In many instances, parents and their "on farm" children or sibling co-owners are able to work together effectively in the farm's management. They have succeeded in developing a common vision for the farm's future, acceptance of shared management and ownership and compatible personal and business expectations, while maintaining proactive and respectful communications. However, each year I have the opportunity to work with farm families and co-owners who have been unable to resolve conflicts, which are damaging business and family relationships.
Too often, initial farm planning focused primarily on a formation of a limited liability company, the parents' estate plan and the concept that membership interests and other farm assets will transfer to the successors over time. However, the successful management sharing and transfer is the biggest challenge for most farm families. The key is the capacity of the parents and the involved children to work as a team and, most importantly, the next generation's successful partnering when the parents are gone. The task is to develop the strength and quality of their partnership as the farm's future depends on the ability to work together effectively.
The senior generation succeeded because they were hard working, decisive and willing to take the risk of buying farm assets while dealing with the ups and downs of commodity prices. Initially, the involved children accept the parents', usually Dad's, right to make the final decision, even when a conflict or disagreement remains unresolved. Eventually, the involved children want, and have earned the right, to have a greater role in decision-making and may question whether their opinions are being fully considered and when they will have meaningful management authority. Too often, I am then contacted by an active child asking how he or she can get the parents to make changes.
Unfortunately, the parents' independent approach to management and decision-making often imparts the same values in one or more of the involved children. The parents' model as independent managers does little to provide shared problem-solving experiences among the involved children. Each child inherently wants to maintain a reasonable degree of independence and to be unique in the business and as a person. However, a successful sibling partnership requires molding themselves into a team. The parents should lead a conversion from a culture of one person in control to a culture of shared decision-making, interdependence and voluntary accountability. The parents must provide leadership by promoting shared decision-making and open sharing of information, and avoiding past individual decision-making and keeping information personal.
The successful transfer of management to the next generation requires leadership, which should come from the parents. They need to give the next generation the education and experiences necessary for their eventual independent management of the farm. They need to make real transfers of authority and responsibility over time. The parents' duty is to be the model of good partners.
When bringing a family member into the farm, the parents should focus on providing exposures and responsibilities and having the family member fill a position for which he or she is qualified. Each family member should be encouraged to get outside training and education and possibly prior outside work experience. To develop successors, the parents should share planning and decision-making responsibility as much as possible. They need to recognize and accept individual differences and also to recognize that the next generation may have different values in balancing work and family.
When anticipating the farm will be co-owned in the next generation, the parents should help them develop separate roles in the farm so that each has the opportunity to make meaningful and substantial contribution, while both balancing a degree of independence and being part of the management team. Compensation must be evaluated based on work, effort and accomplishment to reflect the individual contribution to the business. The standard must be a culture of trust and to treat each other with respect and make certain that third parties have favorable perceptions of each participant's importance to the business.
The management group must recognize and effectively deal with their different management styles and personalities. Each of them has a different way of communicating, different management style and different information processing styles. These differences will lead to conflicts. Understanding, respecting and managing these differences is the key to a successful partnership between parents and their children and eventually sibling co-owners. It requires developing of good, open and respectful communications skills. Proactively dealing with conflicts helps each person to master the skills to cope with differences and to effectively resolve conflicts The transfer of the farm should be contingent on their ability to work together. They need to remember that the farm is being passed to them in anticipation that they will, in the future, pass the farm to the generation of farmers that follow them.
Twohig is a partner in Twohig, Rietbrock, Schneider and Halbach, S.C., a Chilton law firm that specializes in ag law. Call Twohig at 920-849-4999.