Family farm businesses have long been the backbone of agriculture, embodying resilience, tradition, and a deep connection to the land. In the pig industry, this tradition runs particularly deep, with generations of families pouring their sweat and soul into raising healthy, happy pigs. Yet, as the agricultural landscape evolves, so too must the approach to succession in family pig farming. For family-owned pig farms, navigating the uncertainties of the agricultural landscape while preparing for the transition of ownership is essential for long-term sustainability and prosperity.
Risk management is the cornerstone of resilience for family pig farm businesses. Family pig farms confront various risks, from economic shifts to environmental challenges. Proactive risk assessment and monitoring are crucial for identifying and mitigating threats. By staying vigilant, farmers can anticipate risks and implement measures to safeguard their operations. Effective succession planning is another critical aspect of risk management for family farm businesses.
Research by PwC (2021) in the 2021 African Family Business Survey revealed that only 34% of family businesses have a succession plan in place, with only 12% making it to the third generation and, globally, only 24% of family businesses are focused on next-gen involvement. The process of transitioning a family business’s ownership and management is known as family business succession. This process of transition can both delicate and intimidating, especially for founders or senior leaders who often find it difficult to relinquish control of day-to-day management of the family business. In contrast to popular opinion, it is important to understand that a transition in management does not automatically result in a transition of ownership, and the two changes do not have to take place at the same time. The absence of a well-defined succession plan poses a significant threat to the viability of any family farm business. Unclear family member roles and a lack of communication emerge as primary risks to the succession of a family business.
Strategic planning for succession
Succession planning is a crucial aspect of risk management for family farm businesses. Establishing clear succession plans, communicating expectations among family members, and developing contingency plans for unforeseen events ensure a smooth transition of ownership. By preparing for the future, farms can minimise disruptions and safeguard their legacy for generations to come. The journey of succession is not without its hurdles. Economic uncertainties, changing consumer preferences, and technological advancements pose challenges to the traditional model of family farm succession. In the pig industry, factors like disease management, market volatility, and environmental regulations add layers of complexity to the equation. At the same time, embracing change is essential for staying competitive and sustainable in a globalised market. Succession involves three stages: Potential succession, willingness to succeed, and effective succession, requiring gradual role adjustments between founders and the next generation. This process fosters competitiveness and sustainability in a changing market, ensuring the farm’s continuity for future generations.
Preparing the successor
Understanding succession outcomes involves three interconnected processes: Developing replacement representations, advancing up the farm ladder, and reshaping farm business trajectories, known as the stochastic succession cycle model (Figurek et al., 2024). As the current generation nears retirement or considers stepping back from active management, the focus shifts toward preparing the next generation into key roles within the business. While all children may inherit various aspects of the business, successors actively engage in daily operations, requiring preparation for leadership roles. Without forward-thinking successors, families risk fragmentation and companies may face bankruptcy.
Preparing the next generation to assume leadership roles within the business includes the transfer of knowledge and experience from seasoned farmers to the next generation. Agricultural education programmes, on-farm training, and mentorship initiatives play a crucial role in equipping young farmers with the skills and expertise needed to thrive in the pig industry. In the succession process, strategic decisions are crafted to confront industry risks and challenges, with an emphasis on preserving the entrepreneurial spirit of the businessperson while strategising updates to the organisation’s technologies and products.
In family businesses, two distinct approaches shape the development of successors. The first emphasises early immersion within the family business, beginning from entry-level roles and gradually advancing through various departments. This hands-on approach fosters a deep understanding of the business and cultivates strong relationships with employees. Often, successors, typically children or heirs, maintain prolonged proximity to current managers, facilitating the transfer of practical skills and the preservation of the family’s business culture. In contrast, the second viewpoint advocates for successors to gain technical expertise outside the family business. By experiencing diverse organisational cultures and honing entrepreneurial skills in external environments, successors can develop a broader perspective and innovative thinking. Engagement in different agricultural operations reinforces their sense of succession and prepares them for leadership roles within the family business.
Good corporate governance offers an alternative to ensure a balanced and regulated succession process. By prioritising transparency and best practices, it establishes rules, structures, and defines roles for all involved in the family farm business. Succession planning, therefore, entails strategic decisions aimed at addressing industry risks and challenges while upholding the entrepreneurial spirit of the family business.
As one generation of pig farmers prepares to pass the torch to the next, they do so with a sense of pride and purpose, knowing that their legacy will live on in the hands of their successors. The journey of succession in the pig industry is not just a transition of ownership; it’s a testament to the resilience, adaptability, and enduring spirit of family farming. Family farm businesses thrive and achieve sustainable growth when equipped with effective risk management strategies. However, there’s a notable gap in the understanding of risk management within family farm businesses, particularly in the pig industry. This knowledge void underscores the importance of exploring risk management practices in family-owned pig farms, with a specific focus on the South African pig industry. To bridge this gap, an ongoing MBA study is underway, investigating the role of risk management and its impact on business sustainability within family farm businesses in the South African pig industry. By conducting a thorough analysis and drawing insights from multiple participants in the industry, this study aims to identify practical strategies that families can implement to enhance the success of their businesses. Stay tuned for the results, expected to be available later in 2024.
