Generational Transfer of Farm Decision Making08/17/2017
The agri-food industry pays a lot of attention to how assets transfer between generations in farm families. Wills, trusts and estate laws are the subject of financial planning conferences and law seminars. Even so, there are few answers about how is best to manage this complex topic.
There is far less attention paid to how decision-making transitions from one generation to the next. The problem? As the roles of each on-farm generation evolve, it affects more than just the farm families.
In 2016, researchers from Purdue University’s Center for Food and Agricultural Business conducted a study about this issue with farmers in the U.S. and Canada. The goal was to get a better understanding of how decisions are made on multi-generational farms and how the roles of each generation affect purchasing and marketing decisions.
Details of the study are available online, but I’d like to share a summary of thoughts and implications from it – mainly in preparation for a new center program, called Accelerate your Management Potential, or AMP. This program offers sessions dedicated to multi-generational farms and working more effectively across generational shifts and gaps.
How farmers are dealing with generational shifts in decision-making is a big deal today, both for those farms and the sellers of products used on farms. Our data shows that most multi-generational farms in the U.S. and Canada intend to transition to the younger generation over the next eight years. The largest farms are more formal in this process, but few farms are 100 percent confident in the way they accomplish the transfer.
There are some important implications for suppliers to consider as they think about strategies for serving multi-generational farms.
Multiple generations of decision makers and large farms go hand-in-hand. If you think about it, this makes sense. For a farm to support multiple generations of families, they have to be a little larger than most. For smaller farm sizes, the younger generation often works off-farm, and when they do, they work full-time, particularly in the U.S. where they need insurance benefits. When we ask who has responsibility for purchase decisions, it is interesting to note that both generations suggest they have responsibility. The younger generation may have responsibility for selection, but the older generation still feels a great sense of responsibility – usually at least financial.
These points create challenges for sellers who would prefer a simpler process of determining who to talk with about their products and services. Instead, sellers have to figure out where the farm is in terms of the decision-making transfer, which can be a contentious issue. Suppliers also have to figure out the role of each generation in the decision process for each product, and catch up with decision makers who might be working full-time or odd hours off the farm.
As generations shift over the next several years, sellers have to figure out who in their organizations should be calling on whom within the farm. Generation matching is one approach that sellers have taken. Having young sellers call on young buyers and more seasoned sellers call on the older generation of buyers can be a useful strategy, but communication remains a challenge, and having multiple people involved with the farm is not overly efficient.
The younger generation reports more concerns or sources of conflict than the older generation does. Generally, they feel like they have less power in the operation than the older generation does. Suppliers have to be careful about inserting themselves in this process and avoiding the landmines that occur as a result.
At the end of the day, every customer requires individual consideration. For the largest multi-generational farms, frank discussion about the decision-making process and the preferences for approaching them may be worthwhile.
Source: Purdue University