-the-clock computer monitoring (GPS-controlled equipment).

When merging, we assessed the efficiency of employees of both companies by KPIs (key performance indicators). By the way, many top and middle managers moved to AgroGeneration from SigmaBleyzer. At AgroGeneration we have introduced KPIs that cover almost all employees. Thus, every worker understands his/her zone of responsibility and performs as effectively as possible. After analyzing all indicators within a span of several years, we have developed KPIs for every farm. They include revenues per hectare, expenditures, land KPIs etc. I have my own performance indicators. Introduction of KPIs helps to understand what the company will look like in the long-term perspective.


Text: John Shmorhun, CEO of AgroGeneration


The article was originally written in Russian and translated by AgroGeneration