Labor Management Series: Farm Transition to Non-Family

Mr. Chris Zoller, Extension Educator, OSU Extension Tuscarawas County

I was asked recently to assist an area farmer sort through the complexities of his farm transition plan.  This farmer worked hard all of his life, built a successful diversified farm, and as he approached retirement, began investing considerable time and energy into how best to transition his farm business.  Discussions with his children revealed that they had no interest in managing the farm.  However, there was consensus that, if possible, the farm should continue in operation, be profitable, and maintain its reputation in the community.

What to do?

In this case, some key employees had expressed interest in assuming the ownership and management role.  Interviews were held with each interested employee and their family to discuss their goals and level of interest.  The interview process resulted in a husband and wife both employed by the farm as the most likely candidates.  For many, it’s ‘out of the box’ thinking to consider having someone outside the family assume the ownership and management of a farm, but this may be a viable option to consider.

Interviewing potential successors takes time and energy.  It’s helpful to take notes about each interested person.  These notes will be helpful as you reflect on the discussions.  Some may find it helpful to rank each potential successor against a variety of items.  Below is a table from the Ohio State University Extension Fact Sheet, Developing the Next Generation of Managers, which is titled Attributes of Potential Successors.  I encourage you to use this as a starting point to evaluate candidates interested in operating your business.  Feel free to add additional attributes that are important to you.

Name

 

 

 

 

 

Relevant Education

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

Relevant Experience

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

Commitment to Family

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

Management Style

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

Communication Ability

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

Financial Stewardship

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

Leadership Abilities

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

Risk Orientation

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

Creativity

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

Guts and Ambition

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

Values Alignment

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

Total

 

 

 

 

 


Suggested scale: 1 = Poor, 3 = Fair, 5 = Excellent

In order for a potential successor to be successful, they must assume management responsibilities.  An excellent way of providing initial guidance to your successor is to involve this person in current decisions.  Provide this person with a current problem and all the facts you have.  Allow them to work through the problem.  Ask questions as to why they do/did something a certain way.  Ask them situational or ‘what if’ questions.  This should not be confrontational, but rather an opportunity for you to understand how your successor makes decisions.

Allow your successor to develop and use management skills early in the process.  Managing a parcel of land or an existing enterprise are good examples.  All decisions, including purchasing, finance, marketing, and personnel management, should be transferred.  The current farm manager should be available for consultation but should not dictate management decisions.

For some, one of the most difficult parts of the transition is letting go.  Anyone who has worked hard to build and manage a successful business worries about its future.  Peter Drucker, a well-respected management author, once said that it’s the job of the manager to pick his or her successor and get out of the way to let the successor run the company.  For some, easier said than done, but it is a true statement.  Be confident in the abilities of your successor and know they are committed to the long term profitability and success of the business.

Ohio State University Extension has an extensive list of Fact Sheet references related to farm management and transition planning, including:

A Comparison of Business Entities Available to Ohio Farmers
Conducting a SWOT Analysis of Your Agricultural Business
Conducting Successful Family Business Transition Meetings
Develop a Useful Mission Statement for Your Agricultural Business
Developing Goals for the Agricultural Business
Developing the Next Generation of Managers
Planning for the Successful Transition of Your Agricultural Business
Starting, Organizing, and Managing an LLC for a Farm Business
Tax Characteristics of Business Entities Available to Ohio Farmers
Using Liability Limiting Entities to Manage Liability Exposure to Ohio Farms
Is a Prenuptial Agreement Right for Your Farm Business?
Whole Farm Planning Model

Copies of these publications are available at http://ohioline.osu.edu or from your local County Extension office.

This article originally appeared in the Farm and Dairy, September 2015.