Friday, March 29, 2024

Succession, a personal experience

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Tauranga valuer and Kellogg scholar Dylan Barrett has been up close and personal with his chosen Kellogg subject, close enough to make the exercise more than simply an academic treatise, he told Richard Rennie. Dylan Barrett chose the tough chestnut of family succession planning in the primary sector for his Kellogg’s industry applied project. It was driven in part by his own personal experiences when the untimely death of his father in 2012 prompted him to leave his valuation job in Brisbane and move back across the Tasman.
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As the oldest of three children, he admits he felt compelled to take a leading role in the family to ensure its assets were retained and, more importantly, to ensure he was there to provide support to his mother and two younger siblings.

“Looking back after a few years now it was the right thing to do and in fact probably the best decision I ever made but I was not without some doubts and stresses at the time.”

A short time after making the move home, Barrett and his mother entered into a 50:50 partnership and bought a 4.64 canopy hectare organic orchard as a way of diversifying away from the family farm.

The orchard has since been converted to conventional management practices and crop yields continue to improve year on year.

His professional experience as a valuer gave him some insight to what could go wrong in succession planning, particularly when matrimonial disputes rip across one generation, leaving other generations grappling with the fallout for years to follow.

“But this became more of a project motivated by first-hand experience I was having at home and wanting to get other people’s thoughts on what they had learned along the way and what they may have done differently.”

One of the main objectives of Barrett’s research was to identify some of the key processes and initiatives that successful New Zealand family businesses implement to ensure their successes and human capital were passed down through the generations effectively.

Conversely, he was also interested in clearly identifying some of the common issues that arose in family succession plans and ways they might be avoided. 

He fished across a broad sea of family experience, not stopping at the primary sector alone to even include the experience of a large scale family business operating a major franchise.

Primary sector experience included leaders in both the dairy and kiwifruit sectors.

He was also well aware of the “war stories” scattered through the pastoral sector of families that had fallen apart because of a lack of cohesive, balanced and communicated succession planning.

He initially found family succession planning started with family values first and foremost.  Family values needed to be instilled in children from a young age, with strong encouragement towards a supportive environment and a culture in the family where successes were graciously celebrated.

Open communication with children from a young age allowed them to gain an understanding of the family business and was an important step towards creating the foundations of a successful, intergenerational family business. 

It was those early steps to generational integration that led Barrett to be excited by the concept of an intergenerational family business where succession was simply part of the process but one that was accepted and absorbed by all generational members participating at some level.

A consistent theme that came out of his many interviews and significant research time was the value of encouraging children to leave and pursue another career before returning home to the family business.

“This allows an individual to develop more on a personal level and achieve a feeling of self-fulfilment and self-worth.

“Often it’s that lack of transparency and ineffective communication between family members that is the main cause of failed generational transfers.” 

“This also equips them with external knowledge and experience which can be highly valuable by expanding the existing wealth of human capital within the family business.”

Barrett’s research identified that discipline and sound governance procedures were essential for co-ordinating the complex nature of a family-owned business.

It provided a framework to manage conflict, encouraged transparency and allowed the business to be steered in its desired direction.

A clear vision and purpose for the family business were essential in keeping the business on track and allowing a governance structure to achieve the desired outcome. 

Having discipline in a family business in a broad sense was also an essential ingredient to its success. That ranges from having discipline around when and how to communicate over business matters and the discipline of being able to separate quality family time from business related matters.

In an agribusiness and kiwifruit context, separating the operational side of the business from the income-producing asset was an essential structure required to ensure distinction between the different roles of family members, management and the asset owner. 

Effective communication in the family was also one the most critical processes in establishing an effective succession plan. 

“Often it’s that lack of transparency and ineffective communication between family members that is the main cause of failed generational transfers.”

Barrett believed the general perception of succession planning being the transferring of assets or wealth had been an underlying issue which had historically caused hesitation and procrastination in families faced with the issue of succession planning.

He believed family succession planning should be perceived as the creation of an intergenerational family business.

“When perceived in this context, the entire dynamic of succession planning changes. It becomes an exciting opportunity to leverage off the family’s existing wealth and create investment and employment opportunities within the family with longevity and future prosperity.”

MORE? To receive a full copy of the Kellogg report, email dylan.barrett@prpnz.nz

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