5 Key Steps in Succession Planning
|By Kevin Spafford,
Farm Journal’s succession planning expert and owner of Legacy by Design, a company that works with farm families, guiding them through the succession process.
There are 5 essential steps to achieving succession planning goals including:
1. Learn and utilize good communication skills.
Communication is the heartbeat of any business. Learning to connect in a respectful and constructive manner is necessary for planning success. Good communication will help you, family members, non-family members involved in the operation and loyal employees navigate the succession planning process---especially as you begin the transition from one owner/manager to the next.
Communication is more than talking. It's listening to learn, and then making sure your actions support the message. It's important to understand the wants, needs and intentions of others. Owners need to realize that transitioning a farm operation requires a new level of intent, call it formality, to maximize results.
Though a written communication plan may be a bit formal, your plan should include:
- Regular meetings
- Written agendas
- Behavior guidelines
- A decision-making process
- Written/taped records of each meeting
- Follow-up procedures
2. Define objectives for succession.
Human nature encourages us to focus on our own needs first. As a business owner, unchecked self-interest can be the beginning of the end. As an owner, you must acknowledge the decisions you make and actions you take will affect others. You must consider the wants and needs of the next owner, as well as non-farming family members and loyal employees. Focusing your efforts on what's best for the business will result in a farm operation that will continue to endow you with financial rewards, grow equity and provide vocational satisfaction.
Focus on succession planning objectives related to:
- Improving operational integrity
- Enhancing financial security
- Preparing a next generation to lead the operation
3. Overcome common planning obstacles
A succession plan must overcome hurdles that are common to every entrepreneurial venture, and provide solutions to existing issues. The succession planning process is designed first to distill those concerns and draw them out into the light of day, and then to develop solutions to which all the stakeholders can commit.
Early in the succession planning process, confront and consider the following common obstacles:
- Identifying the right successors, whether it's a family or non-family member.
- Ensuring financial security for the owner.
- Negotiating a workable ownership transition.
- Involving extended stakeholders---loyal employees, alliance partners and family.
- Tackling the unknown.
4. Continue to grow and stabilize the operation.
If each of the stakeholders speaks for their own self-interest, who speaks for the operation? If the farm operation is going to survive and continue to endow the current owners in retirement while providing future opportunities for the new owner, it must have a say in the discussion. I call it 'giving voice to the operation.' A vibrant, healthy and growing business will return opportunities in direct proportion to the care it's given. The opposite is true as well. If a business is not healthy, financially and structurally, it cannot possibly continue to survive, especially through an ownership transition.
The strength and long-term health of the operation must be a first priority.
- Each decision must be measured against what is good for the operation.
- Each of the stakeholders must realize some financial and intrinsic value from continuing ownership.
- Personal goals must not compromise or unduly burden the integrity of the operation.
5. Take definitive action, and stay the course.
Good intentions without action are just hollow promises. They don't mean anything, and they'll never lead to a successful result. A determined entrepreneur must take definitive action in order to achieve his most heartfelt succession intentions. Each stakeholder plays a vital role in the succession planning process.
Learn more about the Legacy Project, a program designed to provide good information, relevant tools and experiences to the agricultural community.