Family-owned Farms: Challenges and Opportunities

1.  Family-owned Farms: Challenges and Opportunities • In this section, you will • Define vision for your farm and family • Analyze challenges and opportunities • Develop plans that improve your chances of moving toward where you want to be in the future. Materials developed by: Dr. Patricia (Pat) Frishkoff Leadership In Family Enterprise, LLC Founder and Former Director of Austin Family Business Program at Oregon State University

2. Ten Critical Decisions • What is your vision of the future in terms of continuing as a family farm business? • What actions are important to minimize risk by anticipating possible worst cases? • How will you groom young family members as part of your farm family? • What talents and experiences does the farm need for future success? • What employment opportunities will you offer to family members and what expectations will you have? • What will be the role of non-family employees, and what will they need to do their jobs? • Who will own the farm and farm business next, and how will ownership transfer? • Where might a strategy for selling come into play? • How will senior farmers move to sharing key decisions? • What will strengthen the family glue and keep you headed toward the future together?

3. Decision 1What is your vision of the future in terms of continuing as a family farm business? QUESTIONS TO CONSIDER: • How long do you plan to have your farm business last? Dr. Léon Danco once proposed that every business post this sign -- “This business shall last forever.” Does this fit your situation? • Do you hope to transition the farm to the next generation? Hold a family meeting to discuss these questions. Start by having each family member write or draw something that captures a vision of the future.

4. E-clip: Concept of Commitment Frishkoff5_commitment.wmv

5. Vision – “golden opportunities”and your commitment OPPORTUNITIES • What does the farm mean to you and your family? • What legacy do you want to preserve? • What makes the farm business better because it is run by your family? • What makes the family better because it has a farm business? Include these questions in a family meeting, making a long list of the opportunities. Make copies for everyone. Bring the list out, on a regular basis and especially when conflict arises. COMMITMENT • How much would you be willing to commit of these resources, in the next year, to pursue what you want for the future? • $$$ • Time

6. Decision 2What actions are important to minimize risk? It is important to stop here and be honest about risks. List some of the situations that could create “worst-case” scenarios and, unlike the weather, can somewhat be managed. Consider the four D’s as part of your list. D_____ D_______ D________D_________Risky Situation Action ________________________ ________________________ ________________________ • Once you fill in the blanks, next to each response list the one action that is most important in order for you to protect the farm and your family. This will help you minimize possible risk.

7. Decision 3How will you groom young family members as part of your farm family? Your children will grow up as part of your farm family, whether they ever become employees or owners. These actions could help them embrace the farm as part of their heritage, as well as yours. You, as family members, might teach intentionally by helping them create opportunities to: • Be helpful in ways that develop skills • Play, in activities that promote learning • Invent, plan, undertake and finish projects • Weigh options, make decisions, and understand consequences • Build leadership and independence as well as team focus

8. Decision 4What talents and experiences does the farm need for future success? • What is needed in the next generation? • What abilities will be needed that the senior generation didn’t need to know or that they learned later in life? • How will you ensure that the younger generation is smart enough? Consider drafting the want ad that you would place in the appropriate local or industry publication. This exercise will help you define your expectations, in terms of skills and experiences. These criteria should be applied equally whether non-family or family are employed.

9. Decision 5What employment opportunities will you offer to family members and what expectations will you have for them? Business Focus • Expectations, set when kids are teens, about: • Education • Experience • Coming and going • Clarity about in-laws • Employment? • Ownership? • Hire only those who add value to the farm, and who meet the expectations • Compensation • Based on position, skills and experience • Retention and raises based on performance Family Focus • Invitation to all children • Including their spouses? • Create jobs that fit their skills and experience • Grandkids, too • Step-kids, too? • Work toward equal compensation after a long period of time • Evaluate ability to work as a cohesive team Options Which focus best describes your plan? Or is it a blend? Check all small boxes where you need to define specifics.

10. Discussion – Phone Call from Son Your older son called late in the first semester of his sophomore year, to let you know that he wasn’t making it in college. You suspect too much focus on girls and parties. “Could he come back to the farm?” he asked? You and your wife had met at the same college and were married soon after graduation. You had told all three of your children that you expected them to get college degrees. What are your options? What action would you take were this your family?

11. Decision 6What will be the role of non-family employees, and what will they need to do their jobs? • Establish a realistic budget for human resources, including family employees. • Clearly distinguish from among the roles: owner, employee, family member – for both family and non-family folks. • Provide a clear organizational chart and detailed job descriptions. Have non-family employees understand their relationship to the family and vice versa. • Give all employees the guidance, leadership, information, and independence to do their jobs. • Do regular performance evaluations and build plans for personal development. • Think carefully before sharing ownership with anyone else, family and non-family alike.

12. Decision 7 Who will own the farm and farm business next and how will ownership transfer? • Who can own in the next generation, and who can’t? • Do your legal documents support your wishes? • Will • Shareholders’ agreement (buy-sell) • Will your ownership strategy aim toward? • Equality – everything divided equally • Equity – giving more of business assets so as to have those leading the businesses have decision-making control, through outright ownership or voting strength (such as general partnership position, or trustees for a trust)

13. E-clip: Equitable Distribution of Assets (2 clips) • Frishkoff31_equalityProblems.wmv (Equitable Distribution of Assets 1) • Frishkoff32_(Equitable Distribution of Assets 2)

14. Who will own the farm and farm business next and how will ownership transfer? - continued • Estate planning is essential to the survival of the farm; otherwise, the government and the lawyers end up as winners. • Determining future ownership, of the land and of the farm business, are among the hardest decisions you’ll have to make. • Critical steps are: • finding good advisors • asking important (sometimes emotional) questions • making decisions early • communicating decisions clearly • putting formal financial and legal plans in place Which of the steps listed above is most likely to stop or slow your planning?

15. Discussion -- Who Owns Next? Mom and Dad met earlier this week with their three children, Cindy (36), Todd (33), and Nancy (31), and their lawyer, to explain the decisions just finalized to transfer the farm land. Last night the girls came by and asked to talk to their parents, quickly expressing anger and disappointment with the plan. It seems that Mom and Dad divided the land so that Todd would get the land that houses the operations, including the barns and stables, plus the original homestead land. The girls get similar acreage, from properties added fairly recently; each property has a similar-sized house on it. All three children have worked actively in the business. Todd has been full-time; the girls have been part-time, staying home when possible to raise children. What are the issues? What’s your advice? And, what aspect of ownership might challenge your family?

16. Discussion 8Where might a strategy for selling come into play? • Under what conditions would you sell? List at least two here. ________________ ________________ • What would you change if you knew that you might sell?

17. Decision 9How will senior farmers move to sharing key decisions? • What will it take for the senior generation to share decisions with others? Recognize that as principal owners, they have the right to make whatever decisions they want, for as long as they want. • Will they ever let go? If not, how will that affect younger generations? What must younger generation family members do to take charge? • What does the senior generation risk if they don’t let go and have others share in decision making? Research shows that the farm is more likely to succeed if the younger generation assumes decision making while they are in their prime, without having the senior generation meddle, and possibly sabotage the transition. What might the senior generation retire to?

18. Decision 10What will strengthen the family glue and keep you headed toward the future together? • Regular meetings of the family, to talk about the farm. To keep folks current. And, to have everyone have a chance to be heard. • Provide opportunities even for those not actively involved on the farm. • Family time, absent farm talk (at least as much as possible). • Balance criticism and appreciation. • Record your history and celebrate the legacy. • Show respect, especially to those whom you love the most.

19. Getting What YOU Want:YOUR ACTION PLAN • Which decision is most critical to the success of your family farm? • Circle one question number only. • What is your vision of the future in terms of continuing as a family farm business? • What actions are important to minimize risk by anticipating possible worst cases? • How will you groom young family members as part of your farm family? • What talents and experiences does the farm need for future success? • What employment opportunities will you offer to family members and what expectations will you have? • What will be the role of non-family employees, and what will they need to do their jobs? • Who will own the farm and farm business next, and how will ownership transfer? • Where might a strategy for selling come into play? • How will senior farmers move to sharing key decisions? • What will strengthen the family glue and keep you headed toward the future together? What is the first step that you will take to make this decision? And by when?

20. Homework BEFORE NEXT SESSION: • Meet with other key stakeholders to begin the process of defining a compelling vision for your family farm. Include in that vision your dream for future generations and how long you want the farm to remain a legacy in your family. IN THE TIMEFRAME THAT YOU SPECIFIED: • Take the step that you committed to, that addresses the one question which you specified as most critical to the success of your farm. • And, as you work on that step, discuss that action with other key stakeholders.

21. Family Farm Resources • BOOKS • CHECKLIST • MAGAZINES • GAME • E-CLIPS

22. Follow Up and Project Research IN CONFIDENCE, PLEASE PROVIDE… Your Decision #? First step? Demographics? Your Name: County: Thank you for helping us with the follow-up necessary to provide you the greatest value, and to meet the funding requirements for this project?