-- Family returning to the farm need to have defined roles and goals.
-- New management must work toward building loyalty from employees.
--Embrace technology, such as apps, to track fieldwork and maintenance.
Karen Makamson Edwards remembers clearly the fall day in 2013 when she turned down the drive to her parents' farm and knew her life was going to change forever.
A Mississippi girl turned hair stylist living in Pueblo, Colorado, Karen had never intended to return to the farm after college and styling school. She and husband, Stephen, an attorney, loved where they lived and had started a family.
But, for Karen, there were strong pangs of homesickness when she returned to Morgan City for a visit with 2-year-old McKenzie. Edwards wanted her daughter to get a sense of the farm at harvest, to generate for her the kind of wonderful memories she treasured. And, honestly, she missed those times herself.
"When we turned down the dirt road to home, I knew this time was different," Karen said. "There was a calling for me there. Things were changing, and I knew God wanted me to be a part of the change. The rest is history."
So began the latest phase of a family-farm transition that continues to this day. The Makamsons' experience demonstrates why succession planning can be so difficult -- and traumatic -- for many farm families. Even under the best circumstances, unforeseen events can quickly transform a carefully laid plan into chaos and uncertainty.
UNDER NEW MANAGEMENT
Karen's parents can attest to the fact the family business most people envision doesn't resemble the successful one emerging at Garry Makamson Farms.
"I didn't see Karen having a lot of interest in the farm," said Karen's father, Garry, 63. "I was reserved about her being interested because you don't just walk into this business and run it."
"We did not expect her to come back," said Connie Makamson, Karen's mother. "That was a shocker. But, when she said she wanted to, we were excited."
Certainly, it didn't immediately occur to Karen to move back to the farm. For more than two years, she had helped from Colorado. She built the farm's website and did public relations.
In 2011, the Makamson operation became part of FamilyFarms Group, a national financial and management consulting organization of nearly 90 farms. Karen attended the group's annual conferences with her father.
"I was blown away by the women involved in farming I met there -- in other than just a bookkeeping role," Karen said. "In the back of my mind, I thought, 'We'll see where this goes.' "
Then her brother, Steven Makamson, decided to leave the farm in 2013 to pursue his first love -- coaching basketball and teaching. He had been working on the farm since he was 8 years old but rented and farmed his first 150 acres while in college. At the same time, he worked setting up and maintaining the irrigation systems for his father.
Steven then worked on the farm for 2 1/2 years after college, took a break to continue his education and worked for another six years for his father, the last three years performing human resources (HR) duties on the farm. Karen's "calling" found her returning to take on management duties as the farm's director of human resources.
By December 2014, the Edwards family had moved back to Mississippi, but not to Morgan City. Instead, they settled in Jackson, the state's largest city, where Stephen -- son-in-law and attorney -- got a job.
EARN THE JOB
No matter how a succession plan unfolds, it's crucial for everyone to communicate, said Megan Roberts, Extension educator, agricultural business management at the University of Minnesota.
"When it comes to estate and family business succession planning, we immediately think about all the legal and tax aspects," she said. "Ultimately, however, it is the communication that leads to goal setting that is the foundation for any transition."
The communication has to involve determining the role of the newcomer in running the operation. Nobody should receive an owner-manager salary without doing the work, according to Galen Dody, of Dody Legacy Group, a Missouri-based business planning and accounting group.
"You want an adult child coming back to the farm to take on a management role in some area and watch their growth," he said. His firm isn't working with the Makamsons and isn't familiar with their particular situation.
"For children to come back to the farm, we want them to understand that it may require them taking some courses and showing a desire to grow the operation, and create more success for the future," Dody explained. "If that's not the desire, they are just a hired hand."
MAKING IT WORK
Karen has moved well beyond any hired-hand stage. Her new routine has her traveling 1 1/2 hours to Morgan City at least twice a week to work on the farm's human resources and the operation's paperwork, and to plot the future of the business.
"The hardest part about working from Jackson is balancing work life and home life," Karen said. "When I'm home, my full-time mommy job doesn't stop. Fortunately, most of what I do can be done via phone, email or scan. The Edwardses have two young children with a third due in August.
DIVISION OF LABOR
As for the official delegation of farm duties, Garry is the CEO and owner. On any given day, he could be doing anything from driving the combine to accounting to buying supplies to crop marketing.
"Dad makes the big decisions," Karen said. "He consults Mom and me to weigh out different opinions and options."
Garry's nephew, Curt Jolly, is the operations manager. He coordinates the daily activities of nine employees, and they answer to him about their immediate work.
"Dad and Curt have been working together for more than 25 years," Karen said. "He knows as much about the operation side as Dad does."
A LOT TO LEARN
Karen conducts employee performance reviews and keeps employee records up-to-date. She addresses any complaints from or about employees, and created and enforces the farm's employee handbook. She is also the "face" of the farm and works with the Natural Resources Conservation Service, the Farm Service Agency and FamilyFarms Group.
"I learned a lot about HR skills and how to work with people by working with the public in fashion design and as a hairdresser," Karen said. "I also leaned on FamilyFarms Group [for the] technical part of creating an employee handbook, policies, disciplinary actions, etc."
As for the federal agencies, Karen said she's been fortunate to have had local employees "hold my hand and help me learn."
From day to day, how well is it working?
"Karen has helped me change the way we conduct business," Garry said. "We've implemented things that, in the long run, make us better." For example, she formalized how they work on the farm. Employee hours are closely assigned and tracked, so it's clear who is working on what and when.
Karen has also spent more time on the farm's human capital. She lunches -- on the farm's dime -- regularly with workers. Last fall, the Makamsons took employees to a Mississippi State University football game. The entire farm had a month off last winter.
"I give her a ton of credit for doing some things different on the farm," said David Walker, whose Memphis, Tennessee-based Local Seed Co. works with the farm. "Garry has asked me, 'Do you think we're headed in the right direction? Can Karen handle this?' My response has always been, 'Yes.' She's building loyalty from employees."
SUCCESSION AND BEYOND
Walker said he's been impressed with the newsletter Karen produces. "Karen keeps the farm operation in the eye of their landlords, bankers and other professionals," he said. "And, if another landowner visits their accountant or banker in the area, and wants to find a good farm to rent their ground to, this newsletter, in this area, makes them stand out."
Still, Karen is a young woman manager in a business still dominated by men. And, she's doing it at a distance. As is, she's paid a salary and gas for her travel. Karen and her parents have been looking into providing health care as part of employment but "haven't found the right fit yet."
Farm employee Kevin Mueller believes her input to the business has been valuable. "She sees things here with fresh eyes," said Mueller, 28, who has worked on the farm for four years. "She's taking us to another level in terms of using technology. To me, it doesn't matter who the boss is as long as I can get the work done.
"Karen has started us using Trello [a project-planning application] that allows us to use our phones to make notes on something we see in a field -- and this information can be accessed by everyone else," he added. "I can also use it to go back and check when I've changed the oil on a particular tractor, for instance. This app is a real benefit as opposed to having everyone write everything down on paper and share in a group meeting that may be tough to arrange."
She has also used training exercises for HR purposes that can be accessed on employees' phones to watch, for example, a video on the use of a new forklift. "Otherwise, it would be tough to stop everyone on the farm to have a meeting," Mueller adds.
Planning for succession of the business is just getting started. Garry, admittedly, is glad he has Karen handling human resources. That part of the business was not one of his strengths. "If you can conquer HR, that's one of the hardest things on the farm."
The family has been meeting with bankers, lawyers and estate/succession planners on how to make the best transition of the business. Karen and her brother, Steven, who maintains a financial interest in the operation, will eventually split assets (land and equipment) fairly. Whether that will occur through gifting, buyouts, inheritance or a combination of those methods is as yet undetermined.
"My brother and I have always been in agreement that we want the farm to continue, but our ultimate goal is to stay close as a family," she said.
Upon their retirement, Karen will rent land from her parents. "I've been working to build relationships with current landowners that Dad rents from, so I can hopefully continue those leases in the future," she said.
Long term, the plan is for Karen to take over as CEO. "I will make the big decisions with a team under me to help with the day-in, day-out work."
PLAN YOUR ROAD MAP
A successful farm transition and succession plan transfer the human, business and financial capital to the next generation. Ideally, the plan would play out during the course of a decade.
"We use a decade as a benchmark," said Megan Roberts, Extension educator, agricultural business management, for the University of Minnesota. "The important thing is that the plans that take place over a reasonable period of time can be more successful."
The players in the process not only include the family members involved but possibly others outside the family. The transition planning should also comprise accountants, lawyers, consultants, extension educators and others.
Following are the main elements involved:
-- Retirement Plan. The needs of the generation retiring -- in terms of income -- often have to be met by the farm business. That income can't, however, endanger the future success of the farm business.
"Retirement income needs are not totally dependent on the farm business operating entity," Roberts said. Farmers may receive income from land rents separate from the operating entity as well as social security, prior savings or money from the sale of assets to the succeeding generation. Retirement planning should also include health-care planning as well as retirees' contribution of labor and where to live, Roberts explains.
-- Transition Plan. What strategies should you use to transfer ownership, management and control of the farm business? Transferring management is an often overlooked or inadequately considered aspect of the plan that leads to the failure of many transitions.
"A buy-sell agreement is needed to eliminate the biggest risks a company and its shareholders face: the unexpected loss of a managing shareholder," said Wes Hentges, of AgriLegacy, a business consulting and accounting firm based in Missouri. Such an agreement provides clear terms for transferring share upon triggering events such as the death, disability, retirement or other voluntary and involuntary departure of a shareholder, he added.
-- Estate Plan. This plan must specify how farm assets will be distributed among the heirs upon the death of the owners. The plan should treat heirs fairly while maximizing the opportunity for the farm business to succeed in the future. Fair treatment doesn't necessarily mean equal treatment. This plan should also minimize any tax burden on heirs.
-- Business Plan. What are the business goals of the farm and the strategies to achieve them? Owners and managers need to critically and honestly evaluate the farm business to determine what direction is best for the future. Many farmers don't take this opportunity to make substantive and needed changes to the farm business. The plan should involve the ability to dissolve components of the business if needed, explained Galen Dody, of Dody Legacy Group.
"Don't put your children in business together unless you give them a way to get out," Dody said. "You need good buy-sell agreements that set the terms of a sale between or by family members."
-- Land-Use Plan. Owners should evaluate current and potential future uses of their farmland. The plan might include a decision on whether to keep the land in agriculture or sell it for development.
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