Trust: The Tie that Binds

trust

Very skillful communication is required whenever trust (or the lack of it) emerges as a family business issue. In one family two brothers (Lyle and Jay) worked in the business and one sister (Cathy) did not. At the death one year ago of the founder/father the three siblings became equal 1/3rd owners and Board members. They found themselves at an impasse at a recent Board meeting. In a heated moment Cathy confessed that she was afraid to trust either of her brothers to run the family company.

Raising issues of trust needs to be done very cautiously because the first interpretation is that the honesty of a family member is being questioned. But often the trust issue is not about dishonesty. I have found it very useful to help my client-families define precisely what they mean when they are afraid to trust another family member. It is helpful to differentiate among five categories of trust.

The five categories of trust are honesty, skills, clarity of vision, commitment to the groups’ best interests, and the courage to make hard decisions.

Honesty

Honesty is about the integrity of the person. When this is a problem, family members are either worried that they will be victimized by a relative or that the business will be put at risk by illegal or unethical activities.

Skills

Trust in the skills of a successor is often an issue in succession. Frequently the business has been based on the unique executive skills of a founder that are hard to pass on. While siblings often trust in the honesty of their brother or sister they may not think they are the right person to be the boss.

Clarity of Vision

Leadership is based largely on clarity vision. Very often the successor is honest and competent in specific management skills but lacks a vision of the future that stimulates excitement and loyalty. This weakness in vision and communication makes stakeholders worry about the future of the business and afraid to trust the successor.

Commitment

The ability to balance the pursuit of one’s own self-interests with a commitment to keep the best interests of the other stakeholders in mind is an important way for successors to earn the trust of their family members. It is one thing for a grandparent to treat all their children and grand children equally. It is another thing entirely for that founder’s successor to be a steward of the interests of their siblings and nieces and nephews without taking personal advantage of their unique position of power in the family.

Courage

And still, a successor may have all the personal virtues above and still not be trusted to make hard decisions that require the courage to take the heat from the family over a decision that causes pain. This might be firing an incompetent family member, or even selling the business itself when it threatens to become a liability. Or it may be simply about the courage to speak the truth.

In Cathy’s case she trusted in Lyle’s and Jay’s honesty. But she just knew that Lyle wasn’t the right person to be president because his obvious professional skills did not include leadership. He was an excellent CFO, but he was not the kind of person to inspire others. And she knew that Jay agreed with her impressions about Lyle but lacked the courage to say so or do anything about it.

When she was able to clarify with her brothers what she meant by being afraid to trust them with the business they were able to have a productive series of conversations. Eventually, these discussions lead to the consensus that they needed to hire a non-family member to run the company for them.

Insights that will help to build trust that has been weakened

  1. As intangible assets go, trust is much more important than love in making a family business work. When you are in a relationship with someone you love but do not trust it is almost always emotionally draining, and any little issue can become a big problem. On the other hand, consider a purely business relationship with a non-family member that you don’t love but trust completely. Such a relationship will weather many ups and downs and is thought of as a valuable resource.
  2. The flow of knowledge and information in a family business is profoundly influenced by level of trust in the family. In high trust situations knowledge flows freely, in low trust scenarios “knowledge is power” and it is used that way.
  3. The formula to build trust differs in different kinds of relationships. In interactions between people with equal power (e.g., siblings or spouses) equal give and take leads to trust and a sense of fairness. But in relationships between individuals with unequal power (e.g. parents and children or bosses and employees) a greater burden for the quality of the relationship lies with the more powerful person.