Like most family businesses, the family farm is a complex cauldron of human relationships, business needs and ownership expectations.
Formal communication policies and governance and legal agreements are often missing or inadequate, even when the farm is in a partnership or company structure.
Informal structures and processes have traditionally been accepted as the norm, and the business of farming has managed to progress despite these limitations.
However, the face of modern agriculture has changed and many family farms have evolved into complex, highly capitalized businesses that have outgrown their former practices.
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There is a need to introduce new methodologies, which becomes even stronger when factoring in the complexity of intergenerational transfer.
Strategic thinking on traditional family farms has tended to focus on operations and management, with ideas and direction rarely documented or analyzed beyond discussion at the family dinner table.
This can lead to an atmosphere of uncertainty with poor communication, no clear direction and a culture of avoiding or accommodating behaviour among family members.
This may be accepted when the founding generation remains in charge, but the situation rapidly becomes unsustainable when multiple siblings or cousins are added.
The problem is not unique to farming; it is a condition of many family businesses.
The solution is to introduce formality and educate family members to change the way they think and act. This cannot happen overnight and requires time, effort and a commitment to see things through.
However, it will allow the family to move away from the managerial and operational focus to become more strategic and entrepreneurial in thinking.
This can also help alleviate some of the common tensions that arise out of family farm succession issues.
The three circle model is a basic concept that emerged out of work done at Harvard in the 1980s and is well described in the book Generation to Generation — Life cycles of the family business, (Gersick, Davis, et al. 1997, Harvard Business School Press). It can be summarized as the diagrammatic depiction of three independent but overlapping subsystems within a family business: family, ownership and business.
Pulling apart the three areas of family, ownership and business makes it possible to introduce new processes that clarify how the family business can work in the future.
It is important to note that these three areas overlap and are part of a system that can never be completely separated.
The first step is to acknowledge the need for change, which is often the biggest hurdle.
A specific event, such as the introduction of the next generation or a rapid expansion, is usually needed to trigger the realization that the existing processes are no longer working.
The next step is to educate key family members so that they understand the situation and what needs to be done. This education comes in many forms, from books to the internet to seeking the help of professionals with expertise in this area. Phrases such as “governance,” “shareholder agreements” and “family constitutions” will become more familiar and better understood.
Then the real work begins.
Step three starts with discovering the key issues, which begins with the family. It may be helpful to employ a professional adviser who can extract and reframe these issues in a neutral form.
Step four is creating an action plan to address the key issues, with assigned responsibilities and built-in accountability.
Step five is implementation. Failure to implement is often the main reason why strategic planning does not work, but the chance of success increases if the family adopts new processes and procedures.
Engaging in new thinking helps the family redefine its strategic planning with better communication, better governance structures and an understanding of its values, vision, mission and goals.
Think about some of the large family owned companies: Cargill, Richardson, Kal Tire and the Jim Pattison Group.
The families aren’t sitting around the kitchen table anymore, but the businesses are still guided by family values.
The families changed their approaches and ways of thinking. There is no reason why this can’t be done on the farm.
This quote from an unknown source sums up the need for farm families to take a different approach: “If you change what you talk about and how you talk about it, you will change who you are and where you are heading.”
