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Family Business Matters       08/09 12:21

   The Steps to Succession

   Effective transitions require more than planning.

By Lance Woodbury
DTN Farm Business Adviser

   Transitioning family businesses between generations can be tricky. Knowing 
when or how to hand off responsibilities to a younger partner requires good 
judgment in the elder and some awareness of how the senior partner will spend 
his or her future.

   A junior member must not only have some level of technical readiness but 
also be skillful at balancing parental, community or industry demands. 
Differences in goals and work styles create strains on family ties, and the 
supervision of staff or relationships with vendors and advisers during a 
transition can be confusing and awkward as the balance of power shifts from 
older to younger.

   Every family business struggles with succession, and no magic formula will 
eliminate all the stress. While the culture, history and personalities in every 
family business are unique, three common practices are the keys to success.

   IDENTIFY MANAGEMENT HURDLES

   In a perfect world, a management transition would simply evolve. The younger 
generation would gradually take on more responsibilities as they gain 
experience, and the senior generation would hand off more duties as they ride 
into the sunset. But, in the real world, the younger generation often needs 
more education, coaching and the chance to make some mistakes before they are 
ready to take the helm. The retiring generation often needs to be reminded to 
transfer knowledge and relationships, and be encouraged to spend more time away 
from the farm.

   Both are challenged to do what is uncomfortable, whether it involves going 
to a seminar on managing people or giving up control of marketing decisions. 
This happens best when specific responsibilities are identified and a plan is 
developed. The act of naming the management challenge and the process of 
planning, even if the plan doesn't go exactly as intended, brings the 
management hurdle to the forefront. That is when progress is made.

   COORDINATE OWNERSHIP DISCUSSIONS

   Managing a business is a daily task, so transition discussions tend to focus 
on the management arena. However, the capital needs involving land and 
equipment, the requirements associated with government payments and the 
implications of estate and income tax all point toward the ownership structure.

   Unfortunately, many families only discuss ownership transitions when parents 
are working on their estate plans. Sometimes, they don't have any 
estate-planning conversations, or if they do, they don't share the results of 
the discussion with the on-farm heirs.

   If we expect the next generation on the farm to be excited about the future, 
we need to incorporate a discussion about how the farm, equipment and livestock 
will be owned. Career satisfaction is highly contingent on understanding how 
the future might look. Not discussing a plan for the ownership transition 
leaves the future of your farm vulnerable to the assumptions, and often 
disappointment, of your adult children.

   EXPRESS CONFIDENCE AND APPRECIATION

   When my wife and I were married almost 20 years ago, I told her I loved her. 
Do I really need to tell her again? When we are around family members for a 
long time, we tend to take them for granted. We don't always listen or voice 
our love and gratitude, and we more often vent our criticisms than we voice our 
confidence.

   Hearing you are appreciated by your family members and they have confidence 
in you is like a performance additive in the transition engine. It augments 
succession efforts, creating more momentum and enthusiasm for the work ahead. 
Such positive feedback also creates stronger family bonds.

   Succession "planning" is one thing; succession "doing" is another. By 
specifically identifying management hurdles, having conversations about when 
and how the ownership transition will occur and offering positive feedback to 
family members, your odds of accomplishing a successful transition increase 
dramatically.

   **

   Editor's Note: Write Lance Woodbury at Family Business Matters, 2204 
Lakeshore Dr., Suite 415, Birmingham, AL 35209, or email lance@agprogress.com.


(ES/AG)

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