Tomorrow and tomorrow and tomorrowAs many will attest, farming is far more than just work—it’s a way of life. A vast number of farmers have been living and working on the farm since they were children, often following in the footsteps of their fathers and grandfathers before them.
This process is commonplace in the cycle of the family farm. Yet for the aging senior generation of farmers—their first harvest a distant memory—the thought of relinquishing control of their business and entrusting it to someone else can be a terrifying prospect. As a result, succession planning is often a task that farmers try to ignore or postpone for as long as possible.
“As a farmer, the succession plan always seems to be something that gets pushed off until next week, or next month, or until after harvest,” said Bentley-area farmer Jason Lenz.
Lenz, who farms in a three-way partnership with his father and uncle, is currently in the process of laying the groundwork required for his son Kyle to join the business. In his experience, consulting a succession-planning specialist has been extremely valuable.
“Having some outside influence and a third party to provide another opinion or some new ideas is really important,” he said.
Grant Robinson heads up accounting and advisory firm BDO Canada’s SuccessCare Program and has been guiding the Lenz family through the succession planning process. He said that often a lack of communication among family members is the greatest obstacle to an effective succession.
“There are three things that are important in business transition: communication, communication and communication,” said Robinson. “The greatest challenge in this business transition or succession is that we don’t talk to each other.”
Robinson said that it’s beneficial to actively involve family members in shaping their succession plan rather than doing all the work for them.
“If you can get a family to come up with their own strategy, they’ve bought into it,” he said. “If they don’t come up with their own strategy—they run to their accountant or lawyer—they don’t really understand what’s going on or why they’re doing things.”
However, when families start to communicate about delicate topics like finances, changing business roles and even contingency plans in the event a family member is killed or seriously injured, the conversations can be very emotionally charged.
According to family business consultant and Predictable Futures Inc. founder Gordon Wusyk, managing and overcoming these emotions is another benefit to involving a third party in the succession planning process.
“It de-emotionalizes a lot of the discussion. Family businesses are fraught with emotional interaction,” said Wusyk.
“Having a third party that’s not involved emotionally is extremely helpful.
“The idea is to put all the issues, goals and aspirations on the table in a transparent, open, honest dialogue … so we can attack issues and not one another.”
Jolene Brown, a professional speaker, author and family business consultant from Iowa, has extensive experience dealing with this human element of agriculture.
“When emotion and logic collide, emotion wins,” said Brown. “We must address emotion, or it becomes the roadblock that stalls the meeting and any action.”
She employs a somewhat unorthodox method when it comes to succession planning.
“The four tools I bring to the family business are a mirror, a box of tissues, a roll of duct tape and a two-by-four board,” she said.
Brown explained that she brings the mirror because family members usually bring her to their business to “fix” someone else and the mirror reminds them to start with reality and that the work must be done by those looking in the mirror; the tissues because they acknowledge the range of emotions that will inevitably come into play, whether it’s anger or fear or frustration; the duct tape because individuals need to listen to each other and remain present; and the two-by-four since, as she put it, “Sometimes there’s just no other way. There is no more ‘sitting on the fence.’ It’s time to decide and do the work.”
Differing approaches aside, Robinson, Wusyk and Brown agree that succession planning is a process that farmers should be discussing with their children sooner rather than later.
“When do you start? Today, at whatever age you are,” said Brown. “Transition of labour, management, leadership and ownership involves all generations, and the majority asset owners play a pivotal role.”
“I don’t think there’s a time that’s too early at all,” said Wusyk. “I think when the kids are just getting out of high school that’s a good time to start talking to them.”
This holds especially true when planning for unexpected tragedies like accidental death or injury that could happen at any time.
“You have to plan for that. It doesn’t happen to everybody, but it does happen enough,” said Robinson. “Once your kids can be confidential about information, it’s never too early to start.”
However, Robinson emphasized that it’s not just how early you talk to your children that’s important—it’s also what you say to them.
“One of the greatest challenges I see is people go to their kids and say, ‘are you interested?’ but they don’t tell their kids anything about the business,” he said.
“They understand the business from whatever avenue they’ve done working there. They’ve milked cows, they’ve run the combine, they know the labour side, but they don’t know the business side.”
Lenz understands the succession process well, having taken on the responsibilities of full partnership in his family’s farm by the time he was 25. For him, as it is now for his son, it was a gradual process that involved significant vetting by the other partners.
“You have to prove yourself—that you’re capable of being a partner to the others in the company,” he said. “Once you do that, then you can start the actual process of buying in or financially committing to it.”
When executed successfully, a succession plan can be something very special. It can serve to preserve the legacy and tradition that exists within the history of a family farm passed from generation to generation. On the part of the senior generation, it also involves asking some difficult questions.
“It’s so hard because you know how to work in the business, and now that you’ve created something, how do you protect what you’ve created and how do you pass it along bigger and better to the next generation?” said Robinson. “It’s a really neat legacy to be able to do that, but you have to talk to people about it.”
As far as Wusyk is concerned, farmers don’t need much help to make that legacy a reality.
“These farmers are smart people. They’re hard working, they know what they’re doing and they tend to be quick to implement things,” he said. “So the facilitator or professional advisor like myself is not going to be there for long, but long enough to give them structure and a process so they have a foundation on which they can build a more predictable future.”
Tips for effective succession planning
- Start succession planning as early as possible. It’s never too early to be prepared in the case of accidental death or disability, and procrastination is one of the biggest obstacles to an effective succession.
- Involve a third-party, like a succession planning specialist or business advisor, to help you develop your succession plan, mediate family discussions and keep you on track so that you can achieve your goals.
- Communication is the key to a successful transition. Make sure you are effectively communicating with your family, your advisor and any other professionals (lawyer, accountant, etc.) involved in your succession.