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3-circle

3 Circle Model in Transition (Succession) Planning

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Twice in the course of a week, I was able to partake in a Canadian Association of Farm Advisors (CAFA) Succession Update following the 3 Circle Model http://johndavis.com/three-circle-model-of-the-family-business-system/
The three circles represent each of Ownership, Business, and Family: the critical components that hinder any business transition process. I was speaking in the business circle.

Working with family can be as incredibly rewarding as it can be incredibly challenging. The nature of living with those you work with, grew up with, and hang out with, leads itself to challenges just from being in such close continual contact. Throw in the communication challenges that every family must deal with, and it is truly amazing more family businesses don’t fail.

The illustration of the 3 Circle Model is a simple yet accurate depiction of why there can be challenges in family businesses. The root of the challenge, when tapping into the experience of experts who consult family businesses, is the relative inability of family members to separate the three circles. Issues that belong in the “business” circle often end up in the “family” circle; issues in the “ownership” circle often have heavy effects on the “business” circle; issues in the “family” circle usually ripple outward to affect both the “ownership” and “business” circles.

Success in separating the circles can only be had if all family members are conscious and intentional in their effort to recognize the tendency to let issues bleed from one circle to another and proactively manage their behavior to not let it happen. This is easier said than done.

3-circle-with-a-twistI especially like this graphic that Jim Snyder, National Director, Agricultural Practice Development with BDO, used in his opening presentation to describe the 3 Circle Model. When you think about torque, a planetary is a tremendous bit of engineering (a nice plug for all you gearheads.) Separating the three circles in the model creates a strong business and stronger family. A family affected by the crossover of issues between the circles will be in a constant state of damage control.

Direct Questions

How do you separate the issues you deal with in your family business between three distinct circles: family, business, and ownership?

When you become aware of family issues affecting business, or ownership issues affecting family, etc, how do you stop, reset, and refocus to deal with the issue and not let it “creep?”

Family business is the backbone of our nation’s economy. Are you a “family business” or a “business family?”

From the Home Quarter

There is a distinction between a family business and a business family (please contact me to discuss further.) Neither is bad, but there is a difference in mindset and approach to family, business, and ownership. Knowing which type you fall into will help you understand the challenges to be managed as you eventually navigate through the 3 Circle Model of your future business transition. Because, whether you acknowledge it or not, one day your business will need to transition. You might as well be ready for it…

weakest-link

You’re Only as Good as…

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I had the Cowboys-Packers game on in the background this past weekend when I heard the comment from one of the broadcasters: “Your passing game is only as good as your 3rd receiver.” The 3rd received being the “weakest,” this suggests that even if you have the #1 receiver in the entire league along with the last and second to last receiver, your offence will suck. Interesting theory. How does this apply to your farm?

  1. Production: all the nitrogen in the world won’t grow you a crop if the plants are lacking other nutrients. Even something as overlooked (but gaining more attention) as micro-nutrients, a crop will grow and produce, but will it be the winner you need?
  2. Marketing: “If all you have is a hammer, everything looks like a nail.” Certainly we have progressed beyond selling our entire crop into a cash market; most producers now are using forward pricing contracts. Without them, even grain delivery is left to chance (many grain buyers won’t accept deliveries that haven’t been contracted in advance for that time period.) What about hedging accounts, foreign exchange risk, direct shipping, cross border delivery, etc? Forward pricing contracts today are the minimum, kind of like hauling a load to town and taking the price of the day was the minimum practice 30 years ago…
  3. Human Resources: “Hire for attitude, train for skill.” If you’ve done the opposite (hired for skill,) you’ve likely “fired for attitude.” Your team is only as good as its weakest link. While we can fire a non-arm’s length employee for cause, it is a lot tougher to fire a parent or sibling! Often times, we are not utilizing our team in the best way; many people who might not seem to “fit” can be redeployed, or re-purposed, in a manner or task that allows them to flourish. Training, not only your team for the work you expect of them, but for yourself to be a more effective supervisor, is indescribably critical to success.
  4. Management: “You don’t know what you don’t know…” I find myself spending time with some very successful farmers who don’t have a basic understanding of their financial statements, nor the financial ramifications of many business decisions. They are happy to garner the knowledge and happier still to be able to use that knowledge to improve profits and protect cashflow. Others do not have a game plan, choosing instead to focus solely on operating their farm, and making financial decisions reactively instead of proactively. The reduced tension that can be seen when they understand the benefits of strategy is often quite remarkable.

It’s easy to see how a small oversight in one area of your business, whether it be production, marketing, human resources, or business management, can have significant impact on your financial results. An oversight can be excusable, but negligence cannot. It is up to you as the CEO of your business to identify your weaknesses, evaluate their potential impact, and establish strategy to mitigate the risk. Help is a phone call away if you are not confident in tackling this important management function.

Direct Questions

What are you doing to identify weaknesses in all aspects of your business?

How to you engage in risk mitigation strategies?

What do you do with the weakest link?

From the Home Quarter

In football, players recognize that they are only as good as their last game. There is always someone else who is eager for a chance to take the position on the roster of a player who hasn’t performed to expectations. Reputation will only take a professional athlete so far, they still have to perform. Same can be said for your business. Your reputation with your creditors and vendors is important, and can get you through an occasional “difficult time,” but at the end of the day, they still want to be paid. It’s your performance, not your reputation, that will get them paid.

A chain is only as strong as its weakest link…
Your production system is a chain.
Your marketing practice is a chain.
Your HR approach is a chain.
Your management strategy and execution is a chain.

Your farm’s success is linked by production, marketing, HR, and management. Ignoring the trouble spots makes you the weakest link…

failure to communicate

Critical State – Inability to Communicate

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A few weeks ago, we opened a dialogue on Critical State which is defined as “the point at which something triggers a change in the basic nature or character of the object or group,” or to paraphrase: something can be referred to as being in a critical state when at the point of significant change.

Inability to communicate is, in my opinion, the greatest single cause of breakdown in relationships of all types and sorts. While many other factors come into play, and often bear most of the blame, the primary cause is communication and its lack thereof.

There are virtually countless books, courses, and resources dedicated to improving communication in almost any circumstance: marriage, parenthood, employee, co-worker, sibling, etc. etc. I have only read a minute fraction of what is available on this topic, so I cannot offer insight as to which are most beneficial. But, like you, I have a lifetime of experience in communicating with others. It is fair to say that all of my communication experiences could use improvement, because to say otherwise would indicate that there was, at times, perfection in my communication interactions. Let’s be honest, there is always room for improvement.

Here are some of the most important relationships in your business that need solid communication:

Bankers/Lawyers/Accountants

Often times, when hearing banker-ese or legalese, we tend to not ask that which we do not know or understand for fear of appearing, well let’s say it, stupid. Many people have signed onto something that they did not want, nor did not understand because they were unable to communicate their questions, their fears, or their outright disagreement. The future ramifications of a lack of clarity in matters of borrowing or of law can be monumental.
When I was still in banking, I had a husband & wife client where the wife would apologize for asking what she called “stupid questions” about the terms and conditions of their borrowing package. She could have silently signed her name to the documents and fretted over her lack of confidence in what she just did, but instead she chose to ask. For her own clarity, her own comfort, and her own peace of mind, she asked. For that, I was grateful; it strengthened our business relationship. When I told them I was leaving the bank, she hugged me saying “I’ve never hugged a banker before!” I replied with a wink, “I’m not REALLY a banker; just a farmer who’s working at the bank!”

Employees

Everybody is rowing their own boat in life. It does your business no good whatsoever if your employees are not rowing in the same direction as you. Setting goals and expectations for your team, and sharing the overall business goals with your team can carry significant weight in efforts to get everyone “rowing the same direction.”
I’ve learned about a number of farm businesses that have taken the proactive approach: involve the team in goal planning, provide regular feedback, reward good performance. The most successful farms treat their employees not like employees, but rather like trusted partners who have a vested interest in the success of the business, and communicate with them accordingly.

Family and/or Primary Relationship

I will go on record saying that all “problems” in family and/or primary relationships will trace back to communication. Whether communication be the final straw or not, communication likely led to the behavior that became the final straw.
I was very impressed in meeting a young farmer earlier this year. When he came home to farm a decade or so ago, with his would-be wife, his father made clear with him and his non-farming siblings how the farm would transition. There was no ambiguity; no one could complain; there are no hard feelings today. Consider how things could be today when we acknowledge how successful this farmer now is, and how much wealth he has built in his operation…lack of communication could lead to unreasonable demands from family members, and the potential for critical state.

Direct Questions

Does fear ever affect your communication? How do you manage it?

How would you rate your ability to share positive feedback versus negative?

From the Home Quarter

Lack of communications, or an inability to communicate, will lead to critical state in a sneaky kind of way. If one doesn’t notice that communication is breaking down, over time it will snowball into a major issue. Everybody has a breaking point. It’s usually wise not to let things get that far, not matter which relationship we talk about.

 

family succession

Critical State – Lack of a Succession Plan

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I have been incredibly impressed with the service and quality of work at Queen City Glass. I stumbled onto them a number of years ago when I got a stone chip on my truck’s windshield right at the the beginning of a November cold snap. I knew that tiny chip would spider-web in a big way the first time I cranked on the windshield defroster. Going to the glass shop I had frequented up to that point and being told to come back in 3 days or so, I was about to accept the fate of my front glass when I drove by Queen City Glass. With nothing to lose, I whipped in to see if they could help me out.

They took me right in without an appointment and did a great job of repairing my windshield. I didn’t have glass coverage at that time so the fee would be coming out of my wallet. Not knowing what to expect, having never paid for a windshield repair before, I was happy with what they took from me.

While I was waiting for the work to be done, I learned that they do all kinds of glass, almost anything that one might custom order. The guys in the back were sharing stories of building display cases for jewelry stores and fighting with 10′ high panes for shopping mall store fronts. They admitted to doing a lot of work for antique cars, as well as farm equipment.

Coming back from a recent client meeting, my windshield got hit by a rock which left a chip. Almost as big as a quarter right away, I knew I had to get the damage repaired soon or it would be too big to fix. I pulled over on the highway at about 2:20 pm and called Queen City Glass. They told me if I could get there by 3, they’d have me done in time to get to my 4pm obligation. One of the owners was doing the work on my truck. After he shared with me the story of the company’s ownership,how his father acquired the business in the 1960s and has since passed it down to him and his sister, I asked him what was his succession plan. He replied, “Freedom 85, man!” I clarified that I didn’t mean his retirement plan, but the plan for the future of the business when he and his sister no longer want to work it (sometime after he turns 85 as per his declaration.) He admitted that there is no interest from the 3rd generation to own and operate the business and that if it couldn’t be sold, it would probably close.

As I stood in that shop and considered all the amazing glass work that would have been done there over the years, including a turn-of-the-20th-century hand carved piece of furniture in which they were installing a custom mirrored back that very day, I realized what a shame it would be to not have this business carry on what is most likely a storied legacy. As the late great George Jones once sang, “Who’s gonna fill their shoes?”

Direct Questions

Family business is the backbone of Canada’s economy, and farms are often the most enduring of all family businesses. What is your plan to ensure the progression of your farm carries on?

With family or without, you have opportunity to transition your business without selling everything. What options do you have beyond immediate family?

Whose gonna fill YOUR shoes?

From The Home Quarter

Queen City Glass will be at the point of critical state when one or both of its current owners decide they’ve had enough work, and want to retire. I would argue they are at the point of critical state right now, if not very close to it. With no succeeding generation currently involved in the business, should either of the 2 owners become disabled or killed, the business would likely face an immediate upheaval and could be forced into a final closure. Any family business in any industry without a succession plan faces a similar potential fate; none are immune. If you are the beneficiary of a proud family legacy, what are you doing to ensure that legacy continues?

 

 

despair

Critical State – Disability or Loss of Life

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Frequently over the next several weeks, we will delve further into the many factors that can lead your business to a “Critical State.” To refresh your memory, one reaches critical state when at the point of significant change. The significant change can lead to a state that will have a profound effect on you, your family, or your business. Thus the term “critical.”

Disability or Loss of Life: whether it be one of the major stakeholders in your business, a member of your family, or one of your employees, this is often the most catastrophic change.

Although disability is not guaranteed to happen, the end of one’s life is certain. Arguments have been made as to which is more difficult to manage through. I have experienced both in my family.

What is your strategy, your back-up plan, if someone in your family or your business suddenly became disabled or was killed? How would you continue? Who else knows what that person knows so that the only hardship you must deal with is the emotional one?

  1. Financial: if control rests with only one person, everything financial is instantly in limbo if that person passed away. Secondary signors can be established. Power of attorney should be in place (applies during disability.) Something as simple as writing down account numbers and passwords in a notebook stored in a locked safe can be incredibly beneficial to those who are left behind, struggling to carry on while dealing with their grief.
  2. Operational: “Were those peas on the west half sprayed? When? With what?” A crop could be lost, and subsequently a farm could be lost, if important operational information is not recorded and readily available if/when the person with that knowledge in his/her head is hurt or worse. The importance of managing your business information has been raised here on many occasions.
    What about grain deliveries? Who authorized those holidays for the staff? Etc…
  3. Personal: too often, major crises such as death or disability can lead to a personal “critical state.” Relationships break down under the stress, families fighting on the way to the funeral home, etc. Conversations with family, a current and well prepared will, and preparations for crisis are all required to bring everything back down from “critical state.”

Direct Questions

Do you have a will, and is it current?

Health care directives (also known as living wills), financial power of attorney, and final wishes should all be laid out so that the decisions are not left to those left behind. These are your decisions and the appropriate legal documents allow you to have some control while you’re not able to take control. Have you put these in place, and if not, why not?

 

Early on in most new business engagements, I ask about wills, powers of attorney, life and disability insurances, etc. The answers are as varied as the people I work with. Most have these fundamental pieces in place, and many more have already begun some very intriguing and creative ways to facilitate business succession. From Joint Ventures, to funded buy-sell agreements, to estate freezes, and share purchase plans, there is no right or wrong way to plan, only a series of possibilities that can be “more right” than some others.

I celebrate the plans that are already enacted, and push hard on those who have none.

From the Home Quarter

Not taking action to plan for the inevitable does not delay the inevitable, it only creates extra hardship for those left behind.

 

ic_leap

Experience: LEAP – – Leadership, Engagement, Authenticity, Passion

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Leap year only comes around every 4 years, so to some people, it’s kind of a big deal; to others, not so much. I will have spent the 2016 leap day by taking part in a unique event, Experience: LEAP.

Experience: LEAP is an initiative of the wonderful people behind Project: SHINE Inc. Their passion is for everyone to live the fullest life possible, to be their true self, and to experience life with passion and purpose. The key message is for everyone to learn that where you are is not where you have to stay. The message applies to us personally, but also has business implications.

In the case of this event, LEAP is an acronym as follows:

Leadership

Leaders are made, they are not born. While some people are born with the characteristics that are often found in great leaders, the fact is leadership skills are learned, and therefore, leaders are made. This has 2 different aspects that apply to your farm:

  1. You are the current leader of your operation.
  2. You need to identify and develop a leader to take your place for when you’re no longer leading the business.

We often learn from experience, or learn from others’ examples, but rarely do farm business owners ever get sat down and taught how to be an effective leader. Everyone in your business will perform in direct correlation to their response to the leadership of the organization. It is like the old saying, “Would you rather be in an army of lions led into battle by a sheep, or be in an army of sheep led into battle by a lion?” If you find yourself questioning the effectiveness of your employee(s), first gauge your effectiveness as a leader.

As a leader, you need clarity in the results you expect in your business, the strategy for achieving those results, and the tactics in execution of the plan. Naturally, sharing this information with your team is critically important in effective leadership.

Engagement

One cannot expect to build a profitable business or an effective team without being engaged. A person who is disconnected and unattached will achieve sub-par results, and find the same in their team. How does one become more engaged? What can be done to increase the engagement of a team? By and large, it begins with purpose. Clarifying the “why,” which means “why are we here; why do we do what we do; why are we the best people for the job?” Clarifying purpose by answering the “why” helps teams, and individuals, recognize that they are a part of something bigger and that they have a key role to play in the organization. By turning a basic employee, a laborer per se, into an engaged and contributing member of a highly functioning team will pay dividends to your business that may astound you.

Authenticity

To be authentic is to be real or genuine. This involves interactions with your staff, your business partners, your family, your vendors, but most importantly with yourself.
I find it curious that authenticity is required for true engagement, which is required for effective leadership. Passion affects everything.

Passion

Passion can be difficult to describe because it is a feeling like few others. Passion can consume you, drive you to heights never imagined, and lead to immeasurable levels of joy or even anxiety. Passion can often create infallible commitment, which, if not balanced with sound rationale in decision making has potential to lead to undesirable outcomes. Unbridled passion sounds poetic and profound, but it can be dangerous if not balanced with reason and objectivity.
Yet, life (or business) with no passion becomes an insufferable task to endure. Most farmers I meet are passionate about their farm, about the land, about growing things, about the family legacy they are living and plan to leave behind. “Life becomes work” if there is no passion. But don’t forget balance, because “work can become life” on the opposite end of that spectrum; neither is desirable.

Direct Questions

How are you gauging the effectiveness of your leadership? (HINT: this isn’t a “self-assessment.”)

What are you doing to match your engagement to that of which you expect from your team?

How would you describe your passion?

From the Home Quarter

Recently, I listened to a presentation where the crowd was polled: If you could sell all your land for 25% above market value today, and rent it back for life at half of current rental rates, how many would take that deal? No one raised their hand. The presenter then acknowledged that no one in the crowd was a farmer, but actually a land owner. Everyone laughed in subtle agreement.
The point is to define your passion, your “Why.” Clarity in what you do, why you do it, and how you do it is no longer something that only applies to large corporations who need that “feel-good mumbo-jumbo” as part of their strategy. Make no mistake, farms of the future will require processes that were once foreign, or only found in corporate cultures. The need for social license becomes greater each day. The need for strong and committed teams becomes greater each year. The need for passionate, authentic, engaged leadership becomes greater with each new generation in the family business.

Daddy Selfie

Additional Family Members

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It is amazing how a family is changed when you add another member to the fold. Whether it be the addition of my new daughter last week (Feb 16 if you want to keep track) and the changes she brings to this household, or the addition of another generation into the family’s farm business, the change is not only imminent, but it can also be drastic, unpredictable, and challenging.

Both situations above involve adding a child, or another child, to what used to be “normal” and “routine.” The similarities don’t end there.

Where Does Everyone Fit?

Bringing another person into the mix creates upheaval. What used to be a shared role could now fall to one person solely. New roles that didn’t exist before now have to be addressed to determine who should fill these roles. This can be stressful, cause tension, and can lead to feelings of inadequacy or inequity.

Can I Understand How This Affects Others, Not Just Me?

We humans, despite being the most intellectually and emotionally intelligent animals on the planet, often struggle with empathy and being able to put ourselves in “someone else’s shoes.” We see ourselves as “up earlier, up later, working harder, taking fewer breaks, taking less personal time, doing more than just the fun jobs, etc.” than our cohorts do. We feel our own plight, get grumpy at our circumstance, and then usually either withdraw or lash out (depending on the individual.) If we were to acknowledge that everyone else in the unit probably felt the same way, we would likely find more patience and understanding for each other and for each other’s quandary.

What Do I Have To Do To Do My Part?

Communicate. Of course, it is much more than just that, but it is critical to communicate with your partners about what you want and what you feel. Most issues in business and personal relationships stem from one or more parties feeling like they haven’t been heard. Being reciprocal is key: if we want to be heard, we must also hear our partners.
Clarifying everyone’s “part” is also important. Assuming that Dad should just keeping doing <insert task here> because he’s just always done it is a recipe for conflict. Does Dad even enjoy that task? Is he actually the best person for that task? Same rationale applies to everyone in the family unit.

Direct Questions

To use an analogy, every person is “rowing their own boat.” What are you doing to ensure that everyone in your family (business or household) is rowing in the same direction?

Change is inevitable, even without adding a new person to your business or family unit. How are you ensuring that you aren’t blaming the arrival of a new person for your stress in the face of change?

There is always positive and negative in every situation. The upheaval and change from adding a new person also brings about great opportunity. What are you doing to identify and leverage all of the opportunities that a new person brings to the fold?

From the Home Quarter

The degree of change that comes with the addition of a new person into your realm is monumental, especially if that person is a little baby who is dependent on you for everything. But as we adjust to our “new normal” and a child becomes less dependent, we are no longer suffering under the weight of anxiety of “how to adjust” and actually have to stop and look back once in a while to truly see how far we’ve all come. By working together with a strategy on how to adjust to the new normal, we can accomplish so much more with far less stress and anxiety.
The same holds true in your family farm business. Whether it be a new employee, or a family member who is joining the farm with ownership aspirations, the same tactic applies. Work together with a strategy in mind on how to adjust to this new normal. You’ll find that this new person is more independent than a new baby. Plus, you’ll actually get some sleep from not having to be up every 3 hours.

On a side note, can anyone tell me how adding one tiny person to a household can more than double the volume of garbage produced by 2 adults and a toddler a week earlier? I can’t rationalize this at all.

ag excellence

Musings from the Ag Excellence Conference

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Last week, I attended the Ag Excellence Conference. Facilitated by Farm Management Canada, this year’s edition was held in Regina. Touching into 3 days of information sessions, speakers, and networking opportunities, I was impressed by the quality of content and the discussions that arose.  The following are some of the major questions and statements of which I took note during the conference:

  1. Will continued population growth in developing countries be enough to sustain the price and demand levels we’ve currently enjoyed?
  2. Why do we try to hire the cheapest labor available but expect it to meet high expectations?
  3. Are farmers losing their “social license” to farm?
  4. Why is there such a low priority put on advancing business management among farms?
  5. Just how far can automation advance production agriculture over the next generation?
  6. Are our water ecosystems at risk?
  7. How will Saskatchewan land values be affected with new ownership rules taking effect?
  8. Are you entrepreneurial or intrepreneurial, and can you be both?
  9. Physical (crop) yield does not equal financial yield.
  10. Strategy is nothing more than a dream without a tactical plan.

From the Home Quarter

Unlike most agriculture industry events which focus almost entirely on production, the Ag Excellence Conference focused on business management. Attendees recognize the need to elevate management awareness and skills to help ensure the future viability and sustainability of farm businesses.
The questions and statements above were asked/stated explicitly, or simply implied during conversations. These points stemmed from various regions of Canada, and various sectors of agriculture (from grains to cattle, to vegetables, to dairy, poultry, and egg.) Everyone in agriculture is asking the same questions, and raising the same concerns.
Give consideration to each of points above. Do you have a thought or response to any or all? We hope to tackle these and other issues in the coming weeks of Growing Farm Profits Weekly™.

GFP FI 2

Managed Risk – Part 5: Inaction

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While there could be many more “parts” to the list of topics that would fall under “Managed Risk,” I’ll
end it this week with one that I believe many people, maybe all people, face each day.
The list of reasons (excuses) we provide to support our decision not to act is virtually endless. They can
be found in the 7 Deadly Sins (pride, envy, sloth) or in almost any self-help book (communication issues,
inequality, stress) or even from psychological therapy (apathy, self-esteem issues, narcissism.)
Here are a few of the most monumental farm issues that are affected by inaction:

Business Structure

I recently took a call from a young man looking for guidance on how to manage the complexity of his
current farm arrangement. He farms with his dad and his brother; all three men have their own
corporation and their own land; one brother farms full time with the dad, the other is part time with offfarm
work. Tracking financial contributions and division of labor are a nightmare, and yet both look like
a cakewalk compared to managing “whose inventory is whose?” They are not happy with the increased
efforts needed to deal with these issues, they all know that there is likely a better way, but no one has
taken a step until the day I spoke with one of the brothers.

In this case, the inaction stems from unawareness: none of the men involved in this family farm had the
knowledge of what, if any, options were available, what questions to ask, or who to even ask for help.
It’s also common for inaction to stem from fear – fear of appearing incompetent by asking a “dumb
question,” fear of making the wrong decision, fear of rocking the boat and hurting the family dynamic.

Family Issues

Family issues challenge most intergenerational farms. There are many varieties, and most are worthy of
a book being written on the topic. Elaine Froese wrote Farming’s In-Law Factor. There should be books
written on “How to Fire Your Father” and “Decoding Motivation: How to Translate Boomers, Gen X’ers,
and Millennials.” If only…

The most common reason for inaction on family issues is “I don’t want to blow up the farm.” The
problem is that inaction can blow up the farm with greater odds than if action was taken! Unless the
family member you’re dealing with has truly sinister motivations, the likelihood of a successful dialogue
is quite positive. No one wants to destroy the farm or the family, so with the appropriate approach,
success can be had. The inaction for family issues predominantly stems from fear. Coaching is available
to help families deal with these types of issues.

Transition

Considering the average age of a Canadian prairie farmer today, the volume of farm transitions to take
place over the next 10 years is staggering. The cumulative value of assets that will change ownership
would dwarf the GDP of some small nations. With so much at stake, why does every farm not have a
succession plan already in place (or at least in progress?)
Inaction on this front increases the risk of the following:

  • Future family fighting
  • Colossal tax obligations
  • Destroy the farm business
  • Your legacy lost

Excuses (reasons) for inaction here are unacceptable. It is nothing short of reckless and irresponsible to
leave undone a function with such enormous impact. There is no shame in not having all the answers, or
any answers for that matter. Farm transition is a process, not a result. The process becomes a path of
discovery, but if you insist on keeping your blinders on, don’t be surprised to one day deal with any or all
of the 4 bullet points above.

Direct Questions

What is your main reason for inaction? “No Time” is an excuse. “Fear” is a real reason, but only you can
conquer it.

What have your accountant and lawyer provided you for advice regarding your future transfer (sale) of
assets?

In a family business, inaction increases the probability of irreparable family dysfunction. What is getting
higher priority: family harmony or fear of perceived conflict?

From the Home Quarter

What must happen to make an issue a priority? Is it an immediate tangible loss/damage, like an
equipment breakdown in season? Is it emotional goal, like a new pickup truck? Is it perceived (assumed)
risk, like assuming your employee will quit unless he’s granted a wage increase?

Making an issue a priority is the best way to beat the risk of inaction. The fear of the perceived
outcomes or the fear of not knowing how to proceed gives us permission to keep urgent issues down
low on the priority list. But at what point does reality and rational reasoning take over so that we
recognize that the risk of inaction has more negative potential than that of any perceived outcome?
In retrospect, “inaction” is not so much a managed risk, but an unmanaged risk. Managing our
“inaction” actually reduces, or even eliminates, the risk.

If you struggle with inaction…
For a no charge consultation on where you are best to replace “fear” with “priority,” please call or email
me anytime.

trees

Knowing Your Costs – Part 3: “The Present vs The Future”

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As a proud member of the Rider Nation, and loyal fan of the entire CFL (despite the goofy new rules for
2015,) I witnessed something happen on the weekend that blew up social media and has fans of the
Green & White frothing.

The struggling winless Riders have been devastated by injury and lack-luster performances on field,
especially defensively. The order of the game plan each week seems to be “who can we plug where?”
One of the criticisms from fans is that there has been inadequate planning on behalf of management to
bring in the right new talent to provide appropriate solutions at time of crisis (like injury.)

While the business of football is a mystery to me, the business of business is not. Like a football team,
your business will face crises and you’ll need to adjust quickly. It doesn’t have to be personnel related
(like a football team;) it could be asset related (like equipment catastrophe) or market related (like a
major price decline) or anything. The knee-jerk reactions that are commonplace during times of crisis
rarely bode well for outcomes.

In the case of my favorite football team, the knee jerk reactions have been to sign different players to
the roster regularly. This is meant to fill the gaps left by injury, unsatisfactory performance, etc. This
knee-jerk reaction creates an air of constant uncertainty among the remaining players, and rarely brings
instant results because new players need time to learn the system, and gel with their teammates so as
to function as a unit when on the field. Wouldn’t it be better to have developed some younger players
and keep them on a practice roster? Players who would have learned the system since training camp,
and who are just itching to get on the field and show their stuff?

Similar to your business when you face crises, you could follow the lead of this football team and simply
run to the marketplace to buy another combine, rent more land, hire more people, apply more spray,
etc. The knee-jerk reaction would feel good in the short term because of the band-aid effect, but what
about the future? How has the knee-jerk decision affected your future profitability? Will the lease or
finance cost of that combine be affordable for the next 2-5 years? Will the extra land grow anything, or
will it be flooded out or ravaged with disease? Will your new hire fit in with your existing team and
culture? Will that extra spray increase or decrease your profit? Wouldn’t it be better to have given these
potential crises some consideration before the season started with some planning? With planning, you
would be prepared and then make a timely and informed decision. No more knee-jerk reactions.

The biggest issue with my favorite football team came to light during the last game this past Sunday. The
head coach pulled a young quarterback from the game after he threw an interception. The young QB,
who is 23 years old and fresh out of college, started the season as 3rd in line yet found himself in the #1
slot for the last number of games because of injury. By all accounts, this young man has the skills to be
the future leader of this team…in several years, not now. He needs time to learn, to enhance his skills
and his knowledge. The best way to enhance those skills is with real life experience. On Sunday, the
head coach regressed that young man’s growth by killing his confidence when he got benched for one
mistake. The coach made a knee-jerk decision that can, and likely will, have a detrimental effect on the
future of the team.

While the future of this football team weighs heavy on the fans enthusiasm right now, your business
doesn’t have to be this way. Whether it be a crisis in personnel, equipment, weather, or markets, the
preparation and planning you put in ahead of time will save you time, anxiety, and money.
How does this relate to knowing your costs? It comes from planning. Knowing your critical crisis cost
points from investing time and effort in your management will clearly indicate where you have
sensitivities and where you have breathing room. The sensitive areas, where your return on investment
is tight, require more strategy analysis to better prepare for crisis.

Critical Crisis Cost Points

Personnel

o Key person quits mid-season (do you have a successor on the team today?)
o Injury, serious or minor (do you have a documented safety plan, insurance coverage?)

Equipment

o Does your current equipment cost per acre have room for an increase should there be
an equipment crisis?
o Is your current equipment line deficient or excessive based on your productivity,
efficiency, and cost expectations?

Weather

o Are you prepared for hail or frost, drought or flood? (i.e. do you have sufficient working
capital to handle the loss of gross margin?)

Markets

o Do you know your Unit Cost of Production so you can hedge for a profit?

Direct Questions

What have you done to prepare for crisis on your farm? Will you be making a prepared and informed
decision or a knee-jerk reaction?

What are you doing to understand your costs on your critical cost points to accelerate your ability to
make informed decisions during times of crisis?

From the Home Quarter

The planning that goes into putting together a successful football season resembles the planning it takes
to put together a successful growing season on your farm. You put together the best game plan you can
based on the assets at your disposal, tangible or intangible. You prepare for quandary by building depth
into your game plan for your critical crisis cost points. Sometimes you best plans aren’t enough;
sometimes the dilemma is greater than you could predict or the results are more damaging than you
could imagine. No matter how you slice it, your best bet is planning and being prepared by drawing the
distinction between risking your future on a quick decision in the present, or taking the charted path
keeping the long term success of your business always in mind.

The head coach of the Riders got fired before I could finish writing this article. I expect it was partly
because he refused to take any accountability for the team’s struggles. He routinely made decisions in
the present with a lack of regard for his, or his team’s, future. He arrogantly stated in interviews that
he’s a great coach and will find work if he’s let go. His unwillingness to look within himself as the leader
ultimately cost him his job. As the leader of your farm, please don’t get caught in that same syndrome.
Your future depends on it.