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Better steps for farm transition

Canadian agriculture is suffering a shortage of family farm advisers with the training and skills to help our farms through succession and transition

Farmer and Financial Advisor

It’s expected that three in four Canadian farms will change hands in the next 10 years, many of them from one generation of the family to the next. But where will these farms find help they can trust to navigate their increasingly complex transitions?

There aren’t enough trained and experienced farm advisers to go around now, and there is an urgent need to develop and equip farm advisers with the tools and skills they need to help farm families successfully pass on the farm to the next generation of capable hands.

“Now that we have got farmers interested in succession planning and farm transition, they are asking us, ‘who do we talk to, where do we go?’” says Heather Watson, executive director of Farm Management Canada (FMC). “We discovered that we were lacking people to serve all the needs that were out there.

“We began to ask ourselves: where are the next generation of farm transition advisers going to come from?” Watson says.

That’s led Watson and others to try to pool the experience of the farm advisers who do have experience in succession, getting them to talk about what is working well, lessons learned and pitfalls to avoid.

“We also wanted to see if there’s any common ground or core pieces that they’ve learned over the years that we can use as guidelines,” Watson says.

But don’t call them best management practices.

FMC in partnership with the Agri-Food Management Institute (AMI) organized a series of meetings bringing together around 20 well-known farm transition planning coaches, facilitators and advisers to discuss the lack of and need for farm transition planning and coaching in Canadian agriculture and explore possible solutions.

There were a series of phone meetings and a two-day meeting, held in Ottawa a year ago attended by practitioners from across Canada, the United Kingdom, the United States and New Zealand.

One of the first things that emerged from those discussions was a reluctance to use the term “best practices” because there isn’t any prescribed model guaranteeing success given that every situation, farm and farm family is different and has unique needs. That said, they did find a lot of common ground.

“We wanted to determine the biggest barriers to success,” says Watson. “We were coming up with more questions than solutions, but at the end of the two days we had 14 key result areas where we agreed we needed to dig a little deeper and see if there’s legitimacy behind these thoughts. Over the course of the next few months, we narrowed them down to four Key Priority Areas (KPAs) that had embedded the other pieces.”

Transition, not succession

The first KPA was about terminology and the need to refer to farm transition rather than succession. During the discussions it became clear that the term “succession” has a connotation of hierarchy, inheritance and entitlement, while “transition” speaks to the process of change.

“People are familiar with the term succession… but we also don’t want just another term that has the same meaning,” Watson says. “We have to ensure we are coming out with something different not for the sake of being different but different in terms of it truly is a different way of thinking about it.”

“Transition planning” rather than “succession planning” also recognizes a link between business planning and ownership planning. “This way, farm transition is not thought of as a separate event or something to be put off until retirement, but rather part planning from the get-go,” says Watson.

Adds Watson: “A key feature of a Farm Business Plan should be the Farm Transition Plan, by which there is earlier anticipation of the inevitable life cycle of the family farm and its various players.”

The three-circle model

The second KPA is adoption of the “Three-Circle Model” that addresses the three components of family, business and ownership roles. The Three-Circle Model for Family Business Systems was developed at Harvard Business School by Renato Tagiuri and John Davis in the 1970s. It is a widely adopted organizational framework for understanding family business systems, and is used by families, academics and consultants all over the world.

John Davis’s website describes the Three-Circle Model as a framework which “clarifies, in simple terms, the three interdependent and overlapping groups that comprise the family business system: family, business and ownership. As a result of this overlap, there are seven interest groups present, each with its own legitimate perspectives, goals and dynamics. The long-term success of family business systems depends on the functioning and mutual support of each of these groups.”

The Three-Circle Model of the Family Business System was developed by Renato Tagiuri and John Davis at Harvard Business School, and was circulated in working papers starting in 1978. It was first published in Davis’ doctoral dissertation, The Influence of Life Stages on Father-Son Work Relationships in Family Companies, in 1982. In 1996, the Family Business Review published it in Taguiri and Davis’ classic article, “Bivalent Attributes of the Family Firm.” photo: Tagiuri and Davis, 1982

The Canadian Association of Farm Advisers has been working to offer professional development days where they specifically focus on the Three-Circle Model to make sure that in every conversation about transition, they’re addressing the separate component parts and the intersections between them and the individuals involved in the process.

“It seems everyone can get behind the Three-Circle Model as a comprehensive way to address the different components of transition,” says Watson.

A common process

The third KPA is development of a common farm transition process and components. There was general agreement that farm advisers go through a specific, high-level process when they’re working with farm families through their transition.

There is also a distinct difference between the farm transfer and the farm transition. The transfer is when things like assets are actually, legally being transferred over. The farm transition is a much lengthier process, and perhaps a never-ending process because farms are always in a state of transition and looking towards the future.

“Of course there’s a point where the transition plan has to be finalized and implemented,” says Watson. “So what are the specific components involved in the transition plan, like looking at investments, doing personality profiles or visioning exercises. These are component parts within the process and so we are starting to look at guidelines for that as well.”

The next generation of advisers

The fourth KPA is the need to engage and train the next generation of farm transition advisers. That starts with determining what roles they need to perform for the sector.

“Do we need a training program for farm family coaches as people who can play the quarterback and bring in specialist advisers like accountants and lawyers at specific times, or is there a need for one-on-one training for advisers who are already out there and who need to be made more aware of the comprehensive nature of the topic?” asks Watson.

“FMC and our partners at AMI know that we can’t effect any real change on the ground because we’re not the adviser sitting across the kitchen table from the farmers, so we vitally need input and guidance from the advisory community so that we can move forward together,” says Watson. “We’re not trying to prescribe, we’re facilitating.”

The whole process has been an interesting journey says Watson, which didn’t start out as a very comfortable one. “As you can imagine, at first, the advisers weren’t completely comfortable sharing their secrets to success, because people are naturally sensitive to competition,” says Watson. “But one of the advisers stood up and said, ‘eight per cent of farmers have a transition plan. There are over 200,000 farmers out there and there are 20 of us.’ That’s when they all rolled up their sleeves and started talking about solutions.”

The next steps are to work on a branding and marketing strategy for the terminology and to get the findings of the meetings out in front of the industry.

“We’d like to present our findings as some helpful guidelines for how to give farms and their adviser the best chance for success when it comes to transition planning. We also wish to continue to share best practices between the advisers already out there, as they continue to help Canada’s farmers for years to come.”

At the very start

Typically, farm families turn first to their accountant or lawyer when they are thinking about transferring the farm. But that might not be the best place to start.

“The lawyer can help families with the estate plan and will and the accountant can help them with a tax savings plan,” says Heather Watson, executive director of Farm Management Canada.

“But,” says Watson, “the biggest problem we see is the farm family isn’t ready to have these conversations.”

The family hasn’t had a chance to sit down and talk about their vision, goals and dreams, especially with the next generation. “It’s almost like we’re getting ahead of ourselves,” Watson says.

This means getting the right adviser who will have the right fit for the family, and vice versa.

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Angela Lovell

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