Editor's Note: The U S. pork industry enters 2002 with a full plate of challenges and opportunities. The infrastructure that encompasses National Pork Board and National Pork Producer Council (NPPC) activities has been revamped. Pork producers are attending state association annual meetings to establish positions on key issues and to draft resolutions for delegates to debate at each organization's annual meeting in March.
As a service to our readers, we begin with a progress report on the NPPC and National Pork Board transition plans which were targeted for completion at the close of 2001. Accompanying this update, new National Pork Board CEO Steve Murphy shares his vision of the challenges that lie ahead. Next month, we will provide an update on NPPC's restructuring efforts.
The new year marked a new way of doing business for the National Pork Board and the National Pork Producers Council (NPPC). As mandated in a settlement agreement between three Michigan pork producers, the NPPC and the U.S. Department of Agriculture (USDA) on Feb. 28, 2001, decisive lines have been drawn between the two organizations. Since, both organizations have been reallocating resources and responsibilities.
To facilitate the process, Des Moines-based RSM McGladrey, Inc., an accounting/business management consulting firm was hired to provide third-party, independent oversight for the transition-separation process. A thorough business and operations review brought forth a document, “Business Transition Framework,” which was presented to, and adopted by, the National Pork Board in November.
This progressive plan of work is important for all pork producers to understand as they draft and discuss resolutions destined for action by delegates at separate annual meetings of both organizations set for Feb. 28-March 2 in Denver, CO.
Briefly, the settlement agreement prescribed these guiding principles for the National Pork Board to operate independently of NPPC.
Establish two distinct organizations with independent governance.
Manage all checkoff-funded contracts.
Remove complete reliance of NPPC as primary contractor of checkoff-funded programs.
Establish separate and independent leadership (National Pork Board named Steve Murphy as new chief executive officer (CEO) in October; a new NPPC CEO is expected soon).
Separate communications functions.
Hold separate and distinct annual meetings.
All of this boils down to distinct and separate marching orders for each organization.
National Pork Board will serve pork producers, through management of their checkoff contributions, by providing research, promotion, consumer information and education. Additionally, the board can interact with the government to share and collect information, to provide technical comments on regulations and rules as they relate to science, economics and implications for producers, but in no way, can it attempt to influence policy.
NPPC will represent members and constituents in an advocacy role related to regulatory/legislative issues affecting the pork industry. And, NPPC will provide lobbying for regulatory and public policy issues and establish a working relationship with state pork producer organizations. Presently, a 39-member task force is working to fulfill a shareholder outreach resolution (SO-10), passed during the 2001 annual meeting delegate session. The task force is charged with outlining a new national organizational structure for NPPC, including funding, membership, governance and priorities.
NPPC will also maintain a certification role for environmental standards through newly formed EMS (Environmental Management Solutions, LLC), Production & Financial Standards, food safety initiatives, etc.
The settlement agreement mandated that separate staffs be established for each organization. The agreement also provided that any NPPC staff member that spent at least half of their time working in checkoff-funded programs could transfer to the National Pork Board staff. The goal was to ensure that the impact on checkoff-funded programs would be minimal.
National Pork Board will manage the following functions and areas:
Program services: shareholder outreach, demand enhancement, environment, education, production (EEP) services, science and technology.
Administrative services: general services, accounting, human resources, meeting services and economics.
Senior management: directed by new CEO Steve Murphy and recently named CFO Bill Winkelman.
NPPC, in addition to maintaining separate senior management, will focus on:
Public policy;
Shareholder outreach (including communications), and
Subsidiaries (EMS and others).
Before the agreement, NPPC was the primary service provider contracted to manage the lion's share of checkoff-funded programs.
Now, the National Pork Board is responsible for leading and directing these activities. However, it can contract the delivery of programs with outside vendors, including NPPC.
National Pork Board may contract with various providers for the delivery of environmental research and education programs, such as risk management research/education, environmental research/education and producer training. Murphy points out that vendor contracts will utilize the standard business practices of request for proposals (RFPs) and a value-based assessment for awarding any contract.
World Pork Expo, the industry's largest annual event, remains the property of NPPC. The National Pork Board will pay for the space needed to deliver educational and program information at the event.
National Pork Board funding will remain predominantly checkoff-based, with some supplemental funds generated from royalties or provided through government or foundation grants aimed at enhancing program development. Co-marketing arrangements and demand enhancement activities with private companies, such as Kraft Foods, will continue.
NPPC funding remains a key issue for the SO-10 Task Force. Primary funding possibilities include membership fees, fee-for-service revenue (including World Pork Expo profits) and discretionary funds through industry sponsorships.
NPPC intends to commercialize the Production & Financial Standards program, possibly across other livestock species and crops. The standards were developed using checkoff funds, therefore, the software, database programming remains the intellectual property of the National Pork Board. However, eight NPPC staff members formed the nucleus of EMS, carrying program expertise with them. Consequently, to build equity and value in that intellectual property, both parties have something the other needs.
In an effort to best serve the industry, the National Pork Board waived any fees or royalties for a four-year period. When that period expires, EMS (NPPC) will share the revenues created by this programming area.
Similarly, the Comprehensive Nutrient Management programming is the intellectual property of the National Pork Board. But, again, EMS has the expertise to implement it so it will work with the National Pork Board to ensure producers get maximum value from them.
These two programs represent the only long-term agreements between the National Pork Board and EMS. Both have been approved by the Agriculture Marketing Service (AMS), the arm of the USDA that oversees checkoff-funded programs.
Some key industry relationships, cultivated and managed by NPPC in the past, remain important to both organizations. They have been divvied up and given “primary” or “secondary” status, then assigned to the respective organizations as follows:
The National Pork Board will maintain a primary relationship with the Retail Action Committee (RAC), U.S. Meat Export Federation (USMEF), and American Association of Swine Veterinarians (AASV).
On NPPC's primary list is the Packers & Processors Industry Council (PPIC) and allied industry relationships.
Both organizations, logically, will maintain relationships with pork producers, including their state organizations. The National Pork Board retained responsibility for oversight of checkoff funds to state groups.
And, both NPPC and the National Pork Board will continue to work with government officials and agencies.
New National Pork Board CEO Steve Murphy tackled the first 90 days of his administration with a plan:
Spend the first 30 days in the office getting to know board members, producer leaders and more than 80 staff members and the programs they manage.
Spend the next 30 days on the road getting in front of as many producers, in as many different sizes, types of operations and geographical locations, as possible.
“I look at this as a very complex puzzle that I was out there collecting pieces for. I don't know what the picture is going to look like, but I want to make sure that everybody has an opportunity to throw his or her piece of the puzzle into the box. There will be time, later, to sort through the box and start creating a picture that makes sense to everyone,” he says.
Spend the final 30 days mapping out a plan that will be presented to the National Pork Board in mid-January.
Murphy reinforces that he entered his fact-finding mission with an open mind. “I came in with really no industry background — which is both an asset and a liability. The asset is, I came in with no agenda, no predisposed position on any issue. The liability is, my learning curve might be a little slower,” he says. “But, frankly, the board did not hire me because of my hog or pork expertise. They wanted someone with a different perspective, essentially with some unconventional strategies to solve problems.”
Murphy says many producers told him this: “We've kind of lost control of our checkoff funds; we don't know how this money's spent; we're not sure if it brings any real value to our operation; we really don't have any ownership of what's going on.”
Whether this thinking is a real assessment or not is not the issue. “It's their perception, and in many cases, perception is even stronger than reality,” he says.
Working with that basic premise, Murphy sees a critical gap in many pork producers' ability to feel ownership in the checkoff-funded programming areas.
“Frankly, we don't manufacture anything. We create intellectual capital. There has got to be a transfer of that property to the producer before any value is created,” he asserts.
Using a business analogy, Murphy equates the active pork producer committees and leadership to the research and product development arms of business. They identify the needs of the industry and the portion of the budget to invest in them. This provides the operating plan for the staff. If there is a gap there, there's sure to be disconnect between producers and the checkoff-funded programming, he believes.
The next potential gap is the delivery of information collected through checkoff-funded programs. “After we create programs, we create a catalog that basically says: ‘here it is, if you want it, come and get it.’ Frankly, a lot of producers aren't coming and getting it,” he says.
“If this was a ‘for-profit’ organization, there would be another layer between manufacturing and the customer — and that would be sales, marketing and customer service. That is where the real value proposition is created because it helps him/her extract maximum value out of the product being delivered.”
In Murphy's view, conventional communications efforts focused on telling producers how good their programming is, will not solve the problem.
Murphy offers these possibilities for better delivery of information and real value:
Producer hotlines — producers call a team of experts to discuss a problem; they could quickly share the latest information available on the topic or direct them to a program area. “There's a tremendous amount of expertise among the (current) support staff that already have a strong relationship with the producer community,” he explains.
SWAT teams — individuals or teams of specialists sent to an operation to help analyze and solve problems and apply checkoff-funded programs.
In-field partnerships — teaming up with state organizations to become a ground force to work one-on-one with producers.
“I don't think you can assume, just because the programs are there, that the producers have the motivation, or even the inclination, to jump in and grab the information themselves and make it work. We need to be a facilitator in that process,” says Murphy.
“I think our communications have been somewhat of a one-dimensional, traditional association (approach) — news and public relations oriented — with newsletters and brochures,” he continues. “Frankly, I don't think that vehicle is getting the job done. That's not to say those aren't critical components for communications strategies, but it is to say there's a dimension that's missing today because we're not getting the value message through to producers.
“Rather than providing raw data, I think we must evaluate and analyze that data so we can pass on actionable information they can use.”
Whether the changes will come in time to change some producers' views about the value of the pork checkoff, Murphy admits, he doesn't know. “I do know that if we fix the problem, there will be a checkoff program for some time to come because we're adding value to the industry and we're dealing with it correctly. It may not be mandatory, but there's enough support out there today that if we attack the root of the problems, getting producers reconnected to the programming, there's going to be a tremendous amount of support for some checkoff-funded programming going forward.
“We're not here to propagate the mandatory checkoff program,” he continues. “Our goal is to serve producers; that's where we need to focus.”
With limited time, capital and human resources, Murphy says his entrepreneurial experiences could help. “The only way you can hope to be successful is, one, establish clear objectives; two, get everyone on the same page; and, three — focus, focus, focus.”
Murphy, a strong proponent of “the critical need to focus,” continues: “By virtue of the separation, I think it's an opportunity for us, as the Pork Board, to focus on promotion, research and consumer education. I hope the council (NPPC) adopts the same level of focus to serve the industry in the lobbying, policy and legislation areas.”
“This is not my story,” explains Murphy. “It's a compilation of the feedback I'm getting from producers. This is certainly not a judgment I'm passing on the way things have been done in the past. I think the whole separation process is an opportunity for the organizations to consider change.
“It's a changing industry. It has changed a lot in the last 10 years; it's going to change a lot more in the next 10. The question is — how do we best position the organization to serve the industry in the future?
“I think producers have an expectation about how these checkoff-funded programs should help them personally. That's why we, as an organization, need to focus on helping every producer experience a direct benefit in some fashion. (If they do), I think the support will be there,” he concludes.