Put yourself in this scenario: The phone rings. On the line is a job offer and the pitch goes like this: “Hi, we have a job available. There is plenty of work to be done, but we don’t exactly know where you’ll fit in yet. We might be able to give you some vacation time, but it is going to depend on a lot of factors. You’ll get paid, but we’ll figure that out when you get here. One last thing — we’re going to need you to put in a lot of overtime.”
If you made it through the entire pitch without hanging up the phone, chances are you wouldn’t touch a job offer like that with a 10-foot pole. However, when it comes to entering the family business, many defining factors sometimes go undiscussed until well after the commitment is made.
As we continue into part two of the ranch-succession series, working to peel back the delicate layers of this often uncomfortable subject matter, it is time to transition from getting the conversation started to defining stakeholders’ compensation and involvement roles.
Compensation — a first priority
“In terms of generational transitions, one of the most uncomfortable topics is compensation,” explains Dave Specht, founder of Advising Generations LLC, and author of the new book, The Farm Whisperer — Secrets to Preserving and Perpetuating Farms.
Along with working closely with family businesses in the agricultural industry, Specht will be the consulting source throughout the course of the series. “This discussion is probably what the next generation worries about the most but needs to be addressed as soon as possible. It’s not the work that is involved — many of them have done that most of their lives — but talking about what they will be paid is very uncomfortable.”
Specht says this is often because the next generation wears multiple hats in roles they fill within the family business dynamic. On one hand, they are a sons or daughters maintaining personal relationships with their family members and don’t want to come off as greedy or unappreciative. On the other hand, they are employees and need compensation to maintain a quality of life.
What does that compensation mean?
“When it comes to this topic, the senior generation needs to pursue the process of bringing a family member back to the business in the same manner in which they would pursue outside help — with structure,” Specht says.
This includes but is not limited to: salary, healthcare plans, living situations, vehicles and the discussion of financial growth in the future. Each family business operates differently, and family members don’t always want the same thing. One stakeholder may want to live frugally, investing as much as possible back into ownership of the business, while another may be content with operating as an employee for the family. All are things that need to be discussed.
In the September issue of Drovers CattleNetwork, part three of the ranch-succession planning series will discuss succession process and the generation business 360.