How Strong Is the Trust in Your Family Business?

In a family enterprise, trust influences who gets to lead, how ownership is transferred, whether disagreements can be resolved constructively and how confidently the next generation can take responsibility. Yet, as families expand and businesses become more complex, the trust that once held everything together can become harder to sustain.

Research by The Williams Group, presented in Preparing Heirs by Roy Williams and Vic Preisser, found that 70% of family business and wealth transition plans fail in each generation. Of those failures, 60% were attributed to a breakdown in communication and trust within the family. The implications are particularly relevant in India, where family businesses account for more than 85% of businesses. The challenge is not simply to maintain good relationships. It is to ensure that trust can withstand succession, disagreement, changing ownership structures and professionalisation.

So, how strong is the trust in your family business?

QVSCL’s 1-10 Trust Rating Framework offers a practical way to examine this question across four stages: Crisis, Functional, Collaborative and Institutional. It is a conceptual self-assessment framework, informed by academic research on trust and family-business governance, rather than a validated diagnostic instrument.

Family businesses often begin with a natural advantage: shared history, personal relationships and a common interest in building something for future generations. In the early stages, trust may depend largely on knowing one another well and believing that family members will act in one another’s interests.

However, growth changes the equation. Ownership may pass from siblings to cousins. Some family members may work in the business, while others remain shareholders without operational responsibilities. The next generation may have different ambitions, and professional executives may need authority that was previously concentrated in the founding family.

As these relationships become more complex, personal trust alone may not be sufficient. Trust can be a competitive advantage in the early stages of a family enterprise but may deteriorate as the business grows. Sustaining it requires structures and processes that reinforce interpersonal trust while developing confidence in people’s competence and in organisational systems.

The wider business environment also depends on trust. PwC’s 11th Global Family Business Survey (2023), covering 2,043 family business owners across 82 territories, reported that 69% of family business leaders believed they had built trust between family members. Yet the survey also highlighted the consequences of family conflict for trust across the wider business. In the 2021 edition, only 5% of respondents reported having conflict-resolution mechanisms for family disputes.

The distinction is important: believing that trust exists is not the same as having a mechanism to protect it when disagreements arise. External trust can also be fragile. The Edelman Trust Barometer’s 2017 special report on family businesses found that 75% of respondents trusted family businesses, compared with 59% for businesses in general. However, next-generation CEOs were 17 points less trusted than founders, according to the report.

Academic research by Catherine Faherty at Dublin City University similarly found that perceptions of CEO trustworthiness decrease as family firms evolve across generations. Successors therefore face an additional burden of demonstrating their leadership capability on merit, rather than relying on family lineage alone. Trust, in other words, must evolve alongside the business

Trust is not simply present or absent. It can vary across relationships, decisions and governance arrangements.

Drawing on the three bases of trust described by Lewicki and Bunker (1996), alongside Sundaramurthy’s work on family-business trust, QVSCL’s framework translates these ideas into four practical zones.

The ratings are intended to prompt honest discussion, not to label family members. A family may have strong personal relationships but weak ownership governance, or effective business processes alongside unresolved family tensions. The objective is to identify where trust is strong, where it is vulnerable and what needs to change.

3. Crisis Zone: Ratings 1-3

When trust breaks down, ownership and relationships can become difficult to separate.

In the Crisis Zone, family members may question one another’s intentions, rely on informal assurances or struggle to resolve disagreements without escalating them. Succession and ownership decisions become particularly vulnerable when expectations are not documented or understood.

Raymond Group: The risks of relying on personal trust

In 2015, Vijaypat Singhania handed over his 37% controlling stake in Raymond to his son, Gautam Singhania. He subsequently expressed deep regret over the transfer. In his memoir, An Incomplete Life, he discussed advice he had received to place his shares in a discretionary trust, which could have provided a structural safeguard. The case illustrates a central governance lesson: transferring ownership is not merely a personal decision. It has long-term consequences for control, rights and security. The dispute was subsequently reported to have been resolved. Vijaypat Singhania passed away on 28 March 2026. The lesson is not to judge a family’s relationships in retrospect. It is to recognise that personal confidence cannot replace carefully designed ownership arrangements.

Murugappa Group: The consequences of unwritten rules

Following the death of M. V. Murugappan in 2017, his daughter, Valli Arunachalam, sought a board seat on the family holding company, Ambadi Investments. Other family members rejected her demand. The dispute also brought attention to the group’s traditional practice of appointing male family members to its board. In August 2023, the family reached a settlement under which legal proceedings between the family groups were to be withdrawn once the agreed steps were completed. The case demonstrates how established family practices can become points of conflict when expectations around representation, ownership and governance are contested.

What this zone signals: If important decisions depend on personal assurances, unresolved grievances or assumptions about who is entitled to control the business, trust requires more than reconciliation. It requires clarity on rights, responsibilities and decision-making.

People trust one another because they know what to expect-but the system still depends heavily on individuals. In the Functional Zone, family members can work together, fulfil responsibilities and maintain productive relationships. Yet trust may weaken when behaviour becomes inconsistent, roles are unclear or a leadership transition exposes differences in expectations. The case of “Rick and Bobby,” published by the Family Firm Institute’s FFI Practitioner in 2025, illustrates this stage. Rick, the founder of a family enterprise, intended for his son Bobby to become president. A key non-family executive warned that she would leave if the succession proceeded because she did not trust Bobby.

Rather than treating the issue as a judgment of Bobby’s character, the family used four elements from Charles Feltman’s The Thin Book of Trust to examine specific behaviours:

• Sincerity: Do words reflect what a person genuinely means?
• Reliability: Does the person follow through on commitments?
• Competence: Does the person have the ability to perform the role?
• Care: Does the person demonstrate consideration for others?

The discussion helped Bobby recognise that he did not yet feel ready to lead. He enrolled in a NextGen leadership programme to develop his competence. He and his brother-in-law, Tim, subsequently became trusted allies and later co-led corporate training on the elements of trust. The significance lies in the process: trust became something the family could discuss and improve through observable behaviour. Sundaramurthy’s research also highlights a risk at this stage: strong interpersonal trust can become blind trust, allowing groupthink to develop among closely connected family leaders.

What this zone signals: The family may function well today, but trust remains vulnerable if responsibilities are ambiguous, capability is assumed rather than assessed, or difficult feedback is avoided.

Trust becomes stronger when family members can disagree without losing sight of their shared objectives. Collaboration does not require every family member to have the same ambitions or agree on every business decision. It requires enough trust to discuss differences openly, respect legitimate interests and work towards a sustainable outcome.

Godrej Group: A planned realignment rather than forced unity

In 2024, the Godrej family announced an ownership realignment involving its two branches. The family explained that the third and fourth generations had diverse interests and differing views on strategic direction, growth and governance, and that the arrangement was intended to support harmony across succeeding generations. The branches retained autonomy over their respective operations, with provisions designed to prevent direct or indirect involvement in one another’s entities. The case offers a useful contrast to prolonged ownership disputes: a family can acknowledge differences and reorganise its interests without requiring every branch to follow a single operating model.

Hermès: Aligning ownership around a shared purpose

In 2010, following LVMH’s accumulation of a 17.1% stake in Hermès, more than 50 family members agreed to pool almost 51% of the company’s shares into a private holding company, H51, with a commitment to keep them there for at least 20 years. The arrangement included rights of first refusal on shares held by relatives and a mechanism to retain one-third of annual dividends to purchase shares from family members wishing to sell. Not every family member joined the arrangement; Nicolas Puech, the largest individual shareholder, remained outside it. The example illustrates how shared objectives can be translated into formal ownership arrangements. It also shows why structures matter: agreement among many family members does not necessarily mean universal participation.

What this zone signals: Trust is no longer dependent on agreement about everything. Family members can pursue different interests while respecting shared principles and clearly defined boundaries.

6. Institutional Zone: Ratings 9-10

At the highest level, trust does not depend on one individual being present to hold the family together. It is supported by institutions, governance and consistent processes. This is the distinction between trusting a particular person and trusting the system through which decisions are made.

Merck: Governance across generations

Merck KGaA provides an example of a family enterprise with governance arrangements developed over a long period. Its first family constitution dates to 1888, and the founding family remains the majority owner in its 13th generation. The family constitution clarifies shareholders’ rights and responsibilities as trustees of the enterprise, including the circumstances under which members can exit. The family assembly’s remaining decisions are limited to electing members to the family board and amending the constitution. Merck also runs two next-generation programmes annually, serving family members aged 15-23 and 24-35, and offers voluntary assessments to those considering governance roles. These arrangements help distinguish family participation from business management and prepare family members for their responsibilities as owners.

Dabur: Separating family ownership from professional management

The Burman family provides an Indian example of formal family governance. After commissioning McKinsey & Company to study its business in 1997, the family adopted a constitution on 25 January 2002, incorporating family values and legacy and defining the family council. The constitution limits family nominees to four on the 12-member board. Younger family members are encouraged to establish independent ventures rather than receive automatic entry to the board. According to Mohit Burman, the constitution keeps promoter family members out of executive roles and leaves day-to-day operations to professional management. The family council also enables members to speak with “one voice” as promoters without interfering in daily operations. Alongside these formal arrangements, the family’s weekly luncheon provides a recurring opportunity to maintain personal relationships.

The two examples point to the same principle: institutional trust does not eliminate personal relationships; it ensures that relationships do not have to carry the entire burden of governance.

This distinction is becoming more relevant as family businesses professionalise. The KPMG Global Family Business Report 2026, based on insights from 1,927 family and founder-led business leaders across 41 countries, reports that 83% have a clear growth strategy and 79% report strong leadership alignment. Yet nearly six in ten believe sustaining growth will become harder over the coming decade. The report also projects that the share of businesses identifying as family-run will fall from 49% to approximately 12% by 2035, reflecting a shift towards family-owned enterprises governed through boards and led by professional management. As families step away from day-to-day operations, trust must increasingly reside in governance structures, clear responsibilities and dependable processes.

The following questions can help a family begin an honest discussion about its position on the 1-10 scale.

• Succession: Are leadership transitions planned using clear criteria, or do they depend primarily on personal assurances?
• Ownership: Are shareholder rights, responsibilities and exit arrangements documented and understood?
• Decision-making: Can family members disagree openly without turning business differences into personal conflicts?
• Professional management: Are non-family executives trusted, empowered and held accountable through clear processes?
• Communication: Are family meetings and discussions structured, regular and followed by action?
• Conflict resolution: Is there an agreed mechanism for addressing disputes before they escalate?
• Institutional continuity: Would the business’s governance remain effective if its founder or current family leader were no longer involved?

A useful starting point is to rate each area separately, discuss where family members disagree and identify the two or three most important gaps to address. The aim is not to achieve a perfect score overnight. It is to understand where trust depends too heavily on individuals and where stronger processes could protect the family and the enterprise.

Conclusion: Trust Is a Legacy That Must Be Built

Family businesses are built on more than capital, products or market position. Their long-term continuity also depends on whether people can rely on one another, whether leadership transitions are credible and whether governance remains effective as the family grows. The question is not simply whether family members trust one another today. It is whether that trust can survive disagreement, succession and changes in ownership-and whether the business can continue to function fairly when familiar individuals are no longer in charge. A family business’s strongest legacy is not just what it passes on, but how well it prepares the next generation to protect it.

At QVSCL, we work with businesses and their stakeholders across strategic consulting, board advisory, change management and pre-IPO readiness. For family enterprises navigating succession, governance or professionalisation, the starting point is understanding where the current structure is strong-and where it needs to evolve. Is your family business operating on personal trust alone, or has it built the systems to sustain that trust across generations? Explore how QVSCL can support your family business in strengthening governance, aligning stakeholders and preparing for its next phase of growth.