leadership and turnaround management concepts applied in the agribusiness environment in romania

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Scientific Papers Series Management, Economic Engineering in Agriculture and Rural DevelopmentVol.12, Issue 2, 2012

ISSN 1844-5640

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LEADERSHIP AND TURNAROUND MANAGEMENT CONCEPTS

APPLIED IN THE AGRIBUSINESS ENVIRONMENT IN ROMANIA

Ana-Maria-Loredana PREDA1

1 Mediterranean Agronomic Institute of Chania

Alsyllio Agrokepiou, Chania, Crete, Greece, Phone: +302821035000

Fax: +30 28210 35001 E-mail: [email protected]

Corresponding author: [email protected]

Abstract

Most of the times Romanian businessmen operating in agriculture make wrong use of the terms “ leadership” and

“ management ” , going further, most of them do not differentiate very well when considering the types of

management they actually use. The main objective is to point out the current status in the field and establish

appropriate boundaries, as well as to draw attention over the benefits that leadership and turnaround management

may bring about for both the business environment for the near future through the development of an explorative

study based on a complex survey. Results have shown that the Romanian agribusiness environment is going through

serious changes and is trying to apply concepts that are relatively new for it so that it may catch up with the trends

in the region and EU overall as respect to running businesses during financial crisis times.

Keywords: leadership, turnaround management, agribusiness, financial crisis

INTRODUCTION

Leadership is a very rich word. It represents

how a single person can motivate a group of people to act towards achieving a common

goal. In business – either we are referring to

cars, clothes, furniture, constructions,

agriculture, etc. – leadership is linked directly

to performance. Effective leaders are those

who increase the profitability of the business

they run.

Turnaround management is a tough practice

and it depends mostly on the leadership skills

of the manager and the availableorganizational framework in order to engage

in attaining achievements and being effective.

In agriculture, agribusiness is a broad

expression for the a range of businesses

involved in food production, farming, seed

supply, agrichemicals, farm machinery,

wholesale and distribution, processing,

marketing, and retail sales.

Within the agriculture industry, agribusiness

is extensively used merely as a suitable link ofagriculture and business, referring to the range

of activities and disciplines included by

modern food production.

MATERIAL AND METHOD

The research is structured in two major parts –

literature review and the applicative

questionnaire research. The research

considered 220 businesses from the

agribusiness environment in Romania to

which questionnaires applied in order to

evaluate the extent to which their

leaders/managers/administrators possess theknow-how needed to face the current

economic turmoil. The survey sample is

considered to be representative for the

population targeted. Respondents were asked

to answer a number of questions revealing

their personal knowledge, their operating style

and their willingness to stay up to date with

the progress in their field of work.

The questionnaire included both opened and

closed questions, multiple choice questionsand eliminatory questions and included four

sections: general data, knowledge evaluation


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on the research topics, evaluation section on

the type of leaders they are and an evaluation

section on the willingness to stay up to date

with the progress in the specific field of work.

Each questionnaire was then filled out by a

decision maker – respondent within an

agribusiness profile company/association/

NGO.

The hypothesis proposed for testing were the

following:

1. Romanian agribusiness top management

includes more managers than leaders;

2. most people in Romanian agribusiness tend

not to know what turnaround management is;

3. less than 50% Romanian agribusiness

managers have the have specialized studies;

4. less than 25% Romanian agribusiness

managers are interested in staying up to date;

5. the EU, the Romanian Government, NGOs

are offering specialized support to run

agribusinesses in harsh times of financial

crisis;

6. Romanian agribusiness is progressing –

with small steps.

The materials used in performing the

theoretical part of this research is represented

by specialized literature – books, articles,

handbooks, legislative frameworks, etc..

Beside these resources databases that contain

official census information were accessed. For

the data processing and analysis JMP

Statistics, First Bayes, GGUM 2004, and Ms

Office 2010 Excel were used for the

quantitative and qualitative statistical analysis.For the questionnaire design Ms Office 2010

Word was used.

RESULTS AND DISCUSSIONS

Over time numerous definitions and theories

have been developed in order establish what

leadership is. The overall resemblances

gathered by all definitions wrap up theconcept through two ideas, namely persuasion

attempt and power to encourage attaining

goals [7].

There were a lot of studies performed by

scholars in the past few decades whose sole

purpose was to capture the core of leadership[1].

The meaning of leadership is complex and

includes many dimensions. For some people,

leadership is a trait or ability, for others it is a

skill or behaviour, and for others it is a

relationship or process.

In the 1980s leadership researchers

determined that “leadership is simply doing

the right thing to achieve excellence”.

Management, as a practical, everyday activity,

originated as far back as man in his hunter-

gatherer phase, organizing effective ways of

achieving collective goals in a highly

coordinated manner.

About turnaround management, scholar

Stanley Goodman stated: “A turnaround is to

produce a noticeable and endurable

improvement in performance, to turnaround

the trend of results from down to up, from not

good enough to clearly better, fromunderachieving to acceptable, to losing to

winning” [3].

Turnaround management process aims at

acknowledging that the business is distressed

or operating below expectations. This in turn

may result in loss of prestige, goodwill and

credit lines. Clients and staff may tend to find

other options if formal signals of distress

become public. So it is preferable to apply

turnaround management on an earlier-stage,for a higher flexibility rate and a greater

chance of success.

The turnaround starts with a diagnostic

assessment that is supposed to determine the

actual position of the business from a

strategic, operational and financial

perception. This assessment involves

impartial analytical and technical skills

combined with practice. The manner in

which the assessment is undertaken is

important as it impacts the quality of

information acquired and the chances for a

successful turnaround. The relation with the


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employees is vital and through good

communication a broad picture of the

business is attained. Especially in times of

crisis employees show fear and this is one of

the elements that have to be counteracted. The

turnaround manager must ensure trust and a

truthful and accurate flow of information. A

blend of solid influence skills that can only

come with experience in “steering the ship” is

required as the relationship between all

concerned becomes dominant.

One of the most important functional areas in

a turnaround is differentiating between critical

from non-critical processes so that the

decisions taken use best the scarce resources,

often representing the difference betweensuccess and liquidation.

In simplifying structures the turnaround

management undertakes a commitment to

change. Following through on responsibility

and performance the turnaround plan is

thought out to be successful. Communication

during change is imperative and the risk of

having misunderstandings has to be

prevented.

In troubled circumstances, rescheduling orreorganization of debt and attraction of new

capital is involved. The turnaround

professional, negotiator and visionary, must

show not only exceptional analytical and

technical skills, but the ability to negotiate

sustainable agreements. Change is not

supposed to be seen as an ending point. This

has to be a cyclic element made durable by

the turnaround manager through a clear

understanding of direction involving

employee engagement and communication,

measurable deliverables, taking into account

any financial constraints, pressure on working

capital, and difficult financial-economic and

political times. A steady environment allows

for mistakes and longer cycles to achieve

goals. Distressed businesses show two main

goals, that to survive and to improve.

Following this analytic phase, the transition

can begin towards a successful turnaround.

Businesses often get into distress becausemanagement postpones when it comes to

making decisions. If the decision is made by

evasion, it is similar to making no decision at

all. Survival also depends upon being abrupt

in making opportune decisions. Making a

wrong decision means drive and direction. If a

decision turns out to be wrong, this can be

changed, adapted on the way.

Time is also a central aspect when it comes to

authority. In a stable business, there is time to

delegate and encourage growth of the

management; there is time to work on long-

term concerns and projects. In the distressed

condition assigning takes on a different title.

Managers by nature of their position are held

accountable not only for performance, but for

timely results, and as main decision-makers

they are directly involved.

In a stable situation there is time to develop

ability. But at a distressed business, one must

exploit the abilities of those who can perform

and convert the ability that is deficient. It

means building a permanent management

team capable to bring the business back to

health and add value to it.

Turnaround managers and turnaround leaders

are most often managers with reach

professional experience, who have workedtheir way up the corporate ladder through hard

work and fair play, and who have created

themselves a solid management reputation.

They have also established a set of talents to

lever problem solving, with minimal

resources, and scarce cash flow management,

negotiating and dealing with bankers,

investors and creditors.

Where stability is important in a steady

environment, uncertainty is the core of aturnaround situation. The ability to deal with

change at a rapid pace is critical. The existing

leadership is often “out of its element” as it

enters these periods of distress.

The turnaround specialist, on the other hand,

is a hands-on decision maker who actually

takes control of the business. He is in control

of the business’s purpose. He must know how

to be decisive, know how to segregate the

difficulties and find solutions.

When in crisis there is no time for

preparation. Just as with that patient in


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intensive care, the longer a business is on the

critical list, the harder it is to nurse it back to

vigour. To perform rehabilitation, the

turnaround specialist will know how to make

the quick and suitable decisions put a plan

into action and keep a talented team moving

towards a strong and more valuable goal.

We are living in modern times. Business has

to adapt, especially considering that most of

the advancements were designed for it. From

the computer that occupied one whole room to

the modern personal computer; from simple

accounting software to the complex ERP

systems we can only conclude that change is

part of live and business.

But when we thing to turnaround our

business, most people would still think of

technological or financial related measures.

We propose to go to the third dimension of

the business, respectively to the human

resources. Turnaround management is

extreme change management, and what better

way to implement change management than

to change the management before considering

investing in any other measures. We make

this proposal assuming the fact that thecurrent management of the business has

already applied all possible measures and

performed all conceivable approaches to

eliminate the source of troubles, still without

success. [5]

The early development of turnaround usually

involves a concentration of power that

transforms into discipline and focus.

Nonetheless, after the crisis has been stopped

the most appropriate structure for a fast

growing business is usually decentralized

because it focuses growth where the market

signals.

Successful turnarounds are based on a

competitive management, a healthy economic

cycle, a competitive environment, innovation

and government support. Also, elements that

come to support the turnaround achievement

relate to geographic decentralisation,

centralized functionality and product/service

diversification.

Professionals believe that for the proper

implementation of turnaround management it

is vital for the management to be aware of its

position in the industry in which it is

functioning as also its status in the overall

business environment. Also it is considered

that turnaround is best applied when an

outsider intervenes. The process of a

turnaround requires a fundamental

transformation in the way the internal and

external settings are regarded and replied to

by employees and management. Every so

often, it is an outsider who holds the best

position to lead this forced change and

identify: inaccurate assumptions that led to

the business failure, mental barriers to

optimum solutions that caused the financial

needs, counterproductive management stylesand conducts of individuals, interdepartmental

conflicts, real character of employees toward

the company and their enthusiasm to take an

active part in the turnaround process.

In a turnaround situation, major changes need

to be done and implementation of the plans is

essential. Also for the establishment of

effective plans unfiltered information is a

basic requirement.

Agribusiness is a broad concept used todescribe corporate agricultural enterprises

individually and collectively. Agribusinesses

are companies involved in one or more stages

of the production of crops and livestock.

The agribusiness approach is a method of

examining farming problems in a new and

more comprehensive setting. One benefit

from this approach has been the release of

workers — farm manpower — from agriculture

for employment in new nonfarm

occupations — including the armed forces

during wars. This has resulted in tremendous

economic growth and development and an

improved standard of living.

One prominent feature of agribusiness is its

continuous pursuit of new technologies. Well-

known examples include the use of satellite-

based global positioning systems to closely

manage crop lands and computer systems to

manage various parts of the business. These

technologies boost agricultural efficiency byreducing wasted resources, saving time, and

improving output.


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Crop agriculture, in particular, has turned to

such high-tech solutions to develop what is

known as precision or site-specific farming

methods. These methods involve

systematically testing crop fields for

variations in fertility and soil composition.

The data are then stored in a computer, and,

using GPS equipment on the farm machinery,

the on-board computer can then determine

where in the fields to allocate seed and

fertilizer to maximize yield and minimize

waste.

Moreover, research and development projects

are conducted in agribusiness to find new

technologies and to better use existing ones.

Important R&D work includes developinggenetically engineered crops, improving the

pest resistance of crops, using biotechnology

in agriculture, and formulating new

agricultural pharmaceuticals and chemicals.

Despite considerable government and

university backing for agribusiness research,

the majority of this research is funded by the

private sector.

The agribusiness farmer must have a good

education to be successful. Agribusinessrequires knowledge of business, markets,

agronomy, and mechanics as well as farming.

While the demand for traditional agricultural

economics is diminishing, there is a growing

need for the economics and management of

the food sector and the environment.

The demand for agribusiness was induced by

two factors, one direct and one indirect. First,

as more and more value-added activities

moved off the farm, the size of food processing and agricultural input sectors

increased. In addition, the emergence of

biotechnology and precision farming created

expanded research possibilities in the field.

To become competitive many farms in

Romania need to enlarge. [4] This implies

also that land and labour markets should

function better in order to foster restructuring

of agriculture. This observation can be made

for almost all Candidate Countries. In

addition, measures should be undertaken in

Romania to reduce market transaction costs,

and there is also a need for small-scale

farmers to seek off-farm jobs for

supplementing their income.

Future perspectives for agricultural income

have to be seen with respect to opportunities

and risks. [2] Among the opportunities areland market liberalization that could

contribute to the growth of farm size, with

implications for increased incomes; the EU

funding programs that could facilitate

investments in agriculture and the creation of

non-agricultural income opportunities in rural

areas; macroeconomic stabilization that would

assure new jobs for young people, including

the rural labour force, and reduce over

employment in agriculture. [6] Finally the

increase of agricultural product prices on bothworld and domestic markets, which might

also contribute to a higher income level.

CONCLUSIONS

A turnaround plan is a “back to basics,”

market-responsive approach that is designed

to achieve high impact, short-term results. A

business may only have one chance to regaincredibility with its employees, clients, and

creditors.

For that reason, maximum effort must be

focused on the opportunity.

If the plan succeeds, then many good people

get to keep their jobs and the business remains

feasible.

If the plan is not carefully thought-out and

implemented, the turnaround may fail and

reorganization may be the foreseeableconsequence.

The statistical hypothesis testing performed

has confirmed the following:

- less than 50% of managers in agribusiness

have little or no knowledge on leadership;

- less than 30% of managers in agribusiness

have little or no knowledge on turnaround

management;

- less than 30% of managers in agribusinesshave little knowledge on agribusiness;


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- less than 50% Romanian agribusiness

managers have the have specialized studies;

- less than 25% Romanian agribusiness

managers are interested in staying up to date;

- Romanian agribusiness top management isrun by more managers than leaders;

- there is a direct link between success in

agribusiness and leadership & turnaround

management know-how;

- actualized knowledge is a critical need under

the current economic context

- the EU, the Romanian Government, NGOs

are offering specialized support to run

agribusinesses in harsh times of financial;- Romanian agribusiness is progressing and a

positive trend in the development of the

Romanian agribusiness has been observed for

the past 3 years;

- the data revealed the need for specialized

know-how in restructuring the agribusiness to

best face the negative effects of the financial

crisis;

- application of the two concepts presented

under the herein represent opportunities for

the development of the Romanian agriculture

and especially to the success of the

agribusiness industry, supporting the

overcoming of the negative effects of the

financial crisis.

The Romanian agribusiness environment is

going through serious changes and is trying to

apply concepts that are relatively new for it

and to catch up with the trends in our region

and EU overall as respect to running businesses during financial crisis times.

The material presented in this article offers a

brief view of the research thesis developed by

the author in order to finalize the Master

program of Business Economics and

Management under MAICh – CIHEAM.

This is not an exhaustive study and any of the

concepts debated under the herein may

subsequently be analysed under different

study cases – depending on location, industry, political or economic context.

ACKNOWLEDGEMENTS

This thesis has been developed with the

special contribution and guidance of all the

people who participated to the

accomplishment of this study. I would like to

acknowledge and demonstrate my

appreciation and deepest admiration to

everyone that supported me on my quest.

I would like to thank my supervisor Prof. Dr.

Marios Katsioloudes for his support and

guidance. His comments and ideas have

without a doubt been very helpful in

overcoming the challenges that appeared

thorough the development of the study.

I would also like to extend my thanks to the

head of the Master’s Degree Program in

MAICH, Dr. George Baourakis, who through

his teaching, leadership and advices has given

me the knowledge and motivation to develop

this thesis to the best of my capability.

REFERENCES

[1] Conger, J.A., Riggio R. E., 2007, “The practice of

leadership: developing the next generation of leaders”,

John Wiley & Sons, Inc., ISBN-13: 978-0-7879-8305-

5, p. 331

[2] Dona, I., 2008/2009, “Rural economics - course

notes”, UASVM Bucharest, Romania

[3] Goodman, S. J., 1982, “How to Manage a

Turnaround”, Macmillan Publishing House, ISBN-

13: 978-0029124802, p. 183

[4] Mateoc-Sîrb, N., 1999, “Agricultural Exploitation:

past, present and future”, Agroprint Publishing,Timişoara

[5] Sloma, S.R., 2001, “The Turnaround Manager's

Handbook ”, Beard Books, ISBN: 1893122409, p. 242

[6] Vidican, G., 2008, “Land Reform and Land Use inRomania”, Rural Development and Food Security

Magazine

[7] Wren, D.A., 1995, “Henr i Fayol: learning from

experience”, Journal of management history 1 (3):5-12

leadership and turnaround management concepts applied in the agribusiness environment in romania

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