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Marina Garadzha Farm Management Survey: Preliminary Results

	Farm Management Survey: Preliminary Results

	Marina Garadzha 




1.	The present day agricultural reform is intended primarily to 
promote efficient farming, resuming the work begun in the early 
part of the century by Stolypin. The emergence of efficient 
farming, or Ófirmly establishedÔ farmers as they termed it then, 
is the key to solving the problems of agriculture, including 
political problems. The question is, who can farm efficiently? 
According to Stolypin, only independent citizens will×or can×
achieve this goal. For this to occur, Stolypin believed it was 
necessary for firmly established peasant farmers to be able to 
withdraw from a land-holding community and become independent 
owners: without independent ownership it was impossible to have 
independent citizens. In this sense, Russian farming needed to 
take on some of the characteristics of Western farming.

Current context of agrarian reform

2.	Agrarian reform is currently being implemented in a post-
communist, market economy. The nature of this economy will not be 
discussed here, but it should not be forgotten as the backdrop 
for reform. Basic features of this background are an existing 
large-farm system, the breakdown of the state management system 
of agricultural production and pricing, and an undeveloped market 
structure of sales and services in agriculture and other sectors.

3.	The privatization of collective and state farms carried out 
in 1991Ö93 may be regarded as the first stage of the reform 
transferring ownership rights from the government to the farm 
collectives. However, during this stage no efficient owners of 
production means emerged as by and large the reform did not 
affect the internal structure and management of the farms. It was 
this specific deficiency that the Program of Farm Reorganization 
launched in Nizhny Novgorod in 1993×and since implemented in 
Orel, Ryazan, Rostov and other regions×has attempted to remedy.

What it means to be an efficient farmer

4.	An efficient farmer is characterized by two basic features. 
The first, the ability to make independent business decisions, is 
based on private ownership of the means of production. At the 
least, a farm that is generating a profit should have the 
opportunity to use it for its own development, instead of 
supporting nonprofitable farms. The second feature, the ability 
to efficiently manage farm assets and ensure profitability, 
depends on farm leadership and management capability. Good 
managers are needed to establish efficient production and develop 
a farmÒs full market potential.

5.	In the current reorganization process, new enterprises are 
formed from former collective and state farms and take over the 
land and property in private ownership. In this context, private 
ownership is understood as non-state ownership, meaning in 
general that the government no longer is responsible for 
distributing the products produced by the farms. Immediately, 
therefore, the necessity for efficient management of the new 
enterprises arises. But how can a new owner-farmer efficiently 
distribute his products under immature market conditions? Who can 
aspire to manage efficiently these new farms under these new 
conditions? Reorganization presents opportunities for capable 
workers from the former collective or state farms to create their 
own farms, by themselves or in partnership, and through skill, 
hard work and willingness to learn achieve the efficient 
management that yields a profitable business.

The farmer-entrepreneur

6.	Any manager of an enterprise in the process of reorganizing 
into a private, non-state enterprise can be said to be an 
entrepreneur. However, a true entrepreneur is a manager who uses 
the business practices needed to operate a private enterprise in 
a market environment. In other words, an entrepreneur is a person 
who can efficiently manage his/her enterprise under market 
conditions.

7.	A narrow definition of the term ÓentrepreneurshipÔ is also 
used in Russia to describe commercial trading activity. This 
carries a negative connotation to farmers: a farmer-entrepreneur 
may not like hearing his business identified with a street-
pavilion seller.

8.	The process of entrepreneurship that emerges in rural areas 
is of great interest. Sometimes a farm may change ownership form 
without changing management methods, business strategy or 
directors. In that case, the director could hardly be called an 
entrepreneur. It is therefore important to determine whether 
there are managers who fulfill the requirements of true 
entrepreneurship, who efficiently manage private farms of various 
organizational forms and sizes under market conditions. Who are 
the present-day farmer/entrepreneurs? Do they exhibit common 
characteristics in their attitudes and business practices? And 
finally, is their management efficient? These were the major 
questions targeted in the present study of the operation of more 
than 40 farms that emerged in the reorganization of the 5 pilot 
farms in Nizhny Novgorod oblast in 1993Ö94. 

9.	The study uses data collected for an economic analysis of 
the operation of these farms soon after reorganization and a year 
later in the summer of 1995. For the survey, 482 workers from the 
5 reorganized farms (Association Pravdinsky, Joint-Stock Company 
Emelyanova, Limited Liability Partnership Niva, Collective farm 
60th Anniversary of October, and Joint-Stock Company Yelkinskoye) 
and 204 workers from 4 nonreorganized farms were interviewed. In 
all, 42 managers of all new partnerships, peasant farms and 
individual farms were interviewed. A total of 16 interviews with 
managers of partnerships and 3 interviews with managers of large 
peasant farms were conducted.

Who becomes a leader of a reorganized farm?

10.	In theory, any individual entitled to property and land 
under the current law may set up a worker-owned farm or a peasant 
farm. In practice, the people who usually take on the management 
responsibility are those who are already experienced in 
management and, more important, have sufficient authority to be 
able to head the enterprise. However, leaders do not necessarily 
need to be the directors of the former collectives or state 
farms. For example, a specialist or a former head of one of the 
operational units may become a leader. Quite often, collective or 
state farm workers who possess drive and initiative are willing 
to start their own business even under the current difficult 
farming conditions.

11.	According to the survey data, the current roster of farm 
managers was derived as follows: 12% were either the directors or 
the chairmen of the former collectives or state farms; 22% were 
managers of operational units; 25% were specialists; and 40% were 
workers (see Table 1 for a profile of managers). Most frequently, 
former farm workers headed the peasant farms or became individual 
farmers, and former farm managers and specialists headed the 
partnerships.

12.	The education level among the new managers varied: 54% 
graduated from advanced education institutions, 16% from 
secondary schools, and 24% from secondary professional schools; 
6% have had at least some secondary education. The age span of 
new managers was from 28 to 69, with an average age of 40.

Table 1. Profile of new enterprise managers


Occupation on former farm
  Directors or chairmen	12%
  Manager of operational unit	22%
  Specialist	25%
  Worker	40%

Level of education
  Graduate of advanced institution	54%
  Graduate of secondary school	16%
  Graduate of professional secondary school	24%
  Some secondary education	6%

Age
  Range (42 managers)	29-69
  Average age	40




Profile of reorganized farms

13.	The size of the enterprises created from the five pilot 
farms that these new leaders manage varies widely. Most of the 
land and property was transferred to large farms: peasant farms 
received only 5% of the land and 6% of the property. Most of the 
land was accumulated by mixed partnerships (on average >5,000 
hectares) managed as a rule by a small number of members.

14.	It is at the stage of the formation of a new farm that a 
prospective leader defines the nature of the future enterprise. 
The managers and their colleagues determine then how much land 
and property and of what kind are required, what specialization 
the farm will have, what specialists and workers are required, 
and so forth.

Motivation and attitudes of new leaders

15.	Farm managers expressed various motives for having 
participated in reorganization.. Even prior to reorganization 
some of them were genuine entrepreneurs and their major objective 
was to maximize their profit. For them reorganization was just a 
way to achieve this goal. For example, one manager of a 
partnership said, ÓA long time ago we started to look for 
possibilities to reorganize our farm. That is why, when 
reorganization was launched I was ready for it and I knew exactly 
what kind of enterprise would be profitable.Ô [from an interview]

16.	Other managers were initially opposed to reorganization but 
changed their minds during the process of reorganization. As one 
manager of a partnership said, ÓI started reorganization because 
of pressure from my colleagues. But once I started, there was no 
way back....I would not want to go back to a collective farm. My 
partnership retained the gained potential, it even increased it, 
whereas some other partnerships lost what they got. It is those 
partnerships that want to reunite now.Ô [from an interview]

17.	A third group of managers tried to realize ambitions that 
could not be achieved under a collectivized system. For example, 
one of the partnership managers who was a former collective farm 
director stated that he could not realize all his objectives as 
his collective elected another director at its general meeting. 
However, he had been sure that together with those workers who 
trusted him he would be able to create an efficient farm.

18.	Many entrepreneurs, especially the farmers, were not 
satisfied with their work on the collective farm and were looking 
for independence. The head of large peasant farm said, ÓI made up 
my mind to set up my own farm so that [I could] work by myself, 
manage by myself and use the operational results by myself.Ô 
[from an interview]

19.	The attitude of these new farm managers to reorganization 
can be summarized by saying that most do not want to return to a 
collective form of farming. Only three of the 42 managers 
interviewed expressed that they are ready to go back to the 
former system.

Identification of targets by the managers

20.	Seventeen of the 19 managers of large partnerships and 
peasant farms that were interviewed identified themselves as 
entrepreneurs, although they interpreted this in different ways. 
Usually, they defined an entrepreneur as a Óperson who devotes 
every minute of his time to gaining profit. Sometimes the 
potential for gaining profit is obvious, sometimes a detailed 
analysis is required.Ô [from an interview]

21.	Some managers who are efficiently running their farms in 
practice do not identify themselves as entrepreneurs, however, 
due to the negative connotation of ÓentrepreneurÔ described 
earlier. Others believe that apart from gaining profit one of the 
main goals of entrepreneurship is to maintain and improve the 
quality of land. There is no contradiction here. It is 
characteristic of farmers to work the land in such a way that it 
will feed them in the future. ÓI want to let the land we work on 
live normally. We donÒt want to leave a deserted land to our 
children.Ô [from an interview]

22.	Some new farm managers basically continue to work as they 
used to, not realizing the necessity to introduce changes. Their 
goals remain about the same as those for traditional 
collective/state farms. For example, a dairy farm located in an 
industrial center, where it would have been very profitable to 
sell milk at the local market, continues to deliver all its 
products to a milk processing plant that buys at very low, 
monopolistic prices to the producer. The dairy farm management 
thus exhibits the strong influence of habit over any self-
interest or profit motive. This mind-set was confirmed in the 
interviews.

23.	New farm managers appear to be affected by doubts concerning 
the stability of changes and fear of unpredictable consequences. 
These doubts may be expressed in different forms. For example, 
the managers of two mixed-partnerships that must re-register 
under the new Civil Code are reluctant to do so×at least, not 
before the elections for the State Duma×as they are not sure 
whether there will be drastic changes in the political course.

Who is efficiently farming?

24.	The analysis of the economic variables of the reorganized 
and nonreorganized farms of Nizhny Novgorod oblast showed that on 
average the farms began to operate better after reorganization. 
However, the averages level some unevenness in farm-by-farm 
development; in fact, differences in the operation of new 
reorganized farms are very significant. Thus, for example, for 
two farms of nearly the same, sales proceeds for one of the best 
farms increased sixfold within a year while there was a tenfold 
decrease in the sales proceeds of one of the weakest farms. 

25.	For the analysis of the 1995 operational results of 16 
reorganized farms, the farms were classified into two categories 
as Ómore efficientÔ farms and Óless efficientÔ farms. Criteria 
used were: gross income per worker, per 100 rubles of fixed 
assets, and per 100 rubles of costs; profitability; and the ratio 
between subsidies received and budgetary payments. The farms 
divided out at seven farms in the less efficient category and 
nine in the more efficient, with five of these being clearly the 
most efficient.

26.	The responses of the managers of these farms were then 
compared with the efficiency of their operation in order to draw 
conclusions as to what factors×what operational methods and what 
management principles×yielded an overall successful operation of 
the farms. These principles constitute a kind of philosophy of 
farming.

27.	Due to a lack of sufficient statistical data on peasant and 
individual farms, their management styles were analyzed less 
thoroughly than those of the collective farms. However, the 
business philosophy of managers of peasant and individual farms 
is generally more straightforward since having started their 
businesses practically from ground zero, they faced the market 
right away and survived strictly on their own business sense. At 
the same time, their share of the land and property of the 
reorganized farms is significantly less.

Business philosophy or basic principles of farming

1.	Identity as entrepreneurs.

	Õ	Six out of nine managers of the most efficient farms 
identify themselves as entrepreneurs and believe that 
their primary target is to make a profit.

2.	Investment activity.

	Õ	The efficient farms have usually reinvested profits 
back into production development. Four out of nine 
farms decided not to pay dividends for the last year.

	Õ	Investments considered most profitable by farmers are 
trade, their own processing and construction.

	Õ	Some farmers consider bakeries to be profitable and 
either have already started or are planning to bake 
their own bread.

	Õ	Six out of nine managers of efficient farms consider 
the expansion of their trade to be one of the basic 
elements of an efficient operation under present 
conditions. It is assumed that in the future this 
situation may change.

		Example: Limited Liability Partnership 
ÓIstokÔ is a profitable farm. The farm 
manager, the chief economist of the former 
state farm, believes that the direct sale of 
his own products without any middlemen is the 
best practice for efficient farm operation. 
Istok would not and does not deliver its milk 
to a milk processing plant setting 
monopolistically low prices for producers. 
The farm is located near industrial centers 
where it owns three food stores and sells its 
milk and meat in these outlets as well 
straight from lorries. The farm manager has 
primarily targeted an increase in milk 
production as he considers the dairy business 
the most promising.

	Õ	Farmers consider investments in the purchase of special 
breeds of cattle and seeds to be very profitable since 
they are both very well subsidized by the government 
and they fetch higher prices.

	Õ	The largest financial investments for all types of the 
farms went to the purchase of agricultural machinery. 
Nearly all the farmers stated that a major problem was 
the lack of good machinery and the difficulty and cost 
of upkeep.

3.	Production.

	Õ	Farmers strive to introduce new, more effective 
production lines and technologies and to get rid of 
nonprofitable productions. For example, they might 
reduce the area under nonprofitable crops such as linen 
and expand the area under more profitable crops like 
vegetables, potatoes or cereals.

	Õ	Managers of the efficient farms strive to diversify 
their activities by undertaking handicrafts (or similar 
businesses of this type) and other commercial activity. 
In doing so, they try to lower the risk of production.

		Example: The head of a peasant farm bought 
and repaired a closed canteen on the former 
farm, turning it into a town cafe. The cafe 
provides good services to the people and 
makes a profit for the farm.

	Õ	At the same time it is worth mentioning that of the 
five most efficient farms three are small, specialized 
farms, specializing in plant growing (1) and vegetables 
(2).

	Õ	Nearly all the farmers consider labor intensification 
to be one of the best ways to increase production 
efficiency. One of the basic principles identified by 
the farmers is to use less manpower and to operate more 
efficiently.

		Example: ÓWe try to run our farm employing 
fewer people. All workers have to play 
different roles simultaneously. If we have to 
unload a lorry, both my deputy and my driver 
will be doing that.Ô [from the interviews]

	Õ	The farmers identified careful saving on fuels and 
oils, spare parts and manpower as the primary means for 
decreasing production costs in 1993Ö95.

4.	Management methods.

	Õ	Eight of nine managers of most efficient farms state 
that the most important financial and operational 
decisions are taken only after discussion with the 
specialists, although this does not mean that they 
never resort to an authoritarian management style. Some 
of the farm managers turn to various consulting 
agencies for advice.

	Õ	The farm managers consider the correct selection of 
employees to be very important. The best farms achieved 
success mostly due to intensive and well-coordinated 
work by their carefully selected and, as a rule, small 
group of workers.

	Õ	All of the farm owners believed that labor motivation 
is highly important. To reinforce the motivation, they 
use labor evaluation methods based on results, a system 
of incentives and penalties, and moral encouragement.

		Example: ÓThere was no one to work with 
calves. I invited a pensioner and told her, I 
will pay you 200,000 rubles without any 
deductions plus in autumn you will get [for 
your own use] the best calf if there is no 
loss of calves. I brought 58 calves. She is 
doing well as of now; there is no loss of 
calves as yet. It is beneficial both for me 
and for her. The better she looks after the 
calves and feeds them, the better calf she 
would getÔ.

	Õ	An important labor management mechanism is the 
possibility to lay off negligent workers. Some farm 
owners said they would like to switch to a contractual 
labor system.

	Õ	Under extreme farming conditions, the farm owners are 
distinguished by resourcefulness and an ability to find 
nonstandard solutions in complicated situations.

		Example: ÓThe farm gains its major income 
from potato production. I made one of the 
truck vans warmer and all through the winter, 
when other farms could not sell their 
potatoes if there was frost, we delivered to 
six food stores in Nizhny Novgorod and other 
cities and towns and sold at a good price. 
Thanks to that, the farm was able to purchase 
fuel, oil and mineral fertilizers in the 
winter at a low price and still have some 
funds left.Ô [from the interviews]

	Õ	Most farm owners strive to optimize the ownership 
structure of their farms by buying out the 
participation shares and land shares from shareholders 
(primarily, pensioners). All nine farm owners believed 
it was necessary to reduce the number of shareholders 
in order to improve the production management system. 
Only three of nine farmers strive to increase their 
personal share in the charter capital. Others wanted 
the land and property to be owned by their farm as a 
legal entity.

5.	Marketing.

	Õ	Seven of nine managers of efficient farms stated that 
they devoted most of their time to establishing 
business relations and expanding their sales market. 
Four farms already have a commercial director or a 
commercial department. At small farms, the managers 
take on these marketing functions, but they would like 
to be able to hire specialists to do them.

	Õ	Most farm owners prefer direct deliveries of products 
under contract and barter.

		Example: ÓThe farm sells its products not to 
the state but directly to customers under 
contract. Only direct deliveries. I do not 
understand what the state is, something 
indefinite, no leaders, no responsibilities. 
We have some permanent customers who pay in 
advance. That is the kind of cooperation I am 
striving for.Ô [from the interviews]

	Õ	Some farm owners have marketing information systems, 
but for most them this is still a major problem. 
Usually they get information by calling the markets and 
food stores in the region.

		Example: ÓI get information on prices for 
agricultural products in the region from the 
Department of Agriculture every week. By 
analyzing last year's information, I am able 
to make projections for this year.Ô [from the 
interviews]

28.	The above analysis indicates that the farms operating more 
efficiently post-reorganization are more advanced in the use of 
business methods and management strategy, allowing them to react 
more flexibly to changes in the market environment. This is one 
of the basic factors of success. One of the most striking 
features distinguishing farm owner/entrepreneurs and farm 
managers oriented toward old farming methods is their attitude 
toward trade. The farm owner/entrepreneurs realize that, whether 
they like it or not, they will not be able to achieve maximum 
efficiency unless they resolve the problems related to products 
sales, trade and marketing. 

Labor motivation and behavior in reorganized farms

29.	The success of the most economically efficient farms is 
ensured not only by the economic factors but by social and 
psychological as well. This is confirmed by the results of the 
sociological survey conducted at five pilot farms.

30.	Workers on the leading farms are more highly motivated and 
more involved in the production management as compared with 
workers on other farms. Workers on the less efficient farms have 
changed little or not at all in their attitude toward the farm in 
spite of the fact that they are its co-owners.

31.	Compared with workers on other farms, workers of the leading 
farms are more interested in the results of their labor. 
Responding to the question, ÓHas discipline changed after 
reorganization?Ô they state that discipline has not become worse: 
either it has remained the same (34%) or has improved (61%). 
There are fewer cases of drinking and theft.

32.	The role of a manager in changing worker attitude toward 
labor is significant. The reorganized farms started their 
businesses at a critical moment with outstanding debts, worn-out 
machinery, low-quality manpower, etc. Under these conditions, 
dividends can hardly be expected. The art of management is to 
motivate labor under such severe circumstances using the 
potential presented by the new organizational and legal structure 
of the farm.

Conclusions

33.	In summary, it can be concluded that the most efficient 
farms were those in which the managers succeeded in overcoming a 
mental inertia to change their own and the workers' style of 
work. They realize to a higher extent the philosophy of an 
entrepreneur  and the business strategy. They are more flexible 
and dynamic in adjusting to new market economy. They managed to 
rally their workers, to motivate labor.

34.	It can be said that the market made entrepreneurs emerge. A 
chairman of a former collective farm or a director of a former 
state farm had to ensure the production of products under a state 
order, but a manager of a private farm must ensure the 
profitability of his/her farm. The new goals bring out creative 
management strategies and principles. The importance of farm 
reorganization is that it accelerates these changes and 
stimulates the process of farm adaptation to a market economy.

35.	Reorganization spurs the process of the emergence of new 
leaders who take upon themselves the responsibility of 
decisionmaking under the risk incurred by the market. 
Reorganization also stimulates competition between enterprises 
and entrepreneurs. As a result, land and property of 
noncompetitive enterprises may be transferred to stronger farms 
or more efficient owners. Reorganization encourages the gradual 
improvement of the farm ownership structure through the buying 
out of entitlements by farms that are able to do so, bringing 
about a change in the composition of partners.

36.	The type of entrepreneur described above is clearly an 
idealized entrepreneur. An entrepreneur is a type of economic 
businessman, rationally running his/her business. The farm 
managers in the survey correspond to this ideal only to a certain 
extent. The current economic situation in Russian agriculture is 
very complicated, characterized by low capital turnover. 
Therefore, a farmer/entrepreneur would not attract the Mafia or 
bankers investing in agricultural land. In addition, rural life 
is more static than urban and traditions and habits are much 
stronger there. A farmer/entrepreneur therefore does not look 
like a new person in the rural areas. He is the same specialist, 
manager or worker he used to be, and he is foremost a laborer. 
The old and new values are mixed up in his mind and sometimes 
they may be contradictory. However, today the times themselves 
force him to change and he is succeeding in this better than 
others.





References
Uzun, V. 1995. ÔNizhny Novgorod Model of Farm Reorganization.Ô 
Voprosyi Ekonomiki, No.1.
Simon, G.A. 1993. ÔRationality as a Process and Product of 
Thinking.Ô Mir Cheloveka, No.3.
  Dr. Marina Garadzha is a sociologist on the staff of the Russian Land Privatization Project and a Candidate of 
Philosophic Sciences, Sociologist.


 



 

 



2	Farm Management Survey: Preliminary Results/Garadzha



Russian Land Privatization Project	13