Management succession can be thought of as the keys to the car and the opportunity to have a go in the driver’s seat. When you learnt to drive you were not simply thrown the keys and told “off you go”. As a learner driver, you received training, support and developed confidence over time to drive solo. The same goes for management succession. The process takes time and involves improving skills, gaining confidence and allowing mistakes to occur in a safe place. Tool 1.14 provides a useful template to check-in on your progress.
If management succession is the keys to the car, then estate succession is owning the car! Ownership of the car is the last piece of the puzzle and often does not occur until the parents upgrade the family car. The principle being the parents are looked after first and the next generation is gifted what remains.
But… don’t forget there are plenty of successful and professional drivers who don’t own their car.
Management succession is about providing the next generation with ownership in decision making for the whole business. There may be periods where the older generation are not working in the business on a day-to-day basis, and these periods often get longer over time.
A focus on management succession boosts the likelihood of preserving family relationships. All parties feel valued and part of the shared vision for the future. This process takes time, solid communication and mentoring.
Commonly the transfer of the operating business is part of management succession and includes machinery and livestock assets. Estate succession is the transfer of larger assets, such as land. This is facilitated via the business structures, such as a family trust.
An advisory board is a useful tool for management succession as it allows all stakeholders to agree on the game plan. The next generation can then be responsible for implementation.
The family corporate
There is a trend towards a more corporate style of governance in farming businesses, while still retaining the ‘lifestyle’ and traditional values of the family farm. The family corporate provides:
- retention of family farming values — the family often works hard to make it all happen
- more defined division between family and business
- greater strategic thinking and business systems that are guided by data as well as intuition
- greater access to capital and/or scale through joint ventures
- professionally operated, profitable businesses.
The strengths of this model include:
- The model still carries an emotional attitude towards the property and the business.
- There is greater strategic planning and risk management.
- The farm succession process is managed by facilitation, agreement, communication and systems.
- Strategic decisions are made with the support and critique of a board while still retaining the owner’s intuition for the property.
- Better business systems and policy around managing compliance and business risks.
- Greater communication between business partners.
- It can be a lower-cost business model.
- The model retains a long-term view (more than 50 years) of farming in general, as well as the business.
- The model has better procurement and investment policies.
- There are clearly defined roles and responsibilities for each team member and greater emphasis on human resource (HR) management.
- There is a better balance between ‘working on the business’ and ‘working in the business’.
A business plan is a key part of management succession and the family corporate, but it is also important to identify goals in order to gather the shared future vision.
Mentoring
As farm businesses work through management succession, owners (often parents) start to move out of their long-term management roles. During this time, parents may still have a desire to contribute through active commentary. A role parents can play is that of a mentor. This can be a new role that sometimes doesn’t come naturally.
A mentor can:
- provide or seek out resources (e.g., brings papers, research, opportunities, or experiences to the attention of the mentee)
- act as a role model and offers insight on how he or she came to be in their position
- provide advice by sharing industry and business wisdom, critiquing performance and making suggestions
- coach by helping the mentee learn new skills and practice new behaviours
- support by listening with a sympathetic ear, explaining unwritten rules and acknowledging disappointments and triumphs
- share observations and insights.