While dealers have enjoyed two years of strong bottom lines, the cyclical nature of the ag economy demands companies prepare for challenging times ahead. Co-op powerhouse CHS Inc., headquartered in Inver Grove Heights, MN, has been doing just that, and CropLife editors wanted to learn from its efforts. We talked with Lynn Foth, vice president of Aligned Solutions there. He joined CHS in March 2011 but has spent 36 years in agriculture, many of them at the local cooperative level and many as the CEO/general manager of retail sites in Iowa and Illinois. He describes what CHS is doing internally to be ready for market changes.
Q: You head up CHS’ Aligned Solutions group, formerly known as Business Solutions. What does this segment of the company do?
A: We used to be the business consulting connection between CHS corporate and its locations across the country. With my arrival this year, we went to a different format to identify all the potential offerings that our company has to help local cooperatives through our 14 different divisions. We’re focusing on assisting local cooperatives with market development and market growth, particularly with some of the threats that are in the marketplace today — the multinationals and some of the things that are happening in grain and nutrients today.
A major emphasis now in our group is on external education, what is happening in the macro world, if you might, that the co-ops live in. We are also emphasizing planning to a much higher level — after you understand the world that you live in, you spend time planning.
This group has had a strong history of providing valuable training services and talent development and placement. While we’re not leaving that arena, our number one objective now is to help companies grow their markets and where appropriate, help connect them with some of the resources in our building.
Q: Do retailers have as good a handle as they could on the big picture, what’s happening externally?
A: I think the awareness of retailers has gone up dramatically. They have really made a committed effort to get their boards to understand and become educated on the global aspects of retail agriculture. That’s been a very, very key accomplishment of a successful retailer in the last two years.
Q: How did CHS identify areas within the company that needed attention?
A: We got started about three years ago when our former CEO John Johnson began an initiative known as 2020. The goal was to focus on what may be coming down the trail by the year 2020 and how prepared CHS might be to meet those needs, as well as thinking about what our highly valued customers in the local cooperative community might look like then.
Our new CEO Carl Casale came on board early last year, took those efforts, and did an excellent job of rallying the management team, looking at how we might execute what was learned and build a platform around what our CHS aspirations might be moving forward. We came up with five key aspirations: 1) global commodities expansion, particularly in grain and nutrients; 2) energy platform growth; 3) food ingredients growth — the last two were specific retail aspirations; 4) how to become more producer-focused; and 5) how to leverage our own enterprise for more customer value.
Carl spent a lot of time early in 2011 in meetings around the country to get feedback from our local coops, as well as to introduce the aspirations.
Q: We understand here at presstime that Carl is going to announce some specific steps CHS will be taking at your year-end annual meeting — and you can’t talk about them yet. But can you share some general retail projects?
A: From the Aligned Solutions group, I can say we’re stressing that members really spend a lot more diligence on what we call the ABC’s of good retail.
“A” would be alignment. I think in these times it’s critical that producers align with their board, the board align with the CEO, CEO with senior leadership team, senior leadership team with employees, then basically the employees back to the producers — so that everyone understands the vision and mission — and the aspirations of the local cooperative as well as connecting links in terms of alignment to vendors. This would allow deeper partnerships in this climate.
We have been in good times, so there are a lot of different views on how to use some of the returns that the folks have been fortunate enough to generate. There’s also some generational transformation going on with new, younger directors coming in. That alignment issue is very critical here.
“B” would be balance. A company’s balance centers a lot around its equity programs. These need to be reflective of your past heritage, your current patrons, and your future customers.
“C” is capital situation. In particular, look at the relationships that you have with your banker — and all relationships down through producer financing.
Q: How are you starting to execute some of the changes?
A: From Carl’s discussions across the country and from work within the company, we’ve developed a list of mutually beneficial projects that we hope to explore moving forward.
We’re much more team-driven now, and people are engaging and becoming involved with each other to look at problems and promote solutions collectively — which I think is very much appreciated by the staff. Staff are working with people in the company that perhaps they didn’t have the opportunity to work with before. It’s kind of broadened everyone’s horizons on who CHS is, our connection out into the country, and the focus that’s needed between our business units and our valued customers.
Q: Where do you think you’ve seen some companies falter when they’ve hit some tougher times?
A: I think a lot of it is really understanding the external world they live in as well as their internal capabilities, capacities, and gaps. This all comes back to the planning process. I think those companies that really do well have a history of putting a lot of emphasis on planning and are much better equipped to weather the downturns.
Look at the world in three-year windows. I don’t like to see companies take the five-, 10-year approach. Companies should put a lot of time in assessing the three-year windows that lie ahead and in learning from the three-year windows that they just exited. If they’ve been disciplined enough to go through that and really make it more than just a one-day business planning event — make it perpetual ongoing business plan — I think those are the ones better equipped to make the changes.
Q: Any advice for ag retailers coming off these good years?
A: I can’t emphasize planning enough, that’s the greatest advice I could suggest. But even more so than planning, have the discipline to execute those plans.
We need to really understand that we are in exciting times but also very challenging times. Our two greatest assets are changing. One is our people — we are going through a generational transformation. But we’re also seeing a necessity to shift some of our long-standing asset base.
We have some tired assets, I think, as a cooperative community, some of our assets have got some age on them. These factors again reinforce planning from both a people standpoint and a facilities standpoint as we make this next generation transformation.
So that would be my advice: Put a lot of effort into your planning process, but make sure you execute it with the next generation.