1 Succeeding at Succession Planning A. Edward Staehr Executive Director, NY FarmNet NE Ag and Feed Alliance Albany, NY February 5, 2013
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1
Succeeding at Succession Planning
A. Edward StaehrExecutive Director, NY FarmNet
NE Ag and Feed AllianceAlbany, NY
February 5, 2013
2
Characteristics of Feed Businesses Sold to
Competitor Did not identify and groom a successor.
Did not have written business plans.
Managed the business to avoid paying income taxes.
Did not utilize accrual accounting to measure profitability.
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What Makes a Business Transferrable?
Profitability or potential for future profit Incoming generation is building equity in
the business. Incoming generation has demonstrated
management potential. Present generation is willing to transfer
management. Written agreements – buy/sell, operating,
etc. Estate plan in place
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Business Life Cycle
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Introduction
Growth
Maturity
Decline
Time
Timely Transfer
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Introduction
Growth
MaturityDecline
Time
Planning Links
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To support the incoming genr, 80% of cases expand after implementing a transfer plan.
FarmLink averages 75 transfer plans annually.
Effective communication is necessary for the planning system
Cornell Resources
September 2010 E.B. 2010-09
Profiles of Successful Farm Transfers on Long Island
Charles H. Dyson School of Applied Economics and ManagementCollege of Agriculture and Life SciencesCornell UniversityIthaca, NY 14853-7801
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Long Island Study Successful Factors
Involve the junior generation in the business early on by delegating management responsibilities.
Increase management responsibilities when the junior generation demonstrates their management abilities.
Conduct routine business meetings. Develop job descriptions for everyone
involved in the business.
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Long Island Study, Continued
Having a profitable business with opportunities for increased revenue growth will entice the junior generation to grow the business.
Allow the junior generation to succeed with new ideas, as well as fail when changes take place.
Create a positive work environment between management and employees that will allow for business succession.
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Long Island Study
Put a timeline in place for business transfer and communicate the timeline to the junior generation.
Enlist outside assistance to facilitate business transfer.
Employ a multitude of planning tools to facilitate an effective business transfer.
Periodically review one’s plan to make changes when necessary.
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Business Transfer Insights from Dr. George Conneman, Emeritus Professor, Charles H. Dyson School of Applied Economics and Management at
Cornell University
Management responsibilities need to be transferred before assets.
A neutral third party probably needs to be involved to accomplish the process.
Timely transfer is a must. A date to end the process is a necessity.
Compromise, trust, respect, ability to work with others is required. Don’t take advantage of the other party.
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Conneman, continued
Involve everyone in family from the very beginning.
Business-like methods need to be utilized at all stages of the transition process.
Good communication involves both talking and listening.
In the vast majority of cases, significant outside work experience is a prerequisite to a healthy career in the family business.
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Conneman
Business owners can rarely retire “cold turkey” – they need five years to prepare and substantial interests outside the business to look forward to.
No succession plan is complete until the parents transfer voting control to the next generation. The surprise return of a once-retired business owner is frightfully common.
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Management Transfer
Accomplished through a process very similar to career/executive development in major industries.
Process should begin early in family run businesses.
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Planning for Management Transfer
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Management Transfer Components
Grooming employees/family to be ready to handle responsibility.
Identifying specific skills of individuals on the team and matching positions with skills.
Putting together career development plans combined with professional development.
Reviewing progress in an annual performance review.
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Grooming Management
Provide freedom to make business decisions and have authority, as well as responsibility.
Identify a mentor for members of the management team.
Allow employees/family opportunities for success, as well as chance for failure.
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Example
Incoming family member begins as employee.
Successfully demonstrates management ability.
Takes on increased responsibility over time.
Acquires equity via purchase or stock transfer.
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Jointly Reviewing Financial Statements
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Ensuring Success
Develop written agreements with outside assistance from consultants and attorneys.
Define parameters for annual performance reviews.
Operate in a business-like manner. Develop a business plan. Conduct routine staff meetings. Develop formal job descriptions. Utilize an employee handbook.
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Agreements
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Items in an Agreement
Term agreement is in effect.
Parties involved in agreement.
Timeline for acquiring equity via purchase or transfer. May include a buy/sell arrangement.
Process for dissolving agreement if either side wishes to withdraw.
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Identifying Skills
Many skills assessment tools available. Gallup DISC Myers Briggs Etc.
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Gallup Skills Assessment
Quantifies 34 specific skills/attributes.
Asserts that individual success may be defined by a combination of five skills.
Based on a 30 year study conducted by Gallup.
Over 7 million have taken the assessment.
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For More Information
Strengths Based Leadership, Rath and Conchie. Characteristics of Effective Leaders
Identifying your strengths and investing in other’s strengths. Placing individuals with the right strengths for the position on
your team. Understanding and meeting leadership needs of your team.
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DISC Assessment
Utilizes four personality styles. Drive/Dominance (D)
Influence (I)
Steadiness (S)
Compliance/Conscientiousness (C)
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DISC
Utilized in leadership Different leadership methods may be required with
each personality type.
Problem solving when problems occur in a leadership team.
Accounting for each personality type on the team to solve problems.
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For More Information
https://www.discinsights.com/whatisdisc#.UQv8xGfNmSo
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Myers-Briggs
Four dichotomies Extraversion – Introversion Sensing - Intuition Thinking – Feeling Judging - Perception
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For More Information
http://www.myersbriggs.org/
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IBM’s Career Development Process
Driven by corporate strategy. Strategy may change over time and helps determine:
Where to make investments in employee training Helps managers determine career expectations with employees
to obtain necessary skills.
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Steps in the IBM Process
Select and develop new employees Attract and recruit the best talent.
Introduce employees to organizational culture.
Utilize “onboarding” – new employee orientation.
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IBM Steps
Assess skill levels Identify skill needs.
Assess skill levels and identify gaps in skills.
Develop plans to close skill gaps.
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IBM
Build capacity Build and identify employee capability. Build organizational capability Provide career access paths.
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IBM
Create development plans. Identify career development goals and compliment
with a plan. Utilize development programs to close gaps. Team managers and employees in the development
process.
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IBM
Provide collaborative opportunities. Identify mentors and provide opportunities for
mentorship. Create on the job learning opportunities.
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IBM
Measure success Define and implement a measurement plan. Monitor and measure results. Change course if necessary.
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IBM Performance Results
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Survey
Importance of Planning
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Four key areas of successful farm businesses
* Have a strategic plan
* Completed a farm business transfer plan
* Defined rules for employee conduct
* Conduct annual performance appraisals
Importance of Planning
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Business Plans and Succession Planning
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Business plans considered:
Unwieldy and too difficult to write
Not helpful due to projections not being accurate
Much more willing to tackle once they understand:
Strategic plan is a component, and important for growth
Marketing plan builds off of the business plan
Transitional plan easier if built off of a business plan
How We Help
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Free, Confidential On-Farm Consulting
Financial Consultants
Personal/Family Consultants
Business Meetings
Role Selection Working Agreements Agenda input Process Decision making Problems
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Consultant Locations
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FamilyFinancialLegalTax
Making a Referral
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Have farmer call the NY FarmNet office(800) 547-FARM
Office will not contact individual farms
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