My wife and I had just helped celebrate our granddaughter’s first birthday. One year earlier we had received a phone call at 1 a.m. in the morning from our youngest daughter informing us that she had just given birth to a baby girl – our first grandchild. Seven hours later, I was sitting in a chair in the hospital room holding our little 6 lb. 5 oz. granddaughter. It was a surreal moment. As I was trying to balance my tiny granddaughter in my arms for the first time, standing right next to me and monitoring my every move was her mother. 31 years earlier -she- was the little 6 lb. 7 oz. baby I was trying not to drop as I held her for the first time.
As we drove home from the hospital after having met our granddaughter for the first time, I started to think back to what I had learned about parenting. I reflected back on the childhood of our youngest daughter who had just become a mother herself. Our youngest daughter was never a child who created a lot of problems for her parents, but she always seemed to be in the middle of sibling squabbles with her two older sisters. Even in kindergarten she had been sent to the principal’s office for drawing blood when she clawed a fellow student for not being willing to share the toys.
It was this same daughter, at the age of two, who taught me the most fundamental of parenting lessons. These lessons were learned at our supper table. Our two-year-old sat in her high chair. Her four-year-old sister sat to her right at the end of the table. Her six-year-old sister sat across the table. Once the food was served, the two-year-old would frequently throw food or utensils at one of her sisters – always precise with her timing when her mother and I were looking the other way. Scolding her had a minimal effect. Telling her to straighten up? Also, minimally effective. Taking her food away? Again, virtually no effect. She would make faces at her siblings and they would point at her and say, “Mom, see what she just did?” The two-year-old was quick and cunning.
Her mother and I were getting frustrated and running out of solutions so we embarked on a new plan and this was where my lessons started. As soon as an altercation took place at the table I stopped eating and would get up from my chair and without saying a word, walk around the table and pluck the two-year-old out of her high chair. As I walked into the living room with her in my arms, she would be kicking and squirming and protesting. Eventually, she would slowly start to relax. I would then look into her eyes and tell her that she was a wonderful person but the behavior she had just exhibited at the supper table was not appropriate and unacceptable. I explained as best I could in a language that a two year old could understand that she had two choices. She could return to the supper table and change her behavior or she could head off to her room and I would bring her supper to eat by herself before going to sleep. Then I would put her down on the couch and leave her to decide which of the two choices she was going to make. Without exception, she would return to the kitchen to finish her supper without incident. This scenario happened two to three times per week. And went on for a few months.
So what were the lessons I learned from our youngest daughter? I learned that even two-year-olds can make good decisions for themselves when given the appropriate guidance. (It would have been nicer if she would have made the decision to behave without having to leave the table but that was the process we had to go through with her to eventually reach the point the family could all eat supper together without the drama). She obviously did not like the consequence of eating alone in her room so she chose to rejoin her family and change her behavior – at least for that particular evening. Both as an adolescent and as a teenager, our daughter would always push back if her mother and I pushed our ideas too hard. However, when we gave her the responsibility for making her own decisions after explaining what the consequences would be, there was much more harmony in our home. There were times that she made choices where the consequences were not what she anticipated but she still lived with her decisions. At times this was difficult for us as parents to watch.
In conversations with her now as a young mother, our daughter has said that our confidence in her to make good decisions for herself at a very young age without being told what she absolutely had to do, has been a very fundamental cornerstone in how she is now mothering her own daughter. She also said that the most important thing that has stayed with her is that she understood that we as her parents would enforce the consequences of her decisions.
Life is all about making decisions and living with the consequences. Running a business, whether it is a farm, or another business in the city, is also all about making decisions and living with the consequences. Parents who want to protect their children from the consequences of life, or the consequences of the business world do their children no favors.
When I look at my own life, it is those difficult events where I learned the most. Experience is a great teacher. Protecting our children from experiencing the negative consequences from the decisions that they made may make us feel better – at least in the short term, but it does not give them the opportunity to learn and understand how to take responsibility for themselves.
I love the analogy of learning how to ride a bicycle: It is all about getting on the bike and pedaling until we lose our balance and fall off. You get back up and make the decision to try again. Scrapes and bruises are part of the process. But once you have mastered the ability to balance on two wheels that skill will stay with you for life.
Life is about choices and consequences. Even a two-year-old can begin to make good choices for themselves if we as parents don’t flinch when the going gets challenging.
Farm succession can be defined as the “passing of ownership and management from one generation to the next”. In the past this process may have been called, “passing on the farm, or dad is finally letting go or the son is taking over.”
Family members can and do react in a variety of different ways when they hear the words farm succession. For some, particularly the younger generation (successor generation), there is excitement and anticipation. When it comes to parents, you never can predict how they will respond. Mother may be dreaming about travelling and spending more time with friends, family and grandchildren, father on the other hand may be dreading slowing down.
Farming is no longer a lifestyle that automatically provides a good living. Farming today is big business, it requires the ability to make difficult decisions, the ability to change and adapt, and the ability to develop and maintain a mental toughness for dealing with the day-to-day stresses.
To generate one income from farming often requires an investment of $1-$3 million and in some sectors even more. To have over $10 million invested in a farm business is no longer exceptional.
Over the past 13 years, I have had the opportunity to work as a communication coach with families going through the succession process. Some families do it very successfully – it is virtually a seamless transition from generation to generation. Other families struggle to make the transition work. Why the difference? One word – Communication! In families where communication takes place naturally, or is formalized through meetings, the succession process has a much greater chance to take place in a seamless manner. When communication among family members is a struggle, and there is no formalized meeting structure, succession can become a dragged out process. In this environment when decisions do get made, they are often made out of frustration and not well thought out.
Good decision making requires excellent communication.
How do you start the process of Farm Succession?
It can be helpful to distill the succession process into three very basic, but pointed questions:
As mentioned, these questions are basic and pointed, but they must be answered for a successful succession to take place.
To answer the first question, please seek out the advice of your accountant. The numbers must work before you even start thinking about succession.
The answer to the second question is more difficult to quantify. The following are some best practice suggestions for the successor generation:
1. Pursue a post-secondary education at the diploma or degree level. A degree in business or at least significant business courses will serve you well. Take up employment away from the farm for a minimum of three years. Live away from mother and father. If you want to come home on weekends and holidays to help out, great.
2. Consider working for more than one employer during this period.
3. Start talking about your interest in coming home to farm while still holding down your job away from the farm. Dream about how you would like to run the farm. Draw up businesses plans – yes more than one plan is good. Do budgets. This can be a time to do a lot of “fantasy farming” without fear of making mistakes. But please do not be tempted to short-circuit this experience away from the farm and come home early.
What is next? Trusted advisors are essential. Your accountant is going to be the cornerstone to the success of your succession process. Having faith in your accountant is essential because you need them to provide tax advice, create shareholder agreements, critique budgets, give advice on life insurance needs, provide direction to your lawyer, and answer the many questions you will have. They are the heart and soul of the process. You will also need the involvement of your lawyer, insurance agent and your lender(s). I have also seen situations where other trusted farm advisors such as veterinarians have been asked for advice. Also, do not discount the value of talking with other farmers.
My first experience with farm succession was as a successor – my brother and I took over a 60 cow dairy farm from our father in 1975. We expanded to 125 cows over the next 15 years. That is when I had my second experience with succession – I transitioned out of the partnership. My brother and I still operate a seed business together that has been part of the family since 1975.
I am frequently asked, “Do we need a communication coach/facilitator?” Even though farming is big business, when it comes to making decisions, particularly around the topic of succession, EMOTIONS frequently trump logic. For example, mother may have a different opinion on how the non-farming children should be treated regarding inheritances than what father does. A non-farming child may feel that the parents are favoring their sibling who is going to stay on the farm. A daughter-in-law may feel that her husband is more dedicated and a harder worker than his younger brother. In another situation a daughter-in-law may feel that her contribution on the farm is not being valued by her in-laws. If there are situations like this that you are facing, engaging a skilled coach/facilitator maybe an excellent decision. Everyone needs to be listened to. More importantly they must feel they have been listened to. Getting everyone’s thoughts and feelings out in the open at the beginning of the process before sitting around the board room table in the accountant’s office can eliminate a lot of frustration and surprises. There is often a perception that if there is conflict before succession has taken place that succession will solve the problem. Wrong! Conflict is going to happen. It is how families deal with the conflict that is critical. Acknowledging that conflict is part of business and creating strategy to deal with it should be part of the succession process as well.
The final question: Can a deal be put together that will allow mother and father to sleep peacefully each and every night? The succession process can take two to five years to put in place. One of the reasons is that mother and father frequently need this time period to feel comfortable that the successor generation has the ability, the required skill sets, the passion and commitment to carry the business forward. They want to see results. The security of mother and father’s golden years are dependent upon a thriving business.
It may seem a bit radical to conclude an article on farm succession with this thought, “in certain incidences selling the farm might be the best decision for everyone”.
If mother and father agree that they will be able to sleep peacefully each and every night after this deal gets finalized, you are well on your way to having a successful transition of your farm business.