In family businesses, combining the desire and drive of the younger generation with the capital and financial management skills of the older generation creates a very efficient business structure. However, everything is not always sugar and spice. Rifts in the organization can occur if the parties cannot reach agreement on key decisions.

Perhaps the worst thing the older generation can do is insist on the “modified golden rule theory.” You have probably heard it: “He who has the gold gets to make the rules.”

Certainly, the older generation has a right to veto decisions that could damage the financial position of the business. But, just saying “no,” without detailing the logic of the decision or allowing other family members input in the decision-making process, can be destructive.

The secret to resolving this dilemma is to have all family members become comfortable with the decision-making process.

Allow ideas to develop

I encourage the older generation to adopt the "chairman of the board” approach. If someone comes up with an idea that the chairman feels has little or no chance of success, he should not dismiss it. Rather, the chairman should ask for further clarification, including:

  • What will it cost?
  • What economic benefits will result from adopting the decision?
  • How long will it take to implement and become profitable?
  • What are the chances of success?
  • What other farm businesses have implemented the idea?

If the idea is a bad one, the individual charged with researching it will probably come to the same conclusion. Making the individual research the idea and coming to his or her own conclusion will create a much better atmosphere than simply rejecting the idea outright. In my experience, 90 percent of bad ideas will disappear upon closer examination.

On the other hand, if the family member still believes the idea has merit, it may be best to follow through with it as long as the idea doesn't put the farm in a bad financial position. The chairman needs to calculate how much failure would cost the operation. If the idea won't sink the ship, think of the loss as a learning experience. You can bet that whoever came up with the idea will do a better job examining his position next time. We learn best from our mistakes.

And, the idea may actually work and the operation will profit from the success.

Require participation
Sometimes the chairman must force individuals to participate in the decision-making process. I remember a case where one family member took a devious approach to the decision-making process. Any time a decision was to be made, he was unavailable. But, you can bet he never missed a chance to gripe about decisions that other family members had made in his absence. He also avoided consultants, such as the veterinarian, when they visited the farm.

My solution was to give the “avoider” responsibility. He was placed in charge of organizing the family business meeting and leading the discussion — if he didn’t attend, no meeting was held. And, he also had to set appointments with outside consultants. We forced him to be involved in the process.

Communication is the key to success in family business relationships. Anything you can do to encourage family participation helps the communication process. You are responsible for the success of your family farm business. Take steps today to help your family members make better decisions.

Darrell Dunteman, AAC, is an Accredited Agricultural Consultant and accountant with offices in Bushnell, Ill.