Often, today’s larger farm operations were, or will be, transferred to two or more successors with the expectation that they will successfully work together and co-manage the continuing farm business. Each year we are asked to assist sibling partners dealing with challenging issues and conflict. Consider several of the challenges commonly raised by our farm clients:
Dealing with conflicts. A sibling may be frustrated in working with the other siblings and feel that he or she is not being treated fairly or respected. The other siblings may believe one sibling is taking personal advantage or “watching out for himself.” Siblings inherently have different personalities, management styles, needs for control and personal goals. Unresolved frustrations and conflicts fester and may become worse than they actually are — damaging relationships more than they should.
Whether based on emotion or differences in business strategy, conflicts need to be faced, dealt with and resolved before they damage long-term relationships. Dealing with conflicts may be the most important thing you do. Take the time to understand each person’s frustrations and proactively work to find practical solutions. When necessary, conflict resolution may benefit from involving an outside mediator.
Shared decision-making. Siblings (and their parents) often try to avoid the challenge of shared decision-making by assigning each person his or her own management area. A sibling may be the best person to assume the specific responsibilities of a management position. Unfortunately, the sibling may believe he or she “controls” this area and has the right to manage it as he or she deems best. The sibling then resists changes sought by the other siblings.
In effective partnerships, major decisions are made by the management team. But each sibling needs to accept accountability and the input (i.e., constructive criticism) of others, and be willing to make changes — even changes that are not his or her preference. Even a senior partner must be willing to accept new management practices and eventually turn over all or part of his management area to a successor.
The management team needs to meet frequently and sometimes formally to get on the same game plan. Everyone must accept that accountability. Change is essential to a successful farm business, and each involved member will be affected.
Allocation of work. In recent years, differences in siblings’ objectives for balancing work and personal life have become more common.
A sibling may work long hours and seldom have weekends off or vacation time. Another sibling may demand “normal” work hours to balance his work life and personal life. He or she may want more time with a spouse and children and to participate in the children’s school and sports activities. A sibling may give priority to his Wisconsin addiction of hunting, fishing, snowmobiling or camping. Another partner may demand “limited” work hours to focus on raising children and all the related issues. A senior partner may just want to slow down and work fewer hours, or buy a Speedo and winter in Florida.
These differences often cause an unfair sharing of farm obligations among the involved family members.
The relative contribution by each sibling and other family members should be objectively evaluated, at least annually. Compensation should be based on each person’s actual work, effort and responsibilities, while still meeting the senior partners’ needs for long-term income and financial security. A compensation policy should be blended with the plan for transfer of farm equity, which may not be equal among the siblings.
The cousin generation. Adam and Ben’s parents transferred the farm to them equally. Adam and Ben are committed to continuing the family farm legacy and want to transfer the farm to their respective successors. Adam believes his son should eventually own his 50% interest and that Ben’s two involved children should eventually own 25% each. Ben believes the three cousins should end up as equal owners, since they will be partnering in the work and management of the farm.
Each brother must accept the underlying values that inclusion in the farm business is an earned right, not a family right, and that each future successor must be willing to do the work that needs to be done, not just the work he or she wants to do.
Adam and Ben need to work through this important issue and come to a transfer plan that is equitable to the next generation. Their decision needs to be documented through an effective operating agreement, leases, options and a buy-sell agreement that facilitates transfers to the successors and provides Adam and Ben and their spouses with long-term financial security.
Twohig is a partner in the agricultural law firm of Twohig, Rietbrock, Schneider and Halbach. Call him at 920-849-4999.