Governance to Succession to Progression

Engagement and Participation

Many views and teachings tell us the first steps on the succession journey should involve - ownership structure, balance sheet and profitability.  I have worked alongside farming families and instead found the first step is Engagement and Participation of family members in the family business. 

Engagement and Participation is not about hours worked or chores ticked off, it is a curious, interested mindset and contributing with purpose to the understanding and challenges of the business now and into the future. 

Children heading off to pursue careers outside of the farm business will bring diversity of thought and experience. A child’s unique career path needs to be seen as a strength rather than a weakness for the family business and succession journey. This strength just needs to be recognised, valued and engaged. 

Structures and roles can be established within any business to ensure efficient and effective management is maintained. A successful operating business does not live or die on the day to day involvement of a family member.  

You don’t need to view selling the farm as the only option when holding (and growing) an irreplaceable asset through a number of generations is possible. The next passionate farmer may be your granddaughter.

What shouldn’t be comprised is the engagement of all generations to the success of the business. 

An effective way to achieve this is through an Advisory Board.  

The structure, activities and discipline of an Advisory Board allow family members, whether working within or outside of the business, to make a meaningful contribution to its immediate direction and success. It is interest, curiosity and contribution through the Advisory Board that will bring a sense of progress and purpose to succession.

Voice

“Leaders need to listen” is an often-coined phrase. Our experience is it’s difficult to listen when family members are not speaking. Perhaps leadership is more about creating an environment where individuals have a Voice?

It’s inspiring what ideas are spoken in a culture based on the belief and behaviour that all family members have valuable insights to contribute with the Voice of everyone involved in the process encouraged, heard and respected.

Giving people a Voice is no easy task, many have not developed the skill or confidence to speak in a meeting environment. It’s a developed skill to be able to put to words what you are trying to express, and a leader needs to be both understanding and supportive of this.

How much time do we give to developing an individual’s ability to articulate their ideas, thoughts and feelings?

Safe Zone

Business Leaders

Structure & Process

Letting Go

Make it Happen

While it may seem entirely logical and in the spirit of a great family environment, when does the opportunity to ask the question of your family member “so what is it that you want from life, what is the purpose of this business for you and what time frames do you place around this”?

Not only do we need to ask these questions, we also need a genuine and considered answer as we do not have time to waste on work that will not provide us, and those that are most important to us, with a fulfilled life. 

With the majority of New Zealand farming businesses family owned and operated, it is important that the purpose and time frames around what each family members needs is understood and the business is moving in the right direction.

Our experience with family businesses is that a Safe Zone needs to be created in which these highly personal, and important questions can be asked, answers given and understanding between family members built. Without that Safe Zone these questions simply never get asked and day to day operations just drift in a direction which may fail all family members. 

Not only is potential conflict between family members avoided, the framework for a clear business strategy and execution plan can be put in place. This helps remove the luck factor that the business partners will achieve what they want and will most likely bring the family together in a positive, understanding and supportive way.

The concept of governance by way of an advisory board provides a working framework to include this Safe Zone in regular agenda discussions.

Parents and siblings have a seat and a voice on a family Advisory Board. They become the Business Leaders and begin their governance journey together.

Leaders need to understand a business and how it operates in order to ask effective questions and provide advice to help move the business forward. Some siblings may be closer to the business and have this understanding from the outset. Others, especially if they have built a career outside the family business may need time to develop understanding.

Effectively facilitating this knowledge build is the role of the Advisory Board Chair. It’s important information is available, and time is put aside to answer questions and provide additional insights. Engaging siblings from outside the business is a real opportunity for fresh thinking. Often a fresh, objective view creates “aha” moments for all and can bring about insights or effective changes no one else had considered. Once someone is fully immersed in a business it can be harder to see things with fresh eyes.

Some family members will view hours spent working in the business as the most valuable contribution. A son who has taken on the farming operation and followed in his father’s footsteps has spent many hours working in the business therefore may be perceived to have a more valuable contribution than a daughter with a career in HR who’s never worked on the farm.

This can be a huge roadblock if it’s not dealt with by the family group and requires mutual respect from all family members. Both son and daughter are Business Leaders and have an equally valuable voice and contribution. The daughter’s contribution might be more valuable at times as she brings a different perspective. A family’s focus should be on the value individuals bring to discussion and decision making not hours spent in the business i.e. value versus time.

Forming robust structure and process around a family Advisory Board is important and traditional governance for a business. It’s critical to allow the initial people focused stages to be worked through before establishing formal structures and process. Getting the timing of this right relies on the skill, judgement and leadership of the Chairperson.

An Advisory Board should meet regularly, set an agenda and capture conversations in a set of minutes. A relevant set of reports make all the difference and the reporting format needs to give each member of the family the information they need.

Different family members will need different information to support their understanding of the business operation and this often depends on how close they are to the business. A good report supports all family members to understand the business and wider industry.

A family needs clear boundaries and clarity between the owners, business leaders and management team, particularly when it comes to decisions and who is responsible for making them. Decisions ultimately sit with business owners, directors and the operational team.

Typically, in a family business there is a person(s) who has taken the lead, made the decisions and successfully led the business to where it is today. They not only own the business they also own the decision-making process.

They may be seeking to hand over the lead role, however the process of achieving that is difficult. Letting Go takes time and trust for owners to feel comfortable sharing the conversation and decision-making process. They need to feel assured there’s good discipline, structure and reporting in place. They need to see leadership mindsets and actions develop across the business, roles established, boundaries clear and the Advisory Board in action.

When these things start working together the new structure opens an opportunity for them to let go. You will know you have moved through this stage when the Advisory Board conversations and the dynamic of each meeting starts to change. The historical decision maker(s) step back from leading the conversation, all voices are present and alternative opinions and perspectives are heard and valued.

It’s the Advisory Boards role to ensure relevant questions are asked, prudent advice given, and the business moves forward. What “moving forward” means will be different for each individual business. For some businesses it will be improving profitability, for others growing the business including diversification of revenue streams, it might involve achieving environmental outcomes, becoming carbon neutral or more efficient water usage.

Making it happen is about moving the business forward. This is the sweet spot where Governance has evolved into Succession and Progression becoming less about asset ownership and more about guardianship.