FAMILY farming businesses rely on trust and communication more than other business, farmers attending an inaugural Byfields Business Advisers’ roadshow in Northam recently were told.
Trust and communication were important linked assets for ensuring long-term success of both business and family, roadshow keynote speaker and accredited family business specialist John Broons pointed out.
They were factors, Mr Broons said, that helped “differentiate” a family in business from simply a family business, and involved much more than having a succession plan in place.
While businesses have relatively clear and simple structures defining chain of command, areas of responsibility, decision-making and risk management, he said the involvement of family dynamics added complexity and challenges.
Emotion added another dimension.
Mr Broons said a family’s involvement in business required separate structures and a separate set of rules agreed to and written down to govern how it was involved, and to engender communication and trust between family members.
A further challenge for families in business was added with the issue of ownership.
Mr Broons said many family businesses, particularly farming operations, now involved shareholders or family trust unit holders who were not active participants in the operation but were entitled to some say on strategic decisions.
There were also family members directly involved in running a business who had no ownership rights or obligations.
Mr Broons said those three aspects – business, family and ownership – were “in play” all the time in a family enterprise.
“The dynamics of families in business is not just about accounting, it’s not just about whose got the shares, it’s different and it’s not easy,” he told an audience of about 50 nodding heads.
“The business can be quantified – when there is a discussion about the business we go straight to the numbers – but I can’t tell you the profit or loss of your children, it’s a very different equation.
“We need to understand family differently to what we do the business.”
Mr Broons said families needed to have conversations about how foreseeable and potential ownership and control issues should be dealt with before they arose.
He said avoiding conversations on difficult subjects as a way of preventing friction within the family was not a solution.
“When we live on the farm and work on the farm, we are in the same place, we sit around the dinner table and if we are not talking about the crops we are talking about the tractor and if we are not talking about the tractor we are talking about the fencing,” Mr Broons said.
“There’s always stuff on running the farm to talk about.
“We don’t always stop to talk about the family stuff that we need to talk about.
“When I talk about families in business, the reason I do that is I want to separate the words family and business.
“Families can do stuff to each other that is really unfair.
“If we just talk about the business and we don’t talk about the family stuff, then we are just putting our heads in the sand and we are not going to be prepared when change occurs within the family that affects the business.
“Examples of this are children wanting to come in, parents wanting to retire, a son-in-law being invited to join.
“We need to have a talk about these challenges and changes sooner or later so we can work on resolving them.
“If you are dealing with family members and you don’t have those conversations and you don’t make those choices, those changes will come back at you and you won’t have a choice.”
Mr Broons said no two family businesses were the same and there were no “right or wrong” solutions for families in business, only best practice.
He said this involved separating family issues from business issues by holding regular meetings with an agenda just to discuss business and regular family gatherings where business was not discussed.
Frequency and location of business meetings depended on the size and complexity of the enterprise and the number of share or unit holders involved.
Mr Broons said first meetings should aim to determine a structure for future family business meetings, decision making and responsibility sharing and, if there was likely to be considerable dissent, a neutral territory location and perhaps a facilitator to call time out was recommended.
He said adequate prior notice of meetings was required to be given.
“Structures should fit the family - you don’t need a board if it’s mum, dad and the kids - but you need structures and you need communication all the way,” Mr Broons said.
“This is all about being able to have conversations with the family.
“The reality is you are working with your family, there are always going to be challenges and there are always going to be changes, you need to be prepared for it.”
Mr Broons said families in business could start the structure process by agreeing on and documenting a family charter – a set of rules for your family - that can be reviewed every 12 months to ensure it remained appropriate.
“All it might be is that if the kids want to come into the business we pay them the same rates as everyone else, we pay them more than other people because they’re our kids, we pay them less that others because we think they need to learn the work ethic.
“But also, if we don’t want them there, how are we going to banish them from the business?
“You’ve got to have some rules otherwise it is just going to happen – ‘they’ve broken the tractor, they’re gone’.
“That’s the old way of thinking and that doesn’t work.
“You end up excommunicating family members with that sort of stuff.
“The future involves not solving a problem but creating a structure that anticipates the most likely difficulties and develops the resources for others to solve the problems.
“This means developing other people’s capacity to lead which is different to leading yourself – it involves trust.”
Introducing Mr Broons at the Northam Country Club, Byfields managing director Simon Northey said Mr Broons was an adviser with not-for-profit Family Business Australia and one of two fellows in Australia of the Boston-based Family Firm Institute.
He is also chairman of Tec Group, a coaching and mentoring group for business owners and chief executive officers.
Other Byfields roadshow presenters were Byfields director Jon Bush and David Egerton-Warburton and Tegan Pridham from Mastergroup which markets the Agrimaster agribusiness accounting software.
Mr Bush outlined and demonstrated a number of software products farmers could use to streamline their bookkeeping and get their business paperwork out of the ute and onto the cloud.
He also recommended they invest in internet security programs, use several internet accounts with different passwords for ordering, bill-paying and internet banking security and provided tips on how to recognise phishing emails seeking personal information.
Mr Egerton-Warburton and Ms Pridham demonstrated the seven most useful functions of Agrimaster and its connectivity.
The Byfields roadshow was also held in Perth, Narrogin and Merredin last week.