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Consider factors before coming back to family beef operation

Cassidy Woolsey Published on 24 November 2014

Discussing the future of the family operation isn’t always easy, especially if it involves your future, your compensation or how the operation will transfer ownership down the road.

But if certain issues are not addressed beforehand, a one-time dream could result in a family nightmare.

Dave Specht

Family operations are often targets of conflict, says family business consultant Dave Specht. It is typical for the senior generation to say, “There is plenty of work here, come back and we will figure it all out.”

But without clarity regarding compensation or your role as an employee, you could fall back into the position as son or daughter without any clear path to leadership or added responsibility.

“It happens more than you think,” Specht says. “I know these discussions are challenging, but it is better to have them sooner rather than later.”

Too often in ranching communities, we hear, “Dad hasn’t kept any of his promises,” “The ownership of the ranch went to my brother/sister,” “It wasn’t how I expected it to be,” or “We just couldn’t make it work.”

This may leave you and many others wondering: How can a family business possibly work? And what can be done to avoid these problems and frustrations in the future?

Step 1: There must be an invitation
Jolene Brown

Jolene Brown, professional speaker and family business consultant, has learned valuable lessons from hundreds of farmers and ranchers wanting to grow a successful legacy family business. One of the most important lessons is that being employed in a family business is not a birthright.

“Just because you want to return to work in the family business, doesn’t mean you get to,” she says. “It is not enough to be a ‘worthy’ candidate for employment, there must be a ‘worthy’ job – one that pays you based on the value you bring.”

But not every family will extend an invitation, Specht says. He believes the best-case scenario is when you can present a plan expressing your desire to return and how you can add value to the business.

Ultimately, you need to be committed to the success of the operation, he says. The reason for returning shouldn’t be because it was the easiest job you could find but rather because you love the cattle industry and you want to see the family business grow.

Step 2: Gain some outside experience
Determine what you can do to become uniquely valuable to the operation, Specht says. In other words, what value will you bring back – skills, talents, relationships?

“There are a lot of things you can do that can apply to the operation – accounting, bookkeeping or even a specific skill like A.I. or mechanics,” Specht says. “Be intentional about pursuing the skills that don’t exist on the family operation today; that is what really helps.”

By adding these additional skills to the ranch, outside expenses could be reduced. There could be fewer payments to an accountant or fewer outside costs for mechanical repairs, trucking expenses or other specialty skills.

These value-added talents will help recoup some of the salary costs of adding another family member to the payroll.

Brown also recommends getting at least two to three years of consecutive employment outside of the family business. She says the lessons learned can be a great benefit to you and the operation.

Most of the complaints with her clients have been because the next generation didn’t receive that “employee-employer” lesson.

“I’ve found that most times Mom and Dad are not the best teachers of those initial lessons. You will find that respect from family and non-family employees starts at a different level when you’ve been independently on your own,” Brown says.

The Mathewson family

Step 3: Get the conversation in writing
As time goes by, people tend to forget what was discussed and agreed upon. But by having a written record, both you and your family can understand their roles and expectations – and modify them when needed.

“People don’t always ‘intentionally’ forget things,” Specht says. “A written record isn’t necessarily for legal purposes but rather to help evaluate what should be happening.”

Brown also stresses the importance of open and regular communication in a family business. Grunts, rolling eyes, assumptions, yelling, ignoring and mind-reading are not acceptable forms of communication, she says.

“The business you are returning to may be superior at production, but it’s the people that do that production,” Brown says. “That means communication is key.”

Beau Mathewson, a third-generation rancher near Potter, Nebraska, knows first-hand the importance of discussing and considering certain issues before returning to the family operation.

After attending college, Mathewson decided he wanted to return to the family operation. But before he returned, he was able to sit down with his parents and lay out a plan for his future at the family operation.

“It does help to discuss things,” he says. “Never assume anything because you aren’t psychic and you can’t know what someone is thinking unless you ask them or they tell you.”

Mathewson suggests discussing what your expectations are in terms of payment, health insurance, life insurance, sometimes housing, retirement and other benefits. And to have an idea of what other non-family operations are giving, he says.

“You have to be able to live comfortably,” he says. “If they can’t afford to do that, then maybe they can’t afford to bring another family member back.”

Don’t jeopardize your relationship
Common problems that discussions can help you avoid include confusion over ownership after a family member passes away or retires, disagreements regarding management, conflicting relationships between parents or siblings and unmet expectations.

You may think you are coming back to run the operation, but your parents may think otherwise. They may also think you will help make the day-to-day decisions but not the big decisions.

“All of these things need to be discussed well beforehand so a family member knows what to expect,” Mathewson says.

Mathewson stresses the importance of determining whether or not you and your family can get along. He believes that relationships are key to the success of the business.

Spouses are also a contributor to the family operation, he says. They have to be able to get along with the rest of the family. If there is a situation where not everyone can get along, someone should consider striking out on his or her own.

“Having a shared vision – knowing where you want to go in the future and how you will get there – that is what I think makes for a successful family relationship and business,” Mathewson says.

Specht agrees that the most important aspect in the family operation is the family relationship. He says you should acknowledge your desire to keep a wholesome relationship when trying to spark a discussion.

“It is not enough to just hope it all works out,” Specht says. “These are all important things that need to be considered, and it could be the only thing that keeps you from jeopardizing your family relationship or even your family operation.”  end mark

PHOTO 1: Dave Specht advises ranchers returning to family operations to determine beforehand what their value is to the ranch. Photo courtesy of Dave Specht.

PHOTO 2: Jolene Brown says being employed by your family ranch isn’t necessarily a birthright. Photo courtesy of Jolene Brown.

PHOTO 3: The Mathewson family believes talking about certain key points and gaining experience before returning to the family operation is vital to the success of the operation. Photo courtesy of Beau Mathewson.

For the senior generation
Brown outlines a few things the senior generation should consider when adding another employee or determining the future of the operation.

A look into the “mirror” for the senior generation:

Financial readiness

  • Accurately assess your financial security. If you’ve built the business, have you secured what you need for the lifestyle and living you deserve?

  • Assess the real cost (salary plus benefits) if adding others to the payroll. Is the business financially strong enough to meet the growing expectations?

  • Do you have to maintain “control” in order to manage the risk? Whose names are on the loans?

Educational readiness

  • Are you a good teacher? A good leader?

  • Have you defined the skills, experience, character and personality needed for the next leader? How will you help those develop? How will you assess readiness?

Emotional readiness

  • Are you emotionally ready to transition not just labor … but management, leadership and ownership? Are you willing to be a mentor, and not the master? Are you ready to relinquish control? What is your time frame?

  • What are your interests beyond the business?
To learn more visit Jolene Brown and Dave Specht.