Farm Succession – Who makes the decisions?

 

One of the most challenging aspects of farm succession to the next generation is the process of management transition and for many businesses the changing nature of decision making can be the most confronting of all issues. As the next generation develop their skills and gain experience they are usually keen to take a greater role in making decisions that affect the future of the business. This can be difficult if there is only one child entering the business, however, if more than one is involved then the business is likely to undergo a significant transformation if it is to stay in one piece.

The key reason for this is that the decision making process will often be transitioning from a single person, for instance, the father, to multiple people, the children. Once this process is extended beyond a single person, the dynamics of decision making changes exponentially with the number of people involved, and this may be totally foreign to them, particularly the father.

When generational change is underway formal scheduled management meetings using a third party facilitator can be a very good idea, at least initially, to get farming business into the habit of making decisions as a management team rather than as individuals. This will also allow the father to incorporate the sons’ and/ or daughters’ contribution whilst still having his own input into the decision making process until he gradually bows out.

Historically, an authoritarian style may have predominated where the decision ultimately rested in the hands of one person. This management style was probably fine when one person could dictate the entire process of decision-making and have the final authority on the outcome. As the next generation becomes more involved in the business, this style tends to have more disadvantages than advantages because the people whose opinions are disregarded might have negative feelings about the process.

As the business changes it is important to formalise the communication links. This may involve regular “business only” meetings with a structured agenda, minutes and action points.

When it comes to decision making, brainstorming can be a good means of evaluating various options and then prioritising them. This is a popular method owing to the complete creative freedom it offers to all the participants. There can be a facilitator to facilitate the entire discussion just to ensure that the people don't digress. The facilitator can merely help to start off the conversation, provide subtle hints and nudges when the participants get stuck and thus help to make effective and creative decisions. The positive aspect of this method is that it values the opinion of every individual member and the final decision is reached by a consensus. Where simple brainstorming doesn’t work, a “Voting Based Method” should be used. A voting system allows every participant to cast his/her vote for the option that he/she thinks is the best. There are two basic methods. One option is where a decision that gathers the maximum number of votes is selected. This method however does not value the individual opinion of each and every participant in the group. An alternative is to provide a right of veto. With this method, a decision is not passed unless all agree. This can be cumbersome for day to day decision making, so you may wish to use both methods and select which type of decisions apply to each. For instance, major capital expenditure may require the veto system but operational decisions can be made with a simple majority.

A group decision process gains greater commitment from all involved since everyone has his/her share in the decision-making process. It imbibes a strong sense of team spirit amongst the group members and helps the participants to think together in terms of the future direction of the business.

James Benson is an Executive Director of Next Rural.

Next Rural specialises in business transition and succession planning

Next Rural have put together a simple yet comprehensive guide to business transition and succession planning. To obtain a copy of this FREE guide, with no obligations, email Next Rural at info@ nextrural.com.au or Call 1800 708 495.