Financial Security is Foundation
By Kevin Spafford, for Farm Progress Magazines
“Succession. We all realize it’s important, but how do we know when we’re ready? My son has been working with me since he graduated from college. Over the last several years, farming has been good. Prices have been up and our income has been strong. Now, given current commodity values and higher input costs, our income is down. Needless to say, it doesn’t look good. So, how can I step back and allow him to assume control of the operation while maintaining my standard of living?”
That’s a great question. In 1943 Abraham Maslow published “A Theory of Human Motivation.” In this study, he explains that a person’s effort is devoted first to satisfying their basic physiological needs before they will pursue the more gratifying [read: more complex and difficult desires]. Maslow hypothesized that a person’s motivation is first to assure a secure environment and satisfy hunger before seeking higher, emotional, intellectual, or artistic desires.
He used a pyramid to illustrate his premise. The base of which, represented the most fundamental of human needs---food, water, sleep, air, etc. As the elements at each level are met, the next highest level on the pyramid is pursued. Passing from one level to the next does not imply that the elements in the lower levels are no longer necessary, but rather that they are currently satisfied allowing that person to pursue the next higher need or desire.
Maslow theorized that:
- Physiological needs come first. The need for food, water, and sleep will control a person’s thoughts and behaviors until satisfied.
- Safety needs are the second. Safety may include personal security, basic resources, health, and personal property.
- Love and belonging, or social needs are third. This level may include familial, friendly, and personal relationships.
- Esteem is next. Esteem is achieved, earned, or accomplished through some form of interaction with people or avocation.
- And, Self-Actualization is the crowning jewel of Maslow’s hierarchy. At this level a person is pursuing deeply gratifying experiences personally, vocationally, and/or professionally.
The rungs on the ladder of achievement and satisfaction for the family business owner may be likened to Maslow’s hierarchy. From bottom to top, and following the same rationale, the levels may be labeled as follows:
1. Earnings – physiological needs
2. Financial security – safety
3. Interdependence – love and belonging
4. Affluence – esteem
5. Legacy – self-actualization
So, in answer to the question, this owner won’t be motivated to transition the operation to his son [read: create a legacy] until or unless he can satisfy those lower level needs, including adequate earnings and financial security. The succession planning process, and the way we craft solutions, parallels Maslow’s ‘hierarchy of needs’.
By nature, immediate and consistent earnings are an owner’s primary objective. The business must satisfy income needs first. Money feeds the family, satisfies financial obligations, pays the help, and keeps the doors open.
If earnings are an urgent need for the family business owner, financial security is a close second. Lasting security happens when an owner can consistently produce profits to provide food, shelter, and satisfy immediate financial obligations.
Interdependence stems from a sense of responsibility for others and grows into mutual, or co-dependence. Interdependence is a person’s realization that not only can others depend on them, but they in turn can depend on others. Work, and by extension all of life, becomes better and more satisfying through familial, personal, and professional relationships.
Many business owners dream of significant wealth, yet few are willing to invest the time and energy necessary to create it. Simply put, achieving a level of affluence is difficult and rare. At this level on the pyramid the angle becomes very steep and methods to success difficult. There are many who want to achieve, yet few who will pay the price.
The ambition to transcend self, to create something bigger, better, stronger, and faster, is the desire to leave a legacy. Self-actualization is synonymous with legacy, and the quest for multigenerational success. Some owners strive for constant growth and continue to develop the operation, maximizing opportunities and generating lasting results. Legacy is the pinnacle of achievement for the family business owner. Succession is honoring yesterday, profiting today, and securing tomorrow.
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