Part 2- The Legacy of the Family Farm – Destructive forces of succession and transition

I spoke in front of a group of producers last fall and when the question period came around it took an interesting twist. An older gentleman stood up and asked, “What do we do about all this entitlement from the next generation of farmers coming back to the family farm?”. 

 

Then, the next question was from a younger man in the crowd who stated, “What do you do when the older generation won’t let go or transition any of the responsibilities?”. 

 

This is the lead into us at Farmer Coach identifying the destructive forces around farm succession.

 

Emotion

 

If you want to disagree and be angry with me this will be the hill to die on. You are running a multi-million-dollar business that has thousands of transactions per year and significant risk of loss and reward, emotions cannot be part of the equation. 

 

This is also why I turn down most of these engagements – if you cannot keep emotion out of the boardroom, then the farm is not prepared for a proper succession or transition strategy. Come back when you can leave the “lifestyle” at the door.

 

I have been part of many meetings I honestly should not have been. 

 

Whether they were arguments, tears, or frustration, it went against many of my core philosophies when it comes to the profession. Yes, family succession can be emotional, but no you cannot let this come into your decision-making process when it comes to strategy. 

 

This is where most plans go wrong, you decide with your heart and not your brain.

 

I also don’t buy into the philosophy of “sweat equity”. A proper succession plan and compensation strategy is done so all parties are paid at fair market value for their input. This leaves no room for the adage “fair is not always equal”. 

 

This is done so you can feel better about leaving the farming child more in the estate and not have to split land or equity. In today’s world with today’s corporate structures, all can be fair and equal between all parties. If you have other reasons to differentiate that is your own prerogative, but coming back to the family farm is not one of them.

 

Entitlement

 

You were not born a farmer; you were born into a farming family. I believe in many aspects folks will still try to follow the old “first born son” rule when it comes to succession. 

 

What other industry or business follows these rules? The CEO of major companies is the most qualified, not the heir apparent. We need to take a lesson out of successful businesses in history, you pick the right candidate for the job.

 

What if your child is not the most qualified? 

 

What if they don’t have the knowledge, expertise, or skills to run a progressive family operation? 

 

Easy, you leave them the shareholdings and let them decide if they would like to work at the company. 

 

Now, I know you will never do this but think about it logically. You have built a legacy business that has been prosperous and growing for years. Is your legacy now to leave individuals in charge that don’t have the same capabilities as you to lose the farm? That’s the reason that the “third generation loses the farm”. Unless you believe you can educate and prepare them to be at the top of the hierarchy, you are doing them a disservice by giving them that right.

 

Purpose

 

Quick lesson for the younger generation, your mom and dad aren’t hoarding the business because they want it or don’t believe you should have it (in most instances). They are holding on because the worst thing a person can do is “lose their purpose”. 

 

This in my eyes is one of the largest misconceptions in succession and transition. Although not always, the reason for holding on is that they don’t know what to do outside of the farm that they have never left. 

 

Remember the old joke, what do they call a retirement party for a farmer? A funeral.

 

Although I have started to see this trend shift in the last few years, it still has a long way to go. With the rise of commodity prices and land values some farmers have been able to buy the Arizona home or the cabin at the lake with the boat. This has allowed them to become unplugged from the farm prior to the age of retirement. 

 

In the past this didn’t occur. In fact, I remember neighbours that would not leave the farm because they had nowhere else to go. In fact, I respected my parents because they never missed a sporting event of mine. Many of my relatives never left the farm even to watch their kids’ events.

 

So next time Dad has trouble letting you take on an additional role, remember his side of the story as well. I am not saying it will improve things but remember there are always two sides to every story.

 

In the end, succession will continue to be one of the largest issues in agriculture. Until the farming community starts taking on a larger business management role in their operations, succession will always be about lifestyle and family. Familial ties will continue to dictate the decisions that are made and will make it very difficult for farms to continue to progress and change into the giants that they are starting to become. Only after you feel pain, do you come up with solutions.