Transcript Strategic Business Planning for Commercial Producers Succession Planning: How do I Train the Next General Manager?

Strategic Business Planning for Commercial Producers
Succession Planning: How do I
Train the Next General Manager?
Strategic Business Planning for Commercial Producers
What is succession planning?
…it is a PROCESS that ensures the
continuation of a business through the
generations.
“The final test of greatness in a CEO is how well he
chooses a successor and whether he can step aside
and let his successor run the company.”
Peter Drucker, management expert
Strategic Business Planning for Commercial Producers
Did you know. . .
• 90% of U.S. businesses are categorized as family
owned.
• 7 of America’s 8 oldest family businesses are farms.
• While 78% intend to pass the business on to children,
only 34% create a succession plan (for 25% a will is
the only element of that plan).
• 70% of first generation businesses fail to survive into
the second generation.
• 15% survive into third generation.
• 1% survive into the fourth generation.
Source: Small Business Administration
Strategic Business Planning for Commercial Producers
Strategic Business Planning for Commercial Producers
Steps in Succession Planning
Process
1.
2.
3.
4.
5.
6.
7.
Understand what succession is
Discover expectations
Examine options
Create a plan
Check with experts
Finalize the plan
Implement the plan
Strategic Business Planning for Commercial Producers
Step 1. What Succession Is and Is Not
Succession is:
• A process
• About family, people and
relationships
• About ownership,
management and estate
• About what is fair
• Driven by the family
values, wants and
concerns
Succession is not:
• An event
• One person’s problem
• About minimizing taxes
• About equity
• Driven by technical issues
that are handled by
lawyers, accountants, etc.
Strategic Business Planning for Commercial Producers
Step 2: Discovering Expectations
• Should involve all family member
(whether in the business or not)
• Assumptions at any stage about other’s
wants or expectations should not be made
• Say no to secrecy!
Strategic Business Planning for Commercial Producers
Perry
Rose
Kay
Perry Jr.
Say NO to Secrecy!
Strategic Business Planning for Commercial Producers
Step 3: Examine Options
Key Questions:
– What role, if any, will family members play in the
succession plan?
– What can we do to treat all offspring fairly?
– How can I prepare for either a different role in the
business or for retirement?
– How will the transfer of ownership be handled?
– How will the successor(s) be trained?
– How will the change in roles be communicated to
stakeholders?
Strategic Business Planning for Commercial Producers
Family First versus Business First
Carl
Joe
Farm Owner
Jan
Physician
Bob
Friend
Part-time farmer
Key employee
Strategic Business Planning for Commercial Producers
Fair versus Equal
Robert
Strategic Business Planning for Commercial Producers
Step 4: Create a Succession Plan
• Plan for transferring management
• Plan for transferring property
• Contingency plan for managing
disruptive events
Strategic Business Planning for Commercial Producers
Choosing the Successor
•
What specific attributes would you
look for in a successor?
–
–
–
–
–
Education
Experience
Personal characteristics
Skills required
Job responsibilities
Strategic Business Planning for Commercial Producers
Grooming the Successor
• How do you provide opportunities to make
decisions, take risks, and develop management
skills?
–
–
–
–
–
Initial evaluation
Management training
Career growth
Regular feedback
Timetable (allow 5 years to 15 years)
Strategic Business Planning for Commercial Producers
Low
1
2
Evaluation of Farm
Management Skills
Charles for Charles

l
4
1 Crop Management

2 Livestock management
l
5 Mechanical ability



6 Building construction skills
l
3 Marketing
l
4 Purchasing
l
7 Personnel management
Dad for Charles
3

Average
5
6
l
9 Securing resources
l
High
9 10
l

l




10 Physical endurance
l

l
12 Analytical ability

13 Decision making
l
14 Ability to act and accept risk
l

15 Communication skills
l
16 Negotiation skills
l
17 Leadership skills
8
l
8 Financial management
11 Emotional endurance
7



l

l
Strategic Business Planning for Commercial Producers
Step 5: Check with Experts
• Use them to comment on your thinking,
not to do your thinking for you
• Should be visited only after you’ve
thought about the process
Strategic Business Planning for Commercial Producers
Step 6: Finalize the Plan
Write it down!
Strategic Business Planning for Commercial Producers
Step 7: Implement Plan
•
•
•
•
•
•
How to announce the plan?
Develop program with action plans
Set target dates
Schedule follow up/review of program
Keep everyone informed
Review the plan periodically
Strategic Business Planning for Commercial Producers
Typical Parent-Child Business
Arrangements On Family Farms
• Spin-off model
• Landlord-tenant model
• The “super-firm” model
Strategic Business Planning for Commercial Producers
Succession Planning
Critical Issues:
• Transfer of management
• Transfer of assets
• Anticipating disruptive events
Strategic Business Planning for Commercial Producers
Strategic Business Planning for Commercial Producers
Key Questions About Involvement In the
Family Business
• Who are the participants?
• What role(s) will each family member
play in the business?
• Employee
concerns include income and
benefits, financial security, recognition
• Manager
concerns include
responsibility and authority, career growth,
recognition
• Owner
financial growth, risk versus
reward, rate of return, cash
Strategic Business Planning for Commercial Producers
Think About Separating The Roles
• No single participant need wear all three
hats as manager, employee, and owner
• One advantage of business entities
(super-firms) is they allow us to separate
ownership and management
• Provides opportunity to keep non-farm
heirs involved as investors
Strategic Business Planning for Commercial Producers
Fundamental Tasks When Planning to
Accommodate Off-Farm Heirs
• Assure a degree of marketability to
investments of off-farm heirs, minority
interest holders
• Provide assurances about current or
future returns on their investments
• Provide for legitimate forms of
involvement in family/farm governance
Strategic Business Planning for Commercial Producers
Multiple Entities
(Advantage: Flexibility in Numbers)
• May be easier to deal equitably with onfarm and off-farm heirs
• Using a new operating entity reduces the
investment needed by on-farm heirs to
gain control of the operating entity
Strategic Business Planning for Commercial Producers
Family Governance Structures:
Family Council
• Includes all adult parties in interest to
business or family assets
• Deals with questions of the family’s role in
the business and the welfare of family
members
• Purpose is to give all stakeholders a
legitimate voice in the family business
Strategic Business Planning for Commercial Producers
Strategic Business Planning for
Commercial Producers