Leadership training is the missing ingredient

Is the next generation ready to RUN and LEAD the farm?

Originally published 7/20/21 at https://www.progressivedairy.com/topics/management/keep-in-check-leadership-training-is-the-missing-ingredient

Donald's story -

Donald had a plan.  He worked with his attorney to draft an iron-clad estate plan for his dairy.  He was happy to provide his children with a thriving business.  He felt confident all was in place, and he assumed his children would be ready. After all, they had worked on the dairy since they were kids.

Health issues caused Donald to step back from being in charge.  He was ok with that. He felt good that all was in place and the dairy would run smoothly. After all, he had spent a fortune with the attorney setting up the future ownership structure of the farm through gifts, partnerships, and trusts.

But he was disappointed.  He watched, from the sidelines, as his children struggled to work together as leaders.  He watched them struggle to guide their employees.

He came to realize that he needed more for his transition plan to work.   In all of his planning, he didn't actively train the next generation for their new roles.  He realized he needed to prepare his heirs to lead and run the business side of the business.

The time you spend training your heirs to become effective leaders is worth it.

Think of it as an investment, not of money, but of time and energy.  Every business needs reinvestment to grow.  You reinvest profits back into your farm.  Apply the same idea to your workers.  Invest in their leadership growth.  How?

Below are some areas to invest in before and during a transition plan.

Leadership –

Teaching the next generation to lead people toward a common vision

Identify who is best suited to lead employees.  They should have a combination of technical skills and people skills.

Figure out if they have the desire, competencies, and capacity to handle the job.

Help define next-generation roles and responsibilities.

Allow them to participate in leadership meetings, goal setting, decision making, and financial planning. Invest in off-farm education that focuses on leadership and communication skills.

The Senior generation has lots of knowledge to share.   They should move from doing the work to coaching the next generation in how to do it.  Turn the day-to-day operations over to the new generation, but guide them through it.

Business Management -

Ensure they have a desire and ability to learn the business of farming

Whether they have attended a university or not, ensure they have a desire and ability to learn the business of farming. Encourage them to attend trade shows, conferences, and continued education classes.

Teach them how to make decisions based on financial and business analysis instead of gut feel. More and more bankers require farms to run their own analysis and create their own loan presentations. This may sound like a negative, but it might not be.  It gives you the ability to sell the bank on your idea and makes it easier for your loan officer to sell it to the loan committee.

Make sure they understand how managerial accounting works and how to make decisions from it. Look at tracking leading indicators instead of lagging indicators.

Introduce them to, and have them work with, key contacts such as financial advisors, accountants, bankers consultants, bankers, landlords, suppliers, and attorneys.

Allow them to participate in peer groups to enhance their skills and build relationships with like-minded business owners.

Let the next generation run an expansion project, equipment purchase, or building project. These skills are best learned with a strong mentor and coach such as the senior generation.

A Common Vision and Strategy -

Common Vision: Most likely, all generations have a farm vision that is close to the next. However, even small variations and unspoken assumptions can derail a transition. Take the time, with all generations participating, to create a Vision and Strategy for your farm.

Personal Vision: Have each person create a personal vision for themselves and their family. This is especially important with the Senior generation so the next generation can plan.

Values and Culture: Understand and tell your farm story with a strong focus on values, mission, and culture. This will help you attract quality employees who also share your same value and want your culture.

Family, Operations, and Ownership: Define your transition in three key areas. Create a path so there are no surprises for anyone, including employees.

Strategy and Plan: Build a multi-year plan for growth and an incremental plan to get there.


Look at where the farm is weak.

Do not get me wrong. A big part of the transition process is moving the financial assets and land to the next generation. Tax-efficient transfer of assets will always be important. But we see over and over that transitions are more successful when the farm is smart about transferring key activities and knowledge. Transitions work best when the next generation learns how to lead.


How did it end for Donald?

Donald's kids had worked on the farm since they were kids, so they understood the work. But they weren't ready to lead. Donald was fortunate in that his children had the desire to learn quickly and take responsibility. While at first glance, his illness wasn't good. It opened his eyes to the weak area in his transition plan so he could fix it by building the farm's future leaders.

As you plan your transition strategy, don’t forget to invest in your biggest asset, your future leaders.

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