Dr. John Fast, a business planning consultant, bills himself as “The Family Business Doctor.” Judging from the size of the crowd at his talk at this year’s FarmTech Exhibition in Edmonton, lots of farmers are seeking his prescriptions.
His presentation, “The Ultimate Management Challenge: Succeeding At Succession,” addressed one of the most difficult parts of running a family farm: planning to transition ownership. While 99.9 per cent of farm businesses in Canada are family owned only 30 per cent of are passed down to the second generation, 15 per cent make it to the third, and only five per cent make it to the fourth.
The issues are not legal or financial. The real issues, he said, are relationships. Unresolved conflicts destroy family businesses.
To make transitions easier Fast recommended five habits for families to cultivate.
1. Define a common vision of success
The first thing Fast asks his clients to do is to come up with a common vision of what a successful transition looks like. It doesn’t need to be anything grand like the vision statement of a corporation. What it has to be is common: everyone has to be on board for it to succeed.
One family he helped had their vision of success defined by their mother: “Everyone is happy to come for Christmas dinner every year.” That is, a succession where everyone is still on speaking terms. He recommended making a habit of discussing and refining the common vision, ideally years before the retirement of the owners.
2. Avoid role confusion
Family businesses, Fast said, face a lot of complexity. On a family farm where multiple siblings work along with the parents you often have situations where someone is both a father and a manager, or where one sibling can be the de facto boss of another. This can lead to hurt feelings because impersonal business decisions can feel like personal snubs.
Fast gave the example of a family where the father decided that the fourth son of six would be head of the family farm, which was shocking news to the eldest. That painful situation, Fast said, could have been avoided if the father had come to his sons as a father to discuss what he felt was best for the farm before making a pronouncement as a manager, rather than confusing everyone by mingling the two roles.
3. Respect people’s choices
One major roadblock in succession planning, Fast said, is failure to respect each others choices. This is one of the key sources of resentment in families, particularly towards siblings who left the farm and now when succession is being discussed, expect a part of the business. The failure of respect is mutual — the sibling who left does not appreciate that they made a decision that involves a sacrifice, and the others do not appreciate that the sibling is still family and, while not necessarily entitled to a share, needs to be part of the discussions about succession. These conversations, like all the others, have to start early.
4. Prepare your founder for transition
A founder’s inability to let go is a problem in every type of business, Fast said, but it’s a huge problem on family farms. Retirement means giving up control and that can be very hard for someone who has worked their entire life building a successful business. They can worry that their children will screw things up. Worse, they can fear that their children will be more successful than they were.
To successfully transition the founder to retirement, Fast recommends encouraging them to cultivate hobbies outside of work long before retirement. He also recommends preserving an office for them to give them some place to go, to feel that they’re not completely out of the loop. Finally, he says that they need to be encouraged to see their children’s success as their own: it’s proof that you raised them well.
5. Build trust through communication
Ultimately, Fast said, good relationships come down to good communication. The ultimate habit, he said, the one that embraces all the other four, is making a habit of communicating with your family what you believe and feel.
It is not conflict, he said, that kills people or makes them ill with stress — it is suppressing conflict from fear. This means that conflicts can be buried so long that they will blow up and hurt everyone when they come out when they could have been successfully addressed years before. All members of the family need to start making a habit, right now, of being open with one another about how they feel and what they think about the farm and about succession before it becomes an issue.