When Is Splitting Up The Right Thing To Do?

Family farmers and ranchers often have the goal of passing on their enterprise to the next generation. Passing on the farm or ranch is ambitious, laudable and at the heart of family agriculture. It is the engine that drives families to stay on the land.

It means having a successful enough equity to: 1) provide for own’s retirement and older age, 2) leave enough assets to have a fair estate dispersion for all the heirs and still leave an intact business with enough assets to be viable and competitive, and 3) have motivated and prepared offspring ready to take over. That so many manage to do it and to do it well is a major accomplishment.

When does the goal of passing on the farm or ranch become counter-productive to family interests? When does the goal actually inflict more harm than good? When should families stop farming or ranching together?

- Not profitable enough. When profitability can’t sustain incomes for each family in the operation. An operation without enough income creates stress and friction.

- Too many differences. When the management philosophies and work styles are opposed and communication breakdown is pronounced to the point where the clashes and conflicts are disheartening and demoralizing.

- Overmanned. When there is not enough work to keep all parties engaged and challenged. Turf and authority conflicts flourish when people are underutilized. Bring family members into the operation when and only there is enough bonafide work to be done.

- Undependable partner(s). When one of the partners is dishonest, selfish, lazy, dependent, addicted, abusive, mentally ill, or rigid to the point of not being able to learn or negotiate. These qualities drain the morale of all those who are fully engaged in looking after the well-being of the enterprise. Don’t make the farm or ranch a refuge for the "wayward child" who needs rehabilitation.

- Trapped by guilt or fear. When a family member’s heart isn’t in the work. Too many adult children in agriculture choose to stay because of guilt, pressure or because it is the easiest path to take in life.

If a family member sees or wants a future outside of agriculture, encourage him or her to pursue his or her dreams. Farming and ranching should be a choice rather than an obligation. Keeping the family farm or ranch in the family shouldn’t be more important than a child’s happiness.

- Family tensions. When family business conflicts have become so divisive and hurtful that family members avoid each other, don’t talk or mingle at family gatherings and live with resentment and anger about unresolved issues. It is also painfully obvious when family members avoid public situations where other family members might be present.

Troubled and conflict ridden in-law relationships often result in marital problems and side-taking among family members. Children can be affected. Grandparents and uncles or aunts aren’t encouraged to have normal relationships with the children who are used as pawns in family disputes. Cousin relationships aren’t encouraged because their parents aren’t getting along.

If it takes splitting apart to get family members to act like family to each other, then it outweighs any financial or business considerations. These relationships are too precious to be held hostage to the farm or ranch disputes.

- Family goals begin to differ. Families can be too successful - both from a family and business standpoint. Fathers and sons get along. Brothers complement each other and are true partners. Sisters-in-laws respect each other and are supportive of the overall farm or ranch goals. Mothers-in-law and daughters-in-law enjoy each other and are cooperative and understanding of each other. The business is successful and family gatherings are cordial and friendly. What is not to like?

Each family unit is different in terms of ages, gender and motivations of the children. When these children reach young adulthood, each family will want to provide opportunities to facilitate their futures within or outside of the family business.

The personality, abilities, and maturity level of each child will be unique. Families will want to identify and control their own assets and provide opportunities that will be tailor-made for each child. Each set of parents will tend to look out for their own child or children’s interests within the operation. Where little conflict previously existed, new conflicts will emerge. Each family’s goals in agriculture will change as the emphasis shifts from their own lives to the future.

Cousins don’t need to be farming or ranching with cousins within the tight controls and structure of a family business. There is too much opportunity for unfairness, conflict, exploitation and even lack of incentive to work for one’s own goals. That the brothers and their families were able to pull it off in their generation was a miracle. To expect family and business harmony to extend to another generation with even more personalities, in-laws, motivations and abilities to consider is hoping for a second and even more unlikely miracle.

A family business needs to have a proactive plan to split apart into self-sufficient interlocking businesses and potentially cooperative enterprises. When the children reach an age when joining the family operation becomes a desired goal, each family will be in control of their own family’s business destiny.

Before this happens, it may seem counter-productive from a financial standpoint and even from a family perspective - especially when everyone is getting along so well. But the day will come when each family will appreciate the freedom to operate with their own family goals and to protect their children from a business structure that will no longer meet their needs.