familyownedbusinessblog

Trust: The Glue That Holds Things Together

Trust is the most important ingredient in a successful family business. It is trust, not love, that allows individual family members to work together. It is the presence of trust that allows  non-family employees to work successfully in a family business. It is the absence of trust that underlies the suspicion and resentment of family members not involved in the business toward those family members who are involved. 

Trust can be lost easily and regained only slowly. Trust is that set of behaviors that states that the welfare of all is being served not just of one. Family businesses that are most successful achieve a culture of trust which requires that individuals are trustworthy.

Trust is achieved by following these rules:

1.  Keep promises.

2.  Frequent communication.

3.  Honest communication.

4.  Remaining calm when others are not.

5.  Maintaining a transparent work environment.

6.  Act swiftly and correctly when something goes wrong.

7.  Accepting responsibility when something goes wrong.

There may be other rules of the trust game. These are the ones I've observed over the years as essential to establishing and maintaining trust.

Landmines: Influences on Owners of Family Owned Businesses

Landmines are explosive devices usually concealed or camouflaged which when detonated will cause great harm. There are 4 types of landmines that will have the ability to cause great harm to succession planning In family-owned businesses.

The first of these are the ethical issues arising out of the attorney-client relationship. When a lawyer has multiple clients, there is great potential of a conflict of interest.  Even when the lawyer is representing only the company, frequently there is a perception of a conflict because the corporate attorney is working through one of the family members (usually the President).

The second of these are the client-centered issues arising out of the complex web of relationships within the client's family and business. These issues can be identified when observing how family members use the close family ties to effect the course of the business or the planning. For example, an adult child being offered an executive level position within the family business even though that child lacks the skills, knowledge or experience to successfully meet the challenge of the position.

The third type of landmine is attorney centered and arises out of the skill set of the attorney and the attorney's own web of family relationships. From time to time a corporate attorney will be called upon by the family to draft the complex estate plan without the experience or skill necessary for the level of need. Even when the competent lawyer is drafting the estate plan, care must be taken by that attorney to guard against having the client's web of relationships trigger a response in the attorney that causes the attorney to lose sight of the client's goals and needs; and

Then there are the technical issues arising out of the laws of contracts, wills, trusts and taxes. The best laid plans of man may be derailed by the need to adhere to certain requirements of contract such as employment agreements. Other legal requirements surface in succession planning that involve gift, estate and income taxation that make some plans more tax efficient than others.

Maneuvering through the fields of these landmines is the role of the attorney, accountant, consultant and others who focus their practice on taking families successfully through these fields.