September 5, 2017 at 3:32 p.m.

Avoiding farm transition tragedies

Wittman discusses why families should run their farms as businesses during MMPA workshop
Dick Wittman
Dick Wittman

By By Krista M. Sheehan- | Comments: 0 | Leave a comment

ROCHESTER, Minn. - Dick Wittman has seen many farm family situations fall apart - from the ones who fight over the farm and break relationships among parents and siblings, to the families who don't know what to do after a partner in the farm lost their life in a sudden accident. Whatever the situation, Wittman wants to help farmers avoid transition tragedies.
"This isn't rocket science, it's Management 101," he said.
Wittman gave the keynote presentation Are You Getting a Passing Grade in Farm Management? Along with a breakout session of a family transition case study during the Minnesota Milk Producers Association Dairy Management Workshop on Feb. 5 in St. Joseph and Feb. 6 in Rochester.
"There are fewer people getting into our industry, but there are many opportunities for people who want to be in it. In order to make it, they have to treat it like a business," said Wittman, who has his own consulting business and is an owner on his family's cattle, grain, timber, hunting and wildlife operation in Idaho.
There are three stages of a family business, he said. Stage one is the owned and managed by one person. There are no partners or siblings. Stage two is when siblings go into partnership. The third stage is a collaboration of cousins entering the operation.
"How many of you in phase two or three are scared to death? You should be because the statistics are not on your side," Wittman said. "70 to 80 percent won't make it past the second or third generation."
Ownership is one area farms need to address. The traditional philosophy is that if a person works on the farm, he or she needs to own it, Wittman said.
"This is becoming an obsolete way of thinking. Our business requires so much capital that we need to have all kinds of options," he said.
There are some people who want to work on the farm, but not own it, while others want to invest, but don't want to work on the farm. Still, others would like to work on the farm and own it at the same time.
"We need to accommodate all three options," he said. "Find policies that work for your farm. This is a business that needs to be managed. If we do it right, we can have a successful farm and a successful family relationship."
To form this business, Wittman follows his nine-point management model system. The first important factor is that farm families need to create and write down mission, vision and core values statements. Families need to know how they describe their business, Wittman said. Only 33 percent of agricultural businesses define this, he said.
Common conflicts sometimes come about between owners or potential owners, which happens when values do not align. Wittman gave an example of one person who likes to be progressive, while another person doesn't want to change anything unless it needs fixing.
"You need to agree on priorities and values," Wittman said.
The second step is to plan. Wittman said farms need to have two kinds of plans. The first is an operating plan, which defines what we do - how items are produced, how to finance it, how to market it, etc. The strategic plan has a mentality of how we do it. This is the perspective of looking toward the future. Will the farm include value added products, livestock genetics, be organic or go the conventional route along with many other options.
"These two plans are not disconnected processes," Wittman said.
One cannot survive without the other. The most important part of this step is setting goals and writing them out.
"When we don't plan, we get bad outcomes," Wittman said.
Next in the management system model is to organize and divide responsibilities. Wittman compared it to a bus.
"Who should be on the bus or off the bus and in the right seats," he said. "We also have people who do not want to let go of the wheel. They like what they're doing and they're healthy, but are hanging on too long and not creating opportunities for people to advance."
The farm should have jobs with a clearly defined career path. It should start with a board of directors, which includes owners who are directly affected by the farm. Wittman also suggested farms to have a four to five person advisory board. This group of people has outside perspective and can add professional input about management situations.
A farm also needs a leader.
"Age does not define who should be in charge," Wittman said.
Having the board of directors can create a new position called chairman of the board, which is a job that oversees hiring, grooms successors and makes sure the farm is on the right track. When chairman of the board is created, it allows the next generation or the next successor to take over as CEO or a higher leadership position.
The fourth step is to set policies and standard operating procedures (SOPs). This is an area to determine pay scale.
"Wages and compensation is an area that's poorly managed," Wittman said.
Mistakes Wittman sees many times in family businesses are that children are treated differently than employees, or that all family members are given equal pay regardless of the jobs they do.
"We don't base wages on whose kid it is or their needs, it's about what's the job they're doing and what they should be paid for this job," he said.
Have a family employment policy in place before it is needed, Wittman said.
After the policies are set, implement the plan, which is the fifth step.
The six step of the management system model, communication, is very important, Wittman said.
"Communication gets lost in translation a lot of times," Wittman said.
In many cases, families believe that family status trumps the business roles, or business rules don't apply so people can act unprofessional.
"It's amazing. We think we need to be nonprofessional because we're a family business," Wittman said.
However, Wittman said these obstacles can be tackled if family members communicate.
The next step is to establish control, followed by measuring performance as the eighth step. Records need to be kept along with a clearly defined training and development program. Regular performance reviews should be done to keep employees and other family members on the right pace.
"We need to use these gauges to look at while driving our business," Wittman said. "We need to get equally good at watching how we manage our farm in addition to planning of the business."
The final step is to adjust the plans as needed.
"When you do this right, there is a reward," Wittman said. "And family can get along."
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