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Transfer of management: A relationship story

Heather Schlesser for Progressive Dairy Published on 08 November 2021

During the farm succession process, it is common for the “owner” generation and the “successor” generation to discuss the transfer of assets. However, a conversation about the transfer of management is often overlooked.

Even though this conversation is often an afterthought, it is one of the most critical conversations that should happen at the start of the succession process.

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A recent University of Wisconsin Focus Group project found that the legacy of the farm is very important to many farmers. The owner generation has made significant investments in keeping the farm successful and, as they prepare for retirement, it is very important for them to know they have a competent successor who can manage the farm. Competency of the successor and prior experience in making management decisions related to the farm operation are crucial for a successful farm succession.

Provide decision-making opportunities

Research by psychiatrist Dr. Foster Cline has shown that when we are allowed to make small inconsequential decisions before having to make larger consequential decisions, we are better suited to make the larger decisions. Providing low-risk opportunities to make decisions builds decision-making skills and confidence.

Consequently, if the first time the successor generation is allowed to make decisions on the farm is after the succession, the likelihood of continued success could be in jeopardy. However, if the successor is allowed to make decisions while the owner generation is still involved in the farming operation, there is a safety net in place to help the successor generation make informed decisions. This process of allowing the successor generation to take “baby steps” while the succession process is occurring sets them up for future success.

Identify management retention areas

To help the owner and successor generation discuss the management decisions on the farm, the University of Wisconsin – Division of Extension Farm Succession educators developed a “Transfer of Management Worksheet.” This worksheet breaks the management decisions into four different categories: production-related, finance-related, human resources-related and long-term/strategic planning-related. On the worksheet, the owner and successor generation select a number representing how much they feel this area of management is being retained by the owner generation.

Once the owner and the successor have completed this worksheet, they should have a conversation to determine if there is agreement in the ratings made by both parties. There should also be a conversation to determine if there should be any changes to who is making certain decisions. The goal is to provide an appropriate and individualized plan for transferring management decisions.

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The length of time it takes to get to this point will vary from farm to farm. Factors such as maturity and expertise of the successor generation, or the length of time until the older generation plans to retire, will factor in to how long the transfer process takes. If the successor is mature, has experience and a good grasp of the decision-making process, and the owner is nearing retirement, the transfer process could proceed relatively quickly. However, if the successor generation is inexperienced in decision-making, and the owner generation is far from retirement, the transfer process may proceed over several years.

Whatever timeline you are experiencing, it is important to have open communication about the process. Farms often run into trouble when the transfer process is not happening fast enough or it is happening too quickly for some parties involved. Utilizing the “Transfer of Management Worksheet” will allow both the owner and successor generation to identify where they feel they are in the process and where they would like to be.

Organize transfer in stages

It is important to remember: The transfer of management should not happen all at once. The transfer process should go through various stages, with each stage increasing the successor generation’s decision-making responsibility.

Let’s consider the first stage of the transfer process as the dating stage. This stage is similar to a new relationship. Since most people don’t marry the first person they go on a date with, neither should you.

In farm terms, during the dating phase you are making sure you can work together, with the owner making all of the farm management decisions and the successor watching and learning.

Once you have established you can work together, you get engaged. During this engagement stage, the successor begins to take over some of the minor farm management decisions. During this stage, the successor should be given guidance and the freedom to make management decisions over tasks that will not disrupt farm functionality if they go poorly.

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When the successor has mastered these decisions, it is time to get married. During the marriage stage of the transfer process, the successor is allowed to make more of the vital farm management decisions. The goal is to transfer the majority of the decision-making over to the successor during this stage.

If we stay with the analogy of relationships, the final stage of the transfer process is amicable separation. We call this stage amicable separation because we hope the owner generation can still be a mentor, but the responsibilities and decisions of the farm business are firmly in the hands of the successor generation.

By the time the owner and successor reach the amicable separation stage, the owner should feel confident in the fact that the successor can take over and carry on their legacy. The successor is ready and capable of running a profitable farm business.

Build relationships through phases

To help you move through the stages, University of Wisconsin – Division of Extension Farm Succession educators have developed a “Control of Farm Management Decisions Worksheet.” This worksheet allows you to identify which decisions are really important to both the owner and successor generation. Once these decisions are identified, the worksheet helps you plan the timeline for the transfer process.

The length of time it takes to move through the four stages – dating, engagement, marriage and amicable separation – will ultimately depend on each owner and successor. Identifying the pace that works for all is important. If you stay in the dating stage for too long, you risk losing your successor. However, if you move though the engagement and marriage stages too quickly, the successor generation may not be ready to take over.

Transferring management from the owner generation to the successor generation is a difficult process. The owner is giving up control of the farm business they have invested in. It is important to keep in mind: The ultimate goal of the farm succession process is to have a profitable farm operation after the succession. If the successor generation is not allowed to make mistakes while under the guidance of the owner generation, the odds of future success decrease. By sharing the management decisions during the farm succession process, the owner generation is helping train the successor generation and increasing the odds of future farm success. end mark

Click here for a copy of the Transfer of Management Worksheet

Click here for a copy of the Control of Farm Management Decisions Worksheet.

References omitted but are available upon request. Click here to email an editor.

Heather Schlesser
  • Heather Schlesser

  • Dairy Agent
  • University of Wisconsin – Madison Division of Extension
  • Email Heather Schlesser

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