Family Business Matters 04/05 05:00
Toughest Factor in Succession Planning Is Transitioning Relationships to
One of the hardest tasks in a family business is transitioning relationships
to the next generation.
DTN Farm Business Adviser
Estate and succession planning both involve transitions of the farm or ranch
business to the next generation. While estate planning is focused on the
transfer of assets like land or equipment, succession planning deals more with
the transition of management activities, including the skills, knowledge and
relationships it takes to continue running the enterprise.
New skills and knowledge, which are essential ingredients in succession
planning, can be learned and practiced. For example, managing a team of people
or learning to read financial statements require mastering new behaviors and
concepts. It takes practice, but with diligence, intelligence and some
humility, one can improve in these areas.
Transferring relationships from the senior generation to the younger
generation is different. Think about your relationship with certain landowners,
which can often span multiple generations. Or consider your long-term
relationship with financial advisers like your lender or accountant, who have
been with you through both the good and bad times. If you have long-term or key
employees, contemplate all the hours you've spent working side by side. These
relationships contain a shared history; they are bonds that have developed and
deepened over time.
How do family businesses, then, hand off these long-standing relationships
to the next generation? Consider the following strategies for transitioning
When planning to hand off the business to the next generation, it helps if
the incoming family members are known to important business constituents.
Formally introduce them to make sure the landowner, family adviser or key
employee knows who the next generation family members are, their backgrounds
and what their roles in the business will be. If the next generation member is
known from his or her childhood on the farm or ranch, a specific reintroduction
as an adult helps set the stage for a more professional relationship.
Familiarity between members of the senior generation and their
contemporaries and advisers makes it easy for them to combine both social and
business interaction, but it can make it hard for the incoming generation to be
part of the conversations when important items are discussed.
The senior generation should be very purposeful about including the next
generation in communication. That may mean pausing the discussion and inviting
the younger family members into the office. It could involve scheduling a
future time to visit, which can feel awkward but is necessary to get
next-generation members in the room. It could be as simple as putting the phone
on speaker when a landowner or key adviser calls so the discussion includes the
successor. The point is to be deliberate about how you include the next
generation in the interaction with key business relationships.
The incoming generation needs a chance to forge its own bonds with people
who are important to the business. That means the members of the senior
generation need to be absent during some part of the communication process. You
might have a member of the next generation return the phone call that came to
you. Or, you might have younger family members start the meeting, and senior
members join a few minutes late. You might even say "something came up" that
causes the senior generation to intentionally miss a meeting. In short, create
an environment where the next generation can build a relationship on its terms.
For most farms and ranches, relationships are the foundation for business
success. They are deep and historical and include social components. If you are
intentional about introductions, purposeful in the communication process and
strategic about the senior generation's absence, you improve the odds for a
Write Lance Woodbury at Family Business Matters, 2204 Lakeshore Dr., Suite
415, Birmingham, AL 35209, or email firstname.lastname@example.org
(c) Copyright 2022 DTN, LLC. All rights reserved.
For more free DTN information sent right to your email each morning - click here
to sign up for DTN Snapshot.