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The Miracle of Commitment

February 7, 2009
By: Kevin Spafford, Farm Journal Columnist

Q  Thank you for the work sheet, "Are You Ready for Succession?” [page 40 in the December 2008 issue of Farm Journal]. The annual board meeting of our family farming operation started with each person completing the questionnaire and tallying their score. I am pleased to report that our family averaged 16, which indicates "the environment is good for succession.” Each of us felt it was a valid assessment of the management environment on our family's farm.

To make a long story short, the family board of directors approved the Farm Manager Agreement, which initiated the management transition from my brother, as our CEO and manager, to his son-in-law. We have been working on, struggling with and haggling over this transition for the past three years, so it was appropriate that we started with your work sheet. It was a good exercise; it initiated a lot of constructive conversation and it was timely—and effective.

We'll be glad to use other succession planning tools you develop through the Legacy Project.

A Congratulations, your family has taken a giant leap toward multigenerational success. It's always easier to talk about doing something, but action takes commitment. The succession planning process requires family members to meet in the spirit of cooperation and compromise. They must negotiate the who, how, when and what of transitioning the family farm to the next generation.

When families dedicate time and resources to succession, we see major and immediate changes in their collective behavior. Parents begin letting go, allowing adult children the latitude to make more decisions and the space to assume more responsibility. Children become more assertive, often rising to new levels of dependability. Though real change takes time and habit, the behavioral improvements are immediate. We call this "the miracle of commitment.”

As you begin the journey of succession, our six-step process can help you establish a comprehensive plan—to develop something bigger than self, an operation that will grow for generations to come.

1.Consultation: The purpose of consultation is to help the owner and family define a vision. We explain the basics of good planning and map a road to the future.

2.Discovery: In the discovery phase, we collect data and examine your current familial, operational and
financial picture. The quality and quantity of the information will affect the outcome.

3.Preliminary plan: The preliminary plan is likened to a concept car out for a road test. We'll filter recommendations through a screen of accounting, legal and, sometimes, farm program compliance.

4.Final plan: A final plan is drafted based on the results of the preliminary "road test” and input from professionals and active family members.

5.Implementation: This is the process of creating the legal documents, writing the financial instruments, adopting the accounting practices and learning the practicalities of leadership and mentoring.

6.Review:
The plan must flex and adapt to a changing production and business environment. It must be applicable to a growing operation and provide room for opportunities.

Before you start thinking this is a quick six-step checklist and it's full speed ahead, there's more. For the process to keep pace, there are decisions to make and elements that must fall into place.

Those include:
¡Ownership transition may be as simple as identifying the future leader(s), penciling a time frame and exploring transfer mechanisms.
¡A leadership development program may involve cash flow management and budgeting; business planning and design; human resources; people development; and mentoring. Most potential next-generation leaders have a solid education and experience. They know the fundamentals and can handle farm work.
¡Without jeopardizing the integrity of the farm, an efficient estate distribution minimizes estate taxes, plans for equitable distributions and maintains financial security.
¡A funded retirement option is important for the successful transition of the operation. Many owners don't, or won't, retire because they are
unprepared. A retirement option is just that—the option to enjoy the freedom of not working daily, growing a subsidiary or complementary operation, starting a new vocation, living comfortably knowing you're
financially sound or continuing to work in the operation as mentor.
¡Good financial management skills will alleviate many of the burdens that plague family operations. The financial management component will ensure that money is invested outside the business, fluctuations in the economy won't destroy the operation and capital is available for expansion opportunities.
Please join us for an introduction to succession planning. Plan Success,
Enjoy Life is a primer for families considering the succession planning process. The webinar will be Tuesday, March 3, at 6 p.m. Central and Friday, March 6, at 4 p.m. Central. Register at www.legacy-by-design.com.
 

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