Functional Family Governance

January 27, 2016 02:06 AM
 
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Give loved ones a voice to accelerate your business 

From the board room to the dining room, the family that farms together stays together—assuming business decisions are made transparently.

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“There’s around-the-Thanksgiving-table governance, there’s business governance and there’s the in-between, which means the day-to-day interaction family members have with one another,” explains Gregg Halverson, president of Grand Forks, N.D.-based Black Gold Farms.

Large farms can set the tone for professional management in agriculture by involving all family members with a stake in the farm in formal decision-making. That includes spouses, children and family who don’t own stock in the business, says Barb Dartt, a consultant with The Family Business Consulting Group.

Yet the term family governance can be confusing. It refers to the process of creating meaningful, productive interaction between the family, business and ownership systems, Dartt says. 

“It provides a forum for constructive discussion and problem solving about the family as it relates to the business, as well as how the business relates to the family,” Dartt says. It can take up to three years to gather input, appoint a family council and build momentum, she says, “So I encourage starting with family meetings early on.”

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  Family governance enabled potato    producer Gregg Halverson (right) to   transition his business to his son    Eric, now CEO, on his 65th birthday. 

Formula For Success. In Lowell, Ore., Amelie Brazelton Aust is second-generation co-owner of Fall Creek Farm and Nursery. The blueberry stock operation with facilities on three continents annually produces 30 million plants and attributes its rapid growth in part to its investment in family governance. 

“We meet quarterly as a family council,” Aust says. “We talk about employment policies for the family and codes of conduct.”

Yet the function of family governance isn’t just to ensure the business runs smoothly. It’s also part of a long-term strategy to ensure the health of the company for the future. “It’s a safeguard for future issues,” she points out. “The third generation will grow up knowing the rules of the game.”

At Black Gold Farms, one of the largest potato operations in the U.S., family governance encompasses issues including the way family members are hired onto the farm and rise through the ranks, and the makeup of the executive team responsible for key decisions. 

“We’ve all started from the same place, me included, and that place is at the very bottom on the end of a broom,” says Halverson, the 2012 Top Producer of the Year award winner, laughing. “Different family members have taken different paths to where we are right now.”   

The farm’s executive team, which is the group that makes many of the major business decisions for Black Gold Farms, is composed of six people—Halverson; his sons, CEO Eric Halverson and Chief Operating Officer John Halverson; Danielle Golden, executive vice president of sales; Bob Hoffert, chief financial officer; and John Nordgaard, recently semi-retired executive vice president of operations and the company’s lead agronomist.  

Halverson specifically placed nonfamily members on the executive team to add depth of knowledge in agronomy and other facets of the operation. Golden, Hoffert and Nordgaard each have been with Black Gold Farms for more than 20 years and are respected industry leaders, he says. 

“All three are a lot smarter than I am in any one of those individual fields,” Halverson says. The farm’s bylaws state the board of directors, which is the official ownership team, must meet once annually. The group that actually makes many of the production decisions, the executive team, meets at least twice monthly on average, more at the end of the year and less during harvest. 

Careful planning within the framework of family governance allowed Halverson, on his 65th birthday in 2014, to pass the role of CEO onto his son. 

“It made the transition fairly easy, No. 1,” Halverson says. “No. 2, the last year or so prior to my retirement, he was becoming more involved in dealing with our vendors, our suppliers and our customers so it wouldn’t be a shocker to anybody. It’s not about a press release. It’s more about an orderly transition that nobody even feels.”

It’s also important for incoming younger leaders to recognize they must set expectations independent of family members who came before them, Eric Halverson adds. 

“I’ve got to do my own thing, be my own person and try not to measure up to my dad because we’re not the same person. That won’t happen,” Eric Halverson says. “I’ve got to measure up to my own goals and objectives.”

Other keys he views as essential to quality family governance include acknowledging mistakes, asking for help from experts and celebrating good business decisions. 

Look for more Business Drivers insights on “Market Rally,” “Top Producer Podcast” and “U.S. Farm Report.” For all related coverage, visit agweb.com/business-drivers.


Gregg Halverson’s Guide to Successful Family Governance 

Always be honest, straightforward and transparent with family members and non-family stakeholders alike. “Lay your wishes on the table,” he says.

Have an open mind and be receptive to changes and different structures from those you’ve experienced in the past. “It’s important to set an expectation or a climate that allows change to happen. Not all change affects everybody equally.” 

Take a long-term approach. “Just because it looks good next month or next year doesn’t mean it’s going to look good five years from now,” he says.

Revisit any plans established through family governance on a regular basis. “Lives change, marriages and divorces and kids change. There’s nothing that says you can’t change your game plan.”

Implement the proper legal structures with help from an attorney and an accounting firm.  Without proper representation, “you can really get messed up,” he cautions.

Realize that while you won’t always have everything in writing, you should get as much documentation as possible including wills and buy-sell agreements.

How Family Meetings Can Spur Change
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