Succession planning: What you need to know from a management consultant

Trudy Kelly Forsythe
June 08, 2017
By Trudy Kelly Forsythe
Terry Betker, president and chief executive officer of the management consulting firm Backswath Management Inc.
Terry Betker, president and chief executive officer of the management consulting firm Backswath Management Inc.
Whether you’re at the beginning of the succession planning process, in the midst of transitioning or are about to complete the process, there are different elements to keep in mind.

We caught up with Terry Betker, president and chief executive officer of the management consulting firm Backswath Management Inc., for advice at all stages of the process.

Q) For someone just starting to think about succession, what information do they need to consider about the business, possible successors and the impact succession will have on farming and non-farming family members?

A) The first question people at the beginning of the process need to ask in their succession planning discussions is, do they want it just to be about minimizing tax through the transition of ownership or do they want the plan to drill down to other issues captured in the transition of management? They also need to include discussions about individual desires and expectations that generally accompany the element of estate distribution.

If it’s just tax, they need to talk to accountants and lawyers and they will put the structures in place to accomplish that. But if they want to consider the business, possible successors and the impact succession will have on farming and non-farming family members, they need to broaden the discussion beyond the professionals. That means asking more questions, including:

  • What timelines are they dealing with? When do they want the succession plan developed? When do they want the succession plan implemented?
  • There needs to be clarity around expectations – what do people want? They are working toward what the future looks like and how they align financial expectations with that future vision. Finance has two components: the financial realities of the farm and the financial realities of the retiring generation. How are these realities going to align through the transition process?
  • They also need to come to a consensus on the process they’re going to use. This can be a huge stumbling block for people as there is no “one correct way” to work through the transition. They should do what they can to apply some structure to the process. Clarity on, and application of, a process helps.
  • Finally, they need to get clarity on everyone’s roles and responsibilities throughout the process.

Q) For someone who is implementing their plan and/or in the midst of the transition, what should they be doing to ensure the transition will happen smoothly?

A) At this stage, it is largely focused around the process, the roles and responsibilities. How are they going to transition management and deal with tax? What are the estate plans? They must introduce accountabilities throughout the process to keep it moving forward and they need to have meetings with active, focused communication. Meetings bring clarity to timelines, the process and what everyone is working towards. Meetings are a form of accountability and they help keep everyone on track.

But don’t just talk about it. Write it down. It is powerful to see the difference in working through a transition plan between something that’s spoken and something that’s written. Writing things down provides a point of reference to future discussions and also introduces another form of accountability.

Q) For the successor who has already completed, or is about to complete a transition, what steps should be taken to ensure business continuity and maintain access to the wealth of information and experience the departing owner has accumulated?

A) At this stage they want to ensure business continuity and maintain access to experience. They can do this through the following actions:

Action 1: Developing a management plan and then managing against it where the plan has specific identified actions and timelines.

Action 2: Building clarity around roles and responsibilities is hugely important. This helps to ensure that the incoming and outgoing generation are on the same page. Lack of clarity can result in confusion, duplication of effort, things not getting done and conflict – all typically with less than desirable outcomes.

Action 3: Communicating actively. Active communication is defined as regular meetings between the incoming and outgoing generations. The communication should:

  • Compare the actual transition of management to what was developed and included in the original plan.
  • Review management performance, focusing on all areas of management (notably finance and human resource management) and not just operations.

Action 4: Thoroughly looking at and analyzing the management strengths and weaknesses of the incoming generation, and then developing and implementing a plan to capitalize on the strengths and minimize the weaknesses. This is usually best served through outsourcing.

Q) Any final words of advice for those thinking about or going through the succession planning process?

A) There are two futures – a future that will happen on its own and a future you can work to make happen. For most people, the second option is more ideal. This applies to transitioning ownership and management of the farm to the next generation. The transition will occur at some point. It’s inevitable ... at least the ownership portion. It’s about choice. Do you want to look back and say, “I wish we had have ...” or do you want to look back and know that you tried as best you could to work through a planning process that was designed to achieve preferred outcomes?

A transition plan doesn’t have to be overly complex. It needs to reflect the farm family and business as currently structured and factor in the plans for the future. Determining a step-by-step process to be used in the development and implementation of the plan will help. If you are not sure how to start or have reached a dead end in your planning, find someone to help. There are lots of resources available to you.

Editor's note: This article has been edited and condensed.

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