How is the next generation ever supposed to step up if the current generation can’t step down or at least step aside? The short answer is they can’t. It’s one reason managerial authority on many ranches skips a generation. More calamitous, it’s a major reason why young people don’t stay in ranching and multi-generational ranches are disappearing.
There are two big pieces to the estate planning puzzle: who will run what (management succession) and who will own what (the transfer of assets). In my last ProfitTips column I called management succession the more difficult of the two because it involves judging the competency of people you love and holding them accountable to produce results. It is perceived by the incoming generation as an issue of respect. But the transfer of assets is no cake walk either.
Most people assume that the biggest estate planning fights involve “Who will own what?” It’s been my experience that “Who will run what?” is often a bigger issue. “Who will own what?” is usually a question of perceived fairness. To heirs, “Who will run what?” is a question of respect.
If you have a family ranch, whether you know it or not, you have a family employment policy. At least your kids think you do. In the absence of a formal, written policy, kids often grow up with the expectation that regardless of their education, experience or talent, there will be a role for them in the family business.
University of Wyoming Extension agent and Ranching For Profit School instructor, Dallas Mount, recently led a management succession workshop in Baggs, Wyoming. Dallas is a gifted, innovative teacher, and I was flattered when he asked me to participate in the program.
Dallas did a great job of distilling successful succession into five core areas:
Earlier this month a lot of ranchers in TX, OK and KS experienced a nightmare. Driven by winds of 50 mph and more, they lost grass, infrastructure and livestock to intense, fast-moving wild fires. I’ve heard from several Ranching For Profit Alumni whose entire ranches burned. They spent the day after these devastating fires evaluating losses, euthanizing suffering animals, and taking steps to ensure that the animals that survived were taken care of. I’m not aware of any alumni who lost their home or who were injured. It’s hard to call that “luck,” but what else can you call it when others lost their homes and even their lives?
Santa isn’t the only one that gets letters. Here’s one I received recently:
Thank you for your letter last year. (Click here to see Dave’s 2014 letter.) While I thought several of your ideas would really help our operation, my husband, Nicolas, dismissed them, saying that they may work other places, but they won’t work here. While we do live in a very extreme environment, the real problem is Nick’s resistance to change. He is a jolly workaholic.
One of the questions I often get at workshops is, “How many of the people who go to the Ranching For Profit School are actually doing it?” It’s a reasonable question, but it depends on what it is.
A rancher sent me this email:
My brother is the hardest worker I’ve ever seen, but he’s impossible to work for. Employees have quit, and those who stay avoid my brother and come to me with their issues. My kids, who are good workers and used to enjoy working in the operation, now detest working here. The employees, my children and I are scared to address it. We dodge him. He feels it, he has addressed it with me. When we try to discuss it we hit some kind of a wall and he gets very upset. How can I address this and still keep the peace?
Here is my response:
We use a process at RMC to help families and business teams create a shared vision and a plan to achieve it. We start by asking a very basic question: What do you want? Each participant answers individually by writing several short statements describing how they’d like things to be in three to five years.
Once everyone has done their best to answer the question, we start looking for statements with a common theme. We work with participants to help them describe the interests that underlie the positions they’ve described. Through this process their individual answers are transformed into a statement of what the whole team or family wants. It can be a very powerful process.
As I’ve helped families navigate this process I’ve learned that “What do you want?” is not as easy a question to answer as you might think. Most people either limit their thinking to what they think they can have or describe what they don’t want rather than what they do want. For example, they are likely to write: I don’t want to be in debt, as opposed to: I want to be financially secure. I’ve also noticed that Mom tends to struggle with this question more than anyone else in the family.