Non-Traditional Succession/Staffing Arrangements in Family Farm Business

Having built very successful operations, family business owners eventually plan to phase out of the active management of the business. However, many do not have lineal descendants with immediate interest in assuming key labor/management roles in the business, nor do they desire to sell or liquidate a viable operation. What are the options? Lease out to a 3^rd party? Bring in non-related principals? Contract management out for an interim period?

Situations also arise where a critical position in the business needs staffing but incumbent family members don’t have adequate skills, experience or interest in that discipline. Where do you turn to staff critical positions such as a CEO, CFO, Precision Ag Specialist, a Herd Health Manager, or a Market Innovation Specialist?

Numerous operations have tried to “self-medicate” in structuring non-traditional succession strategies. A high percentage of these efforts have gone awry. In hindsight, those interviewed frequently acknowledge “…it could have worked, if we had better guidance on protocols and considerations for setting these up correctly.” Nothing can be more demoralizing than to strike out on this path and crash, leaving you wondering what to do with a viable, successful business. Give up and sell? Try another experiment?

This course addresses the drivers creating a need for innovative transition staffing strategies. It also helps producers in these unique situations more thoughtfully map out a solution that is custom tailored to their unique situation. It builds on experiences of numerous operations that have seen both success and failure in attempts to experiment and implement “non-traditional” arrangements.

Course length – 90 minutes plus optional case study discussion

Seminar Outline

What’s driving the need for alternative arrangements?
Issues to consider when setting up innovative structures
Case study profiles of alternative situations where non-traditional successors have been brought into play
Take-home lessons for designing a successful non-traditional succession plan

Managing Business Relationships & Transitions in Multi-Family Operations

Business practices and relationship problems, not economic issues, are often the reason family operations dissolve business relationships. This tragic conclusion generally stems from operators failing to run the farm like a business, rather than a family venture. Farms with good production and financial footings still fail because they either don’t know the basic rules of conducting a business, or they know the rules, but don’t apply them to family farm operations.

This seminar tackles a number of sensitive issues that relate to managing family businesses. It is presented from the viewpoint of a working family farm manager who has also provided family farm business transition consulting for over twenty years. The seminar combines serious and humorous discussions of basic principles, actual farm problems and practical, successful solutions.

The goal of this seminar is to change behavior by convincing participants:

Their problems are not unique, nor are the solutions.
Implementation of a professional management system is more critical than anything a family farm business does in production, marketing and financial management.
These principles re-vitalize teamwork, communication, and create a positive work environment.
These principles help assure family farm survival and effective transition from generation to generation.

Seminar Outline

1. Introduction: “These family deals never last!” Is this opinion ‘destiny’ or a choice?

Benefits of multiple parties working together
Common problems that arise in relationships and six specific causes
Defining a “Management System.” What is more important? Process or results?

2. Organization and Division of Responsibility

What is my piece of the pie? Who will make the decisions and implement them?
Techniques for defining specific roles and dividing responsibility
Considerations in bringing new principals into the operation, or retiring others—ownership vs. responsibility
Using job descriptions as a tool in transition situations

3. Company Policies: The Hidden Land Mines

Establishing clear policy understandings: housing, room and board, insurance, compensation, division of earnings, buyout agreements, business benefit continuation, capital injections and withdrawals, inter-entity transactions, work days/hours/leave policies
Common ‘sins’ that violate good business practices
Sample policies and guidelines for developing policy statements
What am I worth per hour to this business? Understanding hidden benefits: How are non-cash benefits valued when structuring compensation packages for employees, partners or business principals?
Should benefit come through the farm, or should each owner be personally responsible? Do I base policy on optimum tax and economic considerations, or on political, personal or other criteria?

4. Planning

Who gets to play in the game, provide input, implement and monitor the plan?
Operational vs. Strategic Planning: What issues should be addressed and why are they important to document?
Operating issues: Production, marketing, financing, personnel, capital items. Systems that work!
Long Range/Strategic Issues: transfers of management and ownership; expansion; major improvements; enterprise shifts; manpower planning; business structuring.
“I know it’s important…just didn’t know where to start!” Strategies for making progress on strategic issues.

5. Communication, Coordination and Control

Business tools often ignored or abused: meetings, farm records, documentation of key business understandings. “Don’t let them know there is money in the bank!” and “We’ll remember what we agreed on!”
The “I can’t be fired” family business syndrome. Impact of unprofessional communication habits.
Developing corporate climate of openness and professionalism. How do mission and core value statements work?
“You want to evaluate me? You’ve gotta be kidding!” Should family business partners/employees be evaluated? How?
What performance gauges do you watch? Tractor gauges and monitors or your financial gauges?

6. Summary: The Basic Business Management Model Applies to Agriculture, Too!

The family farm business: A constant transition of inheriting and passing on values, then letting go of the wheel.
The FARM: Your Child’s First Business School. Are you teaching good business principles or bad habits?

Bring Your Financial Management Process Up to Par

Record increases in commodity prices are being matched with rapidly escalating cost structures. Few farmers understand their cost structures and the strategic decisions that differentiate successful farms from those struggling financially. Traditional Enterprise Analysis hasn’t provided answers growers need to determine what decisions are contributing to success or failure. Ratio analysis is not well understood and seldom connected to goal setting and strategic decision-making. Marketing approaches are too often detached from concrete cost of production understandings. Producers overlook cost saving opportunities by not understanding how to optimize decisions to buy, lease, hire or share equipment.

This course provides a fast paced overview of core financial analysis metrics (what they are and how to interpret them). It helps participants take inventory of critical skills and proficiencies necessary to achieve excellence in financial management disciplines. It challenges producers to understand the “why” for implementing improved financial management and accounting processes and helps identify skill base and experience levels that need to be beefed up in the business. It exposes participants to techniques for implementing management accounting systems; conceptual discussions combined with case study work using the DuPont Model provide real world applications illustrating the often overlooked linkage between financial analysis and strategic decision making.

Participants completing the course go away with a more clear understanding of the difference in skills and needs for staffing the following roles: Chief Financial Officer, Controller, Office Manager, Bookkeeper and Data Entry staff.

*This description summarizes the financial segment of the course taught annually at the NWFCS Advanced Management Seminar. It combines general course content from the TEPAP curriculum with key concepts covered in a more specialized course on Managerial Accounting.

Course length – 5 hours

Train the Trainer

This Train the Trainer program was designed for targeted clients and consulting professionals. It can be delivered as a standalone workshop only, or in two parts with an introductory seminar for family farm business clients and a companion Train the Trainer session the following day for professionals advising family farm business clients.

Target Audience: consulting professionals interested in honing skills and delivery methods for advising family farm business clients in implementing successful transitions and incorporating professional governance systems and structures in commercially complex family farm businesses.

Seminar Outline

Train the Trainer Workshop Sessions

Review Five Stage Consulting Process: creating awareness; negotiating the relationship; building client profile; forming preliminary conclusions; problem resolution & ongoing support
Creating transparency on what you are providing as a “deliverable product” from the engagement; focus on benefits from advising process versus product sale
Alternative strategies for implementation and use of facilitators
Communicating to prospective clients the cost/benefit relationships of investing in this process
How to price your consulting services & build a collaborative team of advisors
Technical Topics Workshop: a hands-on discussion on how to use and personalize tools, exhibits, and templates in the guidebook and consulting process, i.e.
- Engagement Letter & Engagement Outline
- Consulting Agreement & Fee structure options
- Proficiency Test, Questionnaire and Compensation Summary
- TRLC Case Study – Logistics for administering using case study as a teaching tool
- Using guidebook templates to build policy & SOP manuals, job descriptions, etc.

(Optional) Farm Client Seminar

An invited list of farm clients who have demonstrated need and interest in building professional management systems and transition processes into their daily routines.

Purpose – Provide client participants with an introduction to key family business management concepts as well as a defined set of strategies and learning paths to fully implement these concepts. Participants in this workshop are often prime candidates targeted by service providers for future consulting engagements.

Format– program lecture and case studies, and topical sessions that focus in more depth on technical concepts and tools included in the guidebook.

Farm Client Seminar Sessions

Morning Seminar – Overview of Concepts (approximately 3 hours)
Afternoon Case Study Workshop
- Session I: TRLC Case Study A hands on experience building a pro forma management structure for a family farm business going through a succession planning process
- Session II: Conflict Resolution Mini-Cases Participants review conflict scenarios often encountered in family businesses and structure solutions to each problem

Participant Testimonials

“This presentation raised my awareness of many things I had not previously considered…it will come to mind as I interact with clients in the future.”

“I used the essence of the training session discussions with a client couple the day after the workshop. All my family business clients will be approached about their needs to consider these concepts.”

“Information regarding how we build effective client relationships was most valuable. Once we are viewed as a trusted advisor, we can move into problem resolution and implementation. This will be a tremendous tool for our firm. We now have a clear process we can follow to help our family businesses understand the need for management resources.”

“Most valuable outcome from the workshop was seeing real life examples of how clients benefit from this tool, as well as how they are used proactively…this experience has already affected how I will approach client service delivery for farm and non-farm clients in the future. The immediate impact is how I consider and think through the services we offer current and prospective clients.”

“It made me more aware of the specific questions I could ask to determine where I can better serve my clients.”

“It rocked my world and helped me see that I am not as good as I thought at client service. I will be using at least some of the tools we discussed on every client and will be trying to pursue situations where the entire family business process needs to be undertaken. I particularly valued the interaction with Dick and his real-life stories about his experiences.”

“Being proactive for our clients is a key value of our firm…the philosophy of creating awareness with the client greatly improves our ability to help clients and provide additional services. I am now more aware of how we can better help the client and what struggles they might be facing without even realizing it.”

“Dick’s presentation was extremely practical and gave me insight on what we should be pushing our clients to do. I will be much more forceful with my clients in pushing them to be better business owners and managers of their information. I will also do a better job on addressing required discussions at the set up of any new business.”

“When we first agreed to sponsor a workshop for our farm clients, we agreed we’d be happy with 30 families and 50-60 participants…to end up with 52 families and 152 participants was OVER THE TOP! It says volumes about both the sponsors and program content. Then to participate in the Train-the-Trainer program the following day was again OVER THE TOP. The need for this kind of family business education was very apparent to all those in attendance.”

Using Management Accounting to Link Financial Performance Analysis and Strategic Thinking

Few farmers understand cost structures and the strategic decisions that differentiate successful farms from those struggling financially. Traditional Enterprise Analysis hasn’t provided answers growers need to determine what decisions are contributing to success or failure. Ratio analysis is not well understood and seldom connected to goal setting and decision-making. This presentation is a primer course that showcases new initiatives in the farm management arena to implement professional managerial accounting systems. It also illustrates the often overlooked linkage between financial analysis and strategic decision making.

Participants attending this seminar will:

Become familiar with new initiatives and guidelines being developed by the Farm Financial Standards Council to implement professional managerial accounting systems in farm business operations
Gain an improved understanding of the linkage between financial analysis and strategic decision making
Develop strategies for guiding and motivating clients to increase the use of ratio analysis and the DuPont Model to evaluate whole farm business performance; and to assess the impact of alternative strategic shifts under consideration to improve operational efficiency, capital asset management, and use of debt leverage
Become familiar with a broad range of technical issues and concepts that must be understood before managerial accounting can be successfully implemented
Gain hands-on access to training and implementation strategies necessary to lead clients through the process of adopting managerial accounting practices

Participants attending this session will come away with:

An appreciation for the benefits of building a professional managerial accounting approach in the business, and
A vision of the training and implementation strategies necessary to fully lead clients through the process of adopting managerial accounting.

Seminar Outline

The following 90-minute outline can be condensed or expanded with material and case study work to vary the presentation length from 45 minutes (minimum) to a half or all day seminar.

Segment I – 15 minutes

Understanding the evolution from enterprise analysis to managerial accounting – why and how it is taking place
Building a foundation for MA and performance measurement – rekindling client interest and motivation to use ratio analysis as a tool to evaluate whole farm business performance; identifying the four primary drivers of financial performance
Using the Dupont Model to assess the impact of performance in operational efficiency, capital asset management, and use of debt leverage

Segment II – 15 minutes

Five steps to Strategic Management – Why this relates to Managerial Accounting
Using the Dupont Model to simulate the impact on bottom line performance from specific strategic shifts under consideration
Differentiating purposes and methodology associated with Accounting versus Economic/Opportunity Analysis

Segment III – 15 minutes

Defining the Core Concepts underpinning Managerial Accounting Practices
Identifying management intent; manageable segments (cost and profit centers); and developing standardized profit/cost center report formats
A walk through of MA using a Case Study developed by FFSC as a training tool – Spread-N-Grow Case Study

Segment IV – 15 minutes

Handling unusual transactions – how do you assure the initial transaction entry provides the ability to have integrity in both external financial reports and internal managerial accounting reports?
Agreeing on standard definitions: Direct vs. indirect costs; variable vs. fixed costs
Proper methodology for dealing with internal transfer pricing situations

Segment V – 15 minutes

Alternatives for allocating indirect costs (i.e. overhead); defining Capture Periods
Integrating financial and physical quantities ($, bu, acres, employees)
Highlights of several technical issues complicating managerial accounting systems: inventory valuations; handling equipment gains/losses; use of a “land cost center”; tax versus economic (book) depreciation (which number is relevant for business performance analysis?)

Segment VI – 15 minutes

Strategies used and results from experiences teaching Growers, Practitioners, Consultants; lessons and feedback from grower exposures to Managerial Accounting training
Options for accessing resources (grants, personnel, sponsoring organizations; FFSC websites, guidelines, case studies) to teach and implement this concept in agri-business management
Summary and Questions

Process Improvement: Principles and Strategies for Putting This into Daily Practice

Is process improvement an Ivy League term that only applies to big business, or does it apply equally to agricultural businesses?

Agricultural businesses are becoming larger, more complex and involve increasing diversity and numbers of employees and owners working toward a common mission. We operate in a global environment where how we produce is becoming almost as important as what we produce.

Farm managers who adopt a continuous business improvement culture are capitalizing daily on opportunities to streamline efficiency, promote safety, reduce job process uncertainty, access value-added markets, and standardize quality of products and services provided by paying more attention to this discipline. Creation of Standard Operating Procedures, compliance review, rewards for innovation, and penalties for non-compliance are becoming part of standard business governance processes in well run family farm businesses today.

*This course is taught annually in Year 1 of TEPAP (The Executive Program for Agricultural Producers) as part of the core curriculum and has been presented at several producer conferences.

Course length: 90 min – 3 hours

Seminar Outline

Definition of “process improvement”— the 100 year old management discipline

Real life scenarios where Process Improvement has streamlined business efficiency and enhanced performance

Strategies for applying Process Improvement in agricultural businesses
- Office functions
- Harvest/equipment operations & servicing
- Crop agronomic practices
- Fuel and Farm Supply Storage (chemical/fertilizer)
- Worker safety guidelines
- Food safety practices
- Herd health & stock handling procedures
- Value-added market access & certification strategies

Mapping work flow and identifying more optimal processes

Variance Analysis – how to do this and why it’s important

Management System documentation/SOP creation and updating – strategies and templates already developed for improving communication and understanding of business governance structure through written documentation of processes

Equip your family farm business for the future, today.

Learn About Dick's Guidebook

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