Trust is the hidden backbone of family businesses

 

OPINION by Mishal Kanoo for AGBI - Arabian Gulf Business Insight

Trust is the hidden backbone of family businesses

In today’s world, it is becoming increasingly difficult to trust.

Whether it’s people, information, institutions or even the leaders we rely on, the concept of trust is becoming harder to attain. This challenge becomes especially critical when trust impacts our health, finances or personal wellbeing.

That’s why leadership rooted in trust is essential, and nowhere is this more evident than in the context of family businesses – mine, and others.

One of the defining differences between a family business and a traditional corporate entity is that the family’s reputation often stands in for the company’s brand.

Customers and partners don’t just buy a product or service; they buy into a legacy. They trust that the values, integrity and name behind the business are as reliable as the offering itself.

In the Gulf, the issue of trust is especially significant in business. In the Western world, company transactions are based on contracts that are enforceable through courts.

While we do have court systems here, a residual effect of having a newer legal system is that business transactions often occur on trust. The idea of an agreement done over a word or a handshake is still something that people would honor here. This is why trust is significantly more felt when doing business in the Gulf.

But here’s the catch. Once trust is broken, it may never be fully restored. Even with the best public relations efforts, the stain remains.

And while outward image can sometimes be patched over, internal trust, such as between family members, employees and leadership, is far more fragile and far more critical. When that breaks, recovery becomes exponentially harder.

It’s one thing for the public to question the brand. It’s another when the family itself no longer believes in its leadership. This internal disintegration can quietly destroy the core of the business, long before anyone on the outside notices.

Family businesses often tout heritage, tradition and continuity. These attributes become synonymous with reliability – but only if they are consistently lived out. A company known for honesty and unity must continuously instill those values not only among current leaders, but also in employees, partners and, crucially, the next generation.

Healthy bonds for healthy business

Take something as basic as communication. Healthy communication is the lifeline of any family business. Trust in leadership is sustained when there is open dialogue, mutual respect and a sense of fairness. When leaders stop listening, or when decisions are made unilaterally and justified by age or inheritance alone, the foundation begins to rot.

If leadership is assumed simply because of a last name or seniority, and not because of merit, the family business is already heading toward disaster. That downward spiral becomes a question of “when” not “if.”

We have seen some families in the Gulf going to battle in a very public manner. Some prominent names have gone through the courts. These cases have focused on arguably petty issues, as well as more fundamental areas such as leadership or ownership of the company.

Once that threshold is crossed, there is rarely a path back. Such a public fracture sends a message to everyone – employees, clients, suppliers and the public at large: Greed has overtaken governance. Trust has evaporated. Leadership has failed.

Employees, caught in the crossfire, become paralyzed. Productivity drops, morale collapses, and the sense of purpose that once held the company together disappears.

External partners, witnessing how family members treat each other, begin to ask: If this is how they handle their own blood, how will they treat me if things go wrong?

Contracts become short term. Deals are viewed as final rather than ongoing. In some cases, relationships are severed altogether.

I have seen scenarios first-hand in my own business where our family members and employees are confused as to what direction they should take when they see fighting within the family.

What once was a trusted legacy can quickly become a cautionary tale. This comes to be all because a handful of individuals allowed pride, control or self-interest to supersede collaboration and humility.

Worse still, those around the leadership may remain silent not out of agreement, but out of fear, complicity or misplaced loyalty. And so, the cycle continues, even as the foundation weakens.

Can any family business afford to be led by people who are not trustworthy?

The answer is no. I say this because trust is not a luxury in family business. It is the currency everything else is built upon.

In the end, businesses can recover from financial setbacks, market losses or even failed strategies. But once trust is gone, the damage is deeper, longer lasting and sometimes irreversible.

Mishal Kanoo is chairman of The Kanoo Group, a UAE and Oman-based conglomerate.