Managing for Today and Tomorrow

1. Managing for Today and Tomorrow Succession Planning Part Four Developing the Action Plan

2. Key Succession Planning Tasks • Planning for the gradual shift in management from one generation to the next. • Shifting ownership of the assets involved from generation to generation. • Anticipating events that could disrupt management and ownership succession.

3. Building a Management Team • Design a team approach • Develop new management skills • Cross train • Seek a functioning and effective system of routine communications • Implement non-threatening evaluation processes

4. Developing the Next Generation of Managers “The final test of greatness in a CEO is how well he chooses a successor and whether he can step aside and let the successor run the company.” Peter Drucker

5. Turning Over Control • Start early to learn each potential successor’s capacity • Successor may be in-law, grandchild, or neighbor • Ask yourself, “can I live with their decision” • Give control over different sectors of the business so the next generation can master each one independently. • Rome was not built in a day – your successor’s transition into control should be gradual (but not so gradual that they lose interest)

6. Addressing Power Issues • Who controls decision making • Decision making control should be secondary to the quality of the decisions • Decision making under alternative scenarios

7. Assuring Fair Compensation • Address compensation for labor, management and capital contributions • Especially younger generation members with little or no decision making power

8. Valuing Ownership Interest • Ownership interest on a fair and equitable basis • Review process for establishing ownership interest

9. Protecting Minority Owners • Minority owners should be protected from the harshness of majority rule

10. Encouraging Phased Retirement • Encourage older individuals to retire • Level of compensation • Access to retirement benefits • Reduced-responsibility positions on the management team

11. Anticipating Disruptions • The 5 D’s review • Death, Disability, Disaster, Divorce, Disagreement • Legal risk and other liabilities

12. Remember to Communicate • Satisfying Succession Plans depend heavily on the personal chemistry of the individuals involved • The underlying success of any business agreement depends on healthy family relationships • More two-generation family business arrangements fail because of poor family relations than any other reason

13. Barriers Discussion • What are some of the barriers you have discovered in reaching a decision to transition the farm or ranch business or pass a set of assets to the next generation?

14. Transition Plan Road Map Transfer Stages Testing Commitment Establishment Accomplishment Beginning End Transfer Process Divide Income Transfer Management Parent Child Transfer Ownership

15. Your Action Plan • Family Meeting Date: _________ • Goal Setting Date: _________ • SWOT Analysis Date: _________ • Advisory Team Date: _________ • Decision point Date: _________ • Are you going to transfer a farm business, • Or are you going to distribute assets? • Transition Plan Date: _________