Key Succession Planning Tasks Transferring Farm Management: Ready to Move Forward? Ed Farris Purdue Extension Huntington County Jenna Nees Purdue Extension Putnam County Planning for the gradual shift in management from one generation to the next. Shifting ownership of the assets involved from generation to generation. Anticipating events that could disrupt management and ownership succession. Transferring Management Adding a potential successor takes us into the world of HR management Where will new person start and how do they progress? How does this affect the boss job and other jobs on the farm? Feedback and adjust How does the boss exit? We re adding to the team Who should be allowed to join? What experiences do they need? How are we going to teach them what they need to know? How will this change my job and other jobs in the business? What do we expect from the new person? What will they be responsible for? What authority will they have? How are we going to evaluate a new person s performance and provide feedback? What is their compensation? As a New Partner What will I be expected to do? What are the standards of performance? How will I be evaluated and provided feedback about how I am performing? Will I have any authority? If so where? Over what? What experiences will be part of my professional development in learning to be an outstanding manager? Will this farm allow me to balance my personal and business goals? How will my job change over time? Management Skills How well do we complement each other? What are we each good at? How do we build on this? Are there areas in which we need to make improvements? How do we go about this? Can t keep people from doing what they like 1
Where are you now? Complete Evaluation of Farm Management Strengths and Weaknesses After today have another family member assess your management strengths and weaknesses. Management Transfer Hired your (potential) replacement Entered the world of Human Resource Management (HRM) Need a people strategy Added to boss s work load Discover expectations Organize the work Who does what? How do the pieces make a whole? Human Resource Management Business organization Structure of the business Who is the boss? Flows of information Job design (Job descriptions) Duties, responsibilities, & authority of each position Skills required Recruit needed employees Orientation & Training Directing & Motivating Employee Evaluation Employee Compensation Employee Discipline/Termination Organizational structure Makes clear who reports to whom Makes clear who to go to when there is a question or problem Makes clear who the boss is Types No Way My Way Entrepreneurial (Simple) Structure Functional Structure Divisional Structure What do Managers decide? When Organizing the Manager should help decide: Division of tasks Coordination of efforts and tasks among people and enterprises Control over the way in which tasks are performed Flow of information The 3 hats of the family business Family Business Personal Overlap may add confusion to the organizational structure 2
Who reports to whom and why may not be apparent No way Grandpa Dad Son Grandma Son Wife Employee 1 Wife Grandson Hired Man 1 Uncle Mom Employee 2 Employee 3 Aunt My way Entrepreneurial Structure Wife Owner-Manager Daughter Me Son Owner Manger Worker Workers Hired Man Grandma Functional Structure for a Farm Divisional Structure CEO/Family Board General Management Product Division A Product Division B Production Marketing Finance Personnel Operations Marketing Finance Personnel Operations Marketing Finance Personnel 3
Modified Divisional Structure Huffman Farm Marketing General Manager Finance Family Council General Manager Levi Spouses & Other Stakeholders Product Division A Product Division B Crops Aaron Hogs Levi & Aaron Specialty Crops Jim Operations Operations Herdsman Crew Leader Seasonal Workers Activity As a Family complete Steps 1 & 2 of Organizing Activity If times allows or do after the program, Steps 3 & 4. You Have an Organizational Structure Now what? Is there another way you can increase communications and expectations of each member in your organizational structure? Job descriptions can: Clarify duties, responsibilities & authority Reduce job responsibility overlap Improve communication or reduce disagreements about who is in charge Provide performance standards Improve professional development programs Job Description Anatomy Title Reflect the job duties Job Summary Overview of position and role in the business Job responsibilities/authority List of duties What is most important? Where is most of the time spent? Other duties as assigned Where person makes decisions 4
Job Description Anatomy Qualifications Skills & abilities Knowledge, certifications, licenses Experience Relationship/Supervision Who does this position report to? What are the important links to other positions? Acknowledgment of understanding Responsibility/Authority Responsibility Keep the books Enter receipt and expense data in computerized accounting system Pay bills as they are due Pay employees Make sure that withholding & social security taxes are appropriately filed Work with farm manager (Dad and/or Mom) to insure accuracy of financial data Generate budget vs actual reports, balance sheet, & income statement Identify reason of discrepancy between budget & actual Provide needed records to the accountant at tax time Authority Correct any errors found in supplier invoices Sign checks for payment of bills Tips for Getting the Transfer of Management Started Successfully Building a Management Team Design a team approach Develop new management skills Cross train Seek a functioning and effective system of routine communications Implement non threatening evaluation processes Turning Over Control Start early to learn each potential successor s capacity Successor may be in-law, grandchild, or neighbor Ask yourself, can I live with their decision Give control over different sectors of the business so the next generation can master each one independently. Rome was not built in a day your successor s transition into control should be gradual (but not so gradual that they lose interest) Addressing Power Issues Who controls decision making Decision making control should be secondary to the quality of the decisions Decision making under alternative scenarios 5
Developing the Next Generation of Managers The final test of greatness in a CEO is how well he chooses a successor and whether he can step aside and let the successor run the company. Peter Drucker Assignment Develop a job description for your position Discuss how your position & others relate to each other Create an organizational chart for your current and future business Presentation Sources Managing for Today and Tomorrow Success Planning Section http://www.extension.iastate.edu/feci/annie/bfrdp/ind ex.html Purdue Extension Dairy Excel Dr. Craig Dobbins, Purdue University Agricultural Economics Extension Specialist 6