Family Business Matters

"Trust" -- a word that connotes reliance, belief, hope, faith, responsibility and care. It is a word that means to be counted on, and speaks to the integrity, ability or character of a person. A trustworthy person is one whom we can believe and on whom we can rely.

So, what about "trust"? Currently we have all been witnessing a complete breakdown in the trust that investors had in governments, financial systems, bond rating agencies, regulatory agencies, investment bankers and those who created financial products, which in reality were based on quicksand. The malfeasance and outright greed -- yes, greed -- that has come to light in the last two months in particular has caused many sleepless nights for thousands and damaged portfolios and lives all over the globe.

Unfortunately, perhaps the only thing that will reinstate trust in the markets is the arrests and convictions of those who thought they were above the law and could maneuver markets for their own gain.

What does "trust" -- or the lack thereof -- have to do with business-owning families? In reality, trust can be a competitive advantage for family businesses. Unlike their public counterparts, family businesses can make long-term decisions that take years to improve company profits, as they don't answer each quarter to Wall Street and don't "push the numbers" to meet analysts' expectations. Family businesses can consider strategic options that can take time to implement, without worrying about the impatience of investment bankers.

In most family owned businesses, there is less bureaucracy and less pressure to expand or complete an acquisition just to grow the company so a manager's resume looks better. In addition, in a family business, management and ownership overlap, which means the shareholders and family are the same group, working for the best-aligned interests of the family, who are the owners.

"The key trust relationships on which family businesses must work are those between generations, between family branches when the firm grows and/or survives long enough that more than the entrepreneurial members are involved, and between key non-family managers and family employees as well as management," said professor Otis W. Baskin in the Pepperdine University Graziadio Business Report.

Although this can be challenging, in a functional family business, family members work together running the business for the general wellbeing of all of the family shareholders, not simply for their own benefit.

Another competitive advantage is that in international markets, trust is almost as important in the business transaction as is the actual transaction itself. Many family businesses find that they are dealing with foreign family businesses that are just like them and operate in similar fashion. Using the family relationship as a major strategy, the potential customer or partner is more apt to feel more comfortable with "a business like us" that they can understand and trust.

As my prior columns have continually stressed, to maintain the trust among family member/owners and employees in the family business, there needs to be excellent ongoing and congruent communication, consistency, clarity, competence, compassion and comic relief. Perhaps the best marketing tool that any family business can implement in these times is using the word "TRUST" in its advertising and public relations efforts. Family businesses have a reputation of being more trustworthy for some of the reasons mentioned herein. Rather than getting caught up in the angst and anger about the economy and playing the "blame game," family businesses can build off of the trust that customers, vendors, employees, clients and the community have in them. Now is the time to use this attribute to attract new customers, maintain loyal clients and increase the pride the family has in its business.

When the question is raised, "Who can you trust?," my hope is that many families in business will look to each other and press forward together with a shared conviction that the trust placed in them is rightly deserved, hard won and makes them extremely special in our bruised world today!