Legacy by Design LLC.

Cultivating Multigenerational Success in the Agricultural Community

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About Us

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For family business owners, our Comprehensive Succession SolutionTM includes planning for:   

Ownership Transitions

Retirement Options

Financial Security

Investment Strategies

Estate Tax Strategies

Buy/Sell Designs

Key Person Strategies

Equitable Distributions

 

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Designing a Professional Development Plan

Farmer kneeling in his field.By Kevin Spafford, CFP®
Founder - Legacy by Design, LLC

A professional development plan identifies many of the skills necessary to succeed as a management successor, and it provides a methodology that will assist the candidate in acquiring them. The plan should also provide for monitoring the candidate’s progress and be flexible enough to allow for changes.

A professional development plan provides numerous benefits. First, it provides a benchmark for measuring the successor’s progress. This allows the successor to chart his progress and helps maintain his morale when setbacks are encountered. Most important though, the plan helps ensure that the successor acquires the skills needed to become an effective leader.

A professional development plan can take numerous forms depending on the skills a successor needs to acquire. It will also vary depending on the candidate’s age and prior work experience. It’s important to tailor the program to the individual’s needs and utilize all available resources. Some common elements of a professional development plan include:

  • Gaining outside work experience.
  • Utilizing mentors for guidance.
  • Rotating the candidate among various departments and functions.
  • Obtaining industry specific training.
  • Participating in business strategy meetings.
  • Participating in outside associations and activities.  
Gaining Outside Work Experience

One of the best ways for a successor to develop the necessary business and leadership skills is to spend three to five years after college working for another company. This experience provides the individual with another view of how businesses operate, and often provides useful ideas that can be implemented when the potential successor enters the family business. Most importantly, the outside work experience allows the candidate to experience the satisfaction of advancing within the organization on the basis of merit. This can build the necessary confidence the successor needs to operate effectively in the family business. It also allows the candidate the opportunity to experience failure in an environment where every move is not scrutinized by other employees.

Utilizing Mentors for Guidance

A key to any professional development plan is to designate a mentor to assist the successor candidate. The mentor serves as a coach and helps ensure the successor stays on course to the designated goals. Typically, the mentor serves as a sounding board for the successor, providing insight and direction when needed. The mentor generally should not dictate the successor’s course. Instead, the mentor should facilitate the learning process so the candidate learns to navigate his or her own.

The mentor should be truly interested in seeing the candidate succeed. Accordingly, it should not be someone who is threatened or adversely impacted by the candidate’s success. The mentor should also be someone with whom the candidate is comfortable sharing questions and concerns. This generally eliminates bosses or someone responsible for supervising the candidate from serving as mentor. Taking these factors into consideration, there are several likely candidates for the successor’s mentor including:

       Owner/Parent: Due to their family relationship and knowledge of the business, the owner/parent often expects to be the successor’s mentor. Although they should be used as a source of knowledge and experience for the successor, they are often not the best choice to serve as the successor’s mentor. First, the parent/child relationship may inhibit the successor from asking questions for fear of looking weak or inferior in the parent’s eyes. Second, it is usually important for the successor to develop skills that complement the owner’s skills. This is not likely to occur if the owner is the successor’s mentor. It is also important for the successor to learn how to operate the business without the owner’s assistance. This may be difficult if the owner is providing advice and counsel in a mentor’s role. Accordingly, owners generally should be discouraged from serving as their child’s mentor.

       Key Employee. A key employee may be a logical choice to serve as mentor as long as he or she is not threatened by or competing with the successor. A key employee’s knowledge of the business can be invaluable when providing advice and direction to the successor. There are drawbacks to using a key employee as the successor’s mentor. For one, the successor may be reluctant to be totally open with the key employee due to the key employee’s real or apparent loyalty to the parent. The successor may fear the key employee will relay his or her weaknesses to the owner. In addition, key employees may lack the experience of running a company. This may make it difficult to convey the leadership skills needed by someone who will take over the business operations. Despite these inherent limitations, many key employees serve as effective mentors for potential successors.

      Outside Director: An outside director is often a good choice to serve as a successor’s mentor. Lack of direct ties to the company usually eliminates any potential for family or business conflict and helps encourage the successor to draw upon the mentor’s expertise and counsel. In addition, as a respected business leader, he or she possesses a wealth of knowledge that can beneficial to a potential successor. An outside director’s business experiences are often different from the owner’s and help develop complementary skills in the successor. Also, an outside director typically has a wide range of contacts to call upon if an issue arises that is outside his or her expertise. Thus, directors may be the best mentors for a successor.

Rotating the Candidate among Various Departments and Job Functions

Most employees rise through the ranks based on their skills and accomplishments. The employee works in a position until he has demonstrated the skills and aptitude to be promoted to the next level. By the time he reaches upper management, he has a broad base of abilities and experiences that allow him to lead effectively. Unfortunately, many owners bring their children into the company at a high-level position, which seems to overlook the importance of the experiences obtained while rising through the ranks. As a result, the successor often lacks important skills when finally appointed to take over the company.

One of the most effective ways to enhance a successor’s business skills is to design a program that rotates the candidate among various departments and functions within the business. For example, the successor may start off working in manufacturing for a designated period. When the appropriate skills and knowledge have been obtained, the candidate may move to the sales department. This rotation process allows the successor the opportunity to gain experience in a variety of business functions. The ultimate goal of this rotation is to provide the successor with an overall understanding of the business and its operations. However, it also helps eliminate the perception that the successor’s advancement is the result of his family relationship rather than his professional and business merits.

Throughout the rotation the successor should be given additional responsibilities when he has demonstrated the ability to handle them. For example, the candidate should first be required to demonstrate the ability to manage his own duties. Next, the candidate can be given the additional responsibility for managing others. When these skills have been mastered, the candidate may be given the responsibility for managing a department or budgeting for a new term. Ultimately, the candidate can be utilized to suggest strategies for enhancing the operation.

Attending Outside Training Seminars

Outside training seminars can be used to develop or reinforce a candidate’s business, technological, and leadership skills. Accordingly, a professional development program should provide two or three weeks of outside training each year. In the candidate’s early years, the focus should be on obtaining valuable business and industry skills. Thus, it is generally advisable to schedule industry-specific training during early development. As the candidate becomes more knowledgeable in the business and its operations, the focus should shift to management development seminars. These seminars generally focus on skills for improving the successor’s ability to lead and create a team environment.

Participating in Business Management Meetings

Many candidates will benefit from observing the business planning process. It provides insight into the company’s future direction, and helps the candidate develop a forward-looking vision. One way for the candidate to gain this experience is to invite him to attend executive committee meetings, board meetings, and business planning sessions. This allows the candidate to witness the process for planning the company’s path for the future. As an alternative, the candidate can be given access to the board meeting’s minutes or the company’s business plan. Whatever the chosen method, the candidate will develop important leadership skills by being included in the business planning process at some stage of his development.

Participating in Outside Associations and Activities

Successor candidates should be encouraged to participate in outside associations and community activities. Outside associations offer the successor the opportunity to establish a network of business contacts and to share experiences with his peers. In addition to industry associations, successors should be encouraged to join organizations comprised of peers. There are also unlimited opportunities for the candidate to participate in community activities. Often, a successor can obtain valuable business experience by serving on the board of a charitable organization or service club. In addition, these activities help the candidate realize the benefits of being a good corporate citizen.

Monitoring the Candidate’s Progress

It is generally advisable for the candidate’s mentor to monitor his progress throughout the development process. This can be done through periodic reviews. These evaluations should not be confused with performance assessments that are used to determine compensation. Instead, their focus should be on ensuring the candidate is developing the proper skills and experiences. The mentor should request and receive input from the candidate’s supervisors, peers, and subordinates. The same inventory form that was initially used to assess the candidate’s skills can be used for the periodic evaluation. The mentor can then meet with the candidate to determine the progress achieved and develop a game plan for the next evaluation period. When the mentor feels the candidate has developed the requisite skills, the candidate can be promoted to the next level.

If the mentor believes the candidate is not the right person to be the successor, the business should consider ways to provide a graceful out for the candidate.

 

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