On the plus side, the demographics of farming and ranching in the U.S. show these are predominantly a family affair.
But on the downside, transition of these operations from one generation to the next is largely left unplanned.
Ensuring these make an orderly transition, with the wishes of both sides in the deal carried through the process, starts well before family members hash out their views around the dinner table.
“Have you discussed the transition of the farm and ranch with your family? I don’t think a lot of people do. It’s a very tough subject to discuss, especially with family members,” said Ashlee Westerhold, area extension economist with University of Idaho Extension. “However, I think that it is great to bring these topics to light, and to get into the head space of thinking about these things.”
Earlier this March, Westerhold conducted a YouTube live presentation, part one of the succession planning series, and the first in several videos discussing different agriculture business related topics.
Family-owned businesses, “are at the core of the U.S. agriculture industry, according to Hubert Hamer, director for the National Agricultural Statistics Service statistics division. Speaking to the latest Census of Agriculture data, he noted “97 percent of all U.S. farms are family-owned.”
The statistics show the average age of U.S. farmers is 58, and that 70 percent of U.S. farmland likely will change hands during the next two decades.
However, the statistics show only 30 percent of these farms survive into the second generation, and 12 percent are still operating by the third. According to a Jan. 30 article by Ryan Baker, advisor and partner with Open Advisors, 69 percent of the family farms surveyed expected ownership to continue into the next generation, but only 23 percent had a plan.
Westerhold’s presentation came at the start of the COVID-19 pandemic, which while it has changed how people live their lives through preventative measures and social distancing, it has afforded time and introduced many into technologies to connect with family members. Whether through e-mail, Zoom, Skype, Facetime or a phone call, these are good ways to connect with family members “and remain social, even if we are distant.”
And these connection options bring opportunities for secession planning.
“As you’re sitting at home, there’s time to reflect on the past, but it’s also a great time to plan for the future,” she said, in setting up a family meeting.
“This may sound like a very straightforward concept, but a lot of work needs to be done before setting up a family meeting. That way, it is done correctly,” she said, efficiently and effectively. To be clear, this is not an ordinary meeting, Westerhold continued. “This is not just meeting to find out how calving is going or if you’ve started planting. This meeting is to talk about the transition of the business.”
As part of the discussion, Westerhold referred to questionnaires developed by her team to guide such meeting discussion: one for the owner to potential heirs, and the other for potential heirs to the owner. These are available online at https://www.uidaho.edu/cals/idaho-agbiz/resources/tools .
“For the owner sitting down with a potential heir, what do you ask first? Does anyone want to take over this farm or ranch? That’s a great question,” she said, “and if you send this questionnaire to the family before the family meeting, they can think about that for a good time before having to come up with an answer.”
Another owner-to-heir question is what strengths he or she brings to this business, she said.
“This is a business. We need to treat the farm or ranch as a business,” Westerhold said, “and I think what you need to concentrate on is what personality strengths or leadership strengths the next generation brings into the business.”
On the other side, a question for heirs is – if someone were to come back to the farm or ranch -- what expectations would the owner or owners have as far as the transition of management, and what would their roles be if they retire?
“So, I know a lot of farmers and ranchers who don’t plan on retiring,” she said, “but would they enjoy just driving the tractor? Would they enjoy just checking on the cows and not the paperwork and not the recordkeeping?”
This is where sending out the questionnaire works in allowing that everyone’s voice is heard, and they know their concerns and wishes were heard, she said.
In planning locations for family meetings, at the homeplace or dinner table are options; however, to avoid situations where traditional positions of authority (such as with parents) are reinforced, move mom or dad to a different seat, or perhaps hold the meet in a neutral location.
“The purpose here is that all parties involved are working on an even playing field,” Westerhold said. “Kids might be more likely to question mom and dad,” she said, or ask clarification in a neutral setting, “rather feeling as though they are still a kid and in the same spot they have been all their lives.”
Setting ground rules ahead of time is also important, allowing that dominant and extroverted individuals don’t dominate the conversation, she said, and that one person speaks at a time with the others waiting for him or her to finish before they can talk.
“We want to make sure that everyone has a chance to speak and make sure everyone does try to speak,” Westerhold said. For those who don’t want to vocalize their opinions, again, another good reason for the advance questionnaire, she said: “They still have ideas, even if they don’t want to vocalize them.”
An effective meeting also starts with a good opening dialogue, she said, where everyone is thanked for making the time to attend, that the process will be conducted efficiently and effectively, and the ground rules for speaking and respecting the opinions of others.
‘It’s so hard to implement ground rules when it’s mostly family members,” she said, “but if you vocalize and say these out lout, maybe family members will actually listen.” She continued it would be best for the patriarch or matriarch to start these meetings, “because it is their operation,” and state what their wishes are for it.
Westerhold addressed a submitted question regarding what to do if a family member refuses to meet, doesn’t want to talk openly or is very avoidant of such meetings?
“When a family member is avoiding the subject or avoiding a family meeting, they do have something to say,” she said, “which again brings into usefulness the questionnaire, on what their wishes are, what they believe is right. That way, it doesn’t have to be discussed with the other parties involved. But if they want their opinions known, they should be sent to the mom or dad, matriarch or patriarch, to let them know how they feel. And, if a meeting is not the right place to vocalize that, it can be put down on a sheet of paper, but at least it gives them a chance to come up with an answer for themselves.”