succession

By Elaine Froese

“Elaine, Dad just won’t give up control!” is a common frustration with the next generation of farmers trying to navigate into management and ownership before a farm transition.

Ottawa-based lawyer Denis Sicotte presents an interesting concept; he calls it “shades of control.” It defines four different types of control that need to be transferred:

1. Operational Control

The operations, daily decision making, not being restricted to just the founder’s decision, but also allowing more and more input from the successor. For example, daily planning, crop planning, and livestock care.

2. Management Control

These are the high-level decisions to supervise the operational elements, how normal business processes are executed, income, costs, and measuring return on investment. For many farmers who do not like to be transparent about finances, this is a hard thing to share.  The farm teams that communicate and manage well typically have an open book policy for the entire team to analyze cash flows, balance sheets, and debt servicing.

3. Ownership Control

Ownership Control includes corporate governance, strategic targets, and business priorities. Founders (parents) may want to own land to rent for income as they age. The next generation, typically approaching age 40, wants to know how they can get ownership of assets to build equity.

4. Legal Control

To regulate via agreements. Agreements for farm business come in many forms. Land leases, marriage contracts, shareholder agreements, and buy/sell agreements.

When you look at the different shades of control ask yourself these three questions:

  • “Why am I afraid to release control?”
  • “Is owning this farm part of my identity? Who am I if I no longer control my farm?”
  • “What would letting go of control feel like? Would it feel like freedom?”

Sicotte relayed some UK research about farm succession that pointed out three key factors:

  1. Father’s age. If you are 62, there’s a good chance your successor is halfway to 40. Sicotte recommends that by age 60 you have transferred many pieces of control so that you have the next 5 to ten years to continue to mentor and share your wisdom for management.
  2. Perception of the successor’s ability to do well as a manager. Perception is people’s reality. Do you trust your farming daughter or son to be a good manager? Do you have a learning plan for this to happen?
  3. What value do you as a father/mother place on staying in control?

Make the transfer of the different shades of control a topic of discussion for your succession planning. Catch your next generation doing things right and build on the skills that they already exhibit.

Sicotte’s Tips for Changing the Control on Your Farm

  • Begin the transfer of responsibility and control of particular items at the earliest opportunity (e.g. your successor in charge of the spraying operation).
  • Explain, but do not dictate, your management decisions and policies.
  • Encourage young farmers to develop any particular interests and aptitudes that they have, but not to the exclusion of other aspects of the business (e.g. internet research for planning and capital purchases).
  • Embrace their ideas along with cash flows, budgets, and business plans to discuss with you.
  • Increase their responsibilities as their abilities develop to focus on sections of work or specific enterprises (e.g. custom haying business).
  • Use clear job descriptions and responsibilities which are clear, don’t interfere unnecessarily (do not micro-manage, it drives the next generation crazy!)
  • Insist on physical records and costing for any enterprises they are responsible for.
  • Let the successors have their own enterprise (accounts, bills, ) within the farm business.
  • Develop relationships together with your advisors, lenders, marketers so that they learn negotiation and sales skills with you.
  • Give responsibility, assess, and give Only with responsibility does more control arise.
  • Give ongoing feedback. Let others on the team know how well they are performing. Say “I really liked this…, next time I would change this…, and I really think this …is working.”

Dr. John Baker of Iowa State has a great tool for talking about who makes the ultimate decisions on certain tasks. It is part of my Farm Family toolkit, which you can download from my website.

Dr. Baker’s List of Decisions

Who has control of them on your farm?

  • Plan day to day work
  • Make annual crop/livestock plans
  • Decide the mix and type of enterprise in the long run
  • Decide the level of inputs to use
  • Decide the timing of operations
  • Decide when to sell crop/livestock
  • Negotiate sales of crops/livestock
  • Decide when to pay bills
  • Decide type and make of machinery and equipment
  • Negotiate purchase of machinery and equipment
  • Decide when to hire more help
  • Recruit and select employees
  • Decide amount and quality of work
  • Supervise employees
  • Decide work method/ways jobs are done
  • Decide and plan capital projects
  • Identify sources and negotiate loans and financing
  • Livestock management
  • Keeping farm records

There many possible “control” issues on farms during harvest. I hope you will stop to consider the “why” behind the decisions that are made, especially if you feel someone on your farm team has control issues.

The guy or gal on the combine may be able to harvest the crop and manage logistics of the harvest from the cab. Alternatively, it may be the trucker who manages well as the next bin load is planned, and the way to attack the order of fields harvested is negotiated.

Harvest conflict is a snapshot of what control issues may need addressing to make your farm a happier place to be. Even what types of meals are served, and whether you stop the combine to eat or keep rolling can cause conflict!

What shade of control does your team need to address? Remember to catch folks doing things right to affirm and encourage the heart of your team. Shared decision making is a great goal, especially if as the founder you are seeking more freedom from making decisions, and want a great decision-making legacy to be transferred to the next generation.