We talk about succession being the transition of leadership as opposed to estate planning being the transition of assets. That handoff of leadership usually takes place over a long period of time. Happens gradually every day. Typically impacts a team of people. Defies definition. And it can feel overwhelming.
As the senior generation, you may be asking, how do I make this happen?
In a typical scenario, a young adult family member comes to work at the farm with the long-term intention of growing into the future leader of some or all of it. For this situation, I identify four typical phases of succession and provide some suggestions of where to focus in each phase. The example below is aimed at a Next Gen that starts working in field operations. But adapt the concept to your situation.
Boots on the ground
“Ginny Next Gen” is mostly an employee at this point. She is a grunt, working a typical starting job commensurate with her experience level. She should be focused on observing, working hard, learning the ropes, and gaining credibility. She can build relationships with other team members as a peer. She is unassuming and truly open-minded to seeing if this is a good fit for both sides.
Don’t jump too fast into putting her into an “owner’s mindset” or providing the fringe benefits of ownership. Treat her as a typical employee.
Exposure and targeted leadership
In this stage, start broadening exposure to more aspects of farm management. Take her to the annual bank meeting to be exposed to financial process. Include her in the insurance renewal conversation to see what that’s all about. Invite her to the crop insurance decision meeting. Take her to an industry meeting. The goal is to gain awareness of how much she doesn’t know yet and an appreciation of the many aspects of running this business. Don’t expect her to be an expert in any of it at the beginning of this phase.
You may assign more responsibility to learn management of a specific area. For example, over two seasons she gradually learns and becomes responsible for all input purchasing. You keep adding specific responsibility areas at a doable speed.
Active handoff
Phase 2 went well. Ginny Next Gen mastered a few management responsibilities and is ready for more. You see the capability and maturity you’re looking for, and you’re ready to get serious about a more significant handoff. This is when it shifts into turbo drive.
- You make a list of major management decision areas
- You set a multi-year timeline of when Ginny takes over, and you back off of each area of responsibility as it’s transferred.
- Eventually, Ginny becomes the lead contact with important vendors and partners. You let folks know that handoff of leadership authority is happening. You rename titles if appropriate.
- You, as Senior Gen leader, are intentional about deferring questions to Ginny when folks call you first. You may still be actively involved in operations and many decisions, but you’ve carefully clarified who is responsible versus who is consulted. The RCI matrix is useful at this time.
Wise consultation and information sharing
When you get here, 90%+ of handoff of daily leadership is accomplished. To maintain a healthy business and a healthy personal relationship, the trick is being on the same page about what level of advice and consultation is needed and welcomed from Senior Gen. You have lots of hard-earned wisdom and you probably still have significant financial reliance on the business. Ginny Next Gen doesn’t know everything and still needs your input.
Find the right cadence for that input. It could be a Chairman of the Board role. That implies periodic meetings where important decisions are approved (think debt, sales and purchases, enterprise changes, distributions, non-negotiable expectations). More frequent suggestions from Senior Gen may be welcome – decide a time and place that is not disruptive for sharing suggestions.
It's important to note that at some point, if you don’t need to be consulted, you may still expect to be kept informed. This business was your life’s work and may still be your pocketbook. Clarify a process to keep you informed at the level you need.
You’re probably wondering how long each phase lasts? It varies based on ages, business stage, desired retirement, financial opportunities, and speed of mastery. But in typical scenarios, each phase lasts multiple years. Discussing this framework with your successor could help you identify if you’re ready for the next phase.
Davon Cook is an ag family business consultant at Pinion. Reach Davon at davon.cook@pinionglobal.com. The opinions of the author are not necessarily those of Farm Futures or Farm Progress.