During my years in agricultural lending and running The Executive Program for Agricultural Producers (TEPAP), I worked with hundreds of family farm and ranch businesses. In the process, I’ve observed 10 best practices for transitioning management to the next generation:
1. Evaluate the industry. Join a peer group or work with someone outside the business to get objective insight on the current state of the industry and where it’s headed. Consider how consolidation, regulations and technology are influencing the industry.
2. Assess the strengths and weaknesses of the CEO. How effective will the CEO be at helping develop his successor? Knowing the CEO’s weaknesses, who can help the successor in those areas during development?
3. Assess the strengths and weaknesses of the successor. Where does he or she need training and experience and how will his or her weaknesses be compensated as the new management team comes together?
4. Foster honest and mature communication. According to Peter Drucker, 60% of all management problems are caused by communication problems. Often Don Jonovic has said, “Many family businesses are not just closely held, they are hermetically sealed.”
5. Devise a management development plan to address experience, transfer of responsibility, formal training and constructive evaluation and feedback. This process should include the use of a negotiated evaluation that involves the CEO and successor sharing performance reviews before they sit down. It’s a development tool rather than the one-way boss-subordinate review.
6. Provide exposure and networking opportunities for the successor outside the business and industry. A future CEO needs to consider and evaluate various viewpoints as well as recognize much of what’s to come is already happening outside of agriculture.
7. Develop a common vision for the businesses, which includes company values and organizational culture. The discussion should include all parties who will have an ownership interest in the business, including spouses, family members and key stakeholders.
8. Delegate responsibility and authority, with a timeline to achieve objectives. This sort of plan helps the current CEO avoid procrastination and reduces frustration for the successor.
9. Involve the successor in the development of the business plan and the strategic decision-making process. Don’t forget to include key members of the management team. Doing so increases give-and-take interaction and an understanding of how the functions of the business fit together and how decisions are currently made.
10. Outline a plan for what the current CEO is going to do next. If the CEO doesn’t start planning for the future, it’s less likely he or she will step away from the role. It could also lead to unhappiness once he is no longer doing what once consumed his life.
To aid farmers in each step of the succession planning process, the weekly Legacy Moment eNewsletter delivers tips on financial management, family harmony, tax and legal issues and leadership development. To sign up for it and other resources, visit www.FarmJournalLegacyProject.com