In this Issue:
GUEST ARTICLE
Family Business Transfer – Formal Adoption Leads to Success
VEGETABLE NEWS
APPLE NEWS
| Vol 2 No.14 | August 29, 2005 |
Family Business Transfer – Formal Adoption Leads to Success
Karl Foord, Regional Extension Educator, Extension Regional Center-Farmington, Dakota Co.
Family businesses are often built on the vision of one person. The family aligns around this vision and if successful the business expands. Time goes on, people get older, and the person with the original vision needs to look to the future. Can the original owner relinquish power and authority? The transfer has a much better chance of success if the inheritors get some autonomy and authority. They become vested in their business not just their parents.
One vegetable farmer in New Jersey gave shipping and trucking responsibilities to his son. It turns out that one of the critical buyers for their produce was his son’s age. They shared a generational passion for video games which helped to bond the professional relationship. His father is not a video game player and would not be able to relate to the buyer in the same way. This relationship is part of a critical market channel.
The next generation will likely have a different set of values and will face a different set of business challenges. It is almost certain that the personalities of those looking to take over the reins will now be part of a new drama. Will it be a comedy, a tragedy, or a well acted success story in three parts? If you find yourself in this theatre-in-the-round, and you prefer the last of the three options, please consider the following.
Many of Shakespeare’s dramas follow plot lines around miscommunications. Romeo didn’t get the message – tragedy. Hero was defamed by information poorly interpreted in Much Ado about Nothing – Comedy. Many family business inter-generational ownership transfers are tragedies because the second generation taking over has expectations or assumptions that are unspoken. These are often revealed at critical moments only to find that there are significant differences in opinion and perspective.
You can transfer the title of various assets, but the success of the next generation’s business will depend to a great extent on how well the new owner operators meld to form the “new company”. It’s a little like a weld joint. A good one is as strong as the steel. A bad one is less successful under stress. To me the new entity, if it is to be successful, must be reborn or at least formally adopted. In this way the new ownership truly owns not only the assets but also is aligned on what they want to do with them.
If you want to adopt a human, you need to draw up formal papers and sign. I recommend the same for the business. The best way to communicate is to write things down and then sign the documents. It avoids the, “you said this, but I heard this” scenario that can lead to hurt feelings and stress. However, people often resist this process which may be why Shakespeare always had so much good material to work with.
Guidelines
Write a formal business plan so there is written alignment on goals, and strategies to achieve them. Define management and operational responsibilities in an organizational chart. Decide on policies regarding vacation, business expenses and bonuses. Define your ownership transfer plan (buy sell agreement) and keep it current.
References and Recommended Reading
Levi, Alan, 10 Golden Rules of Family Business, Plumbing and Mechanical Magazine, September 2002.
Editor’s Note: Karl Foord, Ph.D., MBA, has considerable experience with horticultural crop production and marketing. Please send your feedback and questions to Karl at: foord001@umn.edu
ACKNOWLEDGEMENTS
Co-Editors: Bill Hutchison (hutch002@umn.edu), Department of Entomology, University of Minnesota, Jeanne Ciborowski, Minnesota Department of Agriculture, Ag. Resources Management and Development Division, and Suzanne Wold-Burkness (woldx018@umn.edu), Department of Entomology, University of Minnesota
The Newsletter is published weekly from May through August, cooperatively, by the Minnesota Department of Agriculture (MDA) and the University of Minnesota (U of MN). Reports are posted on the U of MN and MDA web sites on Fridays. If you have suggestions and/or comments, please send your contributions by 4 p.m., Wednesday to Jeanne Ciborowski, 651-297-3217, jeanne.ciborowski@state.mn.us , MDA, 90 W. Plato Blvd., St. Paul, MN 55107-2094. You can access the Newsletter at the U of MN web site in htm format at: www.vegedge.umn.edu/MNFruit&VegNews/mnindex.htm and at the MDA web site in pdf format at: www.mda.state.mn.us/biocon/fruitreports/
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