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How do you know when the younger generation is ‘ready’?

AME Management: How succession can be successfully planned

Farmer and His Son Standing Side by Side Leaning on a Gate

A tough question for any family business is how to know when the next generation is equipped to take over management decisions. Like many other things, the answer is often lost in a range of factors, not least the attitudes of the individuals in the family.

My experience is that many families have unresolved “stuff” that doesn’t get dealt with. Combining this with a natural reluctance to deal with their own mortality goes far in explaining why so few people in agriculture have clear succession plans. In our CTEAM program, we see an assortment of behaviours that need to be addressed if succession is to be successfully planned.

In this article, we will address some of these behaviours and try to draw lessons that may be useful in planning transition.

To start, definitions are important. It has become politically correct to stop using the word succession when referring to intergenerational transfer of a farm business. In our view, succession has three elements that need to be planned: designing the process to transfer ownership, developing a clear plan for financing the transfer of ownership, and transitioning the farm’s management functions to the next generation.

The problem with calling all of it “transition” is that transition can apply to many things: i.e. transitioning from livestock to grain, from commodity to value-added, from $1 million of revenue to $5 million, from conventional to organic, etc. Each of these transitions has its own issues. This article is focused on the transition of who makes managerial decisions.

A number of problematic behaviours and attitudes seem common in the industry:

You’re supposed to know, but don’t expect a pat on the back when you do

Often the seniors expects the juniors to know how to do things with little preparation. The seniors feel these things should be self-evident and should be mastered quickly, likely because their own parents expected the same. That can lead to the younger generation feeling put down.

The corollary is that when the younger generation does get things right, there’s seldom any positive feedback. You’re supposed to do it right, so why would you expect a compliment?

Ironically, basic behaviours you would take care of with employees — providing training, setting clear expectations, giving positive reinforcement — are often missing for family members. It affects transition planning too. We had a very bright young person with training in a professional field and a solid record of work performance whose parent wouldn’t allow them to use the farm’s financial records in the CTEAM program. How frustrating that they were denied the things they needed to learn.

As a result, we have a younger generation that often doesn’t know where they stand and who may feel reluctant to address the issue of transition, and at the same time the older generation may wonder why the younger doesn’t step up.

No one can do it as well as I can

A similar, but slightly different issue occurs when the older generation is very successful and understands what’s needed to achieve success, but has doubts that the younger generation will be able to match the successes. This one lands close to home: to use a trivial example illustrative of bigger things, my father was still telling me my shortcomings in driving a car when I was in my 60s.

As with the first example, it takes a strong person to feel secure when they were raised this way. Again, it’s easier to not talk about the future when neither generation feels good about the past or the present because their conversations are dominated by criticism. The younger person is most likely to leave.

Anointed and entitled

This is the opposite of the example above. The younger generation is sure of their ability (sometimes with no proof) and feel they are entitled to move upward quickly. They also know that their way is far better than the older-generation’s way. This may not sit well with an older generation that likely started with fewer advantages and went on to stay solvent and prosper through decades of volatile commodity prices and interest rates.

At last year’s Agricultural Excellence Conference, a session on succession divided into two groups of over- and under-40s who were sent into separate rooms to each develop a list of what they expected from the succession process. When they compared lists, most items were similar, except the older room wanted to “continue the legacy.”

This brought from the brash younger contingent that “legacy” could be shorthand for wanting things done the way they always had been. In turn, it was pointed out to the younger generation that acknowledgement with some pride and humility of what the elders had accomplished might make it easier for both to enjoy an expanded definition of legacy.

We were refreshed to have a father and two sons come to CTEAM who were clearly open with and enjoyed each other. They came with a succession and growth plan in place to ensure the farm would provide a good living for three families. Because of their openness, they left the program with an improved business structure, a greatly improved growth plan and an even stronger family bond.

What are the learnings?

The learnings for me are quite fundamental:

Talk and listen to each other. The examples above scream out that people aren’t listening and likely aren’t talking. Be clear about everyone’s expectations and where those expectations are not being met.

This is difficult, especially for families who haven’t talked openly in the past. There is often a 900-lb. gorilla waiting to be let loose and cause havoc. When differences are major, it may be useful to have an objective third-party facilitator who clearly says, “This is what I’m hearing.”

It is important to have clarity on what skills and experience the senior expects the junior to achieve in order to move up, and which skills need improvement. It’s also important for the junior to be clear where they feel they are on the list of expectations and what they need to move forward.

Construct a development plan for the junior. Based on the conversation above, make a clear plan for what the junior needs to do to “prove” themselves to the senior. This may be a series of exercises such as researching the fundamentals of leadership and then developing opportunities to demonstrate them, or helping to develop a management information system to provide better information, or getting some training in an area of need. The plan should provide opportunities for the younger generation to apply the learnings to small situations that show they are prepared for larger decisions.

Construct a plan for junior to start taking on larger aspects of management. The last step is to have a clear path toward the junior having more responsibility to continue to practice and show their management skills. How this is structured depends on the structure of the farm and peoples’ interests. It may start with taking over responsibility for an enterprise, or with doing the marketing, or with managing some or all of the employees.

Like many aspects of good management practice, the suggestions above seem like common sense. But better management and improved family harmony arise when common sense is actually applied.

Larry Martin is a principal in Agri-Food Management Excellence, which runs the Canadian Total Excellence in Agricultural Management (CTEAM) program.

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