Building Trust Within Family Enterprises
As I was preparing for the recent FOX Global Owners Forum, I was thinking about the importance of partnerships for family enterprises and why trust is the essential element in building strong partnerships. I thought it was worth defining trust and illustrating how it influences the different relationships in the family eco-system.
The issue of Trust is a complex concept, and trusting others is not something that comes easily to many entrepreneurs and enterprise families. Because success attracts many untrustworthy suitors, it is natural for successful people to distrust the motives of anyone who might separate them from their success - whether they be outsiders or family members. At the heart of most family conflicts is the ultimate distrust of some (and sometime most) individuals.
Trust has many distinct nuances, but four of the key definitions are critical to building partnerships:
- Trusting someone's judgment or business acumen is the easiest to recognize.
- Trusting someone's intentions or motivations is a more subtle reading of the relationship.
- Trusting someone's ability to put the interests of others ahead of their own goals is related to the stewardship of others' interests.
- And trusting someone's abilities to follow through and execute on commitments is essential for building strong and lasting relationships.
In a Family Enterprise, Trusting the System involves building confidence in the structures that are put in place to protect the family's assets and to ensure that power is balanced among the owners. Trusting the System requires giving up personal control of decisions at some point, in hopes that better outcomes will result from working as a collective group of owners/decision-makers who can engage wiser advisors than they could attract individually. Or, in the extreme case, when a controlling owner leaves the scene, a new system of governance must be installed to protect the heirs and the legacy of the founder.
For families with private capital to sustain their enterprises, there must be an underlying capacity for the family to trust the systems they have created to manage their assets. Trusting the System means working together as a family and constructing a governance system that supports the owners' goals and fairly represents their interests.
Building strong partnerships with external advisors requires a diligence to "trust but verify" the work of a select group of advisors whom you have brought into a special circle of confidantes who have an intimate knowledge of your aspirations and insecurities which may lie behind the stated goals. Having this type of relationship makes an advisor more than just a strategist about technical alternatives but also a person de confidence (or consigliore) to the owners involved. A trusted partnership involves trusting in the judgment of your advisors and believing in their commitment to put your interests above their own. The result is almost always better outcomes, stronger relationships and a mutual respect for each other that can transcend many years of working together - the ultimate benefit of trusting others.
Topic from the FOX Report "Strengthening Partnerships between Families and Advisors."