Succession of the Family Business: A New Perspective
Ignore the People at your Peril
People; their needs, wants, fears and expectations are at the centre of every Succession and business continuance plan, yet they are often ignored or discounted in favour of the so-called technical aspects of the process.
These often-called ‘soft issues’ are in fact the hardest to deal with and therefore are ignored at the expense of the family. Asking the Critical questions such as: What do you REALLY want? Do want the farm business to succeed another generation and if so, when? Do you really want to die on the farm? What are the contents of your will? are often seen as invasive and disrespectful and therefore go unasked and unanswered. Each family has a question that should be asked and so often is not; not because they fear the question, but because they fear the answer.
The ultimate end result is a breakdown in communication and family relations. the family become secretive trying to second guess each other and the farm may be used as a emotional tool to hold the family back e.g. “one day, someday son, this will all be yours’.
John Baker of Iowa State University BEGINNING FARMER CENTER likens this to two blind snipers in a room with a 12 gauge shotgun each - THEY can do a lot of damage before they hit each other.
The point is that this breakdown is not an intentional result but a casualty of poor communication, unstated or misunderstood values and/or an unprofessional approach to what is one of the most important family discussions that will take place – or not as the case may be.
The very question(S) that needs to be asked is the one that is not asked. it is the elephant in the room that everyone knows is there but no one wants to acknowledge its existence which leaves it open to speculation. it is far better to ask the question(s) and deal with the consequences in a managed environment and before it becomes a problem, than to have the issue raise itself later when it is inopportune and cannot be handled.
Planning of any kind is stressful – change is seldom welcome. succession and business continuance planning are no different. What happens to the family and business if there is NO planning is more stressful however, and can destroy families and relationships if left until it is too late.
So What is the planning process?? In short-form, the planning starts with communication and conflict resolution strategies that work for those involved in the process. Identifying those that are in the family, including in-laws, and determining what roles they play in the business and family are important. to prevent conflict, all family should be involved in the discussions initially, to prevent Chinese whispers and ensure that the process is transparent.
The ‘guts’ of the plan is in the identification of what the individuals REALLY want and how honest they are prepared to be about disclosure of these wants. The devil is not in wanting to die on the FARM; it is in not disclosing this early enough so the appropriate plans can be made.
These ‘wants’ or ‘values’ should cover both immediate and long-term aspirations and have a goal-based plan developed for their attainment. They should also be SMART. A time-line for transfer, if appropriate, should also be developed.
Business viability needs to be addressed – is the business profitable or can it be made profitable? there is nothing more soul-destroying than passing on an asset that is in reality, a liability.
Retirement or Reinvention needs to be planned for. How much money is required to achieve the desired lifestyle and how will this happen?
Last but certainly not least, are the legal and financial structures that need to be put in place by competent professionals to achieve the desired objectives.
The most valuable part of the planning process is in dealing with unresolved issues is central to this, as these have a habit of derailing the process if they are not adequately and appropriately addressed. Learning that the power lies in responding to a situation and not in reacting to it is vital.
Mandi McLeod
Silvanus Consulting Ltd
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