What Do You Want? - The only four words that matter in farm succession

It has become clear that farm succession is not progressing. After decades of education, advisory, structures, and just about every strategy that has worked in every other industry, we are worse today than we were before. It’s time to start looking at the delivery, and not the strategy.

In the book Atomic Habits, James Clear made the distinction that “You do not rise to the level of your goals. You fall to the level of your systems”. After working with hundreds to thousands of farms over the last two decades, we have an implementation issue. There are no systems.

The blame does not fall solely on the producers. As an industry with many advisory opinions, we are failing because we never take the farm past the plan and into the actual implementation. You can lead a horse to water; you cannot make it drink. The only way we start to see progress is when consultants provide the day-to-day tools and agendas for the farms to follow, and then we hold them accountable for it. The time for talking is over. We have seen this doesn’t work.

The Implementation

Succession is a system; the moment a successful transition occurs, you are probably already starting the next one with the next generation.

The following systems form the foundation of a successful transition on a family farm:

Communication – Every business has proper communication to be successful. What is the meeting cadence of the farm? Do you discuss issues in operations, finance, and people more than once a year at the Christmas table? The first step is to create a professional meeting cadence to increase transparency, issue-solving, mentorship, and delegation.
Strategy and Vision – When was the last time you actually wrote down what you wanted? The compass was invented before the clock, so stop watching time and start planning where you want to go. Write down your goals independently, then come together to discuss how to create a vision, mission, and values that achieve those goals.
Compensation – You are paid fairly for what you provide. The older generation provides equity and land; pay them a fair percentage return like the bank and pay them rent. This can be done through a percentage of profits. The younger generation does more of the labour and management; pay them like an operator or a C-suite executive. If everything is done at a fair market rate, there are no future “sweat equity” issues. What you invest your profits in is up to you, but remember the more you invest or the more land you buy, the more your returns from the farm increase and the bigger the pot for everybody.
Roles and Accountability – Quit trying to compete for hierarchy. What are you good at, what do you like doing, and where can you provide the most value? Don’t turn an agronomist into a CEO, or a mechanic into a bookkeeper. Mentor, train, develop, educate, and either promote from within or hire from outside. Work with people, and then invest the remainder in capital to keep them busy. The return on investment in a great person is much greater than an additional new combine.
Systems – Agriculture was built around key-person dependency. Outside agriculture, when one employee is so important to the business that it cannot function without them, we call that an issue. In agriculture, we call it normal. Start passing knowledge, start writing down processes, start including multiple members in meetings with advisors or professionals. Rugged individualism is dead; try collaborative thought and transparency. It is remarkable how writing something down makes your life easier.

What do you want?

How many times as a family have you sat down and discussed the next ten years? Actually, do you even know yourself what the next ten years look like? Come up with ten things that you want to see or achieve over the next decade to be successful both professionally and personally. You cannot have one without the other.

As the older generation, have you thought about retirement? I am the last person to say you should leave the farm, but also, I have seen too many operations fail because decision-making and operational safety were never discussed. Only in agriculture do we feel comfortable putting an underage or overage individual in a machine that weighs thousands of tonnes with an engine of high horsepower. As the outgoing farmer, do you know what your purpose will be in your coming years, and do you understand that you will shift from a leader to a mentor, and an operator to an investor? This doesn’t even get into the discussion around how much compensation you need to live; do you know what to do with your time?

As the next generation of successors, what do you stand for? This is a loaded question to a twenty-year-old, but to be fair, a lot of forty-year-olds have not even taken the reins from the outgoing farmer. Every new leader of an organization, in all industries, has their pillars and values they want to lead by. However, in primary production agriculture, we live by the phrase, “it has always been done this way”. How about moving forward, you have your own ideas and your own thoughts. Then see if your new “investors” are interested in being a part of it.

Fair is not equal, or I love the farm kid more

Sarcasm, where art thou? As an advisory group, we have become lazy and accustomed to the easy answers. The farm has too much capital; you cannot split it fairly; you need to leave it all to the kid who says they want to farm. Close the box, lock it tight, and we have finished succession. How about we go back to question one: what do you want?

The notion that fair cannot be equal has evolved because of the value of the farms. Just because a dependent decides they want to take over the family business does not mean they inherit the family wealth. It means they are provided the opportunity to make a living the same way the last generation did. The lines between real estate and farming have become blurred.

I have seen more families destroyed by fair is not equal than I ever did by past practices. How about we don’t look at passing on large cheques that always go to bad investments. As farms, we operate two businesses: real estate and farming. In fact, McDonald’s works the same way: real estate and food retail. If you buy a franchise, you pay royalties and lease on the land owned by McDonald’s. Farming can be structured in a similar way. You pay rent back to the entity that owns the land. Then shareholdings of the family wealth can be fair and equal. Sometimes, the easy answer is not the right one. What do you want?

They won’t have the conversation

Would you work at any other job where you don’t know what you are getting paid or what the path for promotion is? Whether you love the family farm or not, you may have to go to an uncomfortable place to protect yourself and your current or future family. Hiding your head in the sand is not a strategy; it’s the easy button.

I have had numerous conversations about wages and promotions with employees. I respect the fact that somebody recognizes their self-worth and is willing to leverage or negotiate their value. As the next generation, you may need to be comfortable having this conversation and knowing that it can go one of two ways. First, they understand your side, and they open up the lines of communication. Second outcome: they dig in their heels, and you may need to redo your plan around your future. Either way though, the problem is solved. Wait thirty years to have this same conversation, and it is a ticking time bomb.

One of the biggest strengths and biggest weaknesses in agriculture is family. The bonds, the determination, the grit, and the motivation for success are unbreakable on a family farm. The lack of transparency, the lack of communication, the emotional decisions, and the blurred lines between business and personal are also unbreakable on a farm. Until you take the initiative to start treating these multi-million dollar operations like they should be treated, successful transition of farms will continue to be an unachievable dream.

You don’t need an advisor to start any of this. Once these internal systems are in place, you can begin bringing outside advisors into the process. It changes the narrative from asking for help to telling them what to do. Not only will you save a lot of fees on expensive “succession experts”, but you will get exactly the plan in place that will be successful for your farm. There is no roadmap to succession because every farm and every family wants something different. If an advisor tells you they have the answer, show them the door.

I’ll raise a few eyebrows with my peers on this one, as everybody wants to sell you expertise. I believe that your advisors should be 80% educators and 20% implementers. If the farm is not able to achieve the above strides without full-time help, I may argue that succession may not be the correct path for the business. I had a client once who told me succession was too hard; my reply was, “Did you ask your kid if they wanted to farm or if they wanted the cheque that would come from selling the farm?” It was blunt, it was a bit cold, and I won’t tell you the answer was.

We don’t have succession issues. We have an implementation issue.