Succession. Two recent case studies – peripheral overview absent of financial data
The need to look ahead and define a structure to replace current leadership is imperative.
This applies as much in the home as in business. If the business is a family business, then even more so. Very often ‘leadership’ just comes about through circumstance or last-minute plans, if they can be called that – emergency measures to fill a gap. A gap that may make it impossible for the new incumbent to be successful.
In both case studies, it was imperative to develop trust among everyone and to balance input and get past previous assumptions. To record it all and then seek feedback on that – did we capture the situation or do we need to make some adjustments? Then we could start.
Case study 1 – A farmer had three children, 2 boys and a girl. One of the boys looked a natural BUT didn’t want to stay on the farm. A quite brilliant girl who had never been included in farm talk, never consulted, just a passenger., a little resentful and hence hadn’t pushed her case. And a boy who loved the farm but had been treated in much the same way. Dad and favoured son and dad who had convinced himself that ‘his boy’ would come around. This was causing a ruction between that son and his dad – that son being scared it would all be dropped in his lap, extended overdraft, and all.
The property was potentially worth millions of dollars in a good year with weather forecasts good BUT, after a few years of draught, nothing but a liability, not able to cover outstanding loans let alone a lifestyle. Dad handled the finances as they were senior thinking and no one else had any real idea except the situation when the final payment notices started to roll – but it had all worked out in the end, previously.
The GAP – making oneself believe it would all work out and favoured son would come around, which he probably would have on dad’s death but trying to exit before then was no option, the favoured son would probably have backed away – leaving mum and 2nd son holding the cake and mourning at the same time. Favoured son potentially trapped; daughter unfulfilled.
By introducing an external person, an unconnected person who wasn’t constricted by family knowledge or relationship, one who could ask the tricky questions, respectfully call the bluff on defensive behaviour, one that was open to actually listen and hear, put emotion and perceived conclusions aside, everything fell pretty well in place.
The situation – Dad was 65, fit with no health problems. Mum was 63 and although more often excluded in farm conversations, she actually knew almost as much as her husband – she could listen even if not consulted. But she did lack the confidence to readily jump into the role of manager of their affairs but would probably been stoic about it and probably successful – she did behave in a consultative way. With the situation as is, holidays were not an option, and any passing sickness of dad was a major problem.
Favoured son – had successfully completed a master’s degree in agriculture – under Dad’s pressure. Also, a degree in international law and economics – his true passion.
Other son had completed various advanced diploma courses covering agronomy animal science, soil science and agriculture. His true passion. Additionally, a Certificate Four in basic accounting, project management and marketing.
Daughter – a Doctorate in farm management and master’s in accounting. She loved the farm and was very keen to be part of it. She would happily put aside her corporate job and return to the farm – something the dad never actually heard or could contemplate.
She would be happy in fact excited to work with the second son and could see how the favoured son could also be involved. As a three they were close but somewhat disconnected through Dad’s preconceived solution.
Mother – before being pretty much required to retire on getting married had run a successful small business which she had taken over from her parents; had worked in most of her childhood and understood well. The business thrived, and she had good common sense and energy.
Challenge – Everyone except ‘dad’ was on the same page and Dad was somewhat intransigent. The way forward to progress the matter was to find a way to get Dad to listen and in fact manoeuvre him to a position where he would be open to discussion.
This started with
Getting him to recognise the need to develop a plan that could be implemented way before it was necessary – to identify reasons to do that. Then,
- identifying both hard and soft skills required to run the farm
- developing a list of necessary prequalifications (dad had no formal education past ‘intermediate’ (year 10) except for numerous information sessions put on by farm suppliers – usually trying to convince to buy their products. This was academic and experience.
- having his wife and children contribute to this matrix as to their level of experience and then him putting in his score
- identifying gaps
- hearing what each person wanted to achieve in their next five years – their passion.
The end result of this became self-evident and was surprisingly simple – sure a few roadblocks but by having an emotionally disconnected facilitator proactive in bringing people together and problem-solving, not losing sight of the objective – successful succession where the right people were in the right spot for the farm and for themselves AND strategies were identified and implemented to bring up experience and qualifications to suit the various roles.
And, Dad needed to adopt his style and actually hand over various predetermined tasks and allow others to ‘smell success’. These are to be identified and recorded with appropriate actions.
By not seeking the input of friends and relatives, all of whom would have been influenced by Dad’s thinking, by somewhat distancing their own accountants, solicitors and financial advisors, Dad was able to perhaps hear for the first time what his family was saying to see and understand his ’children’s’ capabilities. The time for accountants and financial planners, estate agents etc was to come after the new entity had been defined and all players were active. Armed with the knowledge and comments of the family and the future, these other professionals could now be more adequately briefed.
Through this process, the second son was actually heard and something that Dad had been discarding in his recommendations was picked up, further defined by his sister and 1st son and their farm was almost immediately put in a better financial position.
The agreement was written up in everyday language and after receiving some feedback from the ‘professionals’, much of which only served to complicate the matter, it was witnessed.
Case study 2 – A farmer (woman), 68 years old, in good health and doesn’t really have enough funds/income to make the farm profitable without additional external income. As a family, they were devoted to having a farm-based life. Raised on the family farm which she inherited, with a father who didn’t really set her up to take over (no other children) and a husband who wasn’t from a farming background but who enjoyed it and was committed to trying to make it work.
It is a mixed farm, cropping and sheep. They rely to some degree on contractors. ‘Mum’ isn’t really open to input and continues strategies that didn’t work for her parents,
Spouse (man) is handy and committed but is also a qualified grader driver, with enough work to supplement the farm income and to engage one of his 25-year-old sons and 2 other employees. He is 65 years old and medium health and will need to get his 1st son up to ‘management thinking level’ fairly quickly to maintain contracts etc.
This son enjoys the work and also the farm work and everyone is working long, hard hours.
Dad isn’t good at open conversations and can be passive-aggressive which hinders open communication. Too much telling and not enough listening or respect.
25-year-old twin son (1) – can see a future in the grading business but is also keen to develop some new ideas for the farm. He needs to convince Mum, who is basically thinking like her parents when they were alive and also having trouble getting the farm to be a financial success. In fact, they left debt. He completed university in agriculture and certificate 111 in maintenance heavy duty and did well – plenty of on-the-job training and this flows through to farm work as well.
Dad isn’t good at open conversations and can be passive-aggressive which hinders open communication. Too much telling and not enough listening or respect.
25-year-old twin son (2) – He works on the farm supporting his mum but has some learning difficulties. He is quite capable at a range of tasks but still needs supervision to complete. He also assists Dad with some peripheral tasks in his operation.
The situation – the farm is difficult to sell given the recent impacts of negative weather and consequential income, and some improvements are needed generally to property and equipment. The likelihood of losing the farm and not enough to buy elsewhere but probably sufficient to cash flow life out of the grading business. Potentially currently trading insolvent. Starting to panic and that is hindering open discussion, listening and new actions. Getting fearful input from solicitor and accountant who have both been involved all the time and are only now contributing their negative input.
A cousin of the wife who is currently unemployed, had some light-weight legal issues but is very good at matters concerning farming and would be happy to come and contribute to the effort and thinking of the farm but adults are sceptical about his character. Is a good communicator and in reality the legal issue was more a simple mistake and wrong influence. This added and no cost addition to the workforce could make a lot of positive difference.
The end result – The cousin was brought in, and he immediately saw how the product that hadn’t been resourced could be accessed and sold. He was able to use his influences (even though he had this legal episode, he had been a great footballer and had some credence in the community) and get some debt readjusted. He recognised a paddock (that was important to the owner) was excess to their needs and the adjacent farmer offered to purchase it which solved their liquidity and debt situation in one fell swoop. (Having this new voice at the table changed the family dynamics)
It also gave the three men and him a boost to their relationship. Now the question was about succession – did the cousin feature in any planning? Here the accountant and solicitor became a stumbling block that needed to be managed.
The land was sold, the product and terms were negotiated, and a succession plan process commenced. This was devised to be a two-stage plan, one commencing very quickly that was about skills and needs matrix, timeshare responsibilities and suitable KPIs to underpin future decisions.
Given that KPIs were met, year one two and three, then the basis of succession was clearly about the part that each of the ‘children-aged’ adults would take as their responsibility, a clear meeting structure was developed, and an external ‘mentor’ was appointed non-executive chair. (not the accountant or the solicitor) each to own a quarter and ‘mum’ holds a quarter that in the event of her death, is shared equally.
Everyone was in agreement even though it meant the cousin benefited equally – they recognised that they were very close to losing everything and that his advice steered them in the right direction. A new accountant and solicitor were engaged, as was a financial planner, so that they could then proceed – every quarter a full meeting was to be held, chaired by Mum, which included the other professionals.
Mum was supportive of this whole process after she was assisted in realising the perilous situation she was in and therefore her family was in, and their inability to date, in finding their own remedies.
The agreement was written up in everyday language and after receiving some feedback from the ‘professionals’, much of which only served to complicate the matter, it was witnessed.