So, how can ranch families move into the future with a transition plan in place? Kevin Spafford, a succession planning specialist, shares the following tactics that can be beneficial to the process.
Start communicating. Spafford - along with most succession planning experts - say the best way to resolve or minimize conflict is to keep all involved communicating and informed.
Regular family meetings tend to be the best means for doing this. These meetings should have an agenda, be structured and follow the rules and courtesy expected in any business environment. If necessary a professional facilitator or mediator could be used in early meetings, with facilitation eventually rotating among family members.
Of this process Spafford says, "Once families begin a new era of respectful and open communication, they report an increased appreciation for each other and a renewed love for their work."
Determine the vision. Once family members are communicating, the next essential step is to agree on a shared vision for the family operation. Not everyone will have the same vision; so this process will likely require some compromise and consensus building.
Spafford says, "It's well worth the effort to explore your vision for the business and set it to paper as a fundamental element of your business model."
He suggests considering these questions as you form your vision statement:
• What values will be promoted by the actions, management, systems, and appearance of your farm or agribusiness?
• How do you want to be perceived by your customers?
• How do you want your employees to treat your customers?
• For what particular specialties would you like to be known (both products and services)?
Have a "working" business plan.b Essential to the succession process is a detailed business plan that outlines the goals of the operation and lays the roadmap of how the "vision" will be achieved, while also setting the stage and timeframe for the transition from one generation to the next to take place.
That said, Spafford emphasizes that there is a fine line in implementing the plan. He says on one hand, a plan must be flexible enough to adjust to changing conditions, shifting resources, variations in consumption trends, regulatory initiatives, and evolving abilities.
On the other hand, the plan shouldn't be revised so much - or totally ignored - to the extent that the long-term perspective is lost.
He says, "Annual updates should reflect changes in goals, the business, and the people involved."
Define roles. Along with the business plan development, establish the roles and responsibilities of those involved in the family operation. Spafford suggests this should also include identifying the successor - be it a family member, trusted employee, or promising outside candidate.
Spafford says this definition of roles helps to create competence and encourages accountability among people. He says, "Management, or leadership, in the family operation is no different than any other organization. There must be a workable structure in place to allow for discretion within each role, accountability for each position, interdependence based on the team, and methods for grievance, governance and growth.
Work with a professional "team." Along with the vision and business planning aspects, estate planning must also be considered. This entails the legal details to ensure that the ranch or agribusiness passes to heirs unencumbered by debt that may threaten the economic viability of the business. As well, retirement planning to allow for financial independence for the retiring generation must also be considered.
For this process a team of trusted professionals will need to be included. Spafford says, "Discuss succession planning with your current advisors, CPA, attorney, financial professional, or retain a specialist. Keep in mind action is your ally, and procrastination is your opponent."
Recognize that more than assets must be transferred. A common mistake in succession planning is doing all the proper paperwork to legally transfer the ranch from one generation to the next, but then failing to transfer the control; the decision making abilities; the leadership role.
Spafford sums this up by saying, "Succession planning is not just about passing the business entity to the next generation; it's about transferring the spirit and the intellectual capital of the entrepreneur to tomorrow's business leaders. It is about exit planning with grace, ensuring that the business will continue to grow and prosper as the business owner plans for retirement or the next venture in his/her vocational life."
Specifically, Spafford suggests a written plan should be developed to help both owner and the successor to understand what is required, how the training will be conducted and provide documentation of progress.
Spafford says, "Tomorrow's leader is developed today. Start on the training now - so that the new manager will be fully prepared to step in when you are ready to reduce your own involvement in the day-to-day operations."
In the end, Spafford says the work to develop a comprehensive succession plan should ultimately position your business and your family for long-term success. He concludes, "The ultimate goal is a lasting legacy."
For more information about Spafford's services and his blog visit www.legacy-by-design.com or call 877-523-7411.
