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Passing the farm to the fourth generation

Problem Submitted By R.F., Indiana

It's hard for me to believe that our farm is moving to a fourth generation of ownership. Seems like my generation just got the farm last Tuesday.

My five cousins and I actu ally got the farm from our par ents' generation 26 years ago when we went from a group of three brother-owners who were all farmers, to six cousins, with only half of us farmers.

We've done a lot of the kind of things you have suggested over the years, and the family's held together pretty well. We were open to people who wanted to sell their share and even bought out one of the cousin branches with minimum emo tion or family damage.

Now we're facing a fourth generation with 19 members! The farm is successful, and our family name is well known in our area because of retail outlets, etc. And we all agree it's a legacy we want to keep broadly owned.

Only two of the 19 members seem to want to work in the business, and our problem is how to stay a family farm with many owners and few farmers.

Dr. Jonovic's Solution

The answer here is less solution than the establishment of a way of life that focuses on two fundamental foundations of family farm continuity.

1. Family Unity. The expanding and extended family requires some kind of shared culture that continues to provide a purpose and fertile soil for ongoing relationships – in essence, dynamic (and even new) traditions that will supplement the natural connections that exist among siblings and cousins.

Regular family reunions are a great help, but the commitment and dedication to pull them off can get to be just too much work.

Many families, realizing that some thing more formal is needed, are forming family councils, which are basically committees of selected (and rotating) members from each family branch who accept the role of overseeing the business of the family.

Councils do organize family events, but they go further. They develop state ments of family values. They organize the writing of family histories. They develop social networking tools. They also work with the managers of the business to define reasonable and specific owner expectations of return on investment.

2. Financial Return. In the first three generations of a family farm busi ness, job #1 is usually turning profit into growth, not into the owners' pockets. That's how successful farms get built.

This business model generally crashes into reality by the fourth generation. They are unlikely to get the same level of emotional satisfaction from business growth with nothing in their pockets.

Connection to the land is a powerful return on investment for a family – but not always for all members of that family. Some may prefer cash. Keeping all members of the family as investors will likely require some distributions.

If cash flow to owners is not part of a family farm's business model, it can sur vive beyond the third generation. We all know examples, but we also know they're relatively rare.

In those cases, the family culture has allowed those who wish to leave the business (and not empty-handed) to do so. They don't have to quit the family or be branded as traitors.

 

By Dr. Donald J. Jonovic

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