The vast majority of the approximately 5 million rural properties in Brazil are controlled by business families, from small businesses to enterprises that have tens or even hundreds of thousands of hectares, with large-scale production and a high level of technology.

Regardless of the size of the business and complexity of the business family, a major challenge is figuring out the succession process, as new generations prepare (or not) to take control of production activities. Therefore, the adoption of good governance practices on rural properties is a fundamental basis for planning a successful succession process.

From generation to generation: The involvement of a business family with rural activity It is based on relationships of trust, integration of efforts, long-term vision and agility in the decision-making process. Inter and intragenerational relationships are the key to longevity in family organizations. But the relationship between successors and those succeeded often presents pitfalls that must be avoided.

On the one hand, it is natural for the patriarch or matriarch of a business family to expect that their heirs will be qualified to work in the family business. And, when there are motivated heirs, the result can be magnificent.

But, on the other hand, such expectations should not become pressure or obsession on the part of parents to the point of limiting the life and career decisions of the new generations. Care must be taken not to restrict the professional choices of young people, who are often induced to work in the family business to satisfy their parents' wishes. This can result in personal frustration and negative impacts on the business itself. It is important, yes, to prepare heirs to be potential “partners” with clarity of their duties and rights towards the family society. But it does not necessarily mean that heirs should be the “managers of the family business”.

Along the same lines, in intragenerational relationships, in a society of brothers or a consortium of cousins, a distinction must be made between the succession of assets (equity participation and right to dividends) and the succession in business management. Family members who work in management must be remunerated as “managers” (salary or pro-labore and, possibly, variable incentives) in addition to remuneration as “partners”. But they must be transparently accountable for their actions and share the strategic decision-making process with their “non-managing partners”. The saying goes here that whoever has a partner has a boss.

Conflict management: Conflicts can occur in intra or intergenerational dimensions, in any business society. But in “family” business society, they usually occur with greater intensity, due to the emotional load involved, especially in the agricultural environment, where productive activity is mixed with the rural lifestyle.

Often, “cognitive conflicts” evolve into “affective conflicts” between family members , which can be highly corrosive, both for the business and for the business family. This is often due to absolutely natural differences, after all, the heirs of a business family did not “choose” each other as partners. Divergence of opinions on how to invest or increase withdrawals, leverage, diversify or not the business, can generate divergences and deep scars in relationships. Often, these disputes are difficult to resolve, as the departure of disgruntled partners may be unfeasible, given that a large part of the family's assets are in the real estate asset (land).

The ingredients for a good succession process: Some “combinations” can be listed for the evolution of an effective succession process, which takes into account the alignment of interests of the business family and the family business:

a. The search for balance between reason and emotion, empathy and the development of so-called interpersonal skills are important to maintain the harmony of family relationships. But, equally important, is the formalization of partner agreements and family protocols, in addition to good patrimonial succession planning. The maxim here is that the combination is not expensive.

b. The professionalization of rural properties should not necessarily involve family members or the hiring of external professionals. The importance of professionalization is to treat managers, family members or not, as professionals with clearly established rights and duties, based on a meritocratic culture, based on leadership skills, which requires technical skills and interpersonal skills.

c. Confusion between family and business must be avoided. The rules must be clear regarding the participation of family members in the management of the business, without nepotism. The separation of remuneration for work (pro-labore) and capital (distribution of results) must be transparent.

d. The business vision and strategies must be shared inter and intragenerations. It is important to foster an environment of dialogue, equity and respect for individual interests, but without overlapping with business society. The asset and management succession plan must be structured through consensus.

e. Indeed, it is important to educate heirs for the role of partners, not “necessarily” managers. Different learning paths must be implemented to exercise the role of partners and the role of managers.

f. The “family legacy” must be cultivated. And it goes far beyond transferring assets and managing business operations. It involves the culture, values and principles passed down through generations. It is the amalgam that unites generations and transmits signals to the market, employees, customers, creditors, business partners and other interested parties. Over generations, the legacy that CREATES value is one that improves, preserves positive values and mitigates human errors and failures.

g. Improving the governance system involves structuring the decision-making bodies of the family-business ecosystem, separating the roles of managers and administrative councils (formal or consultative) and structuring the family council to deal with business family matters. Furthermore, a legal structure is necessary that allows for the best tax equation associated with the reduction of corporate risks. Such a governance system must be based on the principles of transparency, equity and responsibility.

In summary, the pursuit of longevity in a family business requires an effective governance structure, appropriate to the cycle of evolution and maturity of the business family and the family business. Every case is different, literally, as businesses and families are unique. But there are tools and processes from a legal, administrative and behavioral point of view that can help agricultural business families in the search for business longevity and good family relationships.