Remarkable Journeys with Jess Fox: Conversations with our clients, people and community. Listen now.
Being adverse to change is not the same as upholding the same family values and traditions. There are many positives from doing some things the same, as family businesses traditionally do attract loyal long-term employees.
But, there can also be negatives with this mindset. Long-term employees can be loyal to the incumbent generation, and not the next gen and the sustainable evolvement of the businesses. They can often be promoted for tenure – and not skill set.
Grant Thornton’s Family Business team has developed the FREEDOM model for succession planning works through each of the hurdles.
In a nutshell: Financial security; Refocus of life plan; Electing a successor; Education and support; Disasters & unplanned events; Objectives alignment; Managing communication.
For this scenario, we look at two letters of the FREEDOM acronym: E and E. Electing a successor; and Education and Support of a successor.
Are the current owners able to choose a successor from the available candidates; and is the candidate willing to accept? Does the next generation have the relevant qualifications and experience, and access to personal development, coaching and mentoring resources to guide them through transition?
Supporting a successor includes always showing respect to the next generation at work and listening and respecting their ideas. The team look up to you and respect you and will follow your lead. If they see the next generation has your respect, there is a high chance they will respect the next generation too.
Our FREEDOM model allows us to assess what hurdles could potentially derail your succession plan and we work with your family to ensure you have addressed the hurdle and set your family up for future success.
How do we define ‘transition-ready’? Introducing the FREEDOM Framework.
In working with many family businesses in becoming ‘transition-ready’, Grant Thornton Australia has developed a tried-and-tested framework for assessing the preparedness of family businesses to successfully achieve generational transition, from the incumbents to the next (rising) generation.
This FREEDOM framework is built around the seven key challenges that we most often see as barriers to successful generational transition.
Financial security: Have the current owners accumulated sufficient wealth outside of the business or will a transfer generate sufficient funds to properly redress the situation in an appropriate timeframe?
Refocus of life plan: Do the current owners have meaningful activities outside of the business that will sustain them as they scale back their involvement?
Electing a successor: Are the current owners able to choose a successor from the available candidates; and is the candidate willing to accept?
Education and support: Does the next generation have the relevant qualifications and experience, and access to personal development, coaching and mentoring resources to guide them through transition?
Disasters & unplanned events: Is there a plan that considers contingencies in the case of death, disability or other crisis events?
Objectives alignment: Do the current and next generations have a shared vision and agreed family values in respect of the family business?
Managing communication: Is there appropriate communication and trust between the current and next generations, enabling effective decisions and the sharing of information?
New “EET election” option for discretionary trusts to avoid the minimum 30 per cent without having to restructure, but creates inflexibility.
For many successful families, creating wealth is only the beginning. As your businesses, investments and family interests grow, arrangements that once worked well can become difficult to manage.
The announced 30 per cent minimum tax on discretionary trusts creates significant challenges for private groups.
