How to Rebuild Business Trust

What miswiring of family circuits could possibly lead sons to stage a boardroom coup against a father, as in the Shoen family of U-Haul? What lifelong process of decay could turn a relationship so rotten that a father mounts a similar coup against his CEO son, as did Herbert Haft of the Dart Group? Differences over business policy cannot account for the feuds we hear about in some family companies. Nor are anger and hurt alone sufficient explanations.

Such enraged acts can only result when something vital to human life is injured: trust. Basic trust is the first thing an infant needs to learn—but the need never ends. Every adult’s safety and emotional survival hangs on our ability to trust others as well.

That is one of the major reasons families exist. If I cannot trust my family, I am a lost soul. Normal, functional people who come to conclude that they cannot trust key family members feel understandably vulnerable and betrayed. No wonder some stop at nothing in their pursuit of justice—or revenge.

The one sentence I hear most often, as a consultant in the field of conflict resolution, is: “I don’t trust him,” or, “I don’t trust her.” It is truly a sentence: The persons being judged are sentenced to a purgatory from which they may never return, so far as their relationship with the speaker is concerned.

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Nothing in life works without trust, especially in a family firm. The whole process of creating an enterprise that will survive its founder means entrusting it to others; and often one reason owners bring family members into their business in the first place is because they believe it will be easier to trust kin than non-kin.

Unfortunately, a certain amount of distrust seems built into family firms. Entrepreneurs are often ambivalent about trust. The energy they needed to start their own business may have been fueled by their distrust of bosses they have worked for or resentment at some betrayal of trust by previous employers. Willing to risk capital, entrepreneurs trust their gut instincts—sometimes without due diligence. Yet studies of the entrepreneurial personality show that their instinct is basically to minimize risk. Thus they often zealously guard control and have difficulty trusting anyone else with business decisions. They may also have trouble believing in their children’s ability to make successes of themselves, perhaps because, as business founders, they know so well the narrow margin between success and failure. So they use the business as a safety net for their offspring, which often turns out to be a snare.

It should not be surprising therefore that family business issues are all about trust, from the everyday problem of delegating responsibility to the ultimate doubt about whether the kids will try to put Grandpa out to pasture prematurely or stop visiting Grandma when she can no longer write a check. Unfortunately, one member’s mistrust only breeds mutual mistrust and self-fulfilling prophecies about lack of trustworthiness in family members.

For example, consider the Bailey family and the packaging materials business that their grandfather started. John Bailey Jr., the founder’s son, had retired from the business but remained chairman of the board. He was trying hard to turn the company’s management over to his son John III and other members of the third generation. John III and his brother, Bill, were working in the business along with one of their two sisters, Sharon, and both sisters’ husbands. But a breach had opened up between John and Bill, on the one hand, and their sisters and their husbands, on the other. It was steadily widening, threatening a breakdown in the business. (This actual family, whose names I’ve changed, is representative of many with whom I and other family business psychologists work.)

The problem was that the two sisters and their husbands didn’t have confidence in either brother. John III, they said, was well-intentioned but lacked energy, vision, and communication skills. Bill—youngest of the four Bailey siblings—did possess those essential qualities of a president, but his sisters didn’t trust him for another reason. “He throws money away,” said Sharon. “And he’s been known to lie.”

So Sharon, the company’s administrative vice-president, and her sister, Joanne, who is both a stockholder and the wife of the director of manufacturing, reacted the way most people do when they distrust others in vital relationships. They put up anticipatory defenses. Interpersonal “deterrents” of this kind recall the old nuclear arms race: They lead to escalated conflict and the threat of Mutual Assured Destruction (MAD). Each faction in the Bailey family blamed the other, defensively denying their own role in the breakdown of trust. Sharon and the brothers-in-law would call Dad long distance, complaining about John and Bill and undermining their decisions. Naturally, the brothers said that was the problem. Feeling besieged, the brothers used Sharon’s “bad-mouthing and back-stabbing” as an excuse to ignore the substance of her complaints. When John acted with excessive authority, or when Bill “pulled one of his surprises” (in Sharon’s words), they explained that they’d been reduced to operating that way in self-defense.

None of this helped the Baileys achieve their revenue goals as a team. It was a vicious circle. Mutual distrust bred the kind of behavior that justified further defensiveness and only eroded the Baileys’ common bonds and goals. Yet trust is indispensable to a relationship in which people need one another, as the Baileys did, in order to stay in business. When trust is lacking or insufficient, the only alternative to ending the relationship is to rebuild it—contrary to the defensive instinct. In the words of another client, “We have to take down the wall brick by brick and use the bricks to build a bridge.”

Three types of distrust

The first step in trying to turn the Baileys’ deteriorating situation around was to clarify the nature of the different members’ distrust, for there are at least three kinds of trust. One has to do with honesty. Sharon did not believe she could trust her brother Bill, the regional sales manager, to tell her the truth. He had lied to her more than once, she said. “It seems to be his way of avoiding conflict. He doesn’t want to tell me bad news, or he doesn’t want to be criticized—so he tells me what he thinks I want to hear. When I find out the truth, I’m twice as upset as I would have been if he had been straight with me in the first place.”

Another kind of trust has to do with intentions: Would this person knowingly hurt me? Both John and Bill had concluded that their sisters and brothers-in-law intended to unseat them, to reduce their power and their incomes as well. That was how they interpreted Sharon’s frequent emphasis on “accountability” and “performance reviews.”

The third kind of trust—or mistrust—is about competence. The faction of the family that was challenging John III’s leadership didn’t doubt his honesty or his good intentions, just his ability to lead the company. They had too much at stake to entrust it to a lackluster president. Sister Joanne explained, “The others [among her generation] don’t know what to do with him. He can’t manage people, and my husband says they all try to keep him away from important customers. His heart is in the right place, but his brain isn’t.”

Those three kinds of trust present similar challenges. In each case, a process over many years has built a wall of distrust. A dismantling and bridge-building process can begin, but it will take time. Trust will come only gradually.

In helping the Baileys begin that process, I saw hope in the fact that each person’s concerns about other family members were limited to only one type of trust. If Sharon had seen her brothers as inept, lying scoundrels who intended to cheat her, I would have encouraged her to dissolve her business relationship with them. If either John or Bill had seen Sharon or their brothers-in-law as untrustworthy in all three ways, I would have held out no hope. (As important as the process of building trust is the assessment of whether the people you love and work with can ever merit your trust.) Instead, the brothers had positive things to say about Sharon’s skills and her honesty. They only doubted her motives, because of the way she made trouble for them, “when she doesn’t get her way.” They didn’t want a whole new sister, and they didn’t want her out of the business; they just wanted her behavior to change. For her part, Sharon acknowledged the good motives of John and the business skills of Bill. Those elements of trust that did exist in the Bailey family gave us a foundation upon which to begin to repair their damaged relationships.

The second thing I pointed out to them was that in all human relationships—friendship, marriage, parent-child relations, teammates, customer-vendor, employee-manager, or business partnerships—trust is an on-going process. Trusting in other people’s competence means giving them room to learn, and testing their competence one step at a time. I let my son drive first when I was in the car, then alone on short daytime errands, and only after that on his own. Trusting someone’s honesty and good intentions is likewise a matter of experience. If your bank extends a $100,000 line of credit, it is relying as much upon your history of repayment as upon any collateral you put up. Trust is a process that requires collecting information (overcoming prejudice) over time; controls and risk assessment (distinguishing between those who can, and cannot, be trusted); feedback and evaluation (“I can trust him just so far before I need to know the results”).

Should trust be automatic in families? Absolutely not. In fact, the Baileys were dealing with a challenge every family faces: How do we allow our members to become individual adults with their own particular talents, lifestyles, and separate goals? That process is called individuation, and the life cycle of every healthy family involves a delicate balance between individuation and shared purpose. In a family business, allowing each member to develop as an individual is even more challenging, because everyone’s livelihood depends on developing and maintaining a shared purpose. Individuation is a matter of how far the members will trust, tolerate, and even celebrate each other’s uniqueness before their differences create anxiety over the possible risk to their interdependence.

When Sharon objected to Bill’s lavish entertaining of customers, or when both brothers bridled at her insistence on accurate expense records and cost accounting, the issue was whether they could trust one another in their shared enterprise despite such differences in personal priorities. My job was to help them decide whether those differences might be more of a strength than a threat.

Building trust

People continually reassess whether others should be trusted. The process is ongoing and normal. Therefore, the Baileys should not regard their need to repair the bonds of trust as abnormal or “dysfunctional.” Trust is always being built, tested, strengthened, or weakened. Likewise, when mistrust has become rampant, as it had in the Bailey family, the approach to repairing it is really the same as the normal process of establishing mutual trust in any important relationship.

That word, mutual, was the next important idea the Baileys needed to grasp. Trust never works one way, not for long. It has to be a trusting-trusted relationship. If you don’t trust Joe, is that a statement about Joe, or about something between you and Joe? It may be a statement about where your relationship with him is at that point in time.

All of us are passengers in boats rowed by others. Each of us also rows a number of boats in which some of those same others are our passengers. Facing backward, the rower pulls the oars while the passengers helplessly eye the obstacles ahead. The passengers have a right to be scared. They are foolish if they have blind faith in the rower who says, “Sit back and trust me.” Unfortunately, the natural anxiety resulting from our vulnerability in such circumstances leads people to play some risky games. We devise tests of others’ trustworthiness, without telling them we’re testing them. We discourage others from trusting us too much, often because we fear the responsibility of accepting their trust. We undermine trust between others if we fear that their good relationship jeopardizes our own relationship with one or the other. And, of course, we lie: We pretend to trust more than we do, and we pretend to be more trustworthy than we are.

The Baileys sought help because they recognized that such games were going too far. They were overreacting, escalating the distrust, and defining the other family members as hopelessly untrustworthy. Instead, all of the members needed to ask what they could do to earn the others’ trust and to make the others more trustworthy—which turned out to be the same process.

I don’t want to suggest that the Baileys’ problem was solved simply by Sharon and the in-laws trusting her brothers more, and vice versa. John is still president of the company, but the board (the four siblings) narrowed his job description to better fit his skills and interests. This family now makes some decisions by executive committee, and shares some figurehead functions once done by their father alone. Sharon won the management performance reviews she had campaigned for—with at least a partial impact on individuals’ bonuses—in exchange for stopping the “tattletaling” behavior that had so factionalized the family leaders.

The process of trust can go awry in many ways. Most of the time, erosion in the process can be reversed by backing up, understanding what is really being asked and said, and earning and giving trust gradually, by degrees. You can always bail out of the process, which means deciding not to be in the kind of relationship that requires trust. (For all I knew at the outset, any of the Baileys might have reached that decision in the course of our work.) But people who go through life withdrawing from challenging relationships too hastily, upon insufficient evidence, wind up just as bereft of mutually productive alliances as those who stay too long in destructive ones.

Kenneth Kaye is a psychologist and consultant to family companies based in Chicago. He is the author of Family Rules (St. Martin’s, 1990) and Workplace Wars (AMACOM Books, 1994).

The Care and Maintenance of Trust

Trust (or mistrust) may involve honesty, intentions, or competence. If you have come to mistrust someone in one of those areas, the others may still provide a foundation upon which to build.

Trust has to be mutual and reciprocal. A trusting-trusted relationship is, moreover, a process. Expect that the relationship always needs maintenance and care. Like our skin, trust normally gets scratched and bruised, and then heals. The key is to back up a step and reassess—“have I entrusted too much, or the wrong things, to this person?”—rather than overreacting and giving up prematurely.

-K.K.

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