In the two previous posts we delved into the reasons why there are inherent differences between the goals of a family and goals for a business. This last installment details basic but powerful intial steps to bridge the divide between family and farm, resulting in a resilient Family Farm.
Some family farms are "Business First" and some are "Family First." Business first farms place the success of the farm far above the relationships of the family. Farms that are heavily Family First see themselves primarily as a family who happens to farm together. Then there are others who have find a happy balance between the two, which, while hard, provides a durable family farm.
If you have ever tried to balance anything in your hand, it requires effort, patience and practice. Finding the balance between farm and family also requires the same skills. Every family and family farm is different but there are several time-tested best practices that fall under the broad banner of Family Business Governance. It all starts with communication and an open mind. The list below is not all-inclusive but is a good place to start.
1. Talk about the current and potential causes for friction from a family viewpoint and a farm viewpoint. Acknowledging there is at least a potential for conflict places the issues in the open and is often the first step in problem-solving.
2. Accept that in order to be a strong family farm business there will be checks and balances on both sides.
3.Create separate time where the primary discussion is business. These meetings are operational and ownership meetings where the primary focus is the health of the business. Too often business meetings either don't happen at all or occur on the fly with little preparation. Consistently holding business only meetings keeps the Thanksgiving dinner cordial and free from a heated debate on debt, cash flows, and the grain markets.
4. Set aside time for the family to be together as a family with no talk of business. The more generations involved in the family farm the more important it is to keep these ties strong. This is especially important if some of the family is involved in the business and some are not. Only discussing business at a family gathering can isolate family not involved in the business. Spend the time creating new memories and traditions. Try hunting trips, lake cabins, joint vacations, or just sitting on the porch on a Sunday afternoon.
5. Sit down and openly discuss the core values of the business and core values of the family. These cornerstones of core values will help the business form visions and business strategies that are stronger because the core values are in alignment with the family. This is an important first step in our transition planning process. Without a common set of guiding principles and values, family and business visions are murky at best.
6. Create a family employment policy that lays out the qualifications, education, and work experience of family members joining the family farm. Farming is a business and is best when the people involved bring value to the business. Having a family employment policy will alleviate many accusations of favoritism and nepotism while setting a high standard of merit-based employment. A side benefit of this is stronger relationships with non-family employees as they realize everyone is held to the same high standards.
7. Separate compensation of ownership (dividends and profit sharing) from job performance compensation such as wages and bonuses. Ownership often follows bloodlines because the property is passed down from generation to generation. Owners have a right to a return on their investment and for taking risks. Wages and bonuses are merit based and are the result of direct skill and labor. Employees, whether family or not, are entitled to fair compensation based on the value they bring to the farm and not every family member is equally as skilled as others. A major demotivation of all employees is equal pay for unequal work. There may be very good tax reasons to pay one type of income over the other, but many farm families have come to the conclusion that paying a few more dollars in tax is worth avoiding the confusion and hard feelings surrounding this issue.
Use the strengths of both business and family
A family is based on relationships and the business based on merit, but if you truly desire to have a strong family farm business then embrace the differences and work toward finding a balance that fits your family farm.
Your family farm is only as strong as both your family AND your farm. There are true differences between family and business but they don’t have to be mutually exclusive. Rather they can be a true source of strength and resilience that can keep your family farm thriving for generations. It may be easy to cast a disparaging eye towards the needs of your family when there are hard business decisions to make. However, when the chips are down your best employee probably will not have the commitment to the family farm as the family members working beside you. If you are truly diligent and maybe with a little luck your family farm may last 125 years like Cargill, or even nearly 500 years like Beretta.
Part one in a series: 3 reasons why farming families don’t get along
Part two in a series: How to spot common conflict areas in farm famiiles
Tim Schaefer founded Encore Consultants to provide specialized advising and coaching to farm families and agribusiness at the crossroads of change. With over 20 years of experience advising farmers, Tim was an early pioneer of peer advisory groups for agriculture as a way for successful farmers to gain knowledge, ideas and skills from each other in a non-competitive environment. Tim can be reached at [email protected] or www.encore-consultants.net.
The opinions of the author are not necessarily those of Farm Futures or Penton Agriculture.