Audio Transcript:

Brady Brewer: Welcome to the Purdue Commercial AgCast, the Purdue University Center for Commercial Agriculture’s podcast featuring farm management news and information. I’m your host, Brady Brewer, and I am a faculty member here in the Department of Agricultural Economics at Purdue University. Joining me today is Dr. Maria Marshall, Professor of Agricultural Economics here at Purdue and the Director of the Purdue Institute for Family Business and the North Central Regional Center for Rural Development. Also joining me today is Renee Wiatt, who is a Family Business Management Specialist here in the Department of Agricultural Economics and is also affiliated with the Purdue Institute for Family Business and the North Central Regional Center for Rural Development.

On today’s episode, we will be discussing farmer retirement and preparedness. Specifically, we’re going to be discussing a survey that Renee and Maria did that was conducted on the topic of succession values in family members.

But before we get into that, I just want to remind all the listeners, that you can find more farm management news and information at the Center for Commercial Agriculture’s website at purdue.edu/commercialag. Or you can find us on Twitter with the handle @PUCommercialAg and you can find all the materials that we are referencing in today’s podcast at the Purdue Institute for Family Businesses website, which can be found at purdue.ag/fambiz. And that’s F A M B I Z.

So Maria and Renee, welcome. I want to turn first to Maria and I know we’ve done several episodes on this now, we’ve done a whole series on farm transitions and small business transitions from one generation to the next. So if you’re interested in that, please go check that out. We also recently have another podcast thinking about farmer preparedness, but I want to just revisit this. Why is it important to keep studying and getting new materials on farmer succession and preparedness?

Maria Marshall: Well, passing on the family business is important. And farmers are no different from any other family or small business, not that farmers may be small businesses, but you know, family businesses or farm family businesses are 98 percent of all farms. If you think about the silver tsunami of the baby boomers uh,, they own 2.3 million businesses. So beyond farming, if you’re thinking of your rural small business, your cafe, your diner, that may be a linchpin to your community that’s owned by baby boomers. They also need to think of successors as well. And farmers and family businesses are no different in terms of that. And so it’s important to study because they are, it’s an important generational change that is about to hit us in the next five to ten years.

Brady Brewer: Yes, and you called that the Silver Tsunami. I don’t think I’ve heard that before. So Renee, you did this study on farmer preparedness. Tell us a little bit about what this study was, who you surveyed, and what it covered.

Renee Wiatt: Sure. This is basically phase two of a bigger study that we did. So first we did an online survey just to see what succession looked like in different farms in the north central region. And then we took it a step further. So this is called Q methods. Basically what we’re trying to ask farmers to do is take these 29 statements that we have in relation to succession and rank them. From most what they agree to least what they agree.

So we had a velcro board basically with these laminated stickies that they could rank these statements and tell us what they value and what they don’t value in the succession process. And so in order to qualify for the survey we had to make sure that they were in Indiana. They had two generations working in the farm and that we could survey two generations at the same time. We wanted them to complete the survey so we can compare. We wanted to see what they value and what it looks like.

Brady Brewer: Yeah, so you surveyed different generations of this transition. process. What were the, what are the three categories that people fall into in this study?

Renee Wiatt: Sure. So if you last listened to past episodes, you’ve probably heard us say incumbent. So that’s the senior generation, the owning generation who’s making most of the decisions on the farm. We have the sandwich generation, that’s kind of stuck in between the successor and the incumbent. They act more like a successor, but they can be more of the age of an incumbent, so they’re kind of stuck in the middle there. And then we have the successors who are the junior generation in the farm.

Brady Brewer: So you have the incumbents, the sandwich generation, and then the successors that were in this study, and you asked them all to rank these 29 statements on how important they are in this transition process to them, right?

So I’m going to go ahead and jump the gun a little bit and just assume that some of these statements, maybe the incumbent generation, the generation that owns the current farm business and the successors, the ones who may take it over, may not agree on some of these statements. Maria, why might we see these different generations of people, uh, the incumbents or the successors or the sandwich generation? all want the same goal, right? To pass on the farm, make it as profitable as possible. But why might we see some big differences or not in, in some of, uh, these statements?

Maria Marshall: Well, usually you will see that the incumbent will be less apt to take risks, will be more risk averse, um, versus the successor, which is thinking more future and more willing to take risks. Now you could think about like, the successor might have less to risk, and the, uh, owner, the incumbent has spent maybe 20, 30 years building something, so they’re less apt to be, want to take risks. Um, so they tend to be, also the incumbent, um, more looking toward what’s worked in the past. Sometimes we say backward looking, not that they’re backward, but more think about this has worked for us in the past. And the successor’s thinking about all the new things that might affect the business for the future. So one’s more past looking, one’s more future looking. Right, so if you’re already starting to think about goals and objectives and risks and where you want to invest, you have these different values that you’re, you’re trying to, to kind of manage between the two generations.

Brady Brewer: Yeah, I think that’s a key point here. Because on the surface, when I was looking, uh, at some of the results from this study, I’m like, well, maybe we should try to get everyone on the same page. And I think that just due to the different, where people are, in their lives and other stuff. I don’t think that’s probably a worthy goal to have. We have to be able to work around some of these goal differences or value differences, I should say, between the different generations rather than try to get everyone on the same page, because I don’t think that’s going to happen. I don’t think it’s realistic.

Maria Marshall: No, that’s, that’s correct.

Brady Brewer: So Renee, we’ll get into some of the areas here in just a second of where the two different generations agreed and where they disagree, but I want to start with where they did agree that I think is probably pretty important. And that’s who do, who do all these generations want as the successor?

Renee Wiatt: Yeah. So basically all generations agree that they want it in the family. They want that successor to be a family member. Um, probably not shocking to anyone listening, but farms want to keep the business in the family.

Brady Brewer: Yeah, it sounds like that’s an overarching goal by everyone involved in these farm transitions. They want to keep it in the family. They want the new generation, the heirs. You made a key distinction between an heir and a successor. They want the heirs to be the successors. Now, what that looks like, uh, may be a little bit different and, and how they’re involved. And that’s, if you want to get into that, I would advise people to go listen to some of the other podcasts we’ve done on farm transition. So that may differ a little bit, but overarching goal, everyone’s surveyed wants it to keep it in the family.

Renee Wiatt: Yeah.

Brady Brewer: Okay. So. Thinking about some of the areas where these generations, let’s start with the agree, and then we’ll move to the disagree. So what were some key areas here where all the generations or at least some of the generations, uh, agree, they want to keep it in the family. What are some other stuff that they agreed on?

Renee Wiatt: Yeah, so, um, another area where some of them agreed on were, um, they were satisfied basically with the ability of their family members to solve conflicts on the farm when they arrived. So they think that they’re conflict managers, they can work through those issues. So that was something they agreed on.

Brady Brewer: Now the skeptical person in me, uh, says maybe these people haven’t gone through a transition yet. Um, you know, just based off some work that you two have done. And then also anecdotally, you know, me just talking with farmers, um, thinking about personal experiences, these conflicts are real conflicts that can drive wedges between family members. So I like the fact that. People are very confident that they will overcome it, uh, but I do, you know, not to be the bearer of bad news, I am, I am skeptical of the overall optimism that all parties will be able to, to, uh, overcome this.

Maria Marshall: Well, if you think, you know, conflict is what drives us forward and what grows, so we might, a conflict could be where do we go to lunch, right? So, right, that is an indeed, right? And we have to compromise and figure out how to deal with all these things. I think it. There’s a degree of different conflicts that make things easier and harder. And so thinking about, you know, and sometimes anecdotally from what we’ve seen, um, not talking about it doesn’t mean you don’t have conflict. And sometimes when we ask, oh, how often do you talk about this? They’re like, only when we need to. Well, that in and of itself is not resolving the conflict. So I, I agree with you, but there are, it’s great that I think they are saying we can deal with disagreements and conflicts as they go on, but then there’s this level of emotion, depending on what it is, that suddenly drives the succession as something that’s just a little bit harder to, to deal with.

Brady Brewer: No, that’s excellent. So I, I think what I’m hearing is, is don’t view conflict maybe as a truly negative association here, right? Conflict, well, it may not be good, but it’s necessary to maybe get those opinions out there so you can determine what is important to people and you can work around it.

Maria Marshall: Right.

Renee Wiatt: Yeah, if you can resolve the conflict, then you can move forward. But it’s that unresolved conflict that causes problems.

Brady Brewer: I like that. What else did, uh, uh, the different generations agree on?

Renee Wiatt: Yeah, so successors and incumbents, um, both agreed that members of the farm business are supportive of each other during difficult times. I would assume a lot of farm businesses, you know, they work together, they have family events together, they’re in the same community. So I would assume that they would have some of these overlapping difficult times, right? If something happens in the family, they all feel it. If something happens in the business or the community, they all feel it. So it’s, It’s good to know that those two generations feel like they can be supportive of each other and work through those difficult times.

Brady Brewer: Now let’s get to the disagreements. So what were some areas, Renee, that the different generations, the successors, the incumbents, the sandwich generation, where did we see some disagreements in the survey?

Renee Wiatt: Yeah, so successors ranked this statement pretty high – maintaining family relationships is more important than transferring the business to the next generation, which was kind of eye opening to me. They’re the ones who would most likely be receiving that business, right? Whether they buy it, whether it’s passed down to them. And it was shocking to me that maintaining family relationships was more important than the business transferring.

Brady Brewer: Yeah. That’s so, so just to clarify the people receiving that or could potentially receive the business are saying, Hey, it’s, it’s more important we maintain a family rather than, uh, you know, so it, in the previous episode, we talked a lot about family goals versus business goals. This tells me the successors, the family goals are more important than the business goals for, for a lot of the successors.

Renee Wiatt: Yeah. And we have seen that some in the field, we’ve seen some, um, successors who are trying to enter the family business and, or, you know, trying to enter the farm business, trying to be part of that management and decision making part and really when it comes down to it, they have decided to exit and get a career elsewhere to maintain family harmony and the business to the next generation. Even if it doesn’t include them. So we have seen that in some cases.

Brady Brewer: Yeah. So key distinction there for a lot of successors, family goals are more important than the business goals.

Maria Marshall: So we’ve seen in past research that when we’ve asked people that have had a transition, we’ve asked them, so did you think the transition was successful? Forty percent said no, and that was because they weren’t speaking to family members or they had lost contact with family members because of the transition. So maybe we have a generation that’s seen some of these bad successions and say, I rather, I prefer to have my brother or sister or you know cousins then have a piece of the business.

Renee Wiatt: Yeah, and when we redid that that same question in a recent survey, similar statistics, so, you know, they got the business but they did not feel it was successful, a successful transfer. And when we asked why, they basically said the process was not at all what they thought, or there were family relationships that were damaged in the process.

Brady Brewer: Yeah, so the family relationships here and the family goals are super important in this, so please do not discount them.

Renee Wiatt: Yeah.

Brady Brewer: Uh, anything else where the three generations you surveyed did not agree?

Renee Wiatt: Yeah, so for the sandwich generation, they were the only generation that ranked the statement, um, that the succession process has been uncertain for my farm business. They were the only generation that chose that, and I think that speaks to where they are, right? They’re kind of in limbo. They have this generation ahead of them, which is the incumbent. You know, they’re the main owners, probably mainly doing most of the management decisions. And then they also have these successors pushing behind them, right? So they’re trying to almost push those incumbents out so they can finally make those management decisions, but they also have to consider the successors that are probably about 20 years, on average, younger than them. So they’re stuck in this gap with the people who are about 20 years ahead of them, 20 years behind them. And they’re in the middle.

Brady Brewer: Yeah. Understandably. That’s probably not a good feeling to be in that position.

Renee Wiatt: Right. I mean, we’ve talked to some farmers who are 50 or 60 and they’re saying, you know, when am I going to get to make decisions? When am I going to get to manage the farm? You know, when really, in other people’s minds, they’re closer to retirement age. So it’s this kind of pull, and they’re kind of stuck in that middle generation.

Maria Marshall: So if we wonder why are farmers on average, you know, 65, um, and still in the stay and grow stage, if we talk about the quadrant from our last episode, that would be why a lot of sandwich generations.

Brady Brewer: Yeah, because they they get a hold of the farm and they should really be thinking about transitioning themselves, but but they just took over themselves.

Renee Wiatt: Right. And then lastly if we look at incumbents, the one statement that they ranked No other generation ranked was that they themselves are mentally prepared to pass the business to the next generation. So they may feel they’re mentally prepared, but no other generations feel that way.

Brady Brewer: So, so the generation that is currently in charge of the farm business says, Hey, I’m ready to do it. No one agrees.

Renee Wiatt: No one agrees.

Brady Brewer: Any, any thoughts on or, or reasonings why they may feel they’re ready, but no one else does. Do you think it’s because the transition is going slower than maybe the next to the sandwich and the, the successors want it to happen or why, why this big disconnect from the incumbents to the other two generations?

Maria Marshall: Yeah. I mean, I think it goes back to that goal that everyone agrees on, right. They want to pass or sell the business or give the business to the next generation of family successors. I mean, I think any farmer that you ask basically says that’s what they want. And they truly do want that. They want that generation, that farm to pass on to the next generation.

Now, mentally letting that farm go is a different thing. So those two, those two statements could kind of be mixing up in their mind. Because they do want it to go to the next generation. They just can’t yet.

Brady Brewer: Yeah. If, if I’m an incumbent, uh, listening to this particular episode, I, I’m thinking, wait, do my successors think I’m not mentally ready to do this? I mean, uh, cause your survey would say highly likely that is, that is the case.

Renee Wiatt: Mm hmm. Yeah.

Maria Marshall: So we would ask them, do you have a roadmap to how your successors are going to take over and you’re going to let go? I think that goes to that uncertainty that the success, that the sandwich generation is talking about. So there might be a lot of, uh, discussion and talk about the process, but not a lot of actual determining when things are going to be transitioning, from little things to big things. And I think that leads to the uncertainty of the sandwich generation and the younger generations thinking you’re not ready even though you think you’re ready.

Brady Brewer: Yeah, so some key differences there between the different generations.

If you would like to read more about this study or, or find other materials to help your farm business transition, please go to the Purdue Institute for Family Businesses website, which is at purdue.ag/fambiz. For more farm management news and information, please go to the Center for Commercial Agriculture’s website at purdue.edu/commercialag. On behalf of the Center for Commercial Agriculture, I would like to thank you for listening to this episode.