CHAPTER 6
BUILDING TRUST: THE FOUNDATION OF FAMILY CAPITAL
A ll families have their secrets. To illustrate the importance of trust, I’m going to share a secret from my own family.
My uncle Jack Gibb was born on December 20, 1914, but the events surrounding his nativity are shrouded in mystery. My grandmother Ada evidently had a boyfriend, but her father, John Lye Gibb, opposed their relationship. In what might be considered an act of rebellion, at age twenty-five Ada and her boyfriend left their small town of Magrath, Alberta, in Canada in the spring of 1914 to vacation in the big city Calgary. Jack was conceived there. While almost nothing is known about the reaction of Ada’s family or the community to her unplanned pregnancy, it can be assumed that in the small, tight-knit, conservative community of Magrath, my grandmother was likely to have been subject to ridicule and shame. Apparently, John Lye Gibb discouraged Ada from marrying the boyfriend, so after Jack was born, Ada and Jack lived with John and his wife Sarah, who showed love and support for both Ada and the baby.
At the same time, George William Dyer lived in Lake Oswego, Oregon. In 1921, “Will”—as he was called—was age forty-nine and single. He worked odd jobs and was an attendant at the boat house on the lake in the town. His mother, Jehzeel, was concerned that Will might never get married and communicated that concern to her half sister, Sarah Gibb (John Lye Gibb’s wife). Sarah, on the other hand, had a thirty-two-year-old daughter with a seven-year-old son whose prospects for marriage in Magrath were virtually nil. They arranged for Ada to travel to Oregon to meet Will and see if a marriage could be manufactured. To the sisters’ delight, Ada and Will agreed to be married, with Ada having the understanding that Will would adopt Jack and give him the Dyer name. This would hopefully remove the stigma associated with Jack’s birth. Ada and Will were married in 1921, but after the wedding Will’s mother, Jehzeel, objected to Jack’s adoption; to my grandmother’s dismay Jack was never adopted and carried the Gibb surname for the rest of his life.
Ada and Will had six children together, two girls and four boys— including my father, William (“Bill”) Gibb Dyer. Jack was ten at the time of Bill’s birth, and my father recounted that as he was growing up he was never told by his parents who Jack was or what his relationship was to him—he just knew there was an older boy living in his home whose name was Jack Gibb. Ada and Will never discussed how Jack came to be in their home. Eventually, when my father was older, Jack told him how he came to be a part of the Dyer family.
After my grandparents were married they moved to Portland, Oregon where Will opened a small grocery store. Jack and the other children worked in the store. During the summer break from school, Jack would often go back to Magrath to see his grandparents and earn money working on one of the farms in the area. Jack wrote about a letter he received from Will during one summer in Magrath:
I remember receiving a letter from my stepfather when I was spending the summer working on the farm of a relative. . . . He asked me to find my real father, who he thought lived near Magrath, and never to return to his home in Portland, Oregon. I remember, at the age of fifteen, understanding the feelings of my stepfather, who deeply resented taking care of his wife’s bastard son. I must have been a continuing reminder of the “sin” that his wife had committed. I could easily understand his feelings. At the same time I was deeply frightened and had no way of knowing how to find my own father, who I had never met and whose name I did not know. I missed my mother, felt that I had nowhere to turn, and felt friendless and abandoned and resentful of [Will’s] action. I felt caught between my strong compassion for him and his pain, and my strong feelings of fear, impotence, and abandonment.1
Jack eventually left home to attend college, and after a number of years of schooling he graduated with a PhD in psychology from Stanford University. He had a successful career as an academic and a consultant, but he never got over the feelings of betrayal and abandonment he felt from his birth father and from Will. I believe the issue of trust was a major factor in Jack’s two failed marriages and his attempt to create utopian societies through what he called “TORI Communities” (TORI standing for Trust, Openness, Responsibility, and Insight). His most important book is titled Trust, which discusses his attempt to build trust in his own life and the lives of others.2
Chapter 4 discussed the cultural assumption regarding trusting others, and this chapter will cover trust in depth. I will first discuss how to define trust and review its origins, and then examine why trust is lost in families and what can be done to restore it. The latter part of the chapter will review trends in family structure worldwide that would tend to undermine trust in families. Finally, the “Family Trust Survey” will help you see the degree of trust in your family and identify potential problems.
Trust has been defined as “a psychological state comprising the intention to accept vulnerability based on positive expectations of the intentions or behavior of another.”3 In other words, people agree to be vulnerable in some way based on the belief that a relationship to a person, a group, or an institution will be beneficial. Three types of trust are in families:4
» Interpersonal trust, which is based on one’s relationship and history with another person. To the extent that another person has proven to be predictable and behaves reliably in certain situations, the person is deemed to be trustworthy. In Jack Gibb’s case, he was unable to build a trusting relationship with his stepfather and his abandonment by his birth father exacerbated his feelings of insecurity.
» Competence trust, which is based on the skills, abilities, and experience of the other party. If the other person has the necessary expertise to help with a particular concern or problem, his or her judgment and advice are trusted. A person’s status in the family, academic degrees, certifications, reputation, etc. are often the ways people “know” someone can be trusted. We trust that our credentialed doctors know what they are doing.
» Institutional trust, which is based on whether the family, the system, the rules, or the processes are seen as being fair and trustworthy. Family members want to know if they will have a place to stay, food to eat, and social support. They also want to know if they can air grievances when not treated fairly in the family and receive a fair hearing.
The psychologist Erik Erikson’s theorizing about the origins of trust can help us to understand why my Uncle Jack would have had difficulty with this issue. Erikson postulated that all of us have a basic dilemma to resolve during childhood—can we trust the world around us or is the world basically unsafe and unworthy of trust?5 Erikson argues that to develop trust children need to grow up in a predictable world where food, shelter, protection, and affection are a given. But when they grow up in environments plagued by constant change and uncertainty, children come to view the world with fear and suspicion. If a family—in particular, the parents—creates a safe and predictable environment, the children will grow up to trust those around them. That’s why single parenthood can create uncertainty for children, given that resources aren’t supplied by two parents and that there may be multiple adults (boyfriends or girlfriends) moving in and out of the children’s lives. However, a person’s beliefs about trust, while primarily formed in early childhood, must also be negotiated throughout life. If, for example, a child has a supportive, trusting home life that is disrupted by a messy divorce during his teenage years, this teenager may doubt the security he once had and begin to see the world as more uncertain and less trustworthy.
People also develop trust as they interact with others. Trust regarding family members tends to be more situation-specific and nuanced. For example, a sister may trust her brother to help her do her homework correctly, but she knows not to trust him in a card game since he’s been known to cheat. These “repeated plays” where we have the opportunity to test trustworthiness allow family members to better predict how others in the family will behave in certain situations. And, of course, people tend to want verbal commitments from other parties when unsure of their trustworthiness; with much uncertainty from the other party, people might rely on written or legal documents to ensure proper behavior and which provide recourse.
Research on trust shows that trusting relationships are particularly valuable in families.6 Trust lowers “transactions costs,” or the costs related to contracting with others for help. By trusting family members, legal documents or other costly and time-consuming legal mechanisms are unnecessary to ensure agreements will be kept. Trust also lowers “agency costs” (i.e., costs associated with monitoring others) because those trusted don’t need to be monitored. Trust also tends to enhance the self-esteem of family members and can lead to more creative and innovative behaviors, since family members will not feel the need to protect themselves from others. In low-trust families, family members often spend time covering their actions to avoid retribution; communications are often restricted and distorted, and conflict often leads to poor outcomes. Trust matters since it allows individuals to interact in a cooperative and productive manner.
Trust can prove problematic in certain situations. Anthropologist Edward Banfield, in his classic work The Moral Basis of a Backward Society, described problems faced by communities in southern Italy when trust was isolated to members of each person’s own family and not extended to outsiders.7 Important community assets such as schools and roads in southern Italy were not supported, since local families were unwilling to trust and cooperate with one another; Banfield labeled such behavior “amoral familism.” Francis Fukuyama, in his book titled Trust, writes that “familistic societies frequently have weak voluntary associations because unrelated people have no basis for trusting one another.”8 The importance of social capital that goes beyond a person’s nuclear family cannot be overstated since it leads to healthy individuals, families, communities, and economies.9 Thus there is a “dark side” to trust if it becomes too insular and undermines building trusting relationships and social capital with those outside the family.
The social capital literature describes differences between bonding and bridging social capital.10 Bonding social capital concerns building trust and strong relationships within a group (e.g., the family), whereas bridging social capital involves creating strong relationships between the group and those outside the group. Those entrepreneurs or families with Banfield’s amoral familism orientation tend to generate strong bonds within the family to the detriment of bridging relationships with those outside the family network.
Consistent with this line of theorizing, Professors Julie Hite and Bill Hesterly summarize some of the constraints entrepreneurs face when they rely too much on their families:
Several studies show that emerging firms tend to leverage ties with entrepreneurs’ family members and friends to gain the key resources needed to establish firm viability. . . . Thus the image is of an entrepreneur drawing resources from a cohesive network of embedded ties . . . [but] cohesive networks are a source of more constraint than advantage for emerging firms.11
Hite and Hesterly rightly point out that in attempting to grow a large business it is important to create a broader resource network outside the family so one won’t be constrained by possibly limited family resources. And as discussed in chapter 1, the “superstar entrepreneurs” rely less on family capital than other youths and appear to go outside the family for resources.
Even if you are not an entrepreneur, your life can be enhanced and resources gained by building bridges with those outside your family.
There appear to be two primary means by which trust is violated:
» Acts of commission—an individual, group, or organization does or says something inconsistent with your expectations. Hence, trust has been violated.
» Acts of omission—someone (or a group or organization) fails to do something expected.
Moreover, apparently not all violations of trust are viewed equally. From my experience as a consultant to many family firms, the following list orders various violations of trust from the most to the least serious:
» Infidelity.
» Violations of the law (e.g., stealing, forgery, drug use). Such violations can lead to the filing of formal complaints or lawsuits against other family members.
» Lying.
» Failure to meet obligations (financial or otherwise).
» Failure to follow agreed-upon procedures.
» Lack of transparency—the lack of sharing or withholding of information from others in the family. Donald Trow discovered in his seminal study of small businesses many years ago that families that shared succession plans with other family members in a demonstration of trust had fewer problems in managing succession, and the firm fared better financially afterward, than those families who did not share succession plans.12
In my experience, trust is easily lost—we, members of our families, and the organizations we belong to are all fallible, and at times expectations are unfulfilled. Losing trust, unfortunately, is quite easy, while regaining it can be incredibly hard.
The following steps are important when repairing interpersonal trust:
1. Confession. Does the person admit his or her mistake and ask for forgiveness?
2. Remorse. Is the offender really sorry? Sincerity is important for those who want to trust the offender again. Showing true remorse is often essential to receive forgiveness and begin to repair the trust.
3. Attribution. Was the violation a result of the situation or some personality flaw? If the person who was harmed by the violation sees the breakdown of trust as situational—something that was caused by an unusual set of circumstances—trust is more easily repaired than if one believes that the offender has a fundamental character flaw that makes him or her difficult to trust.
4. Transformation. Is the problem fixable? Can the person change? If the person harmed believes that someone who violated trust can change, that person would be more willing to begin anew to build trust with that individual. For repeated violations of trust, restoration of trust will be more difficult. That’s true even if the offender goes a long period since the last repetition of the offense.
5. Restitution. Can the person make up for what was lost due to the violation of trust? If a person has hurt another’s reputation, he must act to restore that reputation; if someone has been hurt financially, she needs to be compensated for the loss. To the extent that restitution is difficult, if not impossible (as in cases of infidelity or murder), repairing trust becomes all that more difficult.
6. Willingness to extend forgiveness. Even if the offender goes through the steps to repair trust, it will not be restored unless the offended party forgives the offender and again becomes vulnerable to a degree with the offender.
Repairing competence trust in a family may involve one or more of the following actions:
» Support schooling or other types of training to improve a family member’s skills and abilities.
» Encourage honest, open, and supportive feedback within the family to help family members recognize their weaknesses and develop plans to improve.
» Develop fair and consistent disciplinary procedures to deal with family members who violate expectations in the family and provide support for family members to restore lost trust.
» Require credentials certifying competence. Some families, such as the Haas family at Levi Strauss, required family members to get an MBA degree before being allowed to work in the family business. Other families that I am aware of require significant work experience outside the family business before allowing the family member to work for the family.
Repairing institutional trust—trust in the family—generally requires creating systems and processes that allow for transparency. The following are just some of the activities that help to repair institutional trust:
» Clarify and share the details regarding what will happen when one or both parents die. Sharing your will with your children (when they reach an appropriate age) can build feelings of trust and confidence between parent and child. When I teach classes on succession in family businesses, I ask my students, “Do you know if your parents have a will, and if so, have you seen it?” More than 90 percent of my students don’t know if their parents have a will, and only about 10 percent of those who do (or 1 percent of the total) have been given the opportunity to read it and ask questions.
» Share pertinent financial information regarding family assets with family members on a regular basis. In my case, my wife, Theresa, and I meet with our sons and daughters and their spouses once a year to review our will and to discuss our financial condition. We do this to ensure no significant surprises arise for them when we are gone.
» Ensure that the processes for making important decisions are transparent (e.g., activities such as vacations or important purchases that would affect the family).
In the case of violation of interpersonal trust within a family—particularly if it’s a serious violation such as infidelity—a family may need a therapist or counselor to restore the relationship. In my role as a family business consultant, I’ve often been aided by a family therapist. Given that I have neither the training nor credentials for family therapy, attempting to engage in therapy with a client would be unethical. However, given my background and training, it’s entirely appropriate for me to work with a client to clarify various simple conflicts and violations of trust or to help the family create a plan of action to repair competence or institutional trust. I generally do so by the following:
» Encouraging the family to set clear guidelines and expectations for family members and outline the consequences for not meeting those expectations.
» Engaging in team building activities that help the family clarify how decisions are made and how the family might work as a team.13
» Clarifying the family’s mission—helping the family create a mission statement or statement of values as was described in the previous chapter. Ivan Lansberg, in his book Succeeding Generations, describes how he works with families to commit to a “shared dream” that they can all support, which creates unity and trust within the family.14
» Encouraging family members to get additional schooling and training to help them prepare for their futures and to help the family when needed.
» Encouraging transparency in the sharing of information, decision-making, etc. Family councils provide a means for expressing transparency. A mediator may be needed to help set up the meetings.
Consultants and counselors to families should recognize that trust is often based on whether someone believes she is treated fairly.15 The definition of “fair” often differs among family members. Some may define it as all family members being equal (e.g., all children should receive the same amount of money in their parents’ will). Others may think that fairness should be based on merit (e.g., family members who contribute more should receive greater rewards), while others may believe that fairness should be based on need (e.g., more family resources should go to those family members who need more help). Thus, the role of the consultant is often to clarify what the family members believe is fair and help them come to a consensus so that expectations will not be violated.
Fairness not only involves the criteria we use to make decisions, but it also concerns whether a fair process is used when arriving at a family decision.16 I have witnessed significant variance in families when decisions are made. In some families, it is fair if the family patriarch or matriarch makes key decisions for the family by themselves. At the other extreme, some families require a unanimous decision on the part of all affected family members. Other families take votes, with the majority prevailing, while other families involve outside facilitators who ensure that all family members have a voice in whatever decision is made. Regardless of the process used, for family harmony to be maintained, the family needs to examine the process it uses to make decisions and determine what is fair for all family members.
The fair process used in decision-making also depends on the type of decision. For example, in creating a will, the father and mother may have the final say in deciding how their assets should be distributed; but for deciding where to spend a family vacation, a family vote where all can voice their preferences may be the best approach. Depending on the stage of a family’s development, certain decision-making methods may be appropriate (e.g., when children are young, the parents should probably make the decisions), but as a family evolves, new decision-making approaches often need to be adopted.
When examining the global trends regarding family structure presented earlier in this book, you may ask whether families of the future will likely have more or fewer issues related to trust as they attempt to create and sustain family capital. Several global trends are likely to make developing trust more difficult in the future, including escalating divorce rates and increasing numbers of single-parent families. Divorce naturally undermines trust between parents and children, since it often brings greater uncertainty into children’s lives. Additionally, blended families formed after divorce often face trust issues. (See chapter 2 for a more in-depth discussion of divorce and chapter 3 for case studies of turbulent family paths that may follow divorce.)
Children from single-parent families grow up in a more threatening world. (See chapter 2 for a discussion of how single-parent families can contribute to economic, behavioral, educational, and emotional problems.17) These findings suggest that societies with a high percentage of single-parent families will have less human capital available to support a family or potentially launch a business as compared to societies with fewer single parents. If this is the case, Asian families will have an advantage in human capital for their societies and their family businesses.
If trust has indeed been declining in families due to disruptions in family structure, an effect will be noticed in businesses outside of family businesses. Those organizations will likely have more challenges because their employees will come from families that lack family capital and are unstable. If today’s children develop an inherent distrust of others due to experiences in their families, how will they function in the organizations of the future? Given current trends regarding the family, we’ll likely see the following:
» More employees with emotional and behavioral problems
» More employees who distrust members of their team or department and are therefore less willing to collaborate
» Fewer employees willing to trust authority figures, particularly their immediate bosses
» Fewer employees willing to engage with and commit to an organization
Both theory and practice in the field of management points to the importance of building trust in organizations to obtain optimal results. Unfortunately, current trends regarding the family suggest that building such trust may be difficult.
Chapter Takeaways
» High levels of trust correlate with good family outcomes.
» Family members can lose interpersonal, competence, and institutional trust, but they can regain it.
» Although repairing trust is difficult, research and practice have suggested approaches for doing so.
» Lack of trust in the general population will likely negatively affect family and nonfamily businesses.
Family Trust Survey
1. To what extent do family members feel that they can be open with one another regarding any concerns?
Very little extent |
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To a great extent |
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2. To what extent are family members willing to give negative feedback to other family members?
Very little extent |
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To a great extent |
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3. To what extent do family members feel they can contribute in family decision-making?
Very little extent |
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4. To what extent do family members feel they could loan money to other family members and be repaid?
Very little extent |
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5. To what extent do family members avoid blaming one another for their problems?
Very little extent |
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6. To what extent do family members avoid being critical of other family members behind their backs?
Very little extent |
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To a great extent |
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7. To what extent do family members share sensitive information about themselves with other family members?
Very little extent |
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8. To what extent are family members willing to share their resources with other family members?
Very little extent |
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9. To what extent do you feel that family members are competent and have important skills?
Very little extent |
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10. To what extent are adult children in your immediate family aware of what should happen with their parents’ assets should they die or be incapacitated?
Very little extent |
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To a great extent |
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11. In the past, to what extent have family members avoided violating trust in the family?
Very little extent |
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To a great extent |
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12. To what extent do family members feel secure in their relationships with one another?
Very little extent |
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To a great extent |
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Scoring: Total up your score, ranging from 12 to 60. Scores from 48 to 60 would indicate high trust in the family. Scores from 36 to 47 would indicate moderate trust, and scores below 36 would indicate that significant trust issues exist in the family.
1. Jack R. Gibb, “The Passionate Path,” 1983, http://www.oocities.org/toritrust/passionate_ path.htm.
2. Jack R. Gibb, Trust (North Hollywood, CA: Newcastle Publishing, 1978).
3. Peter H. Kim, Kurt T. Dirks, and Cecily D. Cooper, “The Repair of Trust: A Dynamic Bilateral Perspective and Multilevel Conceptualization,” Academy of Management Review 34 no. 3 (2009): 401.
4. Chamu Sundaramurthy, “Sustaining Trust Within Family Businesses,” Family Business Review 21 no. 1 (2008): 89–102.
5. Erik H. Erikson, Identity and the Life Cycle (New York: W. W. Norton, 1994).
6. William S. Schulze et al., “Agency Relationships in Family Firms: Theory and Evidence,” Organization Science 12 no. 2 (2001): 99–116.
7. Edward C. Banfield, The Moral Basis of a Backward Society (Glencoe, IL: The Free Press, 1958).
8. Francis Fukuyama, Trust: The Social Virtues and the Creation of Prosperity (New York: Free Press, 1996): 28–29.
9. Robert D. Putnam, Bowling Alone: The Collapse and Revival of American Community (New York: Simon and Schuster, 1999).
10. Paul S. Adler and Seok Woo Kwon, “Social Capital: Prospects for a New Concept,” Academy of Management Review 27 no. 1 (2002): 17–40.
11. Julie M. Hite and William S. Hesterly, “The Evolution of Firm Networks: From Emergence to Early Growth of the Firm,” Strategic Management Journal 22 (2001): 275–76.
12. Donald B. Trow, “Executive Succession in Small Companies,” Administrative Science Quarterly 6 no. 2 (1961): 228–39.
13. Gibb Dyer and Jeff Dyer, Beyond Team Building (New York: Wiley, 2019).
14. Ivan Lansberg, Succeeding Generations (Boston: Harvard Business School Press, 1999).
15. Ludo Van der Heyden, Christine Blondel, and Randel S. Carlock, “Fair Process: Striving for Justice in Family Business,” Family Business Review 18 no. 1 (2005): 1–21.
16. Ibid.
17. See also, Sara McLanahan, “Fragile Families and the Reproduction of Poverty,” Annals of the American Academy of Political and Social Science 621 no. 1 (2009): 111–31.
I had a really wonderful upbringing. We were a tight family. It was wonderful to grow up with so many siblings. . . . I learned everything from my older brother and sister and taught it to my younger sisters.
Joaquin Phoenix, actor