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OSU Extension

College of Food, Agricultural, and Environmental Sciences

January 30, 2017 - 8:43am -- lewandowski.11@...

          It is hard work to pass on a family business.  Statistics indicate that 65% of all family businesses fail after two generations and 90% fail after three generations.  When most family businesses are asked what factors they think are most likely to lead to business failure financial reasons such as poor investments, the economy, declining markets, and financial constraints including limited access to capital are often listed.  However, a recent study by The Williams Group of 3,250 families whose businesses failed in either the second or third generation found four main causes:

  1. Breakdown of trust and communication within the family: 65%
  2. Failure to prepare heirs for their roles and responsibilities: 25%
  3. Lack of family mission and vision: 10%
  4. Estate and financial planning errors: less than 5%

          The take home message is that passing on the family farm business begins with regular, consistent, meaningful dialogue and conversations.  A good starting point is to conduct planned and well-organized family farm business meetings. 

          Successful family business meetings don’t just happen; they take some planning and organization.  Every meeting should have an agenda that defines the purpose of the meeting.  What are we trying to accomplish in this meeting?  What decisions need to be made or what information needs to be presented?  Is this a meeting to discuss farm business such as crop rotation, fertilizer purchase, building plans, equipment repair/purchase, livestock marketing etc. or is it a meeting to discuss relationship issues/personality conflicts etc.?  Is the purpose to discuss the future and succession planning or day-to-day operation topics?  Meetings should have a beginning time and a set ending time.  I really do not enjoy going to open ended meetings that will last for “as long as it takes”.   Most people function better and stay more engaged in a meeting if there is a set end time that is adhered to.

            In addition to providing an agenda and time-frame for the meeting, successful meetings create an atmosphere of trust and safety.  This is best accomplished by setting some ground rules and sticking to them.  Some common ground rules include:

  • Only one person speaks at a time.  The other people in the meeting listen.  Side conversations should not be allowed.  It takes practice and effort to be an effective listener and distractions should be avoided.
  • Don’t allow personal attacks, blaming and finger pointing.  These statements and conversations stir up emotions and cause divisions.  The goal is to encourage reasonable, rational conversations.
  •  Everyone is provided an opportunity to speak.  Strive to build an environment where everyone’s opinion and thoughts are listened to. 

          In some situations it may be wise to use someone from outside the family or farm business to facilitate the meeting, especially if the topic is difficult or likely to generate strong emotions.  This person should have some experience in running meetings and can help keep the meeting moving in a positive direction.