While in Australia I was involved in several farm family succession planning meetings. As a guest speaker, I talked about the empowerment of individuals around the table. This is important so the truth is known and heard from all the individuals involved. The meeting leader followed with key points.
Love, power, and/or money can sum up the reasons why farm succession fails. When we try to do it ourselves, often the emotional side deafens our ability to listen or to be heard. It is well known that 55 per cent of what a person hears is read through our posture and facial expression. You can’t disguise that kind of poison. So it is important when one goes into a discussion to ensure we are ready, and relaxed, honest and sincere. Our body will give us away if we are not.
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The tone of our voice is 38 per cent of what is received. If we raise our voice then regardless of what we say, the other members of the family only will hear a third of it. The rest of the time they are emotionally responding to someone being angry. Because the human brain seems to only be capable of getting the full meaning behind an emotional sentence seven per cent of the time, it is important to choose words carefully.
Asking the other family members what they think, how they feel and how they visualize the changes are all key to a healthy discussion. Checking in once in a while with each person with a question like, “What have you heard so far?” is a healthy way to ensure the conversation stays on track.
Help needed
Sounds easy, but in reality it is very difficult to do without help. It is important to have a neutral and qualified third party lead the discussion. We watched a disturbing video of a farm family succession planning meeting with a facilitator who berated one member of the family because it was the consensus that he would not move of the mark.
What the facilitator had totally missed was that the seemingly unmovable resolve of the father to stay on the farm was not driven by power or money, but by love. Once the family discovered his motivation then it was easy to come to an agreement on a plan that worked for all parties. To the credit of the family they were able to find his reason despite the facilitators predetermined ideas. Engaging the right person for your family is important and a full debrief on his/her capabilities is perfectly acceptable.
Because succession planning is complicated and takes a long time, it is important to confirm often what has been agreed upon. Mental and physical exhaustion take their toll, especially if there are several of the players holding a position based on power. And although money is a negotiable area, there are many farms that take years to work this through. In several cases we examined, the family accountant or financial adviser was biased or worse yet, withheld information. As hard as it is to believe, these things do happen during the process of negotiation.
Business plan
The development of the strategic succession also includes a firm business plan for all parties. I have seen several where there is a buyout and in some cases the farm continues to support the parents with an annual payment.
Regardless of the details, it is real lives we deal with in succession planning and all parties have to feel secure that the decisions made will be honoured. The best honour system is to still have the written plan in place prior to any transfers. This way, when the going gets tough or someone is unsure, even in later years, all eyes can go back to the business plan.
The most tragic of circumstances occurs when there has never been a business plan and the children have worked on the farm, often for decades, under the assumption that they are entitled. One case involved not only the lack of a business plan, but the original owner took liberty to change verbal agreements. This is a power play. Combined with a lack of correct information on how that business should have been run resulted in free labour for two decades for the original owners, and the adult children lost their land, home and health.
In another case we worked on it was the parents spoiling the adult children (love) and those children now wanting it all (money) which would have impoverished the parents. In another example the parents were very quiet and seemed withdrawn. They were embarrassed to say that their off-farm investments failed and they could no longer transfer ownership because they had to sell. All parties were going to lose their dreams and their homes.
At all times, it is important if you are working on a family farm to have written agreements and business plans that clearly state the roles and responsibilities and compensation for all parties. We could look back on these examples and ask, “What were they thinking?” But the reality is that people farm because it is what they love to do and it is easy to assume that your life will be the same tomorrow as it was today. We know that is not the truth and at some time the fair negotiations may be clouded with love, power or money or the unexpected. It is best to prepare now with the right people and for all the right reasons.
