Chapter 1.7 Plan management succession
Background information
Management succession can be thought of as the keys to the car and the opportunity to have a go in the driver’s seat. When you learnt to drive you were not simply thrown the keys and told “off you go”. As a learner driver, you received training, support and developed confidence over time to drive solo. The same goes for management succession – the process takes time and involves improving skills, gaining confidence and allowing mistakes to occur in a safe place. Tool 1.14 provides a useful template to check-in on your progress.
If management succession is the keys to the car, then estate succession is owning the car! Ownership of the car is the last piece of the puzzle and often does not occur until your parents have upgraded the family car. The principle being, your parents are looked after first and then you are gifted what remains.
But…don’t forget there are plenty of successful and professional drivers who don’t own their car.
Management succession is about providing the next generation with ownership in decision making for the whole business. There may be periods where the older generation are not working in the business on a day-to-day basis, and these periods often get longer over time.
A focus on management succession boosts the likelihood of preserving family relationships. All parties feel valued and part of the shared vision for the future. This process takes time, solid communication and mentoring.
Commonly the transfer of the operating business is part of management succession and includes machinery and livestock assets. Estate succession is the transfer of larger assets, such as land. This is facilitated via the business structures, such as a family trust.
An advisory board is a useful tool for management succession as it allows all stakeholders to agree on the game plan. The next generation can then be responsible for implementation.
At a glance
- Management succession takes time and involves improving skills, gaining confidence and allowing mistakes to occur in a safe place.
- Applying family corporate principles will to build ownership and accountability for all parties. An advisory board can be very beneficial.
- Management succession is about providing the next generation with ownership in decision making for the whole business.
- A focus on management succession boosts the likelihood of preserving family relationships. All parties feel valued and part of the shared vision for the future.
The family corporate
There is a trend towards a more corporate style of governance in farming business, whilst still retaining the ‘lifestyle’ and traditional values of the family farm. The family corporate provides:
- Retention of family farming values – family often works hard to make it all happen.
- More defined division between family and business.
- Greater strategic thinking and business systems that are guided by data as well as intuition.
- Greater access to capital and/or scale through joint ventures.
- Professionally operated, profitable businesses.
The strengths of this model:
- Still carries an emotional attitude towards the property and the business.
- Greater strategic planning and risk management.
- The farm succession process is managed by facilitation, agreement, communication and systems.
- Strategic decisions are made with the support/critique of a board whilst still retaining the owner’s intuition for the property.
- Better business systems and policy around managing compliance and business risks (see Tool 1.12).
- Greater communication between business partners.
- Can retain a lower cost business model.
- Retains a long-term view (greater than 50 years) of farming in general, as well as the business.
- Better procurement and investment policies.
- Defined roles and responsibilities of the team and greater emphasis on HR management.
- Greater balance between working-on-the-business as well as in-the-business.
A business plan is a key part of management succession and the family corporate. Tool 1.3 provides a business plan template. Tool 1.6 also provides the goals grid, this is an excellent process to gather the shared future vision.
Mentoring
As farm businesses work through management succession, owners (often parents) begin to move out of their long-term management roles. During this time, parents may still have a desire to contribute through active commentary. A role parents can play is that of a mentor. This can be a new role that sometimes doesn’t come naturally.
A mentor can:
- Provide or seek out resources – brings papers, research, opportunities, or experiences to the attention of the mentee.
- Act as a role model – offers insight on how he or she came to be in their position.
- Provide advice – shares industry and business wisdom, critiques performance, makes suggestions.
- Coach – helps a mentee learn new skills and practice new behaviours.
- Support – listens with a sympathetic ear, explains unwritten rules and acknowledges disappointments and triumphs.
- Share observations and insights.
SIGNPOSTS
Provides pointers on how to assess whether an advisory board is what your business needs, how to select the composition of the board and what key factors are critical for it to operate effectively.
A series of webinars and podcasts to help producers understand the succession planning process, the different experts who can assist through the journey, and some tips for getting the family together for the first succession meetings.
Advisory boards can contribute to an improved bottom line by providing decision support, setting guidelines for prudent budgeting and expenditure, and keeping informed and ready for new opportunities and innovations.
The art of excellent farming starts with making first-rate choices about yourself so that you can make the best decisions about crops, people and money.
A series of case studies demonstrating a number of mechanisms to achieve successful business growth, which in turn can help set up succession for future generations.
The latest information on farm succession and transition planning, including planning guides, do’s and don’ts, succession planning case studies and business transition.
A manual to assist producers with their skills to manage a successful business.
Advice for first-time mentors on how to take on a mentor-mentee relationship, including recommendations for becoming a successful role model to your mentee.
Succession planning is an evolving process that ensures the continuation of a business through generations or through layers of management. A selection of resources to help producers implement a successful strategy for change.
A producer case study delving into a family business with particular reference to intergenerational change and succession planning.
Search to find accredited member consultants and advisors in agriculture and natural resource management.
Search this site for consultants and advisors in WA.
Next generation farmers can develop key business management skills to provide a platform for success as succession occurs.
