Mesh family, business values

Your family farm is sustainable because you made the necessary changes to keep it efficient, profitable and competitive. But in spite of all your work, it hasn’t gotten easier. You operate with limited cash flow, rising operating and family living expenses, and maybe high debt from making needed improvements.

You didn’t make this effort or take these risks to receive a high sale price upon retirement. Rather, you want a farm that can transfer to the next generation. Hopefully, your family shares your belief that the farm is a legacy worth maintaining, and a child or maybe several children are committed to a life on the farm. Working with the next generation is meaningful, but it carries a big risk. Unresolved conflicts can damage both farm business and family relationships.

Farm families must recognize and deal with the convergence, and often conflict, of family values and business values. Historically, the farm is the family’s way of life, its business and a tradition to be preserved for future generations. The family inherently stresses its core values, such as unconditional love, emotional support, loyalty, acceptance and inclusion within the family. Because family values hold the ongoing family relationship as most important, mistakes, bad conduct and underperformance are often overlooked or tolerated.

Conversely, business values are based on results, with business decisions and actions being carefully assessed and often challenged. Business values view effective effort, being proactive, teamwork and flexibility as healthy. Job performance and conduct are evaluated. Underperformance or poor conduct is not overlooked, but has consequences.

Balancing act

Involved family members, especially parents, are faced with the challenge of effectively balancing their family values and business values. A member’s failure to effectively deal with both his responsibilities as a family member and as a business manager or employee can result in inconsistent decision-making. The members may lose trust in each other when one member’s poor job performance burdens the other members or otherwise adversely affects the business. The informal nature of many family farms doesn’t help in resolving disagreements between the parents and the involved children, between the children and even between the parents.

With substantial commitment, a farm family can develop common understandings, compatible expectations, an effective business structure, and strategies that facilitate the farm’s success and promote a culture of trust within the farm business and family.

Each member’s objectives, expectations, and management strengths and weaknesses must be recognized. The members need to develop a common vision for the farm’s future as a financial and family business. They should develop a clear understanding about the core values under which members will operate in the farm and within the family. Members may find it valuable to develop a code of conduct that will guide behavior within the farm business.

A successful relationship is inherently based on compatible personal and business values and by striving for the group’s well-being, rather than striving for personal victories. The members should discuss and assess the farm’s strengths and weaknesses, and should develop strategies for needed changes and improvements.

Define roles

The members should also clearly define each member’s role and responsibility in the farm, and how roles may change over time. They need to clarify how each member will be evaluated, and the expectation for each owner’s level of accomplishment. Members must accept constructive criticism and change when necessary.

The members also need to clarify how and by whom decisions will be made, and how conflicts will be resolved. Clear communication is essential in family and business matters. Members need to meet regularly with ground rules on format and responsibility to ensure progress and goodwill.

Your family farm will remain viable as long as the participants recognize the importance of maintaining core family and business values. You and your family may benefit by obtaining the advice and counsel of quality advisers in developing your farm business and succession plan and the supporting estate plans. These are issues that shouldn’t be put off for a rainy day.

Twohig is a partner in Twohig, Rietbrock, Schneider & Halbach S.C. in Chilton. The firm specializes in ag law.

This article published in the September, 2010 edition of WISCONSIN AGRICULTURIST.

All rights reserved. Copyright Farm Progress Cos. 2010.