Successful management transition on a family farm or ranch involves successor development that is intentional and targeted. The best transitions are those that start early and deliberately—the less left to chance, the better the plan works.
Before the successor development and transition process can begin, some prerequisites must be in place:
- The successor has been selected.
- The successor wants the job and his or her family supports the decision.
- The successor can grow into the position.
- The business can afford the successor.
- The current management/ownership has his or her estate and retirement plans in place, the family has been informed and the retirement plans are in the process of being funded.
A successor development plan must include the CEO passing on basic "strategic thinking skills." Strategic management involves anticipating the future, recognizing emerging problems before they mushroom and taking corrective action while there is still opportunity for effective response.
Managers need two analytical skills to solve problems: the ability to view a situation from multiple frames of reference and the ability to identify the heart of an issue. They don’t jump to conclusions because they know that every complex problem has at least one solution that is simple, obvious and wrong.
Successful managers spend time monitoring and analyzing performance in order to spot problems and opportunities before it’s too late. They are also more likely to treat the cause of a problem, and not just the symptom.
Successors need experience and training to develop the vision and evaluative skills needed to strategically redirect the businesses. They also must be able to conceive alternative ways of doing business and choose those that will be more effective.
The successor must learn to become a leader, not just a manager. Leadership revolves around vision, ideas and direction. It has more to do with inspiring people than with handling the daily business operations.
Top managers recognize that their ability to attract and motivate people will largely determine how successful they are. Leaders are great not because of their power but because of their ability to empower.
Leaders must be able to judge the strengths and weaknesses of the business, to assess the opportunities and threats in their environment and, most importantly, to identify which issues are most crucial and deserve their closest attention.
We need to recognize that 80% of our results are produced by 20% of what we do. The management philosophy of doing first things first is based on the Pareto principle, also known as the 80:20 rule.
One of the practices that sets top managers apart is that they set priorities and follow through on them. The most successful are those who have figured out which the top 20% priorities are and put most of their time and resources into accomplishing them. The other 80% get eliminated or turned over to someone else.
Seminars, workshops and other formal continuing education programs also contribute to successor development. The successor development plan should include acquiring skills and knowledge in areas identified in the transition plan and performance appraisals.
While it is important to participate in educational programs targeted to farm and ranch operations, the most successful managers also get outside their commodity, their geographic area and even agriculture as part of their continuing education.
Successors also need to see how the rest of the world operates. Some family businesses require the successor to have three to five years of experience elsewhere and to have earned at least one real promotion before returning to the business.
This experience gives them a broader perspective and it also gives them an opportunity to prove themselves in an environment where they aren’t the crown prince or princess or hired hand.
The successor may also learn by working as an intern for another successful operation. Internships allow the successor to build self-confidence and be held accountable to someone other than a family member. He or she also has an opportunity to compare different organizational cultures.
The best managers know they need continual exposure to new perspectives and ideas. They realize that no matter how well their business is doing, there will always be a better idea or way of doing things.
Jack Welch, former chairman and CEO of General Electric, said, "The only truly sustainable competitive advantage is the ability to learn and adapt faster than your competition." He was referring to continuous learning and improvement. Most sustained success comes from doing 20 things 5% better rather than doing one thing 100% better.
Danny Klinefelter is a professor and Extension economist for Texas AgriLife Extension Service, The Texas A&M University System, and director of TEPAP (The Executive Program for Agricultural Producers).
An Exercise to Develop Shared Vision
Business and family issues and decisions are intimately connected. Everyone may agree on the costs and benefits of a decision but disagree on what to do because of the sharing of risks and rewards.
Even within the business, the CEO and the successor may disagree because of differences in their life stages. The current CEO may have more equity at risk and be concerned about long-term security.
Try the following exercise to help develop a shared vision for the family farm in transition. If this exercise seems too academic or touchy-feely, keep in mind that leaders of the most successful family businesses have learned from it.
The exercise: Both CEO and successor should independently write out their responses to the following questions, then share and discuss their ideas.
CORE VALUES: What is important to me? What is acceptable? What is not acceptable?
VISION: What does my future for the business look like? What do I want from the business? What do I hope will happen? What am I afraid might happen?
MISSION: What is the purpose of the business? Why am I here?
GOALS: What do I want the business to accomplish? What do I want to achieve personally? What sacrifices am I willing to make in order to make it happen?
OBJECTIVES: How will I measure the performance and progress of myself and of the business?
STRATEGIES: What is my plan or approach for accomplishing the goals I have set out?
TACTICS: How do I propose to implement these strategies?