Sustaining farms and families

Judy Wilkinson

Keywords: succession, communication, farming families

Take home messages:

• Have a plan for the future of your farming business and family

  Consider - plan - talk about it - be realistic - be flexible

• Succession of assets and business can be dealt with in a couple of ways:

  Top down - left to the will

  Bottom p - driven by the needs and wants of family participating

• Can be driven by events:

  Front End - people joining the business

  Back End - people leaving the business

Who to include in succession planning

Accountant- provide information on business structure

Lawyer - the law is a tool to assist families achieve their objectives

Financial Planner - help to identify personal and business goals

Ag Consultant - maybe able to make recommendations and monitor progress

Facilitator - can provide independence, objectivity and control

Separating family and business

A key challenge to family business is balancing the family and business decisions. Families in business often have unique challenges and opportunities. For the business to make the most of its opportunities it is essential to manage and address the challenges.

Significant impacts on the family can occur when all decisions are made based on the business and its needs. Likewise there are significant impacts on the business if all decisions are made based on the family considerations.

When family in business make the majority of their decisions considering the impacts on business only, the family is often left bearing the negative consequences of these decisions. Long term effects of this can be quite substantial both financially and for the relationships of family members.

Impacts can include:

• Divorce and potential loss of equity;
• Family disputes which can incur large legal costs;
• Wills challenged;
• Decreased profit due to poor communication and commitment; and
• Loss of family or family members.

Likewise if family businesses make the majority of their decisions considering the impacts on family only, the business is often left bearing the negative consequences of these decisions.

Impacts can include:

• Decrease in equity;
• Business employing people based on relationship not skills; and
• Poor management decisions.

Balancing family and business decisions

The key to enabling this to happen is effective communication. Getting the balance between family and business when making decisions is essential to a sustainable, profitable business and family.

Family members need to think about and be clear about their expectations, they need to then express these expectations with the other family/business members in a way that can be heard.

Everyone in the business or family will have expectations and these expectations will fall into one of three categories:

1. Expectations known and expressed
2. Expectations known and not expressed
3. Expectation not known and therefore not expressed.

No 1. Expectations known and expressed is where we need to be.

Influences on Expectations

Family history has a significant influence on our expectations and behaviour. How your family of origin conducted itself will have huge influence. These are often subconscious, and impact on how you expect many areas of your family and business life to be.

With the integrations of family members or new workers into a business, we must expect that they all come with expectations and behaviours from their own family of origin.

There may be patterns that have an impact - death, divorce, number of children

How things have happening in the past - transfer of family assets, how girls or in-laws where treated

Think about your family.

A business can put a number of processes in place to assist in separating and managing the areas of business, ownership and relationships successfully.

1. Clear communication strategy
   • Scheduled operational meetings.
   • Process for dealing with conflict, triangles and generational difference.
2. Business time and social/family time
   
   • Agreed boundaries (i.e. no work talk at kitchen table).
   • Time allocated to do non-business activities.
3. Keep business out of bedroom and bedroom out of business
   • Making sure one relationship does not contaminate the other.
4. Regular breaks
   
   • Holidays or time away assist greatly in maintaining the balance.

Can be done at the FRONT END

Front end issues

These front end issues if not handled at the beginning, or point of entry, are most likely to lead to conflict and discontent at a later date. Addressing and reviewing these issues proactively is likely to increase the chances of a long term harmonious, profitable and productive team.

When not handled at the front end, significant issues around unpaid wages, inequitable contributions and conflict are likely to arise.

Or at the BACK END

Back end issues

Influences that affect families and peoples abilities to successfully manage change in an intergenerational business are:

Regular operational meetings

An important part of preparing and implementing a communication strategy is setting aside time for the ‘pause’ of meetings – both strategic and operational.

Time needs to be put in to finding suitable meeting times that allow the greatest opportunity for people to function at their best. Some people function better in morning, some in afternoon, as well as certain times in the week.

What day and time will these meeting be held?

How often will the business have operational meetings?

How will they be chaired?

How will minutes be recorded and kept?

How will the minutes be distributed and to who?

How will tasks be delegated?

How will these tasks be rotated?

Strategic meetings

These meetings set the overall direction for the business and cover topics like:

• Entry and exits from business;
• Change of ownership and/or management;
• Entry of new people into the family;
• Change in direction of the business;
• Change in business size or operation; and
• Other events or problems not solved in operational meetings.

Are there some issues that are easier to talk about in your family or business than other?

If there was an occasion or event, would that trigger a strategic meeting?

Do you know how to find a facilitator to conduct the meeting?

Do you know how the decision would be made on a suitable facilitator?

Where to go from here

Family/business members may choose to addressed the trigger question (and hopefully added some more) it is important to get together and discuss your responses and expectations. When expectations differ it is important to try to understand what those expectations are. Endeavour to reach an understanding of what expectations there are in common and the direction the family wish to pursue.

You may end up with a plan as follows:

• What you are going to do;
• How you are going to do it;
• Time frames that it will occur in; and
• What will happen if things don’t occur as planned.

Reaching an understanding of common expectations and making a plan can be enhanced by engaging an external facilitator to work through the questions with the family. Having an external facilitator to chair the meeting will ensure that all family members are heard and misunderstanding are addressed.

Communication strategies need to incorporate methods for discussion of business issues (ie weekly business/operational meetings) as well as the abnormal and longer term planning issues (strategic).

Sustaining relationships in business

Some tips:

• Value the differences.
• Have separate joint interests from the business.
• Have other people outside of business to debrief with.
• Have a holiday where you don’t talk about business.
• Do not let one relationship contaminate another.

Like most things in life,

you have got a better chance of getting it RIGHT

if you (all) know where you are going (vision), and

know how you will get there (plan)

Contact details

Judy Wilkinson
PO Box 121, Snowtown SA 5520
0401 122 049
judy@marocreek.com