Transferring management is a critical step in farm succession planning
Succession is the gradual transfer of management from one generation to the next. As one farming generation slows down, the next generation is gearing up to take over the day-to-day operations of the farm business. However, there will be a period, or transition, when both generations work together for the good of the farm business.
Many times, when we consider farm succession, we focus on the transfer of labor and assets. As the entering generation returns to the farm, they take on many of the day-to-day tasks on the operation including caring for the herd, milking, feeding, and running tillage and cropping equipment. Over time they develop the knowledge and know-how to become skilled in those tasks. However, for the entering generation to truly stay in the farm business, they will want, and need, a more active role in making day-to-day decisions.
Transferring management between generations is one of the most critical steps in transitioning the farm business. Issues of who controls management, or decisions, can be a barrier in a farm succession plan. The transfer of management can not occur if the exiting generation is constantly in charge, planning, or making decisions for the farm business.
Transferring management is a difficult decision as it means the exiting generation is letting go of control of the farm business. Many factors impact the success of transferring management to the next generation including: readiness of the exiting generation in letting go, readiness of the entering generation to take on the responsibility, ability of both generations to work together, and shared vision of both generations of where they are going with the farm business.
Developing future managers is an investment in the farm business and takes time. In general, the exiting generation has made all the decisions regarding day to day management and financial decisions regarding the operation. As the entering generation comes on to the farm, transfer of labor occurs. This allows the individual to gain skills and knowledge regarding the everyday tasks and management of the operation.
As the next generation enters the farm business, the exiting generation must recognize their role in the development of the future manager. The business relationship cannot be viewed as a parent-child or employer-employee relationship, but as a partnership. During the time of transition, both generations must use the opportunity to share knowledge and gain skills in decision making. Just as the previous generation did, the entering generation must be able to make mistakes and learn from them, with the guidance of the exiting generation.
Transfer of management can begin first with ongoing day-to-day operations such as decision of treatment or ration changes and move on to larger areas. Determining who can make the daily management decisions can be based on enterprise or interest such as crops and livestock, or skill set. To avoid conflict, decisions must be based on the overall shared goals and visions of the farm business. Conflict does not occur because of the actual management decision made by an individual but occurs because the decision did not match the goal of the farm operation. Decisions which impact the other areas on the operation should be made as a team. As time proceeds, additional management responsibilities are given to the entering generation, to allow a smooth transition for both generations at the time the exiting generation retires.
Transfer of management over time can be difficult for both generations. However, developing a management structure which defines how ongoing business decisions are made and who is responsible will help to avoid conflict. It will also allow current employees to understand who is responsible for an area and to provide buy-in and support for the up and coming manager. A clearly defined written management structure allows all involved in the farm business know not only their roles and expectations, but also how decisions are made and who will be making them.
As the exiting generation transfers management to the entering generation, it takes time. Farm succession is a transition, allow the time needed to transfer management. Trust and respect are developed. The entering generation must learn the necessary skills to manage the farm business in a safe environment. The exiting generation must feel comfortable their financial investment and life-long dream is secure.
Tina Kohlman is the UW-Madison Extension Dairy & Livestock Agent for Fond du Lac County