🇦🇺 Webinar: Succession Planning for the Future

Partial Transcript

[Hannah Arnold]

Hello everybody and welcome to today’s webinar. Thank you all for joining. I am Hannah Arnold, part of the team here at AgriWebb. Today’s focus is all about succession planning and we’ll go for about an hour. So just to get going or acknowledgement of country, I’d like to begin by acknowledging the traditional custodians of the land on which we meet today and pay our respects to their elders, past and present. We extend that respect to Aboriginal and Torres Strait Islander peoples today. 

A couple of housekeeping tips: first of all, we will be recording this session and sending it out via email after the event. Secondly, we would love to hear from you. Please do put your questions in the Q&A as you think of them or vote on other people’s questions so that we can prioritize which ones we answer if we do get a load of questions. 

A quick word about this topic in farming succession, ‘inheritance’ and ‘entitlement’ are all words that can be laden with negative connotations and can be really tough to talk about. I say that from personal experience, as the eldest daughter of four generations of farming on both sides of my family. Our goal is to shine a more positive light on this topic and to show that even by starting a conversation, you’ve already achieved a big milestone. We’ll be reframing succession planning as more of an ongoing transition process, and we’ll be exploring some practical tips, both to start the process and to keep it moving forward.

There are different definitions of success when it comes to a transition. A good sign is when families can go through this process and still be able to sit around the table for Christmas dinner and enjoy the holidays together. I’m really delighted to be joined by two wonderful guest speakers today. We have Carlyn Sherriff, who’s a senior agribusiness consultant at Pinion Advisory, based in South Australia. Carlyn will be opening with the presentation of about 20 minutes on the Pinion Advisory succession framework and also offering up some best practice tips in management succession. 

We’re also really happy to be joined by Max Gubbins, farmer and AgriWebb user based at Chatsworth in Western [Victoria]. We’re really grateful to Max for sharing his personal experience of succession planning to date, and also some insights into his challenges and some successes of the process. After we’ve heard from both Carlyn and Max we will then be working through some audience questions together. Please remember to pop them in the Q&A as we go. So without further ado, I’m pleased to hand over to Carlyn to talk us through the succession planning framework at Pinion advisory. Carlyn, can you hear us?

[Carlyn Sherriff]

Yes, thank you.

I’ve been working with a company called Rural Directions since 2005 and in July this year we merged with a company from Tasmania called Macquarie Franklin and Sunraysia Environmental, based in Victoria, so some of those names may be familiar to you if you haven’t heard of Pinion Advisory. My role here at Pinion Advisory is Team Leader of People Management and Succession. This area of our business focuses on creating effective teams and ensuring healthy transitions from one generation to the next.

AgriWebb has kindly invited me to speak about succession planning, which is obviously a massive topic, so I’m only going to provide a brief overview today because the session is just one hour. For the team at Pinion Advisory, succession planning is really a key period of change for our clients and we see it as a process rather than an event. Some of the keys during this process are: developing a shared vision, managing communication and expectation with all generations and making provisions early so that that transition can be quite smooth financially and–importantly–building the skills and capability of the next generation as they enter. 

All of this does take time, so it is important to start early. I like to think of succession planning as another form of strategic planning. Every business needs to have a strategic plan–where you’re heading in the next 10 or 20 years–so just include succession planning as part of that strategic thinking. Of course, I should mention the disclaimer here at the top: the advice provided today is general information and not advice of an individual nature. If you are after individual advice, you need to chat to a professional. What I’m going to cover this morning is: the development of skills in the business, which we call management transition. Passing the baton of the skills needed to be an effective and successful farm manager. I’m also going to chat about provisioning. So this is, ‘What are you providing for the older generation and also what are you providing for the non farming siblings?’ 

Of course, there’s another pillar to this and that is: asset transfer. We don’t really have time to cover that today, but I’ll spend some time on the top two. Then we’ll grab your questions after. 

Underpinning the Pinion Advisory succession process is the aim to develop the family corporation. Here we combine the best attributes of a family business with the best parts of a corporate business. Family farms are held close to our heart. They have a very hard working attitude…always willing to go the extra mile. There can be a blurring of lines sometimes between family and business, where it just rolls into one. Because of this, sometimes there’s some challenges around accountability and communication. Typically, a family farm is a really great place to work. On the other side is corporate farms. 

Corporate farms (or corporate businesses) are typically more strategic in their approach and because of this, they have greater clarity and also they have greater accountability. They can also be slow to respond to changes. What we aim to do is work with our clients to encourage them to move towards the family / corporate model, which takes the best aspects of the family business and the corporate business. If you’re operating with this family / corporate framework, you are therefore going to increase the chances of a succession transition. The reason for this is that you’ve retained those strong farming values, like hard work, but you’ve also been able to distinguish between the family (as an entity) and the business. Then you have some division between what the future of each of those are. There is also greater strategic thinking and decision making, which is guided by data rather than emotion. Typically these family corporations can then go on to have greater access to capital and scale within their businesses. They are professionally operated businesses and as a result. Their profitability will be increased. So, one of the first steps for a successful succession process is to adopt the family / corporate way of operating your business. It’s proactive, strategic and accountable.

The second component is building the skills of a well-rounded farm manager. We need to take time from one generation to the other to communicate the skills that are needed to be competent in all areas of the business. We like to look at: production, operations, environment finance,  administration, business management, people management, risk and decision making. We often see tension between the two generations. The next generation might be eager and enthusiastic. They feel that they’ve been around the farm their whole life and they’re ready to take on that farm management role, but Mom and Dad are thinking, ‘oh, not yet…next year’, so there’s this tension with the enthusiasm of the returning generation and then some level of hesitancy with that older generation.

So, we’ve created a capability review tool and we go through each of these areas. We have an extensive list of criteria and we get the next generation to score themselves out of five on each of those criteria. Mum and Dad also get to go through and score their son or daughter on this criteria. What we identify through this process is the skills gap. 

Here is an example of the criteria that we have in the area of production. The format of this radar plot is: the further you are to the outside that’s a 5. Then towards the middle, that’s back towards 0. So the skills that you need are identified when you have the dips in the radar plot. So rather than Mum or Dad saying ‘no, no, you’re not ready yet’ and son or daughter being really frustrated, this tool can actually be quite specific. They can sit down together and they can say, ‘well, you need to learn more about animal husbandry or grain marketing or maintaining records’. We find that this tool can actually foster a mentoring relationship rather than one which is a business relationship. Mum and Dad become a mentor with a clear training plan and the next generation understands what it’s going to take to become that manager. It’s a great process to facilitate communication between each generation. Of course, you can tailor this process to suit your business.

Another tool to assist your family / corporate company with succession planning is forming an Advisory Board, or having management meetings. Advisory boards are a great tool to create and maintain accountability. Ideally you’ll meet three or four times a year. At each meeting you’re reporting back on your progress against strategic actions that are going to assist the business moving forward. It can allow operations to occur with clear key performance indicators, budgets and boundaries. What we see at that Advisory Board table is multiple generations coming together. They agree on what the game plan is for shearing or seeding or harvest and they actually agree on that game plan and then those tasks are delegated; often to the next generation. 

The next generation is then allowed to go away, give it a try and then report back so it actually adds some accountability so that the next generation can try some new things and maybe come to an idea that they want to play around with in the livestock enterprise and introduce, maybe a  level or something like that. Then they can have a clear budget and direction so they can come back and report in an accountable manner. An Advisory Board also sets a strategic direction for the business.

[End of Partial Transcript]

To learn more about farm succession planning, head to our Blog, there are many articles on the subject.