Minding Ag's Business

Joining me today to discuss another topic on family values is Lance Woodbury, DTN and The Progressive Farmer's family business columnist who is based in Garden City, Kan. Lance trained as a professional mediator and has more than 20 years experience counseling small business owners on family conflicts, succession and transition issues. Like me, I think you'll appreciate his western Kansas sensibilities and family values, so here goes.

Taylor, DTN: Lance, last time we chatted we discussed some of the generational differences that can complicate marketing strategies. In other words, well-heeled senior partners may not have the same strategy/philosophy about pulling the price trigger that their beginning farmer partners have. Given volatility in today's commodity markets, this is sure to add more tension to discussions. How do successful families with multi decision makers manage their marketing decisions?

Woodbury: Marcia, there are a lot of family businesses that struggle with decision making, and the area of marketing is no exception. There are several reasons this occurs, one of which is the difference in perspectives or position which you mentioned. Another reason is that in a family business, everyone is wearing a lot of hats, and there aren't many idle managers, so how much to "share" a decision like marketing can be a subjective matter that people will handle differently. Too much sharing can slow you down (think "committee meeting"). Not enough sharing can feel like people aren't getting the benefit of collaboration (think "dictator"). Finding the right balance is not always easy.

Another reason for confusion is that, in some cases, roles and lines of authority have not been well established. If the transition from one generation to the next is gradual (as most would like it to be), then a hard switch in who calls the marketing shots is elusive--unless the family specifically communicates about who makes which decisions at certain points in time or in certain degrees of financial significance.

In order to deal with the differences, you probably won't be surprised to hear me say "communication!" More specifically, however, are four communication topics I would suggest:

1. A discussion about roles. Who is expected to take the lead on certain areas of the business. In marketing, who is expected to "pull the trigger?"

2. A discussion about decisions. Which decisions need group discussion? Which can be made solo? Which should be made in consultation with a smaller group of key people? With marketing, who needs to be involved?

3. A discussion about philosophy. Particularly in marketing, it becomes important to develop a business philosophy or approach to such a key financial decision. What are the principles that will guide the decision? Are there some beliefs about debt? What about the use of options? How does prior grain income deferrals fit in to the picture? I remember a farmer telling me he never considered selling until it was in the bin, and he only sold to the local elevator. You may question the strategy, but his philosophy was clear! As a family you should take a stab at writing down your marketing Standard Operating Procedure. That activity will bring out many of the differences, and allow you to begin working on an approach that everyone can support.

4. A discussion about supporting information. Most would argue that selling grain effectively depends on the accuracy and knowledge of your cost of production and forward-looking budgets. Do you have that knowledge and have you reviewed the information as a family team? The act of doing so helps get people on the same page and tends to help families coalesce around certain options.

Taylor, DTN: Lance, I like your approach to writing down roles and authority for pricing commodities within the business. A formal plan not only soothes issues between family members but should give lenders much more comfort in funding hedging accounts. For example, many players in the pork industry have adopted margin marketing in recent years, preferring to lock in a modest profit rather than gamble for higher prices. When live hogs jumped 45% this year, some of them are now subject to $63/head margin calls, a Farm Credit lender told me. They need both their families and their lenders not to get weak in the knees with those positions!

So readers, do you have any other advice for group marketing decisions within families?

Follow me on Twitter @MarciaZTaylor.

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