Lance Woodbury

The Cost Of Uncertainty

Last month’s column suggested several precursors to a good succession conversation, basic moves that grease the gears of multigenerational transitions. But what if your family business members are still hesitant to engage in transition planning discussions? How do you encourage your family to communicate about the future when they seem reluctant to do so? One approach is to help them see the consequences of avoiding the issue. The conflicts that result from a lack of communication about the future have multiple costs.

Financial Cost. We all know families who are unable to stay in business together. Despite a strong land base, a profitable business and a history of good crop or livestock production, they can’t operate as one organization. Sometimes a breakup is for the better; people have different visions and goals for the future that are simply incompatible. More often, however, the family splits because those different goals or rising tensions aren’t addressed and culminate in a messy division before or at the death of the senior generation.

The financial cost stemming from a lack of communication can be exorbitant. Not only are there often significant estate tax consequences at the death of the parents, the expense of each family member hiring attorneys and accountants to figure out and represent their interest eats away at the family’s collective capital. I’ve seen families spend hundreds of thousands of dollars to fight for a particular division, all stemming from latent conflict or a lack of direction from the parents about their intentions. Some discussion and planning as a family—even if difficult—would have saved money that could have been used to generate wealth for the family. Instead, the money went to the fight.

Energy Cost. When family members aren’t clear about how the business will transition, a significant amount of worrying occurs. During the years, I’ve had multiple conversations with people who, not knowing the family business transition plan, were spending time and energy trying to figure out and plan for their business, career and lifestyle options under multiple scenarios. The uncertainty was, in short, wearing down family members. They were tired of trying to guess how their future might turn out. Worrying takes away from energy that could be directed toward the business or devoted to positive engagement with family.

Energy Cost. When family members aren’t clear about how the business will transition, a significant amount of worrying occurs. During the years, I’ve had multiple conversations with people who, not knowing the family business transition plan, were spending time and energy trying to figure out and plan for their business, career and lifestyle options under multiple scenarios. The uncertainty was, in short, wearing down family members. They were tired of trying to guess how their future might turn out. Worrying takes away from energy that could be directed toward the business or devoted to positive engagement with family.

Relationship Cost. Perhaps the most unfortunate cost of conflict arising from uncertainty is the deterioration of relationships. As family members, we share deep emotional and historical bonds. Conflict or uncertainty about the future serves to weaken or even break those bonds, as family members jockey for position, interpret comments and operate based on assumptions.

One family member I met was lamenting the lack of relationship between her and her siblings because of how they were each anticipating their parent’s decisions about the future of the business. The way things were headed, this daughter’s children wouldn’t experience the values and legacy of a multigenerational family business, wouldn’t work side by side on the farm with their cousins and would have to start from a smaller base of capital. The family was growing distant right before her eyes, yet they all lived in the same small town.

The emotional cost of not having a broader family relationship is significant. In a recent conversation, I asked a father about his primary estate-planning goal. He replied, “To see my adult children and their children sitting around the porch after a hard day’s work on the ranch.” He knew in order to achieve his goals, the family would need to talk together about the future. He also knew the conversations might not be easy, but they were a necessary element in keeping the family and business together.

Originally Published in The Progressive Farmer.

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