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Corn+Soybean Digest

Passing the torch | Retiring Farmers Stay Out of Decision Making So Younger Generation Can Learn

“My succession plan is to slide out of management and back onto the tractor.” That’s Steve Mills’ goal before he transitions into a more secondary role in five years. He plans to have son Jeremy, 34, and daughter-in-law Cindy making all the management decisions.

“If Jeremy asks my advice, I’ll give it, but I try very hard not to,” Steve says. “He needs to learn to make judgments on his own.”

The Marion County, IN, growers figured out what they each did best and enjoyed doing. “Even though we do a lot of jobs together, Jeremy’s better at seeing the big-picture, long-term issues very creatively,” Steve says. “I tend to concentrate more on details.”

Neither of them felt very skilled at marketing their grain, so they have Russell Consulting advise them. “I see some people play the blame game with grain marketing,” Steve says. “Neither Jeremy nor I enjoy sitting in front of a computer all day, and that’s what you need to do. So we hire the experts.”

Jeff Appel, their Russell Consulting advisor, thinks the father and son team’s communication skills are remarkable. “They do as good a job of communicating and making decisions as anyone I’ve come across. I have to hand it to Steve, he really does back away and let Jeremy have control.

“What makes this work is that Steve has confidence in Jeremy to make good decisions, and Jeremy doesn’t hesitate to make decisions. I see father-son teams where the son is nothing more than a glorified tractor driver,” Appel says. “Communication is typically the major breakdown in a family operation. But with them – if I talk to either one of them – the other one knows what was discussed before the day’s over.”

When large decisions or purchases need to be made, father and son exchange views and decide together. If they disagree on something major, they just “let things marinate and hash it over,” Jeremy says.

“Our styles mesh well; we’re the Yin and the Yang. Dad’s more conservative, less likely to upgrade equipment. It’s not that he doesn’t want to do it, but he researches things longer. I’m lucky, Dad is really open to new ideas; he’s not stuck in his ways. We both think along the same lines.”

An example of this is Jeremy’s interest in no-till and cover crops. Since joining the operation 12 years ago, he’s built on the no-till/reduced-tillage practices that Steve began 31 years ago. Jeremy has added related equipment, transitioned all 2,700 acres to no-till and become well versed on using cover crops.

The team constantly bounces ideas off of one another. They recently discussed replacing two smaller planters with a larger GPS-guided one, and to upgrade an older semi. “Jeremy knows more about the latest technology, so he takes the lead and then asks my opinion,” Steve says. “We bounce ideas back and forth rather than one of us making decisions on his own.” Every night they discuss the day by phone and map out the next day together.

Steve is the sixth generation in a long tradition of Marion County farming. He began farming 700-800 acres in 1976. He and Jeremy now farm 2,700 crop acres, plus 300 acres of hay/pasture and a small beef herd.

Jeremy joined the operation after graduating from Purdue in 1998.

“We started formalizing things in 2005, when my parents’ failing health and Jeremy’s interest and talent in running the farm was apparent,” Steve says.

“Someone can tell you what to do, but until you experience it, it’s not the same. You need to share information pretty far in advance (of retirement) and share financial information with grown children. Some say ‘they will find out the finances sooner or later,’ but it’s easier to iron out any problems while you’re still alive. My dad was always very open. I gained his willingness to share things up front.”

Steve credits two other factors for his openness with Jeremy. “I suppose part of it is being a Quaker, where you calmly work things out rather than being adversarial,” he says. Also, each previous generation had off-farm business interests in addition to full-time farming that exposed them to new ideas and different ways of running a business. Steve serves on several boards, and his father ran a law office. His grandfather was a businessman and started a creamery with his brothers. These traditions span six generations (190 years/30 years/generation).

The present generations have the farm in an LLC where Steve and his wife Lynn gift tax-free shares annually. The farm majority will eventually belong to Jeremy and his wife Cindy, a full partner who keeps the farm books and is involved decision-making. A supplementary need trust has been established to provide for Jeremy’s sister, who is disabled.

Father and son have written job descriptions based on a long-term business plan. “If you want to have farming as a lifestyle, you’ve got to run it like a business,” says Jeremy.

The Mills are ahead of the game compared to many farm families. For example, the 2008 Iowa Farm and Rural Life Poll found that 42% of Iowa farmers planned to retire in 2008-2013, yet only 42% of them had selected a successor.

Steve says he’s learned to keep his mouth shut. “I don't want Jeremy’s first year to be sink or swim. I want him to be in the pool a while before I leave.”

The wrong golden rule
Sound familiar: “He who has the gold makes the rules.” Or, “You can buy the farm, but just remember I still own it.”

Steering clear of these stereotypes is the goal of Gary Hachfeld’s Minnesota Extension farm-family workshops entitled, “Farm transition and estate planning; Build your exit strategy.” As a 37-year veteran of Extension, ag economics and adult education, he says, “The Mills family (story, above) is a very unique family.”

They share three traits characterizing farm families who are successfully transitioning the farm to the next generation: communication, respect and trust, Hachfeld says.

“Successful farm transition families typically have regular meetings between generations. They discuss what they need to accomplish, whether they need to purchase equipment and even vacation schedules.”

He suggests periodically inviting spouses to these meetings, since they bring new but informed perspectives. “For example, one farm wife at our workshop asked an important question that her father-in-law and husband had been avoiding: ‘Who’s going to market the grain? Neither of you enjoys doing this. Should we consider hiring outside help?’”

How can you get the ball rolling in your family beyond, “Someday, kids, this will all be yours?” Hachfeld recommends asking the senior generation how the farm was handed down to them, and how they felt about that.

John Baker, attorney and administrator at the Iowa State University Center for Beginning Farming, suggests, “The succession timeline should be defined, with definite times for defined transfers of authority, or management, or money, or assets.

“Have siblings been involved in the decisions?” Baker asks. “What are their attitudes and feelings toward this? What is the parents’ estate plan: equal distribution or equitable distribution? What will they do if they have a conflict?

“In every relationship there are conflicts, and how they are, or are not, resolved largely determines the future of the relationship,” he says.

September 2010

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