There is growing complexity in farm management. As a result, there is an emerging trend towards a more corporate style of management for family farms. There are many differences between corporate farms and family farms. Both models have pros and cons, so implementing the best features of each can be a worthwhile approach.

Family farms can be viewed sentimentally with the lines between business and family often blurred. Decisions are usually made intuitively by one person with the resulting cash surpluses put back into the business. A long-term view (>50 years) is generally taken with land management, and business goals are underpinned by traditional values. Some decisions are made based on emotions, not business cases, and a large amount of time spent is working in the business. Longer hours are often worked to achieve results as outcomes directly benefit the family labour.

The corporate structure has a different outlook which is often geared towards short-term goals and wealth creation for investors. There are limited ties to a property, region or community. All decisions are made in a professional manner based on data and/or business cases. However, they can become bogged down by higher levels of internal reporting and compliance. In addition to this, they can lack local knowledge on land types. Labour efficiency is maximised via an outcome focus and clear roles and responsibilities.

The family corporate is a business model combining the strengths of both the family and corporate strategies. It takes the enthusiasm and long-term views from a family farm and combines them with the professional approach of a corporate. This is done by determining the strategy and formalising long term goals to create clarity and motivation for the whole team.

To achieve this there needs to be regular time working on the business, including determining goals, strategic issues, individual roles and responsibilities, as well as focusing on risk management and implementing business policy.
Goals and strategic issues help align thinking so that everyone is aiming for the same outcomes and recognises potential hurdles on the way. Formalising roles and responsibilities can assist to manage workloads and increase clarity by removing multiplication of some tasks.

A focus on formalised risk management can result in adoption of proactive strategies. Business policies for areas such as living arrangements, succession transition or vehicle/machinery replacement can be positive. Clarity reduces conflict as key decisions and possible hurdles have been discussed and agreed in a planned, inclusive and objective manner.
The transition towards a family corporate can seem challenging. One way to support this transition is to create an advisory board. An advisory board provides accountability, clarity and structure. Having an independent chairperson can provide the structure required to achieve long term outcomes.

If you’re interested in some of these processes or establishing an advisory board then please contact a Rural Directions consultant on 08 8841 4500.