Your Reading List

Succession planning 101

The first step to succession planning is to call a family meeting

Beginning succession planning isn’t easy, but will have long-lasting effects on both the family and operation.

If you asked farmers and ranchers what keeps them up at night, besides markets and weather, many would say the succession plan or lack thereof.

When is the best time to start the process? Similar to planting trees, 25 years ago. But the second-best time is now, was a comment made by a recent Entreleadership Webinar, “The Essentials of Winning at Family Business,” facilitated by Alex Judd and John Felkins.

Actually beginning the conversation is not easy. But it has to happen before we involve accountants, lawyers and financial planners. Having a neutral third party to facilitate and lead the discussion can be extremely helpful.

This type of conversation is not something those of us in agriculture are used to having. It takes practice and guidance. As an industry we have become focused on and skilled at production. There is much less focus and skill on the “softer” or human side of things.

With proper planning, you can successfully grow a family-owned company without ruining all of your relationships, stated facilitators of the family business webinar. Another analogy to the family business transition is that of a relay race, with a smooth and seamless passing of the baton. That way when the successor is officially announced, the public’s response is, “Oh, I thought that had already happened.”

David C. Bentall, family enterprise instructor at the University of British Columbia’s Sauder School of Business, says there are three keys to success: a formalized strategic planning process, a board of directors with outside independent members, and regular family meetings.

Bentall and his colleague Wendy Sage-Hayward differentiate between continuity planning and succession planning. They also refer to six stages of transition that need to be addressed in the family business:

1. Preparing for challenges ahead.
2. Entering the business.
3. Learning to work together.
4. Dealing with newcomers.
5. Passing the baton to the next generation.
6. Taking the baton.

There are common transition patterns in leadership, be it a family business or not — cold turkey; delay, delay, delay; in, out, in; gradual/progressive; and interim/non-family CEO. The last two approaches are the most effective but do require a structured methodology.

Sitting down with the family

Coming together for a family meeting is a first step. Some operations are used to having regular meetings but many are not. The meeting can be organized by a family member or by a third party. One way to set up them up is following the Five Ws — who, what, when, where and why.

Who: When determining who should be involved, it is better to be more inclusive than less, involving both members of the family and the business. At this initial meeting it is not necessary to have the professionals you work with. They will certainly play an important role, but that is further down the road.

Why: It is important that everyone knows the purpose of the meeting. “We recognize the importance of putting together a succession plan for this operation and family and want to start working on it. This is not going to be a one-time event but an ongoing process. The more involvement we have, the more ideas and options we can come up with,” can be a helpful explanation.

Where: Choose a place that is accessible for all. Some also suggest that a neutral place is better, as opposed to someone’s home or the main office. If it is possible to combine the meeting with a family trip, that is great. Also, in today’s technological age, people can be included virtually through Skype or other platforms, if necessary.

When: Whenever the most people can get there. With young adults who are no longer at home or in the operation, some co-ordination and planning ahead will be required. Obviously picking a time of year that is quieter for the business is a good idea.

What: Let participants know what’s on the agenda. It also helps to let them know ahead of time what the discussion points will be. “As we work through this there are some things you can think about ahead of time to enhance the in-person discussions.”

These could include: Where would you like to see the operation in five to 10 years? Are there some barriers or roadblocks that we need to be mindful of? What are the important qualities/values of this operation? What do you most value about this family/operation? Just start with two or three simple questions to get the conversation started.

Adding another often used category is the How. Appoint a chair/leader and note-taker. Have an agenda and timeline. The expectations and goals should be clear to everyone. Share guidelines of how people are expected to participate and communicate.

Start with an opening go-round and check-in. Ask everyone to share their expectations for the time together. Another question could be: “What is the current state of the family business? Red, yellow or green.” Then have people share their reasoning.

A talking stick is a simple but very useful tool for meetings. Whoever has the stick is the one who talks. This is very helpful in both talkative, vocal families and quieter ones, as it ensures all are heard and no one person dominates.

At the end of the meeting determine the next meeting date and the action items that are to be followed up on, by who and when.

Other topics than can be included in initial meetings include an operation overview, determining the resources and assets that are involved in the succession process. A review of current professionals and others that will be required is another potential discussion point.

The contingency plan is an extremely important component. Start the “When I die” conversation: “If tomorrow one of the people at the table is gone, do we have the capacity to continue as seamlessly as possible?” It is highly likely that will be an emotional and difficult conversation but it’s much easier to have before a loss than when everyone is grieving.

Where are all the important documents? Wills, life insurance, loan agreements, passwords, land titles, lease agreement, professionals, banking and accounting information should all be gathered in one place, be it a book or computer file. And don’t forget about production and marketing plans and information. Is there a map of the operation with land locations, ownership and identifying names of fields or pastures? Another helpful tool is a large annual calendar of all the major events, business and personal, that is completed by everyone together. This can then be used as a management tool and broken down into seasons or quarters or whatever works best.

If you can get through these topics in the first meeting, you have done well. The most important piece is that you start doing it. Don’t expect perfection or total harmony. Adapt to what works best for your family. An outside facilitator can help the process. There may be other issues that come up that need to be dealt with first.

Don’t think this is just going to happen on its own, because it is not. It is not easy and takes courage. It is not going to be perfect, but you have to take action. It will have long-lasting effects on both the family and operation.

Kelly Sidoryk ranches with her family just west of Lloydminster, Alta. She consults in a number of areas including succession planning and holistic management.

About the author


Kelly Sidoryk ranches with her family just west of Lloydminster, Alta. She consults in a number of areas including succession planning and holistic management.



Stories from our other publications