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.
Involvement — define expectations
“Almost everyone I work with in agriculture fights formality, and by that, I mean defining a job description,” Dave Specht, founder of Advising Generations LLC, and author of the new book, The Farm Whisperer — Secrets to Preserving and Perpetuating Farms, says. “Most family-business stakeholders have a ‘do whatever it takes to get the job done’ type work ethic because their operation depends on it. While that attitude is essential, it isn’t concrete enough to provide the structure needed.”
According to Specht, the definition needs to start out with simple things, such as when to show up in the morning; when it’s ok to call it a day; weekend requirements for special projects and feeding; specific tasks they are expected to fulfill; and expectations for seasonal hours such as during hay season, calving and breeding.
“There needs to be clarification of what the expectations are, and then in one way or another need to be followed up on,” Specht explains. “That way accountability is given to everyone involved, and if something needs to be addressed, the job specifications can be pulled out and it doesn’t become personal.”
Specht also warns of unintended consequences when open communication is not practiced between the senior and junior generations. A classic scenario he often sees is a communication triangle. For example, dad has a problem with the way son is handling work responsibilities. Instead of approaching son directly, he goes to mom to have her talk to son.
“There are so many women who play the mediator between two men with dysfunctional communication — and it’s not fair to expect them to be the buffer,” Specht says. “In this example, dad needs to go to son directly. And if needed, mom can coach dad on how to approach the conversation.”
One of the most crucial aspects in outlining involvement is the plan in how the transition of responsibilities from the senior generation to the next will be made. Specht says he has seen the greatest success when key decisions are gradually handed down to be made by the younger generation while they still have the safety net of the senior generation to fall on if needed. He also recommends cross-training to eliminate risk in responsibilities not being taken care of properly if something happens to the key decision maker.
“Write down the things that only one person knows how to do and start working on cross-training, checking things off the list as you go,” he says. “This also helps keep the next generation engaged through continually progressing and learning.”
Specht recalls a case he worked on several years ago which involved a family-owned feedyard that was operated by three sons and their father. The father was well into his 80s but still making every single buying, selling and management decision for the feedyard.
“His sons, or ‘the boys,’ as I like to call them, had essentially worked as hired men for their father their entire lives — and there were all in their 50s,” Specht recalls. “So the boys called me in to talk to their father about the importance of not only succession planning, but the importance of handing down responsibilities and cross-training. Long story short, I was sent packing by their father.
“I often wonder what happened to the family, but I doubt it was a successful ending.”