One of the main challenges that we (as ranch directors) have to deal with, on a day to day basis is that of enhancing ranch productivity. I was reflecting on this subject — namely the subject of maximizing ranch productivity — the other day, and it occurred to me that there are, in fact, three key determinants of ranch productivity. These three are aligned with the factors of production: which, to me, makes sense given the fact that ranch management revolves around seeing to it that the factors of production are optimally utilized.
The first key determinant of ranch productivity is that of land utilization. A ranch is said to be optimally productive if the land in it is optimally utilized. Thus if one ranch is 2,000 acres, and it gives, say, $1 million per year, while another mini ranch is 500 acres, and gives $500,000 per year, then the mini ranch (of 500 acres) is said to be more productive the big ranch of 2,000 acres. This is because for the big ranch of 2,000 acres giving $1 million per day, it translates to a productivity of $500 per acre, whereas for the mini ranch of 500 acres giving $500,000, it translates to a productivity of $1,000 per acre.
The second key determinant of ranch productivity is that of labor utilization. The idea is to produce as much as possible, using as little labor as possible, whilst at the same time ensuring that the labor is not over-strained.
And the third key determinant of ranch productivity is that of capital utilization. The idea here is to produce as much as possible, for a given amount of capital investment.
It is critical to understand that these factors are not supposed to be looked at in isolation, but rather, the factors should be looked at together. Thus, the first mine ranch that seemed to be very productive at $1,000 per acre may turn out to be not so productive, when we discover that the capital investment in it is much higher or/and when we discover that its labor costs are also much higher. So you need to look at the whole matrix of these four factors, while trying to figure out whether or not a given ranch is optimally productive or not.