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Better Decisions Open and honest communication - the key to sound succession planning Good communication builds trust and keeps minor misunderstandings or disagreements from becoming more serious. But it takes a lot on talking and, more importantly, listening by PETER COUGHLER Where do we start in planning for succession? This is a common question for farm families and, unfortunately, there is no simple answer. Every family business is unique and is at a different stage of planning. Some are well on their way and are asking the question rhetorically. However, some have not even broached the subject yet. There are many different ways to define succession planning. In this series of articles, succession planning will focus on the long-term thinking and advance planning needed to ensure the smooth transfer of the skills, knowledge, management, control and, ultimately, ownership of a business (in this instance a farm business) between the current generation and the next. The plan also needs to ensure the gracious exit of the retiring generation into a financially secure and satisfying retirement. Succession planning is, then, a process to achieve this transfer; it is not an event to be put off indefinitely. Since succession is a process and not an event, it takes time and effort to develop a comprehensive plan which best meets the needs of the farm family. Process versus paper There are two main parts in developing a succession plan: first, the "process" of thinking about it, discussing it, researching options, planning and deciding; second, the "documentation" or the "paper" recording the decisions in a written succession plan. The effective implementation of the plan is also important, but this discussion is beyond the scope of this article. So where should a farm family start? Farm families can sometimes feel overwhelmed and alone. They wonder whether they are the only ones facing these issues. However, many farm families are facing similar challenges and feel exactly the same way. In view of all of these considerations, it helps to break succession planning into smaller pieces or a step-by-step approach and this, too, will be outlined in a future article. The first rule is: the sooner the better. The sooner communication and planning starts, the greater the number of options available. Open and honest communication is critically important to the success of developing a plan that will work and be acceptable to everyone. Good communication builds trust and keeps minor misunderstandings or disagreements from becoming more serious. It will take a lot of talking and, more importantly, listening. Everyone involved in the business needs to have the opportunity to articulate his or her goals. For example, it might be important to one member of the family that the farm always operates as a dairy or cash-crop business. However, someone else may not be as concerned with this, but may simply want to ensure that the business remains in the family. These are not mutually exclusive but rather different viewpoints to start the discussion. No one will know about either of these unless they are talked about. It is sometimes difficult to listen to other people's ideas, particularly if they do not initially seem appealing or in line with one's own thinking. However, these ideas should not be discounted - they may help stimulate conversations that could lead to other workable options. So it is necessary to make a little extra effort in listening and understanding. Family business meetings -- an effective tool There are numerous tools and techniques that can help move these sometimes difficult conversations forward. One mechanism to consider is regular family business meetings. These can help to "professionalize" the business and separate the family and business aspects. The first few meetings can feel a little awkward and this is where an outside facilitator or advisor might be helpful. Once everyone is comfortable with the process and discussions are flowing, then the family is on its way. The obvious next question is: "Who do we involve in these discussions?" Again, each family is different and there is no one answer. Some families are very open and it is natural to include all members. For others, this is not so natural. In some instances, family business meetings will only involve those directly involved in the business. However, in this situation, there might be a "family meeting" for all family members who wish to take part. The important thing is that communication occurs. This is why family dynamics are a key ingredient in succession planning. Sometimes these dynamics are referred to as the "soft issues," but they can be challenging to the process. The purpose of a business is to generate a profit for the owners. The purpose of family is to love, nurture and pass on family values and traditions. So now put the words together -- family business - and you almost have a contradiction in terms. However, looked at it in another way, families in business together have a secret weapon -- they share common values and a shared vision for the business. This can be very powerful, involving as it does the interaction of people in the strong bonds of love and family. After each family business meeting, a one-page report should be prepared, which records the key thoughts and ideas generated at the meeting and documents the decisions made. This one page then becomes a living, dynamic, straightforward succession document and record of decisions. In this manner, everyone can see the major themes and decisions and, if they don't agree with something, the concern can be expressed early. Some common goals While each family will have its own objectives, some common goals of a successful succession and transfer plan include: (1) providing financially for the founders (parents); (2) ensuring financial terms the successors can handle; (3) utilizing the capital gains exemption; (4) providing for non-farming children (this is where discussions about fair and equitable treatment come into play); and (5) maintaining family harmony. There are resources available to help farm families develop their succession plans. These include Agriculture & Agri-Food Canada's Specialized Business Planning Services (SBPS) and the Business Management Resources of the Ontario Ministry of Agriculture and Food (OMAF). For more details and an application for SBPS, farm families can contact the Canadian Agri-Renewal Services Office at 1-866-452-5558 (toll-free) or, in northern Ontario, call 1-800-461-6132 or visit online at www.agr.gc.ca/renewal. The OMAF Business Management resources can be found at OMAF Resource Centres or online at www.gov.on.ca/OMAFRA/english/busdev/agbusdev.html. In all of this talking and communication, it should be remembered that the end game is the successful transfer of the skills, knowledge, management, control and ownership of the business between generations and to maintain family harmony. Developing and implementing a plan which meets the family members' goals and objectives is key in achieving this.BF Peter Coughler, M.Sc., P.A., is OMAF's Succession Planning and Business Agreements Program Lead, based at the OMAF Brighton Resource Centre. He can be reached by phone at (613) 475-4908 or by e-mail at peter.coughler@omaf.gov.on.ca. © copyright 2005AgMedia Inc.. top back