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FAMILY BUSINESS LOSING TRUST ADVANTAGE

RICHARD EDELMAN / MARCH 21, 2023

Family business has always held a strong edge in trust over business in general. According to our 2023 Edelman Trust Barometer, this advantage is steadily eroding. Family business was twenty points ahead of business in general in 2013, but ten years later is only six points ahead. What’s happened is that trust in Business has risen steadily from 52 percent to 60 percent in the decade, while trust in family business has declined from 72 percent to 66 percent. What’s happened to the trust premium afforded family business?

FAMILY BUSINESS KEEPS HEAD DOWN

Business has stepped into the void left by government, but family business has generally kept its head below the parapet. There are exceptions such as Cargill, Mars, and SC Johnson, where CEOs have not only spoken up on sustainability, DE&I, and reskilling but have taken action. For example: Cargill’s sourcing of soybeans from approved areas of Brazil; Mars’ sustainable cocoa pilot program, which aimed to double the household income levels of cocoa farmers in West Africa; and SC Johnson’s efforts to reduce plastic packaging.

THE ANTI-WEALTH SENTIMENT

One of the disturbing findings of the 2023 Trust Barometer was that the rich and powerful are the number one dividing force pulling people apart (62 percent), even more than hostile foreign governments (61 percent).

EMPLOYEES EXPECT FAMILY EMPLOYERS TO TAKE A STAND

This is even more so for family business (74 percent, on average) than for non-family business employees (73 percent, on average). In this weekend’s Financial Times, Poul Weihrauch, CEO of Mars, said, “Associates won’t stay with us if we don’t care about ESG or purpose. Quality companies are deeply invested in this.”  

EMPLOYEES WANT A SEAT AT THE TABLE

Two thirds of respondents at family businesses say they want a voice in how the company reacts to issues of the day.

EMPLOYEE COMMUNICATIONS

The most believed source of information for employees is communications from their employer, such as the company newsletter (2022 Edelman Trust Barometer). But employer communications are less believable to family business employees (58 percent) than to non-family business employees (64 percent).  

I was on a panel earlier today for PwC, which just released its 11th Global Family Business Survey. Here are a few points from their study:

  1. Family Business Not Doing Enough to Build Trust — Nearly 60 percent of companies do not communicate purpose externally. Eighty-four percent do not take a public stand on important issues.
  2. Family Business Overlooking ESG and DEI — Only 15 percent of family companies consider themselves very advanced on ESG strategy. Only one in 10 set a standard for DE&I.
  3. Huge Trust Gaps for Family Business — Forty-four percent gap on family business leaders’ perception of trust from customers (what is expected versus delivered), 49 percent gap on trust from employees.

Andrew Hill wrote a terrific piece for the Financial Times on March 12. He profiled the Brenninkmeijer family, which is considering an opening to outside capital as part of a diversification strategy. He wrote, “for the family companies that are privately owned, the path is often much less clear. The desire to expand and invest can often collide with what are often regarded as family company shibboleths, such as fiscal conservatism, keeping full ownership and passing key management jobs on to family members.” The clear message to family owners is that you need to have more transparency, including binding commitments on climate, and a more public face so that employees and consumers see you responding to the needs of society through your business.

Having a positive impact on society is one of our firm’s values and that matters to employees; in a survey of our staff, we found that eight out of 10 respondents believe Edelman having a citizenship and sustainability program was an important reason to join the firm. It’s also why we set near-term science-based emissions reduction targets and were the first in the industry to mandate Climate and Communications training for all employees. Stakeholders need to understand the values of the company, the North Star of the family.  

Richard Edelman is CEO.