During the farm succession process it is common for the owner generation and the successor generation to discuss a transfer of assets. However, a conversation about the transfer of management – which is important to the success of the farm succession – is often overlooked. Extension has resources that are available to help you through the process.
As the owner generation prepares for retirement it is important to have a competent successor to take over the farm. For a successor to be competent they need to have experience making decisions on the farm. However, the owner generation has made a significant investment in keeping the farm successful and is often reticent to let go of many of the management decisions. Research by Dr. Foster Cline, psychiatrist, have shown that when we are allowed to make small inconsequential decisions before having to make larger consequential decisions, we are better suited to make the larger decisions. If we are never allowed to make those small inconsequential decisions we are not equipped to make the larger decisions. If the first time the successor generation is allowed to make decisions on the farm is after the farm succession is complete there is no safety net. If instead the successor is allowed to make decisions while the owner generation is still involved in the farming operation the safety net is in place and able to help the successor generation make informed decisions. This process of allowing the successor generation to take “baby steps” while the succession process is occurring sets them up for success instead of failure.
In order to help the owner and successor generation discuss the management decisions on the farm the University of Wisconsin-Madison Division of Extension Farm Succession educators have developed the Transfer of Management Worksheet. This worksheet breaks the management decisions into four different categories: Production – Related, Finance- Related, Human- Resources- Related, and Long-Term/ Strategic – Planning –Related. For each area the owner and successor generation should circle a number representing how much they feel this area of management is being retained by the owner generation. A one represents that the decision is being made solely by the owner generation. A five represents that the decision is being made solely by the successor generation. The numbers two, three, and four represent there being shared management between the owner and the successor generation. A two means that the owner maintains the majority of the management making decisions but the successor has some input. A three represents equal input on the decision by both the owner and the successor. A four means that the successor has the majority of the management making decisions but the owner still has some input.
Once the owner and the successor have completed this worksheet they should have a conversation to determine if there is agreement in the ratings made by both parties. There should also be a conversation to determine if there should be any changes to who is making certain decisions.
Transferring management from the owner generation to the successor generation is a difficult process because the owner is giving up control of the farm. However, it is important to keep in mind the ultimate goal of the farm succession process, to have a profitable farm operation after the succession. If the successor generation is not allowed to make mistakes while under the supervision of the owner generation the odds of future success are decreased. By sharing management during the farm succession process the owner generation is helping to train the successor generation and increasing the odds of future farm success.