Amid growing big-business distrust and perceptions of corporate corruption, the good ol’ family business has endured in America, and these mom and pop shops have stayed close to the hearts of consumers. Indeed, a new Edelman Trust Barometer special report reveals that people trust family businesses significantly more than business in general (75 percent vs. 59 percent); given the choice, would rather work for a family business than business in general; and, if they know a company is a family business, are three times more likely to pay more for its products or services.
This trust, however, sits on an unstable foundation
The 2017 Edelman Trust Barometer Special Report: Family Business reveals that these shops are estimated to create 50-to-80 percent of jobs globally, according to the Family Firm Institute, but fewer than one in three respondents see them as job creators. And compared with nonfamily businesses, family businesses are much less likely to be considered long-term thinkers (45 percent vs. 21 percent), innovators (45 percent vs. 15 percent), or drivers of financial success (43 percent vs. 15 percent). Although the vast majority of the world’s largest family businesses practice philanthropy (E&Y and Kennesaw State University), only 17 percent see them as leaders on societal challenges.
An underlying “mass versus class” distrust is coloring these attitudes
The 2017 Edelman Trust Barometer, released in January, showed that globally there is now a 15-point gap between the higher trust of the informed public and the lower trust of the mass population in the institutions of government, business, media and NGOs. In many markets, the gap is even wider—leading the inequality scoreboard are the U.S., with a 21-point difference; the U.K., with 19 points; and France, with 18 points.
“Historically, family businesses have been reluctant to share even the most basic information about their business and family heritage,” said Richard Edelman, president and CEO of Edelman, in a news release. “In an era marked by distrust in institutions and concern about growing wealth inequality, this playbook of a low-key presence and let-the-results-speak-for-themselves behavior will no longer work.”
The report also points to a growing distrust of next-generation family business leaders
Next-generation CEOs are 17 points less trusted than founders, and respondents also believe that next-generation CEOs are more likely to mismanage the business (63 percent) and are less passionate and committed (56 percent). In addition, when compared to earned wealth, people do not think those who inherited their wealth deserve what they have (66 percent vs. 40 percent), nor do they see them as people worthy of admiration or respect.
Although seven in 10 respondents agree that wealthy individuals should channel their wealth into society through foundations and other vehicles, this expectation is tinged with skepticism—78 percent agree that wealthy individuals engage in philanthropy for self-serving reasons, such as to gain political influence, to assuage guilt, or for vanity.
Despite these challenges and misperceptions, family business is well-positioned to counter the skepticism
- Family business has a seven-point advantage over nonfamily business on being respectful of local customs. Family business is also given significant credit for creating value locally by keeping profits in the countries in which they are earned; respondents ranked this as the No. 2 area of strong performance for family business, versus No. 13 for business in general.
- Family business also enjoys a huge advantage with talent. The data shows that employees of family business are more committed than those who are not employed by a family business. Sixty-six percent of respondents employed by a family business say they want to do the best possible job for customers, versus 56 percent of employees at nonfamily businesses.
- Family business employees also lead by 10 percentage points on being committed to achieving goals (59 percent versus 49 percent) and feeling motivated to do well (53 percent versus 43 percent). These findings are particularly compelling as the business marketplace navigates changes in the global workforce due to automation, shifts in job roles and immigration.
To begin to illustrate greater leadership and maintain the family business trust advantage, family businesses must tell their stories
Seventy-three percent of respondents say knowing the company’s history and founding story builds trust. Transparency also helps combat distrust related to the next generation, wealth, and philanthropy. Seventy-eight percent of respondents noted that transparency around the next-generation succession plan would help build trust, and 71 percent agree that family businesses should be transparent about their philanthropic activities and not keep their impact a secret.
When sharing family business information and stories, the research found that the founder and CEO is as trusted as a technical expert (61 percent versus 62 percent) or an academic (61 percent) when speaking about the business, but employees of a family business are seen as more trusted sources of information about the company (52 percent) than a second-or-third generation family member (49 percent) and nonfamily CEOs (50 percent).
“Family business has both the ability and the responsibility to step up and take a stand on issues that affect customers, employees and society,” said Edelman. “Now is the time for family companies to act by showcasing the value of their leadership and contributions.”
The Edelman Trust Barometer Special Report: Family Business is the firm’s second trust and credibility survey specific to family business and its leaders, with the inaugural study released in 2014. The survey was done by research firm Edelman Intelligence and consisted of 25-minute online interviews conducted in June 2017. The online survey sampled more than 15,000 respondents age 18+ across 12 markets: Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Mexico, Saudi Arabia, U.K. and the U.S.
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