Girls Can Farm Too!

 

“Any fool can teach his daughter to drive a tractor, any fool can leave his daughter that tractor in the will; but will she be able to make that tractor pay?”  

There are many men who would kick anyone’s ass at the coffee shop, if anyone said that his daughter couldn’t farm the same as any boy.  But at some point, the same man is probably going to do something chauvinistic without knowing it.  Surprisingly, his wife is more likely to say something chauvinistic.  Agriculture is a traditional society filled with conflicted social norms like a woman’s role on the farm.  Even the most open minded and progressive family is going to make mistakes without knowing.   We’ve got thousands of years of chauvinism in our social culture and it’s going to take a few generations to overcome.  

100 years ago, the boys would get the farm and the girls would get grandma’s china set.  Now women are getting more equity in the farm, depending on their level of involvement in the farm.  However, getting included in the will isn’t enough.  You’ve got to transfer wisdom, not just assets.  

For instance a father might bring his son along to negotiate a tractor deal or even let him make the deal, but many father’s are making these deal’s on behalf of their daughters right until their death.  What happens when Dad dies prematurely and then suddenly the daughter has never bought a tractor?  The skill of negotiation of a tractor deal (not just driving a tractor) is a competitive advantage that determines the farm’s success 30 years out.  But the bigger issue is having the confidence to succeed and negotiating a major deal without dad’s emotional support is tough for a seasoned veteran, let alone a rookie.  Thus when females inherit their share of the farm’s assets and not have these skills taught to them, they are at major disadvantage and thus can’t realize their full potential if they aren’t equipped with the wisdom/skills prior to their parent’s death.  

I met a girl named Molly at the dairy expo who complained about her dad discussing strategic decisions with her two brothers and trying to groom them to make decisions together, but never consulting with her about anything.  This irritated her because she did more work than her two brothers combined and in the five years she was home, she had turned the operation around.  The farm was putting almost 20% more milk into the tank because of her hard work and attention to details.  

She got upset one day when a combine showed up in the yard and she knew nothing about it.  She said, we need to put money into ventilation for the calf barn and buying ketosis strips for the fresh cows.  She said, it’s all of my hard work and the results I got in the barn that is paying for that stupid machine.  

Her one brother flunked out of college and was there because it was easier than getting a job in the real world.  He constantly slept in, showing up at 10am to be a dairy farmer and was a useless piece of skin.  His other brother’s big off farm experience was going to jail and it wasn’t because he was a criminal mastermind.  By far Molly was the bright one of the family.  Yet her dad was trying to groom his two boys to take over the farm and Molly was just seen as a temporary employee on the farm until she went off and got married.  

Her mom said, “well you can marry a farmer and go work on his farm”.  Molly said, if I marry a farm, he can come work on my farm because I’m taking over this farm.  

Parents will do stupid, chauvinistic actions even if they mean not too.  Hell even I make foolish judgements from time to time and helping females get a “fair shake” to take over the farm is something I’m passionate about.  We’ve got thousands of years of chauvinistic social norms and perspectives to overcome.   Rather than getting upset act what is bound to happen, a female should focus on changing the processes that lead to stupid decisions being made.  I said Molly, don’t blame the process not the results.  Instead of being upset about the decisions and the consequences you have to live with, change the decision making process beforehand.  Rather than being upset at a combine being purchased or being upset that she wasn’t included in the decisions when they were made with her brothers in the shop, she should change how decisions are made.  

She signed up for my program and via SKYPE we started having both weekly and quarterly meetings.  She came to the table with such great ideas and showed leadership as a result of actions identified in those meetings.  In once meeting, we discussed the issue of wages and got it straightened out, one of her big pet peeves that her one brother made more than her, even though he worked less hours.  Within 15 months when we set up the farm to be incorporated as part of succession planning it was obvious to everyone that Molly should be named the farm’s CEO.  

It’s only by changing how decisions are made on the farm and how daughters are included in decision making, that a farmer’s daughter can shatter the glass ceiling holding her back from her full potential.  

Inner Drive

The 25 year old son was only concerned about his needs and his little world. 

It was a large farm with multiple employees and thus they used a punch card clock to keep track of hours.  He had his list of jobs to do and he did them.  He actually did them well.  He showed up for his milking shift at 4:01 every morning and punched out at 9:03am.  The issue was that he punched out, when he punched out mentally and never thought twice about the farm. 

The farm was clearly falling apart and the son didn’t care.  It was a $20,000,000 dairy operation with 6 non related employees and it was obvious that Dad was having a hard time keeping things together.  He was a man that liked to control everything to the last detail.  It was this personality trait that had made the operation so successful initially but as it grew beyond the scope of what he could manage personally, things were falling apart.  His kids weren’t helping. 

As we walked across the yard, I noticed small manure pit from the 60’s which wasn’t used anymore that was overflowing with water.  Then I seen a dead heifer carcass floating in that pit.  I stopped and looked at the son to say “what do we have going on here”.  He said “ya, last fall three heifer calves jumped into that manure pit and drowned”.  I said, why didn’t you fix the fence after the first one drowned”?  He said “I told Dad about it, but he never got around to it”.  I said “why in the hell didn’t you fix it yourself”?  His voice went from zero to 60 and he screamed at me “its not my job and also I don’t know how to fix the fence, Dad never taught me that”.   He then went into a tirade about how he didn’t have enough time for his personal life, about how he was being mistreated by his parents or how the farm wasn’t paying him enough to care. 

That moment defined the problem for that farm for the next 20 years.  “Its not my job” was not what I wanted to hear come out of the mouth of a 25 year old eldest son who was positioned to take over a $20,000,000 farm.  Yet for so many successful family farms, this is the situation they face.  It takes one generation to start a farm, the second to build it into an empire and the issue of entitlement is what causes the third generation to run the farm into the ground in a hurry. 

For successful family farms, getting your sons/daughters to take personal ownership in the farm’s success is a critical issue which few family farms overcome.  Contrary to many accountant’s perspectives, gifting equity in the company in many cases is not the answer and quite often can lead to further problems.  I’ve seen many entitled farmers get gifted millions in equity from an empire which took generations to build.  I’ve seen them 7 years later try to retire young because they feel they “worked hard in their youth” and deserve it. 

You can either motivate a mule to move using a carrot or a stick.  Rather than constantly yelling at your kid to get his butt out of bed or get his head in the game (stick), you’ve got to rethink your approach and think about how to adjust his/her mindset (carrot) to become a better farmer. 

There are many things you can do, but here are a few suggestions: 

  1. Off Farm Experience

Have your son/daughter work away from your farm on a similar sized operation.  Make sure it’s with a progressive farmer whom you don’t know (nepotism) but respect.  Make sure this farm is understaffed and has a reputation for being a tough work environment, so they learn that your farm isn't all that bad. 

  1. Encourage Change

For a lot of successful farmers, control is a big factor and it’s this subliminal infatuation with control which has made them awesome managers.  The problem is that it comes back to bite them.  Whether they know it or not, their infatuation with control and micromanagement is often what causes many farm kids to lose interest in the farming operation.  The kids feel helpless to make changes, because they feel they have to do its “dad’s way or the highway”.  The kids need to feel that they can make a real difference and turn around outcomes.    

  1. Withhold Praise

What motivates a man to get out of bed who was born with a silver spoon in his mouth and has a large inheritance coming some day?  Praise from someone they respect.  In my experience with the most successful farms, the hardest working young farmers work with the hope of earning their parent’s respect.  They want to hear a few complimentary words, more than they want air.  In these operations, praise is held back like a currency and is only given when deserved.  The farms whereby the parents praise their kids for every action are not necessarily successful because the kids think they are better than they actually are.  Similar to spoiling kids with too much money, giving too much praise can be counterproductive.  Yet, never forget to praise them from time to time when deserved or else they will grow to despise you. 

  1. Let them prove themselves

Many farmers don’t want to go to Florida for the winter, but they need to realize it might be the best thing for the farm.  When your son is in his late 20’s, for parents to go to Florida for a few months during the winter, it is one of the best things to teaching a son to think for himself and to take pride in the operation’s day to day success.  I am not talking about a 10 day holiday but a 3 month period from which the son/daughter can evaluate their management performance.  It is one thing for a parent to look over a shoulder and push a son to perform daily chores, but another if the son knows he is ultimately responsible for chore success.  Learning to problem solve without parental supervision (perhaps vet’s oversight) will teach your son/daughter to take personal responsibility to solving the problems.  This will teach your son/daughter to think of the operation as his sole responsibility, rather than a place I “punch in and punch out”. 

  1. Encourage Vision

Every farm kid needs a vision of what the farm is going to look like by the time he is by the time he is 40 and this vision is key to get him out of bed in the morning.  Getting your son/daughter to travel to visit large farms out of state and see different ideas is key to motivating them to create their own vision of what they want the farm to grow into.  Getting them to have friends whom are farmers is also critical.  Although it’s a pain in the butt for your son/daughter to want to grow/do things differently than the parent’s envision, this is beneficial in the long term.  They need their own drum beat to walk to. 

These are just a few ideas about what I am discovering is a big undiscussed problem within a lot of farm families, but I know the list doesn’t stop here.  I’m currently writing a book on “How to overcome the third generation curse” and would love your feedback: 8004742057chairman@agriculturestrategy.com 

Motivation

Motivation is a powerful force in agriculture.  Actually it’s the only force.  Really when it comes down to it, it’s motivation that gets a crop in off a field; not money.  In the end it’s motivation that makes money, not the other way around. 

Motivation is what drives a man to get out of bed at 5am without hitting the snooze button and during the day is what keeps a farmer’s mind focused on improving the efficiency of the farm, not on sports scores or what happened last night on American Idol.  The reason why farming is an industry that is dominated by families, not "wall street money" is the need for personal motivation to make farms work. 

I’ve seen sons that work for money.  They are the ones that want to quit harvesting early while their neighbors work until midnight to get a crop off.  Their father’s try to buy their motivation through increased wages, shares in the farm corporation and a new upgraded house to live in.  They try to crack the whip and throw cold ice on their sons to get them out of bed.  But the father’s don’t realize how they can’t buy motivation.  It’s from within.  They have the sailboats, but not the wind needed to sail. 

One time a father couldn’t figure out why his son couldn’t get out of bed in the morning and this mangy mutt came up with his paws and jumped on me, leaving huge mud marks on my starch white shirt.  The father kicked it.  I looked at him and said, raising a son to be a farm manager is like raising a hound dog.  Sometimes you’ve got to kick it, if it does something foolish; but if you kick it too many times; the only thing it will do is snarl at you and then one day it will just run away.  His son was snarling at him. 

In farming too often, we are only concerned about our own lives and what motivates us.  Let’s face it, often we are the narcissists whom are only concerned about our own lives, not the needs of others. In the short term, it’s easy to bark orders to employees or family members to get them to do the things you want done.  But a true leader is constantly thinking about the other family member’s needs, wants and desires.  What makes a leader isn’t job title or ownership in the company, it’s your attitude.  Sometimes a kind word, time off or listening to someone’s ideas are critical for the future.  It doesn’t mean you need to be soft on family members and every time give them what they want.  But it does mean that you got to be conscious of every decision you make and not only how does that affect farm profitability, but the long term motivation of that employee or family member.  You’ve got to ask yourself how can you motivate every family member to do more and be more passionate about the farm being as successful as you want it to be.  This requires putting “we before me”. 

If you want to have a successful business, the word “we” should be front and center on your mind.  How can you keep everyone in the business from your family members to casual employees to stay motivated on your business success and most importantly frame success in the same terms as you?   If you can accomplish this, then you won’t have to crack the whip or have daily frustration.  Everyone will be working towards accomplishing the same carrot.  True leadership isn’t barking orders and getting people to do what you want.  It’s motivating them to do what you want on their own.  

Our New Book's Last Page

Note:  I'm putting together a farming photo slideshow while reading the last page (below) from new book "Tough Times Never Last Tough Farmers Do". If anyone has any good farming photos they don't mind being used please send prior to Nov 9 to: president@agriculturestrategy.com.  Thanks.

Tough Times Never Last, Tough Farmers Do.  

On most family farms we have a business culture of being tough with one another.  We have power struggles and competition to see who gets their way.  Yet this behavior is destructive and causes farms to loose potential profitability.  Your family needs to do everything you can to stop butting heads and start pulling in the same direction.  This truck pull style of farm management is wasting time, burning money and frustrating family relations.  You got to get everyone pulling in the same direction.  You first also need to identify where that direction is. 

You first have to define what the farm is all about and where it is going.  You then got to change how you make decisions together so you are able to get from where you are at, to where you want to go quickest. 

You look at statistics of farming & you’ll quickly realize that in the past 200 years less than 50% of family farms survive.  You have to admit to yourself that there is less than a 50% chance that you will succeed.  In fact, if you look at the technology coming down the pipeline like robotic milker and self-driven tractors, the reality is that for the next generation of farmers only 20% of farms might survive.  You’ve got to realize you are the underdog.  It’s only by making changes to how you change that you’ll survive! 

Everyone thinks of farming like a country music video, with a farm boy driving his tractor up and down the corn field.  For some of you driving a tractor during the spring rush might be your favorite job, but it isn’t what farming is.  20 years from now you might not be even driving a tractor.  Farming is always changing. The one thing that remains constant isn’t the activities but the challenge of overcoming the impossible. 

Think about the pioneers who settled your farm.  They probably came with nothing more than what you could fit into a wheelbarrow.  They probably came late in the season and didn’t know what they were doing.  But when they got to your farm, there was no turning back.  They either had to make it work or die.  They probably came to your farm with big dreams, but there was a strange moment when they realized that they were all alone and up the creek.  There is no Calvary coming!  It’s just you alone that is going to make this work.  They had to solve overwhelming problems to create what you have today.   

Everyone is going to hit an unanticipated problem in their farm’s history.  There are simply going to be things that no matter how good of a manager you are, that you are going to be blindsided by.  If you are a farmer, there isn’t any question that you are going to be hit by a few critical crisis in the farm’s history but when.  The issue isn’t when you are hit with a problem, but HOW you deal with it.  What separates the boys from the men in farming?  It isn’t your balance sheet, how hard you work or how much you know about agronomy.  When you think about it, it isn’t the size of farm you start off with because there are many big players from the 60’s that aren’t around today.  It’s your ability to deal with problems and turn them into opportunities.  It’s your character of how you react to bad news and bad times brings out the best in you.  It’s also how you as a family come together to make/execute good decisions in bad times. 

Don’t wait until these bad times hit to retrofit how you deal with problems.  Because by then it will be too late.  You’ve got to take your family’s farm management from good to great today.  Be proactive.  Because by doing so it will make your farm more profitable today and also a better place to work day to day with your family.  It’ll make farming fun again.   Instead of focusing on being tough with your partners, focus on building a tough business culture where your family is constantly evolving for the better and your family can take on whatever the world throws at you.   

Tough Times Never Last, Tough Farmers Do.

Your farms has been through tougher times than this...

My friend’s dad always said “You think times are tough now, you don’t know what it was like to farm with 18% interest”.  And he’s right, my friend doesn’t and he never will.   It’s more than likely that we will never see 18% interest rates, he’ll be challenged by a whole different set of problems.  Every generation is going to have a different set of problems to overcome.  The holy trinity of problems for most businesses is: bad economics, the wrong people or you are undercapitalized.  Deal with it.  For one generation the challenge was the Indians, another a dust bowl and another is high interest rates.  Who knows what the challenge will be for our generation!  But what is key is realizing the attitude it requires to survive.  The attitude is that I am in a bad situation but I am going to win, no matter what it takes. 

This summer I’ve seen twitter feeds from a few farmers in Alberta whom are in their 30’s and this is their first big drought.  It’s obvious that they are overwhelmed and I feel for them.  They can remember the drought back in 92 but they were not the ones writing the checks at the time.  Over the past decade there has always been money in the bank when they were making decisions and everything kind of worked out like they had cash flowed it at the beginning of the year.  They’ve never really been in a situation where they had limited resources.    They have to scramble making some tough decisions in order to keep their heads afloat.  The decisions they make today won’t just impact them now but for the decade. 

There comes a time in every farmer’s life when he or she feel’s overwhelmed.  This is the day you go from thinking you know it all, to realizing you are in over your head.  This might happen the day after your Dad’s funeral and you are only 18.  It might not happen until you are 55 and you went and did everything your Dad said wouldn’t work, only to realize he was right.  That is the moment when a boy becomes a man.  The moment when you realize you are up the creek without a paddle.  What does it take to be a good farmer?  It takes a lot of confidence and yet also being scared **less at the same moment.  Just like war, it takes you making good decisions under fire when others are in the foxhole crying “mommy”. 

The statistics of farming are harsh.  For each generation, less than 50% of farms survive.  Each generation has different challenges.  What determines success isn’t who is better positioned, but who overcomes the odds stacked against them and makes things work when there is no way it should. 

There are times in the history of your farm where you have plenty and there are times when resources are extremely tight.  Your limiting factor might be dollars, it might turn out to be something different like manpower or even a lack of water.  It might be the moment that your stuck in a business partnership and can’t tolerate an in-law.  What makes a good farmer is being able to do without and dealing with the impossible.  Even impossible people.  It’s easy to farm by the textbook.  It’s tough to overcome the moments when you don’t have two nickels to scrape together and still pay the bills.  It’s your ability to make things work, no matter what. 

Think about the pioneers who settled your farm.  They probably came with nothing more than what you could fit into a wheelbarrow.  They probably came late in the season and didn’t know what they were doing.  But when they got to your farm, there was no turning back.  They either had to make it work or die.  They probably came to your farm with big dreams, but there was a strange moment when they realized that they were all alone and up the creek.  There is no Calvary coming!  It’s just you alone that is going to make this work.  

It doesn’t matter what the problem is, only you are in control of your solution.  And believe me in that moment, you’ll feel that you have your hands tied behind your back and can’t cut your way loose.  For instance, on top of an economic problem; you might be a dysfunctional business partnership were you have a partner who is incompetent and you feel it’s impossible to control the outcome.   Well suck it up buttercup.  That is just life.  Farming isn’t being in a country video with cute girls, it’s living the lyrics to a sad country son.  You either have to make it work or fail. 

Tough times never last, tough farmers do!   

 

Rational vs. Emotional Decision Making

I once had a new client who was an engineer whom suddenly had to take over the management of a sizeable hog farm in a very tough financial position after his dad died of what was suspected to be a suicide.  Obviously, he had a lot going on in his head and he called me in to help him 24 hours after the funeral.  I sat down with him and had a bunch of chicken scratches of ink on a piece of paper.  I asked him what was going on. He used his training as an engineer, to sit down and solving his problems. 

  1. He used a process called the mind mapping process whereby he got a blank piece of paper.  In the center of the paper, he wrote down what the problem or idea was. 

  2. He then expanded the idea with sub-ideas or sub-problems until it looked like branches in the tree. 

  3. He then ranked his problems. 

  4. For each problem, he started framing specific questions.  For instance, one question was how am I going to pay creditors $20,000 when I only have $10,000 in liquid cash available by that day? 

  5. He didn’t have the answer at the time, but because he wrote it down by the end of the week he did.  He carried around these questions in his pocket.  Every time he had an answer to the question, he wrote it down.   By the end of the week, he had the answer to most of these questions figured out.  

What this guy did this might seem nerdy and it is.  But what it did was get his thoughts down on paper and off his chest.  Instead of lying awake at night worrying, he was able to sleep like a baby because he had that cue card in his shirt pocket.  He didn’t immediately have every problem solved, but by knowing what he didn’t know; he had a list of problems to solve while he did his day to day manual labor. 

He then took a recipe card and one side he put down the actions he had to do that month on a list.  On the flip side of this recipe card, he wrote any outstanding questions that he hadn’t figured out yet.  When he got out of bed in the morning, he looked at his action list and it helped him keep focused on getting the critical things done.  He stroked one after another off the list and it felt, like he was making progress.  He then flipped over the card and looked at the questions of things he didn’t know but needed to figure out.  Within five minutes of waking up in the morning, he was thinking about those 4 problems that he simply didn’t have an answer to.  Over the course of the week, when he was showering and once when he was moving pigs, he got Eureka moments where he figured out an answer to one of the questions.  By the end of the week, that cue card was stained because he had kept it in his shirt pocket; but had an answer under each question in pencil.  He squeaked by a tough situation and is still farming to this day.

Now you might think that sitting down and writing it down is silly.  Only an academic would suggest that.  But the fact is that he was able to deal with his problems in a rational, systematic manner despite pretty overwhelming circumstances.  Had he not written his ideas onto paper like a nerd, his mind would be all over the place and he would get nowhere quick!  He was a trained MBA executive in an engineering company and because of this background he was able to overcome a set of tough circumstances most would cave under.  His dad got overwhelmed by the farm’s debt crisis and killed himself, but this engineer looked at it rationally instead of emotionally and within a week was able to solve a tough problem. 

When you are hit by a tough farm crisis, the issues aren’t financial.  It’s controlling your mindset and dealing with the problems proactively that is the challenge.  Having a DISCIPLINED method to organize your thoughts and keep “focused on what matters” is what will dictate success in the long run. 

Tickle Me Elmo

The “tickle me elmo” craze occurred in Christmas 1996 whereby parents paid 500% the going rate for a chidren’s toy.  They didn’t care what price had to be paid, these parents were going to do whatever it took to have the toy their kids wanted under the Christmas tree. 

It was a purchasing decision made based on emotion, rather than rational thought. 

Over the past decade, the same farming parents that critiqued Yuppie parents for making crazy purchasing decisions based on emotion have gone and bought land at 3x the going rate for even crazier emotional reasons.  These parents will do whatever it takes to get their kids into farming. 

It’s not just land that we’ve been buying based on emotion.  Everything from buying new machinery, to building dream homes to multiple families drawing wages from a one family unit farm.  We are simply not farming under the same mindset as the frugal farmers of the early 90’s who survived the 80’s.

Not everyone, but nearly everyone is guilty.  Certainly you can throw stones at a neighbor who has been more foolish.  But all that matters is what your situation and what you are going to do about it.  More importantly, how can you treat this farm crisis as an opportunity to grow and expand when your neighbors are failing?

History has proven that what wins battles is the ability to change strategy mid-course and ability to focus on winning the war, not just the single battle. Sometimes you’ve got to cut losses to strategically gain.  The issue is how “nimble” is your farm organization or are you cumbersome like the Titanic? 

A lot of farms have been bought because parents didn’t want to say NO to their kids and will do whatever it takes to “give them a chance to get into farming”.  There is a lot of farms whereby the “home farm” stretched itself thin in order to create a spin-off farm entity for a second son or daughter.  For many family farms, this spin off farm has put the “home farm” in a bad financial position. 

Your succession strategy seemed like a good idea at the time and was done under the best intentions, but you’ve got to face the current reality and make decisions based on the information at hand.  We are no longer dealing with $7 corn and could realistically be dealing with ~$3.50 corn for the next five year cycle.  For a lot of farms, they can’t cash-flow payments at these prices and it’s going to lead to a negative domino effect!  These succession strategies have to be re-adjusted and for most families that may mean that some family members have to make personal sacrifices in order to keep the “home farm” financially viable.   

The first thing about winning a battle as a general is understanding where you are at.  From there you can understand how to re-organize your resources, by winning the battle or cutting losses.   A Farm Financial Analysis done by a stranger will allow your family to OBJECTIVELY understand where you are at and then be a discussion point for changing strategy.

At Agriculture College we always were taught that the most farms that went bankrupt were the poor farm managers.  In the majority of cases, this was not the situation.  Many farms that went broke were the ones that were financially leveraged because the parents were trying to setup multiple siblings.  Interest rates dealt the finishing blow to farms on wobbly footing.  One kid might have been the victim and sometimes the whole family was brought down by stretching themselves too thin for altruistic reasons. 

If something isn’t done immediately to re-correct strategy, then it all could go. 

So here is the tough question:  How are you going to sit down as a family and reform strategy? 

What is tragic is that a lot of families will “bury their head in the sand” over the next two years because they don’t want to face the consequences and drama of renegotiating what is a bad succession strategy.  However, at some point these families will have to face the music and the later you wait, the fewer options you have.

Developing a financial strategy is easy.  In tough times, 80% of the challenges aren’t the numbers; it’s the joint decision making between family members.  It’s dealing with emotionally charged problems and making the best well thought through, rational decisions.  Having a facilitator there to make sure those conversations are constructive, not destructive can be invaluable both in terms of quality of decisions made and long term family relations. (Bias Note: This Is What I do) 

Here is the real issue.  How do you transform your family from a culture whereby “daddy’s going to buy you everything” to “we can’t afford this” or “son, we are going to have to sell your bike to buy groceries”?  

How do you have these tough conversations and make joint decisions which everyone can live with? 

 

ROI

Hyperinflation in land prices is masking whether we are good farmers or not.  Happy bankers creates complacent farm managers.  Sadly, it’s only when times are tight that we really brainstorm ways to innovate. 

I had a client who said to me “last year, we had a good year we made $100,000” and he honestly believed it.  For the previous three years, he had lost money and had the banker at the door.  He was so happy with himself.  I said to him, Lad your farm is worth over $12,000,000 in assets; you had less than a 1% Return On Investment (ROI).  He said to me, that is good right? 

I told him, the top guys in your region with the same assets and your industry are making 8-10% return on investment this year.  He said what do you mean?  I said, well a farm of your size should be making 800,000 to 1,000,000 this year.  You didn’t have a really good year, you are actually way under-performing. 

I didn’t tell him that fact to be a jerk.  I told him that fact so that he’d pull up his socks and look at farm profitability in a different way.  I wanted him to look at his farm in a different way.  

He argued stating how much his assets rose in value.   I countered his argument saying are you in the business of land speculation or are you a farm manager?  A spike in land values is only good to a 92 year old farmer wanting to retire in the next year and gift his estate to his kids in the city.  This farmer had a very large family and had big ambitions to set-up each kid with a farm.  If he wanted to achieve his vision, he couldn’t be happy with mediocrity; he had to be driven to be the most profitable operation in the county. 

When you are at an auction sale, there are a lot of neighbors at the event.  These days with the way that banks are giving away money, it’s easy to put your hand up and buy a farm, just like it was in the 1970’s.  But in five years times, when economic conditions are different and the banker is like a wolf at the door, who will be able to afford farm payments?  Only the farms that have exceptional return on investment.

Your farm has to be able to make profit, in the year of the worst financial crisis.  If you are able to achieve this level of profitability, then you can squeeze by when others beside you fall by the way side.  It’s just plain common sense.

When it was $7 corn, I had to stop a cash crop family from buying the farm next door until they had an outsider do a farm financial analysis.  The family really thought that the previous year was a banner year and they were set for unreal profits in the forthcoming year.  The mother was a full time book keeper and the wife was a commercial Ag Lender on Maternity leave.  The analysis revealed that the farm was losing $200/acre at $7 corn and was on the verge of bankruptcy.  The boys hadn’t cared about looking at the books closely because “the banker was encouraging them to buy the farm”.  Both brothers had business degrees yet they felt it was the banker’s job to tell them whether they should borrow money or not.  They themselves didn’t have any financial metrics by which they governed themselves.  This behavior is more common than you’d think and in my humble opinion, Generation Y hasn’t learned anything from the 80’s farm crisis!    

I have a huge problem with our approach to accounting.  We usually don’t get our books back from the accountants until 3-6 months after the farm’s year end.  Now a lot of accounting firms do provide you a financial analysis.  By that time, you are in a completely different season and that financial information isn’t relevant.  Let’s face it, most farmers only use an accountant is to avoid paying taxes not to make real farm management decisions. 

I recently had to sit down with a farmer that was on the verge of a farm debt crisis and didn’t know it.  We sat down and I said to him, his brother and his boys, we aren’t leaving her until we figure out a way to squeeze out an extra $1,000,000 out of this operation.  Within two hours, we had figured out a way to squeeze an extra $800,000 out of the operation ranging from changing feeding companies to not feeding veal calves to the kids working more hours and hiring fewer employees.  What amazed me was the question of why wasn’t those changes happening two years previously before the farm got into a financial bind.  The answer was simple.  We don’t push ourselves to find new efficiencies when times are good, it’s only when times are tight that we find new profitability in farming. 

Every farm should have the farm’s written target return on investment on the wall.  On the wall beside it should be your current return on investment.  Walking by this wall and seeing the difference will irritate many farmers to the point of thinking of new ways to improve the operation to improve.  It’s like seeing that scoreboard in a hockey game which tells you that you are losing by a goal and have 3 minutes to turn it around.  Numbers motivate! 

When you get these numbers on the wall, it changes family dynamics.  It gets everyone in the family brainstorming together as a team how to improve farm profit.  Ideas for change are no longer seen as a criticism of what dad has done in the past but good ideas on how to cut costs to achieve end goals.  It changes family dynamics! 

Rather than having a question about how you can squeeze an extra thousand dollars of profit out of your operation, you should step back and ask yourself how you can squeeze an extra 5% ROI out of your operation.  It’s not by brainstorming ideas, but the instilling a structured approach to brainstorming/implementation itself. 

 

 

 

It’s Either Me or Her

Sabrina and Matt had been married for only 18 months when Sabrina packed her bags and threatened to move back to Iowa. She loved her husband, but she didn’t feel welcome on her husband’s family farm.

The trouble had started a year earlier when a feed salesman came to speak to Matt’s father, Norm, about the animals. Sabrina had just finished her chores and joined in the conversation. Because she had a master’s degree in nutrition, she posed some good questions to the nutritionist. Soon the conversation went over Norm’s head. Norm felt that Sabrina had pushed him out of the conversation, and their relationship changed instantly. Within that moment, Norm thought that Sabrina had gone from being the ideal daughter-in-law to the witch that had to go. Deep down, Norm was afraid that Sabrina was going to start bossing him around. He was only 59 years old and wasn’t ready to give up control. “It’s either me or her,” he said. 

Narcissism is a term used to describe people who are extremely self-centered and oblivious to the needs and feelings of others. When it comes to farm succession, narcissism is one of the biggest threats to an operation’s continued success.

Few people understand that for some men, the farm is the center of his identity. The farm is who he is. It is his pride and joy. If there is even an inkling that the farm is being taken over, he may get very defensive. He has spent his entire life building the business, and he is used to having people follow his instructions and trust his leadership. 

Norm was surprised to realize that when Sabrina got involved in ‘his business,’ he felt as if someone had come into his house and started kissing his wife. To watch as someone else took the lead with a salesmen felt like a huge betrayal to Norm, one similar to adultery. He felt that Sabrina had somehow taken what was his and because of that she couldn’t be trusted any more. No longer feeling he could have Sabrina on his farm, Norm fired her.

Sabrina was devastated. She had grown up on one of the largest swine operations in her hometown. She lived and breathed hog farming, was extremely skilled and worked very hard. She loved her husband, but she loved farming more.   

Matt continued to work 15-hour days on the farm and barely saw his wife. This was definitely not the marriage either of them had signed up for. Sabrina became homesick and depressed, and even thought about suicide.  Norm wasn’t open to mediation. He didn’t care about Sabrina or Matt’s feelings. He only cared about his own insecurities and his need to be in control. 

Norm was so wrapped up in being in charge that he was stunned when Matt dropped everything to follow his wife back to her family farm in Iowa. Finding farmhands to complete Matt’s share of the chores caused Norm nothing but headaches. He was forced to sell the sows within 18 months, leaving him with no farm and no family. Dad’s infatuation with his own ego left nobody the winner.

This story shows just how powerful emotions can be. Norm, an experienced, rational and mature man, felt so threatened when someone else seemed to know more than he did about hog husbandry, he took drastic action. In other words, his raw emotions caused him to make irrational decisions, like firing his daughter-in-law who could have been a huge asset to the operation. This kind of thing happens all too often. 

Along with the fear of losing control of the farm, the fear of divorce is a quiet menace to farm succession and overall farm business management. The stress of managing a business and working with in-laws, combined with a more tolerant attitude toward divorce in the younger generation means that the rate of farm divorce is skyrocketing. When huge assets like farms are involved, divorce has a big impact on the rural economy. Divorce could cause more farms to become insolvent in the next decade than the total number that failed over the past century.

Family support is crucial to farm success so it makes sense to think about how to reduce the probability of divorce and increase the amount of quality time a husband and wife can spend together. Everyone has a role to play. Younger spouses and their parents or in-laws need to take some responsibility for making the relationship work, even through the rough patches.  Often in a family business, the in-laws are part of the problem for a marriage to work. Statistics show that whereas society is at a 50% divorce rate, it’s exponentially higher (>80%) for family business owners due to the added stress of in-law relations and stress from the business itself. 

When a new person comes into the family, weird things happen. People who are typically rational, kind, and down-to-earth may suddenly make erratic decisions due to deep-seeded fears that they themselves might not know about. It’s a very good idea to discuss these things with an outsider so that these feelings can stay in check. You don’t want to be the one who causes your son’s or daughter’s divorce. Remember, it’s not what you say, but how you say it. It’s important that your family has a time and place to deal with problems before they fester and grow. If you don’t acknowledge people’s feelings, then any attempts at a partnership will eventually fall apart. 

Farming with family ain’t always easy. But addressing these issues head-on will help resolve the majority of the problems you encounter before they cause too much damage.

Forgetting About Who We Are

I was raised to believe that if you save your nickels, the dollars will come to hand.  But the American nickel (5 cent piece) has another story to be taught to re-emphasize that point. 

On the back of the five cent piece is a picture of Thomas Jefferson’s mansion that he called Monticello. 

The house, which Jefferson designed, was based on the neoclassical principles described in the books of the Italian renaissance architect Andrea Palladio.  He reworked it through much of his presidency to include design elements popular in late 18th-century Europe. It contains many of his own design solutions. In other words, the house was fancy and much more than a farm house. 

At the age of 27, Thomas Jefferson built this mansion after he took over his daddy’s 5,000 acre plantation.  Jefferson wasn’t a self-made man; he used his family capital to build a house to fit his ego. 

Jefferson wasn’t just the third president of the United States of America; he was the third generation farmer.  He exemplified what I call “The Third Generation Curse”.  By the end of his life he has misspent the family fortune so that his daughter had to sell the plantation, nearly going into poverty.  A witness, Samuel Whitcomb Jr., who visited Jefferson in 1824 towards the end of Jefferson’s life thought it was run down. He said, "His house is rather old and going to decay; appearances about his yard and hill are rather slovenly. It commands an extensive prospect but it being a misty cloudy day, I could see but little of the surrounding scenery”.  After Jefferson died on July 4, 1826, his only surviving daughter Martha Jefferson Randolph inherited Monticello. The estate was encumbered with debt and in 1831 she sold it. 

Jefferson lived what is commonly referred to as the third generation curse.  They say it takes the first generation to start a farm, the second generation to grow it into an empire and the third generation to fritter it away.  Jefferson had inherited a flourishing 5,000 acre plantation which in it’s day would have been significant sized farming operation and in his lifetime had mismanaged the family farm away. 

Jefferson lost perspective of who he was.  He forgot that he was a farmer first and instead of reinvesting capital back into the farm to grow it; he spent it on his own lavish lifestyle and lost focus on squeezing every nickel out of his operation.  For the short term, he could pull off the bad investment of family capital but in the long term it left him living in squalor.  Weekly I see farm families living this way! 

Now I should state, that Jefferson is one of my favorite presidents and I am spinning a negative story on a man whose impact on history was enormous and whom I greatly admire.  However, the vast majority of third generation farmers will never achieve much beyond their farm.  Yet they will think that they are rock stars in their community like Thomas Jefferson, but never will be. 

A survey of the top dairy operations in Minnesota revealed that the biggest issues these dairies were having was the disagreement between father and son about how much time the son spends in the barn.  Often I see sons who say “I’m not going to spend my life working like my dad did.  I’m going to enjoy my life and spend more time with my family”.  I remember one son shutting down the combine at 5pm because he wanted to go watch his son’s hockey game and thus the entire operation came to a halt.  The neighbors worked until midnight and got another fifty acres off that operation, while the son played pickup hockey in a men’s rec league after watching his son’s game.  It rained the next day and 50 acres of uninsured white beans never got off the field, costing the farm >$20,000.  Yet the son felt entitled to building a new house, similar to Monticello because he “deserved it” after working so hard.   

How many third generation farmers spend family capital on building a lavish home in their mid 20’s or 30’s instead of pouring cement for new barn foundations?  How many couples do you see spend money on holidays, not reinvesting capital into replacing machinery and being stuck fixing scrap iron later in life.  How many third generation farmers get involved in non-farming activities/passions completely loosing perspective of who they are and where they need to focus their attention?   

If you think you are Thomas Jefferson and are going to change the world, then sell your family’s farm and put your inheritance into mutual funds.  Make 5% interest or greater off your family’s wealth instead of losing it.  Buy a nice house in town and live off the dividends.  However, if you are a farmer be a farmer.  Don’t pretend to be a farmer, disappointing your family and squandering your family’s capital. 

Are you a farmer or a playboy?  Decide!   

 

 

 

 

 

 

 

 

 

Sitting on your Hands

Ask any solider, being in garrison sucks. 

For a warrior, the worst thing that can happen is that there is no war to fight. 

Being in Garrison is the term used for the time that a professional soldier sits on his army base, preparing (or waiting) for war.  There is only so much polishing of belt buckles and cleaning rifles and doing drills that an action oriented man can take.  For action oriented men, it drives them stir crazy. 

The same is with farming and investing in Agriculture. 

As my Grandpa said:

“Walk while the others are running and run while the others walk”.  My Grandfather nearly bought a farm a year for nearly a decade when everyone said “there is no future to farming” because he had “sat on his wallet” during an economic boom.  He set up 4 sons with viable operations and retired young. 

For a son to be on a farm which is focused on paying off debt, while his friends are going in over their heads in debt is a frustrating factor.  However, it might be a prudent move; depending on your perspective. 

On a lot of farms, both the father and son might recognize that now is not the time to invest.  But instead of both generations taking on the world together, they start to in-fight amongst each other.  Military Police are used mostly for the reason of soldiers fighting each other during garrison, not war!

I am not going to go into an economic debate as to whether now is a good time to invest in Agriculture.  I could argue it any way, any day and come up with a convincing argument.  It all depends on your personal perspective of the future economic conditions, your long term business vision and the opportunities locally.  I help men make decisions, but don’t tell men what to decide. 

However, what I am saying is that wars are won during garrison, not on the battlefield. 

How well prepared are you for an opportunity when it does come up?  Why? 

This summer, I had a farmer who feels that it’s not the right time to invest.  He feels land prices are out of control and that within three years there is going to be a serious economic adjustment, creating real opportunities to invest.  I don’t care if he is right or wrong, what I care about is what is he doing while waiting? 

To be honest, he is going crazy.  Not crazy crazy, but this man is not used to waiting.  He is action oriented.  Like Toronto Mayor Rob Ford’s addiction to Crack; he is addicted to growing farms and creating opportunities.  The man is an empire builder and without his ability to grow his empire, he feels completely lost.  The man was extremely successful in all aspects of life, but without his ability to “do a deal” he was reverting into a slumber of depression. 

I have an immense respect for this man.  Immense. 

But this is what I said to him “What are you doing while in garrison, to get ready for war”? 

He told me that he had bank approval already for millions and told me of other investments that he could quickly cash in, if the right opportunity presented itself. 

But I said, Fred what are you doing to get ready for war? 

We then laid out a program for:

  1. Learning.  What farms do you aspire to be like?  In Canada Dairy farmers do chores daily and occasionally go to neighbor’s barn expansion open houses.  Due to restrictive marketing systems, most of these guys are 200 cow dairy operations whom have a pipedream of someday milking 1,000 cows but they have never been in a barn larger than 500 cows.  By US standards these operations are small, but in their minds these farms are big players.  They are big fish in a small pond.  They never go to California to tour large herds or to learn the mindset of a large herd operator.  If your 20 year goal is to be milking 1,000 cows, then you need to spend your time learning as much as you can from 1,000 cow operators; not neighbors whom are milking 200 cows at a scale similar to yourself.  Regardless of what type/size of farm you are, it’s critical to identify larger farms that you want to become like and then get to know these farms intimately.   Instead of being a big fish in a small pond, you need to start swimming with bigger fish in different ponds and expose yourself to new ways of thinking. 

  2. Brainstorming.  When you go to the grocery store, there is more offered than corn, beans and wheat.  As farmer we are in the business of growing commodities, not food.  We need to change our mindsets to become more profitable per acre.  Spend the time researching alternative crops and production methods that will give you competitive edges.  Will planting a unique strain of apple trees on your current acreage be more of an opportunity in 5 years than buying the farm next door?  

  3. Profitability.  What are you doing to demonstrate exceptional management so that whenever you do borrow money, it’s at 1% below what your neighbor pays?  What are you doing not just to be in the top 1% of farm managers, but to be in the top 1% of managers in all aspects of farm management? Does your Return on Assets exceed 7% per year?  More importantly, what paper trail do you create to show that you are an exceptional manager so that your banker can go to his boss’s boss to prove that you can manage a risky loan when Ag Lending policies are fiscally conservative.        

Sitting on your hands, like a soldier in garrison can be the best strategy for a farm family.  However, make sure you are making the most of your time preparing for war.  Remember Preparation creates Opportunities! 

 

 

 

 

Girls Can Farm Too!

Many fathers would harshly criticize anyone at the coffee shop who would say that their daughter couldn’t farm. Yet, too often what they say and actually do is completely different! 

 

In families with multiple siblings, who becomes CEO of the farm isn’t based on merit but based on anatomy.  The issue of estate planning is a completely separate topic than the issue of farm management and leadership.  Many farms are splitting equity equally amongst siblings but rarely do you see a farm corporation whereby the daughter is being groomed to be CEO. 

 

On too many farms, the daughter is becoming CEO of the farm corporation only if there aren’t any male heirs.  In fact the daughter isn’t included in strategic conversations as a partner.  Dad calls the shots to his grave and never grooms her to manage.  She may work 100 hours a week on the farm, but she is never really treated as a full partner by her father.  She’s never groomed to manage the farm and upon her father’s death she’s left overwhelmed in Dad’s shoes.  

 

Any fool can teach his son/daughter how to drive a tractor straight up and down the field.  Any fool can leave his kids with an estate whereby a brand new tractor and full line of equipment are sitting in the yard.  But very few parents are successful in teaching their kids to manage so that the next time they trade in that equipment, the kids can afford to buy new, buy twice the horse power and buy three vehicles from the cash flow of the previous one. 

 

Farmer’s daughters too often do all of the work in the final years, but it’s Dad who goes into the machinery dealership or into the bank alone to negotiate the purchase of the tractor.  It’s these “soft skills” which are never taught to the daughter, but are taught to most sons.  These skills are more invaluable to teach your daughter than how to plough! 

 

If there are multiple siblings, it’s usually the son that goes with Dad to learn how to negotiate these deals.  But rarely ever the daughter…

 

I had one client whereby there was two delinquent sons and a stellar daughter.   The farm was one of the largest in the county.  The 63 year old father had just been notified that he had terminal cancer and he had me out to the farm to setup his succession strategy. 

 

His one son was a hard worker but also a drug problem.  The other son had a hard time getting out of bed and was the first to head home.  Both boys were farmers, not out of passion but because it was easy to stay home instead of “venturing off into the world”.  The daughter had multiple job offers after finishing top of her class at University, but had a deep desire to go home and farm with her dad. 

 

It was the daughter that did all of the work.  Since she came home to the Dairy Farm she had turned around the production both within the cow herd and calf barn.  The calf death rate went from >30% when the lazy brother was doing it to 4% when the daughter was doing it.  Due to better feeding, milking protocols and herd health the cow’s production spiked 20%.  She worked 70+ hour weeks consistently and was meticulous about everything she did. 

 

She represented everything that was right with girl’s farming, yet everything that was wrong.  She was drop dead gorgeous.  She had several Dairy farmers vying for her heart.  She didn’t want to move to his farm to become a “Farmer’s wife” but wanted to be the farmer herself.  “he can move to our farm and work for me” she said.  But her father laughed thinking that was a foolish thought.  He thought she’d be married and living on her husband’s farm in 5 years…

 

Dad had me out to his farm to meet with his son’s about succession planning.   The Daughter was going to get some assets, wasn’t even being considered for succession.  It was all about the boys and Dad was beside himself, not knowing what to do.  He felt neither son was competent enough to take over the management of the Dairy and thought the farm would be sold within 10 years if he gave it to the sons.   He even was wondering about selling the farm and setting up each child with a house and a trust fund. 

 

The father had been trying to groom his sons to be managers of the operation, but they didn’t take the initiative.  To them, the farm was simply a job. He made a smart alec comment about his daughter putting his sons to shame and “it was too bad she wasn’t a boy”. 

 

I then made him realize that his daughter was competent to be CEO of the Dairy and she could best manage her brothers to be good employees.  If they didn’t listen to her, she could fire them but the could retain their equity in the corporation as absentee owners.  Together, the three kids could take on the world together.  The farmer was skeptical at first, but after a few days was on board… 

 

I’ve also had a client family whereby the daughter was now 68 and her two delinquent/younger brothers were in the mid 60’s.  Back in 1981 their father died suddenly leaving the estate in shambles.  It was her leadership that kept the sizeable farm together over the years.  But because the father never named her as CEO and her gender, it was two decades of daily bickering and lost opportunities. 

 

It’s not the Parent’s fault for being chauvinistic.  It’s a cultural norm which is over for 2,000 years old and it’s going to take generations to change.  Even farming mothers who advocate women’s lib sometimes catch themselves falling into the trap of chauvinistic paradigms. 

 

The way to fix this issue on your farm today, is to change the decision culture.  Family decision-making has to evolve to becomes a group process where the daughters are included as an equal partners.  You have got to start having monthly meetings with all of the key family members where the business issues are discussed openly.  No more, Dad discussing strategies one on one with the kids, with the Daughter being the last to know.  

 

If you are a female and serious about being a farmer you need to be at the table when decisions are made. You need to be integrated into the business as a decision maker, not just as a shareholder.    By doing so, over the long term you’ll be regarded as a real decision maker.

You’ll be regarded as a partner, not the princess!

Read More

Don't Complain About The Ref's Call, Change The Rules

The farm had been losing money for years and only its rising land values had kept the bank complacent.  The wife Ida laid down the law that either the farm started making money or else it was to be sold, even if she had to file for divorce.  She loved her husband Jack, but she didn’t want to spend her retirement years penniless because her husband had an addiction to machinery and wouldn’t listen to their vet.

The problem?  Jack felt that he knew more than the experts.  He was a know it all, yet knew very little! 

Jack had three kids whom were keen to come home to farm, yet one if not all of them were about ready to quit because none of their ideas where being considered.  If the sons suggested black, Dad would insist on white; just to prove he was in charge.  Sadly, to some extent this happens on a vast majority of family farms at various levels. 

There are men whom you can’t tell them what to do.  However, you can help them better organize their thoughts and hold them accountable to doing what they’d say they’d do. 

I had a meeting with all of the parents, the three siblings that were involved in the farm.  We also included their vet, nutritionist and agronomist.  What I did was challenge the family to break down the business into different components and then identify the critical things within those components that were critical to profit.  Then I challenged the family to increase profit in each component by 20%. 

The format of the meeting was for the family to brainstorm themselves what they wanted to change.  The nutritionist, agronomist and vet were there as information resources.  My focus as meeting facilitator was to get Jack talking and for him to volunteer the ideas, not to tell him what to do.  If Jack thought it was his ideas and he was in control of the process, then these ideas would be adapted. 

The vet was skeptical of the process going into the meeting but within an hour was completely floored.  Jack started to volunteer suggestions based on advice the Vet had recommended years before but Jack had dismissed.  Yet when pushed in a positive format to improve farm profit by 10%, he became in favor of the ideas because they were his.  The kids contributed to the ideas and within three hours, we had 7 realistic improvements to the farm operation that should have improved profit by at least 20% without costing more than $10,000 extra.  It was as simple as picking dollars off the floor.    

The real challenge was implementation.  I knew that as soon as I left the operation that everyone would forget what was said and it would be business as usual.  For this reason, I got the family to sign a one page family contract which:

  1. Identified the dire nature of the situation and the need for change. 

  2. Listed the seven major points agreed upon and roughly how much money would be saved in 2014.

  3. Who was responsible for their implementation and by when. 

  4. An accountability agreement whereby each person agreed to pay $5 for the first month each item didn’t get done and $50 each month thereafter.

  5. An agreement to meet monthly at a set time to review implementation for the next year.   

In the month following, I knew that half those tasks wouldn’t have gotten done.  The farm got busy with day to day challenges like putting the corn in and taking off the hayledge.  But then I sat down with them and helped them figure out how much potential profit they had lost because they hadn’t gotten those tasks done.  It was over $20,000 and they quickly realized that was more than they had paid themselves that month.  Little things like testing for Ketosis or changing the heifer’s feed ration, add up to big savings to the farm’s bottom line.  Having an outsider hold the family accountable, made the family aware of the importance of follow through and got things done the next month! 

A third party holding family members accountable also eliminated internal power struggles and disappointments when other family members let the team down! 

The bigger thing was the introduction of metrics (measureable facts/numbers).  What we did in the exercise was identify the critical things that determine farm profitability.  We measured the things that influenced farm success, not the things that resulted in farm success.  For instance, we measured % heifers pregnant at 14 months; not the number of heifers calving.  From these metrics, we then created a dashboard from which we could monitor the farm’s success and monitored these numbers as part of our monthly meeting. 

By me coming back, month after month to ask “where are you at with this metric” it got the family focused on the forest, not the trees.  I forced them to put dollar bills into a jar for each metric that they didn’t achieve on target and fined them in proportion to the potential profit they were missing.  For them having to dig change out of their pocket made them cognate that they were losing money as a result of their lack of action.  It changed the culture of the family business from “fighting fires” to focusing on getting the critical things done right and done right on time! 

With the family measuring themselves against self-set production targets, they became keen to make changes in order to achieve these targets instead of being opposed to change.   They started actively listening to the advisors, instead of distrusting his advice.  The reason why?  Numbers don’t lie! 

So what is the walk away message for any young farmer?  Instead of telling a Dad WHAT TO DO, get the farmer to have an internal process that CHANGES HOW THEY DECIDE.  Get the farm family to identify their top 10 weaknesses that affects profitability and then get the family to start measuring the factors which measure success.  Then start using external resource of information (i.e. your vet) to help the family solve these issues.  By the farm recognizing how much money they could make if they hit these goals (gap analysis), they’ll be motivated to take a second look at solutions they previously dismissed as too costly. 

Most importantly, change your culture of accountability.  Often family patriarch’s and family members don’t get things they’d say they do done and this costs the farm bundles.  Instead nagging, giving the silent treatment or having power struggles, get an outsider to hold each family member equally accountable at a specific time each month.  There will be things you forget to do as well and it’s only through a third party holding you accountable that you are going to change your habits.    

Instead of “banging your head against the wall” find a door.  Focus on changing the decision culture of your farm, rather than complaining about bad decisions. 

5 Languages of Love

Think about Christmas morning, what gift would you rather receive?  When I was 14 at Christmas I was hoping for a shotgun for Christmas and instead got tickets to the Opera with my mother.  I was Huckleberry Finn reincarnated and had no interest in spending quality time with my mother at the Opera.  The tickets were expensive and my mother thought that I’d be delighted.  But she obviously didn’t know the hillbilly son she raised and was gifting me a present based on what she wanted, rather than what I wanted. 

It seems so silly to talk about love to a reading audience which consists mostly of farmers.  Believe me, ten years ago I would be reluctant to have a conversation with any of my readers about this topic.  It’s a topic real men simply don’t discuss.   However, the issue of love is one of the root cause of why we do what we do.  Sometimes it can be a good thing, but many times it’s creates dysfunctional behavior and is often why I get called in as a mediator.  It is the root issue which causes many family empires to fall!    

There is a book by Gary Chapmin called “The 5 Love Languages” that every farmer should read. 

It outlines five ways to express and experience love that Chapman calls "love languages": gifts, quality time, words of affirmation, acts of service, and physical touch.  Chapman argues that, emotionally, people need to receive love.  He also writes that people should not use the love languages that they like the most but rather the love languages that their loved ones can receive. 

The problem I often see with farmers is that they demonstrate their love to their family members in one way, but the person that receives this gift isn’t at the same “love level”.

It’s like trying to fit a square peg into a round hole. 

For instance for one son, his father continually wrote checks giving his son everything because the father had grown up with absolutely nothing.  The form of love that the father favored was giving.  Yet the son didn’t want money or things from his dad.  He was about to reject his $10,000,000 inheritance of a poultry farm and get a job in town.  He had grown up with his Dad always working and essentially his dad had been a stranger in the house.  The son wanted to spend time with his Dad that didn’t involve making money (farming together).  The son wanted to go fishing with his dad or go to a hockey game.  The son wanted his Dad to give him more quality time.  The father thought that time not spent making money (working on the farm vs. fishing) was time wasted. 

The two men had different forms of love that they desired. 

Farm Succession is the time where the languages of love become most predominant.  For a lot of patriarchs they feel writing a check or gifting a farm is the ultimate form of love.  However, for their son or daughter, they often expect a different form of love often a word of praise or time spent not farming. 

I often see fathers gifting a farm asset to a son and not getting the gifts fully appreciated in the way that they should be.  However, the son wants to be gifted “words of affirmation or praise” for the hard work the son has done.  The father keeps gifting more and more equity of the farm corporation, figuring that would solve the son’s grievances.  Often the accountants are of the same personality type as the fathers and figure gifting equity or the farm asset entirely is the solution.  However, it isn’t and it leads to very bitter family disputes, ending in an unhappy family. 

For some farm families, saying “I love you son and am proud of what you’ve accomplished” is simply taboo.  However, it is exactly the form of love that some men needs to hear in order to be functional. 

Often this lack of understood love, will drive men to work harder.  However, after a time of not receiving love in a format that they can recognize will feel completely rejected and hatred will develop.  They will start to become negative and bitter.  According to my granddaddy, a good dog needs to be pet, but sometimes needs a boot in the ass to correct bad behavior.  However, if the dog only gets booted and never pet, then it becomes bitter.   This creates a good guard dog, but not a good family dog. 

The same scenerios is with men.  Without a man experiencing love, it creates a vicious fighter but not a good business partner or family member.  Love makes the world go round…    

Alcoholism is an obvious form of a dysfunctional vice and there are a lot of factors that contribute to it.  However, often one of the root causes is an emotional need that isn’t being met by a key family member that the person needs love from.  A good example would be a son who worked hard for his father’s praise but never received it, drawing to drinking excessively to escape the frustration and stress of working with a man who is always critical of every move the son made.  Too often I’ve seen father’s blame the alcohol or the foolish behavior, but never realize that a few kind words would fix all problems.  The father blames the effects but not the root causes.  The root cause isn’t the alcohol, it’s the man’s poor self-esteem caused by a lack of praise which is one format of love some folks need worse than air itself.  The alcoholic has to spend his life in and out of rehab when a few kind words from Dad would fix the issue. 

Father’s often misunderstand how a few kind words of praise could turn around the life of their son or daughter.  They think that providing a kind word or other form of a gift is foolish and outside their business culture.  That is because their form of love gift is different than their kids or wife’s.  Like the tower of Babel everyone is speaking different languages to one another and not understanding why no one understands one another.  This is what leads to frustration, confusion and hatred on a family farm! 

We often think about what form of gifts we expect.  The question is, have we ever thought about the gifts others in our lives need?  How would you classify your family members?  What form of love language do they need? What drives them and why?  How do you interrelate to them and how can you better relate to them by giving them a gift they’d actually enjoy, not what you’d enjoy? 

So the question reader is this, are you going to rethink about how you relate with your family members?  Are you going to spend five minutes thinking about your family member’s personality types and how they are different than yours?  Are you going to start giving what they need, instead of giving them fluff they won’t appreciate like gifting opera tickets at Christmas to a 14 year Huck Finn? 

 

Don't Vote Dad Off the Island!

Thomas Henry Ford created a system whereby he paid five times the standard wage to attract the best of the best.  The flip side of this policy was that if you didn’t meet his standards, you got fired.

Under Jack Welch’s leadership in the 90’s, General Electric fired their bottom 10% of performers every year.  It created a culture of “whose head is on the platter” this week?  Any mistake became a reason for termination.  This created a highly competitive business culture which didn’t create team harmony but did create incredible results. 

Coincidentally, during this time the most popular television show was “Survivor”.  This reality T.V. show weekly “voted one character off the island”.  Only the strong survived.

Unfortunately on too many family farms and family businesses, we have this culture of survivor.

Let’s take a family farm whereby there are three brothers starting off together.  During their teenage years, they had spats like brothers do but fundamentally get along.    Then in their early 20’s it became evident that one brother had a conflicting personality which rubbed the other two brothers wrong.  He was “voted off the island” either getting setup with his own farm or getting a “glorious” job in town.   

Then within five years Dad becomes a problem.  He stands in the way of the two boys making good decisions together.  Soon enough Dad gets “voted off the island”, through a hostile insurrection whereby either succession planning happens or else the boys are going to walk off.  So soon dad is sidelined from management and often is forced to live in town away from the farm’s business.   

Then it leaves two brothers farming together.  Bliss for a few years and then hell for the next ten.  They both get married and believe it or not, the wives have issues with the business partnership.  Sometime in the mix, nephews get involved and the strain of an uncle not being able to “discipline spoiled brats” gets in the mix.  Soon enough the boys are at odds with each other.  It becomes a power struggle.  Yet again, another game of survivor; leaving only one man on the island. 

 This “culture of survivor” leaves unprofitable farms and lonely Christmas dinners. 

Edward Deming was an American statistician whose philosophies were polar opposite to Henry Fords and fifty years later his methods nearly put the American Automotive industry under.  Ford adopted his philosophies in the 80’s; whereas GM did not and this decision was one of the leading contributors to GM going into bankruptcy. 

Instead of expecting perfection, Deming expected imperfections and flaws.  He celebrated flaws.  He got Japanese manufacturers to embrace mistakes and problem solve to prevent these mistakes from happening again.  Instead of playing the blame game, they got good at team problem solving and making sure mistakes don’t happen again.  They even got good at anticipating problems before they occurred.  It’s for this reason that Toyota was able to build better quality cars faster and cheaper.  Instead of a culture of “serving someone’s head on the platter” they got good at “putting their heads together to solve problems constructively”.   

When you are an automotive manufacturer, it’s easy to fire folks and replace them with better workers.  However, you usually have to go through 10 employees to get one employee that meets your expectations and they usually are hard to retain on farm wages.  Unless you are from a family of 11, this is not the way to go!

Firing family, makes Christmas dinner plain uncomfortable.  More importantly, it makes every other day of the year with the relative you’d like to fire but feel you shouldn’t, just plain uncomfortable! 

Nobody is perfect and yet with most family farms we have a culture of expecting perfection which leads to non-stop frustration and repeated mistakes.    The problem is that we expect a standard of perfection.  What happens if we did the opposite and assume a culture of imperfection?  What happens if we expect flaws and have both the right systems and attitudes to deal with them?  What happens if instead of sweeping problems under the carpet, we had a method to proactively deal with them?

I walked onto a farm which was known for being the best managed operation in the county and often in other farm meetings, they refered to what that farm did as the gold standard.  Yet they had the culture of playing the blame game and the day I showed up, the one brother had just gotten back from rehab and was just about to “get voted off the island”.  Part of the reason the one son had a drinking problem was that he was the scape goat for many problems on the farm and in the previous year he had become a closet drinker due to the pressure of being family screw up.  The more he screwed up, the more he drank and the more his head was in a fog; the more he screwed up. 

I started meeting with the family on a monthly basis and in several categories ranging from production to human resources, we had each sibling/parent identify one way to improve how the family worked together.  It wasn’t an hour of playing the blame game, but actual problem solving.  For that alcoholic son and actually the entire family, it changed their entire lives.  By picking away at one problem in multiple categories, it created a hope for actual productive change; which changed everyone’s attitude.  For each meeting we had, we walked away with 5+ improvements ranging from scheduling time off for weekend holidays to finding/fixing $110,000 production mistakes in their breeding program through simple management changed.  Over the course of the year, we had made over 50 improvements and that family went from hating each other, to actually getting along fabulously at Christmas. 

They felt that having an outsider to act as a chairman for those meetings was invaluable.  It forced them to discuss the topics they didn’t really want to tackle in a constructive not destructive manner.  Nobody was allowed to leave until topics where addressed, resolved and an actual implementation was developed.  Having someone to come back at month’s end to hold everyone accountable to implementation and to fix the root issues of why plans didn’t get done was even more critical.  It leveled the playing field and when I left, dad went back to being boss and the family back to being a happy family instead of 30 days of being a begrudging family.    

Creating a culture whereby your family looks at the facts and deals with the facts, instead of blaming each other for the problems or either sweeping problems under the rug is critical.  Instead of farming being a game of Survivor or Family Feud, with the right business processes it can be fun/wholesome like the Dukes of Hazard. 

 

Reform The Marriage Act Now!

Dear Premier Kathleen Wynne or is it Minister of Agriculture Wynne?

When are you going to start delving into real agriculture issues that affects real Agriculture? 

If you want to actually do something for agriculture, then you would deal with the marriage act immediately.  If you don’t, more farms will go broke over the next decade from issues spiraling from divorce than the number of farm bankruptcies over the past 100 years altogether. 

Although Agriculture is a conservative society, the number of cases of divorce are skyrocketing.  Soon close to 50% of farmers will be faced with the possibility of divorce and this will have a profound impact on the financial viability of the Agriculture industry. 

Dividing a farm’s assets is much different than a factory working splitting assets such as the house, car and kids.  It’s a family business which took generations to build a capital base and after division, simply becomes economically unviable for future success. 

Prenuptial agreements in themselves aren’t air tight.  Within the same day, one lawyer will argue both for and against the same type of prenuptial.  But the bigger issue that hasn’t been addressed is the dynamics that a signed prenuptial and also an unsigned prenuptial creates.  If a bride signs a prenuptial then it often makes her feel detached from the family.  If she doesn’t sign a prenuptial then her in-laws will live in fear that she will divorce and take half of the farm.  For either case, with many families this is a serious unspoken problem that is ripping families and family businesses apart. 

This fear creates more fears. 

Is it right that a spouse is entitled to half of his/her partner’s assets seconds after the wedding ceremony?  No!  However, what is even worse is the way pre-nup agreements are splitting families or the way that THE FEAR of divorce is splitting family relationships to the point it’s CATALYZING divorces. 

Over the past several years, we’ve had a very prosperous agriculture economy for most industry sectors.    However, corn has fallen from $7/bu to $3.80 and over the next several years it might be tight.  .  I fear that many of these farms will fail once economic conditions change.  You can’t write a check for half the value of a business without increasing the value of the business expect future success during tight times.  This is especially in an industry where the Return On Assets (ROA) is less than 5% on average.  Many farms are financially over extended due to divorce and any interest rate jump could seriously impact the viability of these debt burdened farms.

If farm families catch up to the societal norm of over 50% probability of divorce and there are multiple partners within the farm, it is a situation which could affect almost every family:   

  1. Is it right that a man or women gets half of the spouse’s assets two minutes after marriage?  No!

  2. Is it right that a woman is forced into signing an air tight and yet ridiculous prenuptial agreement three days before the wedding, only to be forced onto a country road with nothing 15 years later?  No! 

  3. Is it right that a wife doesn’t feel part of a farm family because she has signed a prenuptial agreement and thus emotionally detaches from both the family and the farm?  No?  Does this have more of an economic impact than ever before considered to the success of the family farm?  Yes!

  4. Does this spiral a culture of distrust and hatred between in-laws and newlyweds?  Absolutely.  Is it sick that grandparents barely hold their grandchildren due to this mistrust caused by prenuptials?  Extremely!   Have I seen this happen, all spurning from the day the prenuptials brought up?  Yes! 

  5. Is it right that a succession planner has to ask the wife to sign a prenuptial agreement five years after the wedding in order to get family assets into her husband’s name?  No!  Does it happen?  Yes!  For many families, it is the only way that the family’s assets can be transferred into their kid’s name. 

  6. How many farms with mature adults managing the farm have not started the farm succession process because of the parent’s fears of divorce?  Many. Way too many!  How many marriages are being strained to the point of divorce by the stress of farm succession due to the parent’s fears of a divorce?   Many!   How many grown men own nothing after 20 years of hard work because of this fear of divorce, only to have his life work divided up and sold to non-farming siblings?  Many! 

  7. How many farm kids are not growing up on the family farm because of a messy divorce?  Many!   

  8. How many family patriarchs have told their son that it took 3+ generations to build up the family’s farm and it’s not going to be put out of business because “you can’t manage your wife”?  How many women live in fear of leaving the farm due to concerns about domestic violence or a even worse, Tony Terpstra type of paid assassination?  More than you’d think.  It’s a serious unspoken problem! 

  9. How many sons/daughters (like me) are not going into farming because of a fear of their parent’s divorcing or the uncertainty that the environment brings to a business’s future.  How many sons don’t talk to their parents due to the issues created by a divorce and the son’s future livelihood?

  10. How many farms will be affected in 15 years by the economic impacts of this social phenomenon unless something is done by our rural politicians?  More than you can count.   

I know that the issue of divorce is something that affects non-agrarian society as well.  However, the capital at stake took generations to build and without that capital the businesses simply won’t exist.  The land will continue to be farmed, but by larger farms whom will put less into the local economy and the social fabric of Rural Ontario. 

This isn’t just an issue of the family farm but represents many issues had by small family business owners.  The issue isn’t the farmers, it’s the politicians whom don’t reform the laws.  Without reasonable laws, chaos comes into play.  Because politicians are afraid of “opening a can of worms” many families will live in strife! 

Part of getting married should include an exit strategy clearly spelled out.  It should be a simple document with multiple choice options to ~10 common issues of divorce dispute (ex. Division of assets).  Each couple can select what option works for them.  It should be a fourth document that is signed at the time of the wedding ceremony and is signature by two witnesses.  Thus it’s clearly spelled out without being awkward like a prenuptial agreement.  It’s an exit strategy and will prevent many headaches.

Having an exit strategy clearly defined will help couples focus on repairing their relationships during legal separation rather than focus on the battle of “who gets what”.  It eliminates many fears and enables everyone to focus on making the marriage work.  It will actually save many marriages. 

Establishing your own 10 Commandments

With each new generation, every family farm is going to grow in a different direction. 

The question is how? 

It’s natural for a son to want to grow a farm in a different direction than his father or grandfather would.  It really doesn’t matter what the son grows or how the production parameters are different.  The question that matters is, are the same principles which made the previous generation successful being applied?  Or are they being forgotten, resulting in an 80% probability of failure? 

I once had a father/son situation whereby it would be impossible to be a better hog operator than the father.  He had immigrated to Canada with nothing and had built a sizeable multi-site hog operation. 

One of the reasons, he had achieved this success by always working out his mistakes with a pencil first.  The father had never made any investment which didn’t return at least 7% ROI on paper first.  Granted there was a few times, that investments didn’t pan out as expected but overall he had been extremely successful. 

His son was an extremely hard worker and I simply could not speak enough praise for his character.   He shared many of the traits of his father.  Yet he wanted to be the opposite of his father.  He complained that he was tired of being inside a concrete barn all day.  He wanted to spend more time outdoors and farm holistically.  He had a vision of wanting to raise clean, green Dexter organic beef cows.  

Now there was absolutely nothing wrong with his son’s vision and niche marketing is definitely a trend.  However, his son wanted to instantly jump into things and do it in a big way without thinking.  He was passionate about his vision and it was very emotional for him.  He wanted “just to do it” and didn’t care about the details.  He wanted instant results.   

This is because the son was born with a silver spoon in his mouth and had never starved!   

For several months, I worked with the son to formulate a business plan and we looked at it from multiple perspectives.  It simply didn’t cash flow and didn’t make sense whatsoever.  Yet the son wanted to do it that spring anyways.  He didn’t care about what worked on paper, his gut told him it would work out.  The son never knew what it was like to fail and starve.  Thus he had romantic visions of taking risk!  He spoke to me of risk as if he was reading a motivational poster, not as a man who had experienced it. 

The son wanted to rent prime cash crop land at $300 per acre per year from the neighbors over five years to pasture 20 beef cows.  He spent $30,000 on a custom fencer to build a permanent perimeter fence around 80 acres because the son “didn’t have time to do it himself”.   

We interviewed a beef farmer who had successfully marketed his beef at a 300% premium, but the son failed to comprehend the work and strategic branding that went with it.  He just thought it was a matter of pasturing cows on grass, then charging a premium.  He expected folks would drive an hour from the city to buy freezer beef at 300% markup with nothing more than a sign at the end of the gravel road.  The son didn’t want to go through the fuss of value adding the beef with certified organic certifications.  He planned to sell the beef from his Dad’s conventional hog operation, with the cows being pastured “down the road” out of sight.  He wouldn’t let kids onto his farm to play with the barn cats or animals due to liability.  He simply didn’t get the concept of marketing to the green urban consumer.    

Yet the father wrote the check to “finance his son’s dreams”.  On one hand, anyone would have to admire the father for supporting his son’s dreams; no matter the reservation.  However, the question is what is going to be the end result?  That farm could risk $200,000.  Yet when that capital was lost, would the father continue to support his son’s dreams? 

This bigger issue was that the father was passing on capital; not wisdom.  The most valuable lesson the father could have passed onto his son is this “if it cash flows and your assumptions are reasonable, we’ll do it.  If it doesn’t pencil out, go back to the drawing board until it does”. 

For another family at the same time, they faced similar challenges.  Yet the parents had upfront developed a list of 10 commandments which had dictated the farm’s success in the past.  One of these commandments was “Work your mistakes out on paper with a pencil before you spend a nickel”. 

By having a list of “family values” the parent’s had an out.  They could say no to their son’s dreams, without being discouraging.  In fact they encouraged the son on his first draft of the business plan and told him to “sharpen his pencil and go back to the drawing board until the numbers worked out realistically”.  The son came back to the father with various revisions and after draft #4, they invested. 

So what am I saying?  Don’t support your son’s or daughter’s dreams, absolutely not! 

What I am saying is figure out what made 10 things made you successful and chisel those values in stone.  Really spend six months thinking about 10 commandments and for six months carry them in your pen pocket on a slip of paper.  Then frame it and share these values with your kids openly. 

To get examples, email me at chairman@agriculturestrategy.com and I’ll send you free samples. 

This process might seem nerdy and frankly, it is.  Yet it will prevent many family arguments and you having to say no to your kids dreams.  It allows you to point to a rule and then encourage your son/daughter to structure their dreams around the framework of what has made you successful.        

More importantly, these core values once written in stone will be around forever.  Your great grandkids might never meet you and your wealth might have petered out by 2050, but the values that made you successful might be something they hang on their walls someday. 

Wisdom is worth more than money to pass on….

Graduation Into Life

They say it takes one generation to start a farm, the second generation to grow it into an empire and the third generation to run it into the ground.  For most young farmers today, they are the cursed!

The issue isn’t skill, knowledge or networks.  The issue is Entitlement and inner drive. 

Entitlement is often one of the biggest issues that rear’s its big ugly head during farm succession.  When one is born with a silver spoon in one’s mouth, he/she expects things to happen for them without fully comprehending the personal sacrifice required to make it happen. 

I’ve seen second generation and fourth generation families suffer from the third generation curse.  It isn’t an issue of family lineage, but an issue of being born into a successful family and not understanding what is required to be successful.  Also, knowing what poverty feels like and why it’s to be avoided. 

Parents often send their kids off to college and get teary eyed on the date of their graduation.  However, the years thereafter as the kids integrate themselves into the operation aren’t always bliss.  That is because your kids haven’t truly been educated. 

Families make sacrifices in the form of a labor shortage on the farm when their kids go off to college.  However, they expect that college is the only source of education that their kid needs before returning home to the farm.   Focus on education is on book knowledge and giving experiences the 2nd generation never had (ex. Travel).  Not on building character or drive. 

The question every parent should ask is not just how we can have a son/daughter come back to the farm with knowledge and skills which can be of value in growing the future of this operation.  The real question is how can we get the raw inner drive to succeed without entitlement issues like Grandpa had?

For anyone having a kid graduate from college this summer, the best present you can give them is a $1,000 and the help wanted section from a Farm Paper in a Different State.  By your kid spending a year out of state and on a farming operation you admire/want to become, your kid will:

  • Get homesick and learn about the value of family. 

  • Learn about the value of money and how to budget when living on $15/hour.

  • Learn that they aren’t entitled to own a 52 inch T.V. and if they want it, they’ve got to work for it. 

  • Learn that they could never buy their own farm by working for someone else.  

  • Learn that personal life (i.e. girlfriend dramas) or parties should never impact work performance. 

  • Learn to get out of bed and show up on time without dispute.  Or else get fired…

  • Learn to be a better employer, by first being managed by a non-family member.

  • Learn the business culture/work ethic from a farmer whom you respect. 

Most folks never take this advice.  They think they’ll never have entitlement issues with their perfect kids.  They feel their kids can’t learn as much by working for someone else as they can working by walking into an assistant manager position on the farm.  Then 10 years later, they’ll tell you a different story and by that their kids have a family to support and the farm has other constraints.  Then it becomes a much more complex problem to solve…

Even if you have to hire two men to replace your 20 year old son and have to go into debt to do so, it’s a cheap investment in comparison to the long term cost of having an entitled spoiled brat in their 30’s…

My biggest suggestion is to make sure that your kid is out of state for this experience.  If your son works for a local farmer or agronomist, he is less likely to get fired due to small town politics than if he did the same mediocre job in a different state!  They can’t be living in the hired man’s house, raiding mom’s fridge or borrowing cash from friends when money gets tight.  The tougher the experience, the better they will learn to think and grow in character.   Also make sure they don’t work a fluff job but for a workaholic whom will be a tough employer and teach a work ethic you can’t.  Finally, make sure it’s on an operation which emulates what you envision your farm becoming like someday.  It’s one thing to tour a farm 3X your farm’s size, but another for your son to work within that environment and learn little management tricks from his boss which he/she can someday apply at home. 

This advice isn’t just for boys but also for daughters.  If you envision your daughter to be CEO of your farm’s corporation and she wants to be treated like a partner, not a princess: prove it.  By her “holding her own” on a tougher outfit, it will earn her the respect she needs in order to come home as a manager.  For a daughter to prove herself to her family elsewhere makes a significant impact on whether she is an employee/shareholder or if she’s actually “the boss” when she’s enters her 30’s. 

For the son/daughter to understand what life is like in Agriculture without your family’s name or money is the most critical thing prior to them inheriting your family’s good name/money.   The concept is not to make a fortune, but to gain a lifetime experience and character which in the long run will make your farm exponentially profitable.  If after two years, they come home broke; great.  If he finds it tough to make ends meet on minimum wage, even better.  Let him/her starve for a year.  If they go through this tough character development (weaning), then they will have the inner drive to succeed like Grandpa did.   

Character isn’t bought or taught, it’s earned through tough experiences. 

Stupid Emotions

My first vivid memories that I can recall were related to the 80’s farm crisis.  My Dad and his brothers split up the business partnership in the 71 due to disagreements, loosing their economies of scale.  I remember the day in 1984 my Uncle Gerald had to sell his entire line of equipment mid-summer just to cover his interest rate debt.  I remember him complaining that it was difficult to get out of bed in the morning, when by dawn the interest rates had already accumulated overnight more than he could make farming that day.  Gerald was known as a near genius cattleman, a hard worker and everything he touched turned to gold in the 70’s.  It was the exact opposite in the 80’s and interest rates killed him.  They found his corpse in a lake…

What did we learn from the 80’s?  Supposedly we learned to be more fiscally prudent and work out our decisions with a “sharp” pencil prior to spending a dime.  However, I am very, very concerned that we have forgotten the lessons learned. 

  In regions not affected by the drought, it’s caused erratic spending and land prices to skyrocket.  In succession planning, I am seeing plans being made based on emotion; not by pro forma cash flow statements.  Things are getting silly…

For instance, a son had moved onto the “home farm” and had spent nearly $200,000 fixing up the house while the parent’s built a $700,000 dream home down the concession.   The home farm had a decent shop built in the 80’s which was the base that the family ran 2,000+ acres across Lambton County. 

The father and the son had problems.  They had split up their farming partnership but both shared the same shop and some equipment.  The son’s wife suggested that the father in law build his own shop at his new house, so that the two weren’t always “on-top of each other”, fighting all the time.  Then I got an email, stating that she wanted a new shop built for her husband on an adjacent farm so that the home farm wouldn’t have so much traffic with little children around.  Thus one new shop for dad and one shop for the son, use the old one for machinery storage.  Land prices had risen and the banks would give them the money, so why not? 

You might chuckle, but this stupid logic is happening on almost every farm at some level and it’s got to come to a halt.  Succession related issues are causing stupid emotional decisions to be made, which just simply don’t make economic sense.  It’s easy to do in good times when banks are foolishly giving away money but when hard times hit, reality will hit the fan.

Remember, my Dad and his brother’s split up their partnership because of “everyone not getting along” in the 70’s.  In the 80’s, life became difficult.  I am certain that many readers recall the same plight. 

I am an economic “dooms dayer” because I lived through it.   I don’t think that high corn prices and low interest rates will always be around.  I think this is cyclical.  That said, I respect the opinion of many of my farm clients whom think interest rates will remain low and crop prices will go even higher.  No one has a crystal ball.  But I do think you’ve got to imagine the worst possible case scenario and make decisions based on these forecasts.  These scenarios should act as the acid test for your decisions.  If it pencils out do it and if not, think twice about it. 

I am seeing a lot of brothers split farming partnerships today when it simply doesn’t make sense economically.  Too often I am seeing brand new sprayers, combines and seed drills being bought to farm the same volume of acres farmed by two brothers and one line of equipment a decade prior.  It starts off with the creation of two separate business entities with the promise of sharing equipment.  Then over the years, this synergy wanes. The brothers quickly get into a subtle competition of who can own the bigger sprayer and spend money get the best-looking (not most profitable) crops.  In the majority of the time, splitting partnerships does not improve brotherly love, regardless of what you tell the neighbors…

I just had a new client call me from Iowa and due to their faith they don’t carry crop insurance.  They were having hard times after two years of drought.  A decade ago two brothers split a partnership and since then had bought two complete lines of equipment.  Stupid decisions were made based on emotions, not economics. I am now helping the 83 year old father sort out the boy’s relationships so that they can sell a line of equipment, sell a few farms and get their economic affairs in order.  15 years ago, the old man had 1,200 acres with no debt and a full line of new equipment.  Now, because of decisions made by the brothers based on emotions not rationality, the family might loose it all!

I want to emphasize that I am not against investing in a farm’s future.  However, I am dead set against wasting money, which is not going to improve farm profit or provide any strategic value in the long run.  Brothers splitting farms because “they can’t get along” isn’t always the smartest strategic move and might result in the family name not being on the farm’s mailbox in 30 years time.

If Corn hits $3.50/bu and interest rates jumped by 5% overnight, can you cash flow your decisions?  This should be the acid test for all decisions made during a family fight. 

Remember, the banks were “giving away money” in the 70’s and then wanted it back in the 1980’s.  Today they may be lending “on Prozac”, but watch out…    

Money doesn’t grow on trees.  It’s time to end the madness…

Let’s start making decisions using a sharp pencil instead of raw emotions!

 

Narcissism

I recently met with a politician at a Pork BBQ.  He wanted to know what I thought was one of the biggest problems for the family farm.  He was expecting me to complain about the low hog prices or the recent drought.  He laughed when I told him “Narcissism”.

Narcissism is when a person is so self centered that they are led to believe that the world is centered on them.  When it comes to farm succession, it is the biggest threat to many farm’s continued success.

Farmers and small business owners come across being narcissists honestly.  For most of their lives they are the primary boss on the farm.  When they tell an employee to “jump” the employee says “how high” or else they are fired.  Salesmen equally are geared to fulfilling the farmer’s every whim or else they lose the client.  Many farm wives become subservient to their husbands and put dinner on the table according to Dad’s schedule.  The patriarch becomes king of his fiefdom. 

To be honest, in order to be a successful farmer you have to have a narcissistic mindset when you are farming on your own.  You have to control every aspect of your world “to your liking” in order to be successful businessman. But when your kids join the business partnership, things change. 

For these men to have other people make decisions and for the farm to no longer be centered on them is a dramatic moment for some men.  For men whom have their name on the side of the barn, no longer feel relevant to the day-to-day operations is a major blow to their ego.    They feel sidelined and feel used.  They feel violated. 

What some people don’t understand is that for some men, it’s as nearly emotional of an issue as a sexual violation.  These men have spent their entire lives building the business and are used to everyone catering to them.  To have salesmen now cater to another decision maker is the emotional feeling one would have with adultery.  You are being overstepped. 

In order for farm succession to be successful, every patriarch needs to seriously consider the subject of narcissism and it’s implications. 

For instance, I had one client farm whereby the son was only married 18 months and his wife’s bags were packed for a flight back to Idaho. She loved her husband but she didn’t feel welcome on her husband’s family farm and for her, life was about farming with your family.  She was very concerned about harming herself and needed to leave ASAP. 

The problems started one day a year earlier when the feed salesmen and a nutritionist came out to the farm to talk to the father.  Sabrina had just finished doing chores and she joined the conversation. The daughter in-law had a masters in dairy nutrition and she had some good questions for the nutritionist.  Soon the conversation went over the father’s head.  He felt pushed out of the conversation and at that moment their relationship did a 180 degree turn.  Within a minute, she went from being the ideal farmer’s daughter in law to the “witch that had to go”.    Dad felt that she was soon going to be bossing him around.  The father was only 59 and that wasn’t ever going to happen.  He felt that “its either me or her on this farm and she has got to go”. 

When the salesmen start going to the daughter in-law for decisions, instead of the father; it’s evoked raw emotion for the father in-law in a way he never expected.  It was for this reason that he told his son that she needed to get an off-farm job and not come to the barn anymore.  She essentially was fired without any good reason. 

Now what you have to understand about Sabrina is that she lived and breathed Dairy Farming.  She came from one of the largest Dairies in Idaho and she was an extremely hard worker, skilled at everything on the Dairy farm.  She loved her husband, but she loved farming more.  It devastated her that she couldn’t farm anymore! 

Ben continued to work 15 hour days and with her having an off farm job she barely seen him.  It was definitely not the marriage that she had signed up for and she felt that she was pushed out of the family.  She got extremely homesick and depressed, that she realized that she had to leaver her husband’s family or else risk suicide.  When I showed up, she had her bags packed and a ticket home in six hours. 

The father wasn’t open to mediation.  He simply wanted the daughter in law gone.  He didn’t care about his son’s feelings, he simply only cared about his own insecurities and his need to be in control. 

They were a wealthy family & the father felt he could easily find his son a replacement wife.  Dad already had a girl at church in mind. 

  Ben had to choose between following his wife to Idaho or stay at home farming with his family. Ben’s father was such a narcissist and it never crossed his mind what would actually happen if his son did leave.  Ben did get on the plane, buying a ticket at the airport and did go to Idaho with his wife.  He left with nothing but the shirt on his back, leaving everything behind.  The father was stuck with Ben’s 15 hours of chores and had to hire two men to replace Bert, but it was nothing but headaches.  The cows were sold within a few months, leaving the father with no farm and no family to be the boss of.  His infatuation with his own ego, left nobody the winner. 

The root problem was Narcissism and the father’s insecurities with someone else on the farm that knew more about Dairy Cattle than himself.  What you seen was the effect of the raw emotion causing irrational decisions to be made.  Obviously firing your Daughter in Law because you feel threatened by her knowledge and uncertain about your own future of the farm, isn’t a rational behavior.  Yet it happens all the time and it’s a key behavior to beware of. 

When you are farming, you’ve got to ask yourself the question is this a “Family farm or a Me, Myself and I farm?”  Often patriarch’s claim that it’s a family farm all of their lives, but in the end it’s up as a “ME farm”. 

In order to be a successful farmer, you have to be a narcissism for the majority of your career.  But in order for your farm to continue to be a success, you’ve got to put your personal ego & emotions aside, for the good of the family.  The farm has to go from a mindset ME to We.  It’s easy to say but hard to do.  But if you don’t make the effort, then you’ll be left with nothing but a lot of cows to milk by yourself!