Family-Owned Business Problems Tied to the Trust Paradox

Posted by Rock LaManna


Funny how messages from different quadrants of your life all seem to sync up and form one coherent message.  Such was the case when I chatted with Alliance member Tom Hubler about family-owned business problems.

I was inspired to reach out to Tom after my presentation at the SGIA Expo.  My entire presentation had been about the quantitative end of running a business – of how your financials should really lead your strategy. 

But the attendees wanted to talk about something else:  Family.  

Printing owner after printing owner talked to me about the difficulties of running a family business.  They wanted qualitative, not quantitative.

I reached out to Tom to share my comments, and a bit of my frustration.  That’s when Tom introduced me to the Trust Paradox, and why understanding it is critical to maintaining a family business.  

What is a paradox, and who is Tom Hubler?

Let’s start out by defining the word paradox, which can be a kind of a slippery term.

As Wikipedia describes it, a paradox is a series of true statements that seem to contradict reason.  

There are an infinite number of paradoxes listed on Wikipedia, and if you deep dive into them, your head will surely spin.   

For a better example, I prefer the The Oatmeal’s Dog Paradox.  (Warning:  This is absolutely side-splitting, but it does contain some vulgar language. However, it is a perfect example of a paradox.)


Family-Owned Business Problems Tied to the Trust Paradox

Note the truths in the Dog Paradox, and how they seem to contradict reason.  Keep this in mind when we tackle the Trust Paradox.

Before we get to that, however, let’s get a little background on Tom.

Family-Owned Business Problems Tied to the Trust Paradox

Tom Hubler is the President of Hubler for Business Families.  He began his family business consulting practices in 1980, and he has over 35 years of experience of working with families.  Take a look at his experience – it’s quite impressive.

My father hired Tom to help our own family through a rough patch in the 80s, and he was incredibly effective.

I called Tom, and talked to him about some of the feedback I had received at the SGIA Expo.  He wasn’t surprised.

Why Family Businesses Outperform Fortune 500 Companies

Usually when Tom is called to a family business, there is some sort of internal issues needing some form of conflict resolution.  I was surprised to hear that battling through these problems is well worth the time and investment, not only on a financial level, but on a personal level, too.

As Ernesto Poza stated in his book, Family Business, when a family is in harmony, it can actually outperform a Fortune 500 company.  When I asked Tom why this happens, he said its because their commitment, their structure and the spirit de corps.

“They communicate their differences effectively,” Tom said.  “And it’s this social capital in the end which helps them outperform their competition.”

Of this social capital, trust is the most valuable currency.  

Trust is the key to any relationship.  Think about the people you love the most and you work with the best:  At the root of all your feelings is the fact that you trust them, you can count on them, and you know they’ll always be there for you.

Check out this video from Erika Napoletano on building an honest, trusted relationship.  She calls them “front-stabbers.”

Unfortunately, trust is not a given – even in a family.  (Some might say “Especially not in a family.”)  Often there is so much emotional baggage that prevents families from moving ahead.

It’s this emotional baggage that prevented the owners at the SGIA Expo from focusing about their financials.  They felt there were too many qualitative issues at their respective companies, and they needed to iron those out first.  

Tom performs plenty of activities to get families to mend on an emotional level, and I think it’s a crucial part of the equation. His goal is to help create an environment where a sense of trust is created, and those topics can be discussed.

He has led many family meetings, in which fractured relationships are brought together, and forgiveness helps rebuild those trusted relationships.

But those emotional outpourings are just the beginning of establishing trust – not the end.  You may cry and laugh and hug your family, but come Monday morning, has anything really changed for the better back at the workplace?

In many cases, it hasn’t.  Which is where the Trust Paradox comes into play.

“Rational, Structured Action Nurtures Trust”

During our conversation, I asked Tom if our emphasis on using financials to guide performance was important, especially in light of all the emotional reconciliation necessary to build trust.  

To my surprise, he asserted it was one of the most critical aspects, and pointed to a fantastic article he’d written on the Trust Paradox.  Here’s one of the takeaways that jumped off the page at me:

“Ambiguous, emotional expectations produce hurt feelings that destroy trust.  Logic might infer that to rebuild trust, the family should share compensating emotional rewards.  I contend the opposite:  Emotionally triggered mistrust requires an unsentimental response.  Rational, formal structured action nurtures trust – within the family and the business.”

That “formal structured action” is the key.  Within a family business, there is a sort of informality.  For example, if the father owns the business and always has an open door policy, it might be customary for people to walk right into his office.  

If the business grows and his children assume leadership ranks, longtime employees might continue with this informal mode of communication and bypass the owner’s kids.  There is no formal mode of communication, which will eventually lead to miscommunication in a bigger company.  

Informality might also extend to decision-making and distributing rewards.  For example, you get promoted because you’re my child, not because you did anything to help the company.  

Using your financial metrics can help establish formal structured action.  For example, instead of relying on family bonds to get a promotion, a member of the company must prove his or her worth through performance results.  

While this might inspire some initial resistance, it’s ultimately going to be the formal, structure method which rebuilds any sense of fractured trust.  

To gain trust, you have to earn it.  And to prove you have earned it, it must be trackable.

The feedback I received at the SGIA Expo was to be expected.  Emotions were hurt, and people were desperately looking for a fix.  But as the Trust Paradox indicates, the reasonable approach is to start with the benchmarks.  That’s the only way to rebuild trust, in a manner that’s good for business and healthy for the family.

Photo by: jay.denhart


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Topics: Succession Planning, Family Business