Defining dedication (by Dave Christiansen)



For the most part, many people who dedicate a lot of time to something they are passionate about go without recognition for their efforts.  When one chooses to serve on various boards of directors or in advisory capacities, he or she has a choice to make.  Am I here to represent a vocal few or do what is best for the entire company?  Do I give all I can or do I just put in my time and go through the motions? I think it’s important to recognize the effort given by MKC’s board of directors along with the expectations they have for themselves and the standards they hold each other to.

The sheer time commitment to be a board member who is engaged and “up to speed” regarding industry knowledge is enough to take most people out of the running.  In today’s business climate the pace of change is incredible and I will contend agriculture is leading the pack with our rate of change.  Not only is agriculture as volatile as any other business today, but the counter party risk is becoming increasingly more worrisome. You better have a good understanding of what that risk is and how it could potentially impact you.  You can’t learn this by only attending monthly meetings. You have to seek out educational opportunities that will expose you to what the experts have to say.

MKC’s board of directors has met with consultants who are experts in doing a risk management assessment. Following assessments of the entire enterprise, the board believed, and I agree, that we have a pretty good handle on the more traditional risks.  The board has also done an excellent job of making sure we have policies and procedures in place to deal with what we already know to be true and potential perils.  What keeps us up at night is what we don’t know.  What potentially can be lurking in the shadows and not even be on our radar?  Or, if it even is known, do we have a solid understanding of what the implications of an event could be.  Is it just a speed bump or does it have the potential of tipping a company completely over?

MF Global is a perfect example of something that certainly wasn’t on anyone’s radar.  It never crossed anyone’s mind that a commodity clearing house would experience fraud at such a magnitude.  When you’re suddenly faced with the potential loss of a few million dollars, you review all of your processes.  Thankfully, MKC has recovered the majority of its funds at this point, but it did cause us to re-evaluate and alter many of our processes. 

Assessing our enterprise risk management was prudent and provided an excellent opportunity for the board and management to look into some areas in which we may not have understood the full extent of our exposure.  It caused us to assess the way we monitor and manage risk in many areas of our company. It also forced us to determine just how much risk we’re willing and able to accept as a company.  Do most companies do this?  Clearly the answer is no, but they should.  By going through this exercise, MKC became a better company.

In addition to meeting with consultants, your board attends a number of conferences to learn how others in the industry are managing their own risk.  Rarely are two situations ever exactly the same. However, by listening and asking great questions they get a good direction to lead discussions with management. 

The key to gaining the most value from this type of exchange is the courage to ask questions, the knowledge of how to ask the right questions and the willingness to challenge the status quo.  When a director observes the world from a different platform, he understands that continuous change and constant transformation is the only way to stay relevant and successful.  Change is your competitive advantage.  So, in addition to seeking out information, you have to be able to communicate the information in a manner that will be clearly understood and actionable. 

It would be impossible to create the vision for MKC’s future if these steps weren’t taken.  Envisioning our future is one of the primary duties of the board.  In addition, your directors work with management to define major objectives that help determine a direction in which to go and create a vision for the future.  The board then holds management accountable for executing the stated objectives.  This can’t be done unless there is a good understanding of what is going on in the world and how you want to fit.

Another part of each director’s responsibility is succession planning. Most people automatically think that a board focuses only on CEO succession.  While that is a part of their duties, another has to be succession planning for the board.  We’ve taken many steps to ensure other members are introduced to the functions of the board including decision-making processes.  Our associate director program continues to be one of the best ways for younger members who think they may be interested, but are unsure, to gain exposure to the process.  If you are someone (or know of someone) who may be interested in this program, please contact a board member or me.  The board also opts to send a number of producers to the quality cooperative young leader conferences held each year. The intent is simply to expose more people to the leadership needs and scope of the cooperative system.

I’ve been in the cooperative system long enough that I’ve had the opportunity to watch an evolution take place.  I can remember a time when the majority of board members of a coop lived in the same county, many times in the same neighborhood or on the same section. Many days, most directors would be in the office in a normal course of business and it was much easier to keep them informed. 

After the formation of the cooperatives and the initial infrastructure was put in place, the decisions directors made then were generally more operational than directional.  Decisions were generally about how many and what kind of trucks to buy, does the leg in the elevator get upgraded or does a new roof get put on the dry fertilizer shed.  Today those decisions have been delegated to others.  Decisions now are about what locations will be replaced, what assets are no longer practical (or no longer required) to serve customers today and who should their strategic partnerships be with.  With today’s volatility and the risk that comes with it, it’s paramount that we do exceptional analysis to evaluate the long-term impact and the return on future projects when looking at annual investments of $5, $10 or $20 million. 

Board members are fully responsible for the fiscal well-being of the coop as well as the maintenance and growth of the company’s equity.  They are charged with ensuring the cooperative is a perpetual entity.  There is no retirement date for their company.   Boards today deal with more emphasis and scrutiny than ever before regarding regulations, environmental and safety compliance, legal compliance, fraud, insurance coverage, employment laws and personnel benefits administration.  Although administered by management, the board has oversight to insure the company is managing all risk properly. 

When you have inventory that can exceed $100 million, understanding your exposure and policies is vital.  Liability exposure for our company is an entirely different concern.  Each year MKC’s directors meet with the insurance and risk management providers to review any changes we have made or should make to our coverage.  Proper training to understand and perform these functions is important as legal counsel constantly reminds our directors that as fiduciaries they potentially have personal asset exposure. 

In addition to serving on our board of directors, we have two directors who chose to be further involved in the influence of the cooperative system.  They campaigned and were elected to serve on the boards of Land O’ Lakes and Cenex Harvest States, both of which are multi-billion dollar worldwide regional cooperatives.  We take a lot of pride in having them in these positions.  The opportunities and experiences they gain far exceed what our local board participates in.  Project analysis takes on an entirely different level at $100 million (plus) and in a foreign country.  To bring that kind of experience back home and use it on a local level is invaluable.  We also have directors who serve on the boards of banks, school districts and in various other capacities, all of which contributes to the skill set they bring to our board meetings. 

As you can tell I’m very proud of the job your board of directors does and the efforts they make to educate themselves.  I make this next comment a little tongue-in-cheek, but it’s true none the less.  I have a tendency to build a management team of very intelligent, capable people and it takes a director with strength, knowledge and confidence to challenge their thought process.  Our current board learns new ways to do that daily.  By being able to work together in this fashion we generally come to much better conclusions. 

The rules are being re-written daily and you have to be tactical or deliberate in your effort to stay knowledgeable.  It doesn’t happen in the coffee shop or just by attending monthly meetings.  You must be dedicated to being a lifelong learner.  If you aren’t, your ability to help make the decisions that truly guide the coop in the right direction will be of little value.  Sure it’s important to remember the past and have a good understanding of corporate history, but today, just doing what you’ve always done doesn’t guarantee that you will always get what you’ve always got! 

People give of their time, their most valuable commodity, for many reasons.  The majority do it not for the recognition or rewards or to serve a self-interest, but because they have a passion for making a difference.  I’m certainly pleased we have members still interested in doing just that and who have the passion for positioning this company to be stronger in the future.