The Family Business Advantage: Trust and Stewardshipc

1. The Family Business Advantage: Trust and Stewardshipc Justin B. Craig Ph.D.

2. Introductory Frameworks

3. L4 Learn to Let Go L1 Learn Business L2 Learn Our Family Business L3 Learn to Lead ON IN Paradox = Inside-Outside Priority = Proficiency Pathways = Go Outside Paradox = Leading by Leaving Priority = Prescience (Foresight) Pathways = De velop timeline for retirement. Create development management systems. Stick to the plan. STEWARDSHIP APPRENTICESHIP Paradox = Continuing Differently Priority = Perpetuating Values Pathways = Keep philosophies, not details; Learn market value of family values Paradox = Informal Formality Priority = Perspicacity (Insight) Pathways = No simple pathways LEADERSHIP Ken Moores and Mary Barrett: Learning Family Business…Paradoxes and Pathways, Ashgate, 2004.

4. The Developmental Stages of the Ownership System Cousin Consortium Sibling Partnership Controlling Owner

5. Governance Structure for a Complex Family Enterprise

6. John Ward’s 5 Insights ISSUES same… PERSPECTIVES differ RESPECT the Challenge PLANNING is ESSENTIAL COMMITMENT to Us COMMUNICATION indispensible Source: “Perpetuating the Family Business. Palgrave Publishing, 2004.

7. TRUST &STEWARDSHIP

8. Journal of Small Business Management 2008 46(3), pp. 351-374 . Leveraging Family-Based Brand Identity to Enhance Firm Competitiveness and Performance in Family Businesses* By Justin B. Craig, Clay Dibrell, and Peter S. Davis

9. Stewardship Climate Research Stewardship Climate: Scale Development and Validation. Justin B. Craig with Don Neubaum, Chris Thomas and Clay Dibrell. ln Press at Family Business Review.

10. The Fundamental Dilemma Business = Capitalist System Family = Social System

11. Similarly…two complex topics STEWARDSHIP TRUST

12. TRUST STEWARDSHIP

13. TRUST

14. Are we in good hands?

15. The Three Circle Model

16. 2016 Edelman TRUST Barometer

18. Trust Quotes • …the spinal cord of all economies • “Trust is an important lubricant of a social system, it is extremely efficient; it saves a lot of trouble to have a fair degree of reliance on other peoples’ word.”Kenneth Arrow, Nobel Prize Economist • “Without trust, we don’t truly collaborate, we coordinate, or at best, cooperate. It is trust that forms a group into a team.”Stephen M. R. Covey

20. Mayer, Davis and Schoorman, 1995 • …a willingness to be vulnerable (Mayer, Davis, and Schoorman, 1995) Qualities: • Ability: possession of the means or skill to do something • Benevolence: desire to do good to others; goodwill; charitableness • Integrity: the quality of being good; having strong moral principles; moral uprightness

21. The Trust Project at Northwestern TRUST = ABILITY, BENEVOLENCE, CONSISTENCY & INTEGRITY

22. Trust = I - A B C Integrity - Ability * Benevolence * Consistency A WILLINGNESS TO BE VULNERABLE

23. Are we in good hands?

24. STEWARDSHIP

25. STEWARDSHIP CLIMATE Psychological (Individual level) 1. intrinsic (rather than extrinsic) motivation 2. (high) organizational identification 3. use of personal (rather than positional) forms of power Situational (Organization level) 1. collectivist culture (rather than individualism) 2. low power distance 3. involvement orientation

26. Stewardship Climate Research To achieve collective goals, stewards have a psychological preference for using personal powerrather than institutional-based forms of power. Rather than relying on formally established authority, personal power relies on interpersonal relationships, often built over time, based on mutual trust, standards of reciprocity, and information exchange (French & Raven, 1959; Kurland & Pelled, 2000). Following social exchange theory (Blau, 1964; Emerson, 1976), building trust, establishing norms of reciprocity, and gaining recognition as a knowledgeable leader is accomplished through information sharing (Heath, 1994). Providing sound rationale for decisions that will impact or potentially change the way work is done further builds trust and leads to attributions of expertise (Kurland & Pelled, 2000). Stewardship Climate: Scale Development and Validation. Justin B. Craig with Don Neubaum, Chris Thomas and Clay Dibrell. Under review at Family Business Review.

27. STEWARDSHIP (and Trust) To build a Trusted Team of Decision-Making Teams consider: (1) Trustworthiness (I & ABC) (2) Stewardship Climate

28. The Team of Decision-Making Teams are STEWARDS… ..of WHAT?

29. The Team of Decision-Making Teams can be STEWARDS… ...of Emotional Assets… ROEA = PRIDE

30. The Four Kinds of Tests (in FM&O)

31. The Four Kinds of Tests (in FM&O)

32. The Four Kinds of Tests (in FM&O)

33. The Four Kinds of Tests (in FM&O)

34. The Four Kinds of Tests (in FM&O)

35. C-SUITE&F-SUITE MINDSET &SKILL SET

36. F-SUITE&C-SUITE MINDSET &SKILL SET

37. TRUST STEWARDSHIP

38. F-Suite C-Suite

39. Skill Set Mindset

45. Justin B. Craig, Ph.D. Clinical Professor of Family Enterprise Co-Director of the Center for Family Enterprises Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, Illinois, 60208 Email: justin.craig@kellogg.northwestern.edu Office: 847-467-1082 www.kellogg.northwestern.edu/familyenterprises