Managing for Today and Tomorrow

1. Managing for Today and Tomorrow Succession Planning Session Four Block Two

2. Succession Planning

3. Objectives • Constructing a Succession Plan • Review tools • Tie together the tools used in a transition plan • Planning the transition plan • Discussion of barriers • Action plan • Your transition plan

4. Constructing a Succession Plan • 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

5. Building a Management Team • A team approach • Developing management skills • Cross training • Develop a functioning and effective system of routine communications • Implementing a non-threatening evaluation

6. 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

7. 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) Turning Over Control

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

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

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

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

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

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

14. When do you wish to retire? How much $ will I need in retirement? How is and how will the family business help for retirement? What additional retirement sources are available to each family member? Are plans being made for retirement?

15. Succession Plans • Depends 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

16. Tools • Succession Planning • Estate Planning • Business Planning • Retirement Planning

17. Farm/Ranch Transition Plan Asset Transfer Transition Plan Estate Plan

18. Transition Plan

19. Transfer Stages Testing Commitment Established Withdrawal Beginning End Transfer Process Divide Income Transfer Management Parent Child Transfer Ownership

20. 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.

21. Your Action Plan • Family Meeting Date: _________ • Goal Setting Date: _________ • SWOT Analysis Date: _________ • Management (Advisory Team) Date: _________ • Decision point Date: _________ • Transition plan _________ • Asset distribution _________ • Transition Plan Date: _________

22. Resource Materials

23. Managing for Today and Tomorrow • Presenter • Address • Phone • E-mail