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Business Basics: Farm family businesses need a written plan for employee advancement.

July 25, 2022

3 Min Read
two women inspecting corn plants
PLAN AHEAD: Young family members returning to the farm need to know the path to ownership and management. Take time to develop a business plan that outlines employee policies and advancement.Edwin Remsberg/Getty Images

Many next-generation farmers dream of returning to the family operation. But once they arrive, they simply feel stuck, uncertain of when or how they can advance into ownership or management of the family business. Some are too afraid to ask.

Family farm businesses need to develop a career advancement path for employees.

In my last column, I introduced the Taguiri & Davis three-circle graphic of family businesses.

To recap, a family business consists of three separate but potentially overlapping groups of individuals: family members, individuals who own the business, and individuals who contribute management or labor to the business.

Each circle requires its participants to accept certain roles and responsibilities. Some individuals may be in all three circles, while others are only in one or two.


Understand business drivers

In addition to different roles, each circle also has expectations of the business:

  • A business owner, whether it be a small family business or a large corporation, expects to receive a return on the equity they have invested.

  • An employee of any business expects to receive fair compensation for the time they spend working.

  • A family member is entitled to love and respect from all other family members.

Family members will have different expectations based on how many circles they are in. A family member who is an owner, but is not actively involved in the business, will have different goals and expectations for the business than a family member who is employed on the farm.

If all family members are in all three circles, they may be more likely to want the same things for the family business. But as family members begin to separate, conflicts may arise.

Those on the outside of overlapping circles struggle to figure out how to move their career forward in the family business.

Time to advance

It’s important for individuals involved in a family business to know what it takes to move into an overlapping circle and accept new roles and responsibilities.

Here are a few questions that may arise:

  • What is required for a family member to become an employee of the business?

  • What qualifications are needed to do the job?

  • Does being a family member guarantee employment?

  • What does it take for a family member or key employee to advance to an ownership role?

  • Are those wishing to become owners required to make a financial contribution or an investment of sweat equity to earn the right to be in that circle?

So often, many family businesses do not have any of these answers, let alone have them in writing. Have a meeting that includes an honest discussion that ultimately leads to an employment policy and accurate job descriptions for the family business. Also, develop a farm ownership policy to define what it takes to become an owner.

Make a plan

Items such as employment and ownership policies may sound too complicated and not necessary. But in reality, they don’t have to be complex.

A little time spent in open discussions to gather everyone’s thoughts and desires about the future of the farm and the role they wish to play can help develop a plan to meet the needs of both owners and managers. But it takes communication to make it happen. To help get you started, check out the new University of Missouri Extension guide sheet on family roles at muext.us/farmroles.

As families develop a better understanding of each of their own family business circles, keeping roles separate becomes easier and leads to less conflict.

Tucker is a University of Missouri Extension ag business specialist and succession planner. He can be reached at [email protected] or 417-326-4916.


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