How Family Farm Perks Can Create Lifetime Conflict
The issue at hand, at least on the surface, was the fish house being built in the farm shop. For those in warmer climates, let me explain. Here in the upper Midwest, we can fish all year long. In the winter, it gets cold enough, and the ice thick enough to drive pickups on the ice and pull out fish houses. These look like small 8x12 ft. (some are longer than 18 feet!) enclosed trailers. Often, these fish houses are built instead of bought. Some are spartan, and others have solar, satellite TV, cook ranges, and beds for staying on the ice for the weekend. The point is these are often a nice luxury and take time to build right. Building one inside a warm farm shop is even better.
Personal use of equipment and facilities
What's the issue? Sometimes, a nice gesture takes on a life of its own. In one case, the fish house build was taking not only the time of the builder but also space in the farm shop, so the corn planter wasn't getting serviced. What happens if everyone shows up with their pet project? Is there enough space? Even if there is room, is everyone okay with accommodating personal projects? What happens if a project is at someone's home, but they're borrowing the shop tools to work on it? Then, the workers at the farm shop don't have the tools to get their work done.
This is just one small example of how a family business's perks can be abused or expanded over time until it creates conflict.
Here are a few more that we've seen.
Vehicles - Business vehicle purchases and use. One person wants a top-line truck they drive for personal and business, while other partners drive a 10-year-old mid-price model.
Housing – Some farms provide housing for their owners. Some like a nicer home, others are fine with a little less, and maybe the unmarried bachelor brother is content living in the extra room above the shop and doesn't use any housing.
Typically, the founders started the perks for tax planning purposes, which worked well for them. However, as time passes, there tends to be a common thread to the perks that causes issues.
- The founder started the perks, not considering how it could impact the farm and family down the road.
- Often, the perks were created for tax planning purposes.
- The farm has grown, and more people are involved, so more people are using the perks.
- It's unclear how much the perks cost the farm or their impact on farm operations.
How can your farm manage perks?
- Compile a list of all farm perks provided to family members.
- When possible, place a dollar value on them.
- Call a business meeting and discuss whether all family members use and value the perk. Some members may use the perk often, while others do not. Discuss where the perk is causing conflict or could impede the business. Then, agree on whether it is worth the costs, the tax savings, or the conflict. Kill the perks that don't pass this test.
- For the remaining perks, create a governance agreement outlining the perk, estimated value, and parameters of how and when it is used. This doesn't need to be a legal document but should be in writing and reviewed yearly.
You'll have peace of mind when you drive your farm truck to the new fish house you built in the farm shop. Peace of mind that you are not stepping on anyone's toes and your perk isn't causing issues for the rest of the farm.
