Keeping The Family Farm Healthy

Amy Lyman
Penn State University

Life on a family farm can be hectic and at times seem out of control. Much of the activity is fast-paced and decisions need to be made quickly. This reality can keep many family farm operators from attending to the basic needs of the business. Here are a few ideas for you.

Developing A Structure To Support Your Work

Job descriptions for all family members involved with farm work, including a definition of the role of board members, are a necessity. Job descriptions set the boundaries of each person's responsibility and designate individuals as the primary holders of certain information. Job descriptions are not straight jackets, they provide quidelines that define how and by whom the work will get done.

Cross-training employees help you identify the information needed to run the operation and helps you figure out what areas need backup support. Having two people trained to do the same job (although one person holds the primary responsibility) lets employees and managers know who to call if an employee is absent, instead of frantically searching for someone to fill in.

Plan for major events, whether they be purchases of equipment, building or renovating a structure, doing major maintenance work, etc. There never seems to be enough time to get anything done, and often it takes a crisis before something finally happens. If you use part of a scheduled meeting to brainstorm about the items that need to be taken care of, and prioritize those items, then you are providing yourself with useful guidelines for the work to be carried out over the next 3 to 6 month period.

Family business vision statement. This document will say why you are doing what you are doing and how you want to see it get done. This statement should reflect family members' ethics and values that guide business operations. This is especially important for family owned businesses because it clarifies the reason why you are in a family business. Is there something about your family's history or the way you run the operation that is important to you? These family concerns can be incorporated into the vision statement and serve as a guideline for making major decisions on issues such as hiring, land use practices, and long term growth plans. It doesn't take a tremendous amount of time to develop a vision statement; however, it takes a good deal of thought. Once you've started to talk about your vision, it is easy to write the statement.

Acknowledging The Dynamics Of Family Business Life

There are unique dynamics that operate in a family business. Many management consultants tell people to separate their family lives from their business lives, and only make decisions based on one set of concerns or relationships. This is not possible in a family business (I question whether it's possible in any business!). In a family business, a sound decision takes into consideration personal issues and business issues (see table below).

Differences in Family and Business Systems

Family Systems

Business Systems

Rewards are given because of your membership in the family and possibly because of need

Rewards are given because of your performance on specific tasks

Training is implicit, talked about as training to be a good family member, no standardized practices

Training is explicit, necessary to do a good job, tends to be standardized

Promotions are based on longevity, a very inflexible system, you are born into a position

Promotions are based on skill and seniority, you can work hard to achieve a new position

Separations are usually messy, no clear guidelines for process

Separations are less painful, clear guidelines to follow, is a common process

Operating principles incorporate compassion and caring

Operating principles incorporate efficiency and objectivity

Basic motive is to seek harmony

Basic motive is to seek profits

Paying attention to both family and business concerns is not easy. Family rules and norms about what to talk about and what to keep quiet may limit discussion of important issues. As you begin to discuss family and business concerns you may need to use a non-family member to help you sort through the questions that come up. But, families tend to be closed groups—it's in their nature. This can affect the family's willingness to call on outside resources for help. If you're thinking, "Well, we can do it ourselves," or "We don't need any outside help," remember that one of the advantages an outsider has is not being caught up in your family's rules and norms. They can ask the "dumb" questions which will trigger, in your own mind, a solution to the problem that had been stuck or hidden.

To make the most of your family business, it is vital to create and use a diverse network of people resources for both your business and family concerns. Bring all family members and their resources in the business so you don't just use the resources of the founder or first generation. This can be hard when the resources that the younger generation is bringing in are new or unfamiliar. An example is the use of computers and computer programs for bookkeeping or keeping records on the health of the herd.

There are many things you can do to prepare yourself to make decisions. The first thing is to talk about the importance of being honest instead of saying what people want to hear. When it's your operation and you are the ones making the decisions, you need to have people be honest about their anxieties and questions. Everyone involved in the decision should be encouraged to speak up about what they perceive as the pluses and minuses of this decision and their willingness to take collective responsibility.

Collective responsibility means that everyone agrees to be responsible for the decisions that are made. This brings with it a tremendous amount of individual responsibility and comes in handy as a philosophy when there is dissension within the family. At times, family members who don't get along pay less attention to decisions made that affect someone else's work area. They accept decisions that they are not comfortable with because they don't see it as their decision. Having collective responsibility says everyone who is involved in the operation is responsible for the decision. It's a very powerful tool for encouraging people to speak up.

Another part of decision making to consider is the relationship between trust and risk. Trust involves risk. Part of risk is supporting someone's efforts to take on a challenge. When you trust someone you accept the risk that some things will be out of your hands. There may be times when you feel uncomfortable because a decision has been made but someone else is responsible for doing the job. The risk piece of this process is letting go of the anxiety and saying, "I trust you. We made this decision. It's your area to implement. I trust you to do it and to do the best that you can." This process does not imply taking unnecessary risks my making a decision with which you are not comfortable. The focus should be on trusting the person to do his or her best once the decision has been made.

When decisions are made, pay attention to both family and business concerns. It's very important to consider the family reasons and the family dynamics that are influencing the business decision. Often in family business, decisions are made ignoring the family background that influences the decision. Sometimes it's hard to separate the two, so calling in an outsider may help. I have never seen a business decision made in a family business that did not have a family component to it. Sometimes it's 90% family concerns and 10% business concerns and sometimes it's the other way around. For example, consider a family that owned a large parcel of land which was split up, with parts of it sold to different farms over time. Now the family wants to buy the land back to recreate the family homestead. If you talk about it in terms of business decisions you can get into all kinds of convoluted justifications for why you want to buy the land. Acknowledging that it is the family homestead and that is why the family wants to buy it back frees people up from trying to justify something that no one really wants to talk about. A decision can be made based on the impact of the decision on the business and the family. Can the business support this purchase? Is it going to hurt the operation? Will it help the operation? Are we going to feel good about it?

Decision making involves responsibility as well as opportunity and can be affected by an individual's family and business roles. To successfully make decisions the responsibility that comes along with all of the opportunities needs to be emphasized. Accepting responsibility for business decisions can be a difficult area for board members who are not actively involved in business operations but participate in decision making. They can have a hard time dealing with the conflicts between perceived family and business responsibilities. Without a job description—especially one that spells out board responsibilities—all a family member has to rely on are family responsibilities, and that's only half the picture. I strongly advocate that all family members who are involved in decision making have job descriptions that cover their business responsibilities. This makes clear what their obligations are to the business, and what the boundaries are around the opportunities that can be pursued.

Develop Opportunities For Participation in Educational Programs

Developing specific educational programs for family members coming into the business is especially important to insure that knowledge is transferred visibly rather than assumed to be learned through osmosis. The next generation family member may have worked on the farm during the summer or helped out in one area, which is a good start, but this does not provide an understanding of the total operation.

Educational programs that all employees can participate in are a good enticement for attracting the best people to your operation. Including opportunities for education as a part of the job says that you care not only about what the employee can do now, but also about what he or she will be able to do in the future. This might not work for every employee, but for your key employees it can be very important to say we are going to help you further your education.

Education for career advancement may involve taking time off from the farm. One issue that often comes up for next generation family members is the dilemma of having gone right on to the farm or ranch after high school. Questions such as "Can I do anything else? Am I just here because I'm a family member? Do I really have skills that are transferable?" pop-up after a few years.

It is often recommended that next generation family members work somewhere else for two years prior to entering the family business. There are a number of reasons for this. One is to gain a sense of independence and a sense of confidence in one's own skills. Another is to change the relationship between parent and child to an adult-adult relationship. Education for career advancement and support for pursuing educational opportunities away from the farm are very important to the development of the next generation of managers.

One of the most difficult family business issues concerns retirement and succession planning. Who will be the next leader? Very often retirement means an end to something and it may be difficult to talk about what's next. Here is this person who may have built the operation or who has worked on it all of his or her life, and all of a sudden he's talking about retirement.

Retirement is such a loaded issue to deal with that it can take attention away from other concerns that need to be addressed. Questions such as "what are you going to do when you stop going out to the dairy at four in the morning or when you stop running the tractor in the fields?" place attention on what a person will do after he or she is finished with current activities. It does not imply an end to one's active life. Rather it indicates a movement from one lifestage to another.

It is very healthy to think about what's next. What's next can be teaching, working in the community or working with other farmers who are struggling to get started. There is a wealth of knowledge, skill and wisdom in people about to retire that could be passed on. We don't tap into this resource very well. One program called SCORE—the Service Corp. of Retired Executives—makes connections between retired executives and other organizations where there is a need for part time help in areas such as accounting, production processes, or marketing. You can do the exact same thing in terms of a farming operation. Think about what's next!

Conclusion The four areas I have discussed above are those that I encourage all family business members to pay attention to. Focusing on the issues in each area will enable you to ground your business in a solid framework of ideas (vision statement), opportunities (educational programs) and structures (job descriptions). This will provide you with a strong base for handling the daily ups and downs that are bound to be a part of your own family business.

Amy Lyman is a family business specialist, and was formerly Lecturer in Applied Behavioral Sciences, University of California, Davis. She is presently a Family Business Consultant with the The Great Place to Work Institute, 1559 Noe Street, San Francisco, CA 94131.

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15 November 2004