Strengthening Trust: A Family Business Paradox

Strengthening Trust A Family Business Paradox

Trust: a five-letter word that can expand over an entire lifetime that is often central to our daily lives even if we don’t fully realize it. 

We trust that our car or the bus will get us to work on time. 

We trust that the sun will rise and the caffeine will kick in right when we need it to. 

We trust our partners to make decisions based on group interest, rather than solo-interest, and if we’ve put our trust in the right people, the results can be life changing. 

Trust, as I see it, is the central component in developing a family firm’s social capital. But how can you develop trust, show that your business is worthy of it, and keep your customer’s trust as your family business evolves? Fragile enough to be irreparable if broken, yet strong enough to make up the foundation of most decisions and plans, ensuring your business is worth trusting cannot be understated in its importance.

When defined, trust is the ability to rely on an individual behaviorally and emotionally. 

It’s knowing that that individual will be there for you when you need them, and vice versa if they trust you. To me, the understanding of being able to trust someone implicitly is genetically wired at the creation of a family. 

According to Dan Gilbert, a Harvard psychologist in the 2010 PBS series, This Emotional Life, there is a biochemical response in the brains between newborn babies and their parents. It appears that we are wired for this response, and that the creation of trust is an implicit response. Even in the extreme cases of sibling rivalry I have experienced in business families, there is a bond of trust that exceeds seeing their sibling as competition.

However, trust is something that has to be nourished, and even if trust already exists within the family dynamic, it cannot be ignored. Consider trust like a houseplant: if you ignore it, forget to water it, keep it in a dark, shaded corner of the room, it will wilt and wither until it dies. It’s an important reminder to keep nourishing the trust within a family to prevent it from breaking and spilling into the business. This can be strengthened by showing up when expected, maintaining honest and open lines of communication when it pertains to the business and expectations, and working to develop a stronger team to fortify those lines of trust.

I have seen family businesses deteriorate from a lack of trust when one member of the family doesn’t respond in a way that is expected, doesn’t communicate effectively, or exhibits untrustworthy behavior. Not only are feelings hurt in the process, but breach of trust has the chance to erode the healthy foundation built for the family business, not just within the family members but with clients as well. While it is virtually impossible to go through life without accidentally stepping on someone’s toes as a result of indirect or direct action, ensuring that communication remains open and that the family is able to forgive and move on is paramount to strengthening the trust between family members. The stronger that trust is, the stronger the foundation you create for the family business to flourish.

In the third edition of Family Business, Ernesto Poza posits that “involving family members in developing policies and setting direction can increase trust, a sense of unity and goals deemed important by family members” (Poza 40). In my experience, these policies are two-fold and need to occur on both sides of the family/business equation. 

  • The creation of emotional strategies within the family not only strengthens the trust that family members have with one another, but further upholds the trust that is weaved into the creation of the business. 
  • Additionally, creating structure, discipline, and formality in business allows for trust to happen naturally as actions become predictable and dependable, leading to higher profits and greater return business. As your customers begin to realize that they can count on your business, the more likely they are to return when the need arises.

These activities of formality and structure in business also have a significant impact on the trust in the family, which is what I consider to be the family business trust paradox. The higher the level of trust within the family, the higher the level of trust within the business, thus strengthening the family’s social capital.

It is not unusual for a close-knit family to balk at the idea of creating structure or formalities within their business; they believe that their love and respect for one another will be powerful enough forces to keep everyone working smoothly and succinctly together. While that may be true for the short term, when you are working to get your team off the ground, not having structures or formalities to fall back on leads to a business that is not scalable, and will often struggle when tested by a larger volume of customers or work. Feelings get hurt when accountability goes out the window, and as trust lags within the family about whether or not certain team members are able to finish their work on time as expected, those same feelings of uncertainty will find their way to your customer-base, too.

Because your family loves one another, you need to create structures to preserve the trust and your family relationships. 

These structures will help to create clarity and expectations within the business, leading to a building of trust when expectations are met or exceeded, and providing safeguards in the event that something happens and a deadline is not met. We’re human, after all, but isn’t it worth creating these safeguards and structures ahead of time to prevent yourself from struggling in the aftermath of a system breaking?

Below are some suggestions for ways to build trust, both as a family and as a business. Every business has their own needs and goals that they fall back on, so what might work for one business may not for another. See which you can implement to deepen your family and business’s trust, and enjoy reaping the rewards.

Behaviors and Actions that Promote Trust


Family Participation Plan: Clear rules and policies for family members working in the company, including a career and leadership plan
Authentic CommunicationCompensation Plan that is open and transparent
CourageDistribution Plan
Leadership that promotes learning and growingRegularly family meetings or family council
Having and celebrating measurements of successShareholder Development Plan
Honor the product (what) and the process (how)Active board with outside members or advisors
Equality/FairnessWealth Preparation Plan: family discussion about money and wealth
Spirituality/ReligionService and Philanthropy Plan
Truthfulness/SharingCommon Family Vision
Coherence: predictability, manageability and optimismForgiveness Plan
Sense of Community: emotional support, esteem support (specific and exact praise), networking (belonging), appraisal support (honest feedback), altruistic support (giving to other people)Plan for management of differences and dispute resolution
High level of family rituals and fun (such as family outings or retreats)Strategic Business Plan