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Managing Transitions

Kriss Lightner, 56, still feels a rush when he pulls the planter into the field. He knows when he's done all he can to lay the groundwork for a bin-busting harvest. He's in the driver's seat and ready to go.

The Lohrville, Iowa, farmer can't quite muster the same enthusiasm for studying tax tables, income projections, and retirement timetables. He's still in the driver's seat, but long-range plans sometimes take a backseat. "We get busy, and with the urgency of production and harvest, planning is pushed aside," says his wife, Deb.

The Lightners aren't alone. Working a successor into the business can be intimidating. Farmers spend a lifetime building a business; it's not in their nature to look forward to winding down. In reality, management and ownership transition are more a series of steps than an abrupt exit.

The Lightners are making headway toward their goals. They prepared the seedbed by encouraging son Zac as a young sprout. The 33-year-old began raising cattle and renting land when he was in FFA. "When Zac and his wife, Darci, returned in 2003, we knew we needed to generate a plan," Kriss says. "It always seemed far in the future," Deb says. "In 2005, we turned 50 and although we knew we'd continue with some input in the operation for some time, we needed to move on it."

Their plan is to complete the management transition when they're in their early to mid-60s. Kriss buys fertilizer, equipment, feeder cattle, feedstuffs, and land. Deb is financial manager, record keeper, and grain marketer. Zac collects and analyzes technical data to help with input purchases, makes seed purchasing and chemical plan decisions, runs the sprayer, and does mechanical repairs and welding. He began managing their employees in 2006. "Management transition is a constant work in progress," Kriss says. "Every day you're involved, you can feel the needle move a little more. It's complicated -- like a montage."

Deb agrees. "Zac isn't the only one going through transition," she says. "As he takes on more, Kriss' jobs change." Darci, a teacher, also is transitioning. She recently completed Annie's Project workshops to prepare for a business role.

At the same time, the Lightners are addressing changes in the farm business structure. A family corporation formed in 1984 includes Kriss' two sisters and his mother, Jeanne. Over the past two years, they interviewed advisers at four or five firms. "We needed to make sure it was a good fit," Kriss says. After finding a match, they've made progress through face-to-face meetings, conference calls, e-mail exchanges, and meetings with extended family.

The Lightners have a daughter who is not involved in the farm. "It's a cliché," Deb says. "But we still dance around equal vs. fair. We're looking at the legal, financial, and emotional sides. You can't find a consultant for the emotional. We have to be honest, compromise, and work things out."

In the last year, a plan has taken shape. "It's down on paper," Deb says. "We knew what we wanted for everyone, and we designed a plan. They tweaked it and outlined legal and tax implications. We've presented it to our family."

They have a time line. "It's going to take longer than we thought," Deb says. Kriss agrees. "You can't ever say you're done with the process," he adds. "Change is a constant."

When expansion has to be part of the strategy

Paul and Cindy Heins know that change is a given. The Higginsville, Missouri, dairy producers knew that new facilities were needed. They had updated the dairy barn built by Paul's dad in the 1960s after they joined the business in 1983. But they needed a more labor efficient, environmentally engineered facility that was comfortable for the cows.

Expansion also was a necessary part of the strategy. They made plans to grow from a 100-cow dairy to a 665-cow dairy. The facility was completed in the fall of 2009.

"Financial planning was step one," Paul says. "Consultants were a key resource. They helped us avoid repeating the mistakes of other families."

He adds, "At the same time, a consultant doesn't have the same skin in the game as we do. I made every effort to verify numbers from at least two, preferably three, sources."

To glean advice, Paul visited dairies throughout the country. "Building a 665-cow dairy in the most unsettling financial times since the Great Depression was a challenge," he says.

Juggling a major expansion at the same time as managing the on-going work was a challenge. "It's hard to manage the daily operation and plan for the future," he says. "Sometimes we chose to tolerate issues so we could focus on the new facility. We knew that poor planning or design would cost us each day for the next 30 years -- or even into the next generation."

In addition to planning, Paul suggests another essential skill. "Adapting and regrouping is just as important," he says. "The givens in the equation during planning can change drastically. That's when members of your team need to step up to the plate, readjust, and make it happen."

Son Chris, 25, has been out of college and back at the farm for three years, expanding the Heins' team by one. "As we battled through the growing pains of a start-up dairy, Dad gave me more responsibility," Chris says. "Young people will go where they're given opportunity, respect, and
autonomy. My parents gave me these three things."

Mutual respect is key

Management and ownership are separate transitions. Shared decision making, responsibility, and mutual respect are critical to a successful management transition. Few older farmers completely retire. Retirement is an extended series of transitions, often tied to the economy.

Ag economists working on The FARMTRANSFERS project developed a scale to plot the sequence of managerial control as it's passed on. Managerial decisions are divided into three categories.

1. Initial shared decisions such as the day-to-day planning, organizing of work, and work methods. This often leads to decision input about the type and make of machines and equipment.

2. Decisions related to longer-term strategic planning, including the long-term balance and type of crops or enterprises, or decisions and plans for capital projects.

3. Financial decision the successor participates in, such as negotiating sales of farm products and identifying and negotiating farm loans. This point often is where the transfer process stalls, according FARMTRANSFERS research. The decision least often delegated is paying farm invoices.

"Problems occur when people don't respect each other," says Don Jonovic, founder of Family Business Management Services in Cleveland, Ohio. "Respect means different things at the family and business levels. Respecting each other is the best pathway to accurate communication."

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