Living Inside a Pariah Company

A while back I wrote a very critical blogpost about Volkswagen. I was, of course, hardly alone in doing so; the scandal they incurred at the time created major tremors in the business world.

But in the years since, I’ve been trying to think in different terms – in particular, what must it have been like to be an employee of VW in those difficult days? What is the view from inside the glass, looking up and out? What tensions must it have caused people – and what could they have done?

The Pariah Organization

My good friend Matt Nixon started writing a book a year before the VW incident, tentatively titled “Pariahs: Hubris, Reputation and Organisational Crisis.”  I happen to be re-reading it now.

Matt has the credibility to write this book: an MBA, he spent over a decade in consulting (Accenture, Towers Perrin), then another decade as a VP at Shell Oil and later an MD at Barclays. He knows something about whereof he speaks. Combined with a classical English education and a wide network, the book makes for illuminating reading.

Matt suggests that being a pariah organization (think “outcast” and “exile”) is a phenomenon on the increase (just because you’re paranoid doesn’t mean they’re not out to get you, it’s really true).  He also points out that pariah-dom is about much more than individual moral failings – it is trackable at an industry level (another gut feeling ratified by data).

He provides some diagnostics and descriptive models to identify and predict pariah-like conditions in organizations. Particularly telling is his critique of “false metamorphosis,” the consultant snake oil of “transformation” that has been overblown. True change, he suggests, requires a lot more, and is a lot more uncommon.

But what about VW’s employees? As Matt notes from other pariah organizations, a great many people in such companies feel bewildered and unfairly treated.  They see themselves, and their company, as largely ethical, and remain quite positive about staying with the organization they are part of.

The overwhelming criticism of their organizations feels like torches and pitchforks.

At a time of crisis, Matt suggests employees go through a predictable sequence of emotions – shock, followed by anger and shame, swinging back to resurgent loyalty, and ending in a blend of guilt, responsibility, and denial. He talks as well about three “tribes” of employees: Loyalists, Mercenaries, and Heroes. The three tribes react differently to the four phases.

What Can Be Done?

Matt’s book has some great insights for organizations and leadership. For me, for this post in particular, I want to focus on what an individual at VW could have been thinking about, what they could do, and what we could have done to support them.

Human beings are delicate creatures. We process information that is critical of us in very self-protective ways. We will take advice from a friend that we would never take from a stranger.

As outsiders, this means we have to temper criticism with the recognition that exceeding few employees assume personal guilt. The vast majority feel very little personal accountability for the sins of the organization, and personalizing accusations doesn’t help them come to grips with any objective truth.

The increasing demand for personal civil and criminal accountability of leaders in pariah organizations is, I think, a good thing. But it must be tempered by some focus on responsibility – our criminal justice systems are easily inclined to focus on the underlings, and not the leaders. Indiscriminate demonization of employees is counter-productive. In the VW case in particular, the role of culture and corporate environment seemed a strong contributor, rather than a simple case of “bad apples.”

As employees, the challenge is to see this as a “Santa Claus” moment: as in, “there is no…”

This did not happen in a vacuum; as Matt notes, the cult of leadership is partly to blame for obscuring the truth that corporate cultures “eat strategy for breakfast,” not to mention well-intended but impotent compliance programs. It’s critical to employees – for their own psychic health, as well as that of the organization – to be constructively schizophrenic.

They need to both feel secure in their own good intentions and, at the same time, be able to objectively see how things could have gotten to this point. As Henry Mintzberg angrily points out, this kind of phenomenon is best seen not as a scandal, but as a syndrome. And only insiders have access to the “real” story.

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Moral outrage has its place in the reform of business. So does shaming, by bringing business issues outside narrowly proscribed economic boundaries and into the social realm as a whole.

But blame and shame are two-edged swords, and very hard to control. At a social level, their overuse just promotes entrenched ill-will; look no further than the current state of US national politics.

At an individual level, blame and shame keep us from seeing and accepting reality, as it is. In a very real sense, as my friend Phil McGee puts it, “Blame is captivity – responsibility is freedom.”

As we look at more recent scandals/syndromes, we need to balance our outrage with a sense of respect for other individuals, and our defensiveness with a willingness to see things as they are.

Being Offensive vs. Being Offended – and Trust

When you offend someone, someone is offended. That seems obviously, trivially true. But the two are very different events – each touching on a part of the human experience, and each teaching us something about trust.

The Social and the Psychological

Disrespecting someone is a social violation: it is not a nice thing to do. It goes against the rules of etiquette and ethics (most of if not all ethical precepts have to do with our relationships to others). Every society has its rules about how to respect others, and to violate them is a serious matter.

To disrespect someone is a matter of one of two things – ignorance, or deliberate malice and rudeness. Both are matters of personal choice.

Being offensive and disrespectful, then, deals with the social side of being human.

Being disrespected or offended, on the other hand, is an intensely personal event. It is experienced one person at a time, as an interior phenomenon.

Being offended and disrespected, then, deals with the individual side of being human.

How do we integrate, as human beings, these two realms? Where are the ’shoulds’ in our social behavior, and in our individual behavior?

The answer is a little paradoxical: We should strive not to offend or disrespect others. At the same time, we should also strive to not feel offended, or disrespected, for long. In other words, we should strive to be kind socially, and to feel free psychologically.

We should respect others, yet not take personally others’ disrespect of ourselves.

The second is often the harder of the two. Here are a few contrasts to help make the point.

  • Religions teach us to be good to each other – the social message. Twelve Step programs remind us “pain is inevitable; suffering is optional” – the psychological message.
  • MLK fought for human rights – the social side. Viktor Frankl reminds us that “human freedom is not a freedom from but a freedom to” – the psychological side.

What’s Trust Got to Do With It?

Quite a bit, actually.

In contrast to almost all you read about ‘trust’ as some all-inclusive thing, keep in mind this simple fact, obvious to anyone on reflection:

Like tango, trust takes two. Trust is a relationship between a trustor and a trustee. The trustor initiates trust by taking a risk. The trustee then responds by being trustworthy. The roles then shift, and the players reciprocate. Rinse and repeat, etc. etc.

First, the trustee side: If you disrespect or offend others, then others will not trust you. You become untrustworthy. Disrespect and offensiveness affects the trustee.

Using the Trust Equation, you will have low Intimacy scores, because others will not confide in you. You will probably have high Self-orientation scores as well (a bad thing), because you’re likely acting out of willful anger or resentment, or willful ignorance – all of which are about you, not about the Other.

Being offended works the other side of the trust dynamic, that of the trustor: it renders you incapable of trusting others. You cannot initiate a trust relationship if you live in fear of being disrespected or offended.

Being chronically prone to offense means you are not free to act fully as a human. Rather than risk being hurt, you choose never to engage. You will never enjoy trust-as-relationship if you cannot trust-as-action. Victimhood destroys trust as much as  rudeness.

The Human Conundrum

And so the sociological and psychological, aka human, conundrum. You should never disrespect others. And you should never allow yourself to (remain) feeling disrespected.

You should always be trustworthy. And you should also never depend solely on the Other to initiate a relationship of trust.

May you not offend, nor be offended. And both are entirely your choice.

 

 

What Buyers Really Want

What do buyers really want?

In particular, what is the true role of expertise in evaluating the purchase of complex intangible services?

The head of marketing for a US East Coast major law firm was asked by 3 partners to help rehearse and prepare them for a key sales meeting at a major potential new client. “If only we can convince them that we are absolutely the best in this area, which we are,” the lead partner said, “then they’ll have to go with us.”

This point of view seemed so self-evident to the senior partner that it didn’t feel like an opinion; it seemed like an obvious truth. Unfortunately, not only is it just an opinion—it also is not particularly accurate.

Lawyers, accountants, bankers, actuaries, consultants—all behave more often than not as if the key to selling lies in a powerful display of expertise. Most complex intangible services sales are sold with the implicit, if not explicit, belief that expertise is the issue. But that doesn’t make it right. And if it’s not right, then we must answer three questions:

  • if expertise doesn’t sell best, then what does?
  • don’t buyers seem to want to buy expertise?
  • if selling expertise isn’t the best approach, why is it the dominant one?

Good questions all. The answers lie in the psychology of buyer and seller of complex intangible services, and in trust—which is what really lies at the heart of successful sales.

WHAT’S THE ALTERNATIVE?

If buyers don’t primarily buy expertise, then what are they buying? The answer, in a word, is trust.

Take a simple case. Imagine you have recently moved to a new city, and must find a pediatrician for your 2-year old child. You have a list of 6 doctors, referrals from a combination of health plans, co-workers and neighbors. One doctor clearly has a slight edge in reputation of medical school; another has the most years’ experience; another is on staff at a teaching hospital and has written several articles.

But there is one who hits it off immediately with your 2-year old. This pediatrician connects with and seems genuinely focused on your interests as a parent and on those of your child, rather than on getting you as a new patient. In other technical respects, this physician is in the top half, but not number 1 in any category.

What do you do? Not everyone, but a majority nonetheless, will go for the pediatrician who seems to care, as long as he or she is within an acceptable range of expertise. And, they will use the word “trust” to describe their decision. There are exceptions, of course; a few people always buy purely on the basis of technical specifications, a few more buy only on price, and occasionally one seller is overwhelmingly dominant in the technical realm.

But the majority behave as if expertise has an acceptability threshold. Achieving that threshold is a necessary condition for getting hired—but even expertise beyond the threshold is not a sufficient condition. Given an acceptable level of expertise, people prefer—strongly—to buy from someone whom they trust. In other words, expertise serves as a first-order screen in the buying process—but not as a final decision-making criterion.

To put it simply: most buyers of complex intangible services prefer to find an expert they can trust, rather than to evaluate expertise across experts.

THEN WHY DON’T BUYERS BEHAVE THAT WAY?

They do. They just don’t say so. There’s a difference.

First, buyers are a little intimidated by the role of buyer. Usually the seller has greater expertise. There is often a lot at stake, and the services are costly. It is often truly hard to choose between several very competent sellers. So, buyers feel a need to display some level of technical expertise themselves, partly out of natural human ego, and partly to keep the seller on his toes.

Second, corporate buyers of complex intangible services are usually professionals themselves—they worship at the same altar of expertise. And, they are particularly concerned to be able to justify their decision. Justification in business almost always consists of rational, mostly financial, arguments. Therefore buyers drive discussions in the technical direction, even while looking to assess their level of trust with the sellers.

How does this play out? Buyers look for rational reasons to justify what is finally an emotional decision, built heavily on trust. The most commonly accepted rational reasons are price and features. (Price is a very comfortable excuse for saying no—it is quantitative, impersonal, and only the buyer has all the numbers. However, price is rarely given as a positive reason for selection). Very few chief counsels will say to their CEO or board nothing more than, “I think we should go with XYZ because, basically, I think like them better and trust them more.” Yet that is how most of us do behave when buying complex intangible services.

THEN WHY DO SELLERS SELL EXPERTISE?

Professionals over-emphasize expertise for three reasons.

First, that’s what they think (falsely) the buyer wants— and the buyer encourages them in that belief.

Second, expertise is what we professionals are most comfortable with. Very few lawyers went into law because they wanted to sell, or because they wanted to work with people. They went because they love the law, and the vast majority of their learning, development, evaluations and study consist of greater and greater mastery of content expertise. The same is true for consultants, commercial bankers, accountants and actuaries. Why would anyone want to sell on any other basis than what they’re good at and spend all their time and energy at?

Finally, professionals have an emotional vested interest in selling on expertise. It is not comfortable to believe that success in selling might depend on something other than what we spend almost all our time and energy focused on. Still, it’s the truth.

Most buyers of complex intangible services prefer to use technical expertise as a screening mechanism, and then make final decisions based on trust. Sellers who recognize this will listen more, talk less, and focus on the issues of the client at hand (rather than those of past clients). These simple client-focused behaviors are the ways buyers assess trust. Get yourself in the door by focusing on expertise; but once in, drop it and focus on the client, not on yourself.

Why the Talking Stick Creates Trust

The morning news is celebrating a minor triumph of civility in the United States Senate. Senator Susan Collins helped broker a (very) short-term deal by using a talking stick – a centuries-old example of early social engineering from Native Americans.

What’s interesting here is not the agreement itself, but how the use of the talking stick creates trust.

The Nature of Trust

Interpersonal trust is a bilateral, reciprocating relationship based on risk-taking. Let me unpack that in simple English.

Trust requires a trustor, and a trustee. The trustor initiates the relationship by taking a risk. The trustee then responds, or not, by being trustworthy. The players than reciprocate roles – it becomes the trustee’s turn to be the trustor. And so on.

As a visual metaphor, think of a simple handshake; one person extends their hand – the other (usually) responds in kind. A minor social ritual, but of the type that plays out dozens of times a day in simple respectful, reciprocating gestures. It is the stuff of etiquette, among other things.

The Critical Role of Listening

Trust formation follows the rule of reciprocity – but what is the currency of that reciprocity? A powerful component of it is very basic – listening. As in, “If you listen to me, I will listen to you.”

This is a familiar proposition to all of us. In sales, we have “I don’t care what you know until I know that you care.” In fields as diverse as hostage negotiation, terrorist interrogation, and suicide hotlines, we know the critical nature of listening in order to ensure the other person feels heard. (In the field of relationships, you’ve probably been on one end or the other of the familiar line, “Would you stop trying to solve the problem, I just want you to listen to me.”)

I’m not talking about “active listening,” or listening to find out the other person’s position, or to formulate a value proposition. I’m talking about something much more basic and fundamental – listening so that the other person feels heard, validated, understood. This is primal stuff.

The Talking Stick

What the talking stick does is to ritualize this fundamental human truth. The only person allowed to talk is the one holding the stick. The result – even though everyone ‘knows’ that it’s an artificial constraint – is that it works.

We are hard-wired to appreciate the civility of listening – and to respond in return. The talking stick is a physical reminder of a basic rule of trust creation: the critical role of listening. If you let me talk about my issues, I will then let you talk about yours.

It’s a rule all humans seem to respect; and a clever vehicle, even if transparent, for drawing on our better natures to create trust.

 

A Better New Year’s Resolution

Eleven years have passed since I first wrote the following thoughts on New Years resolutions. Frankly, it was good. And frankly I haven’t been able to write a better one. Next year, maybe.
So, apologies to those who have read it year after year—though I suspect some of you won’t mind.

Happy New Year.
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My unscientific sampling says many people make New Years resolutions, and few follow through. Net result—unhappiness.

It doesn’t have to be that way.

You could, of course, just try harder, stiffen your resolve, etc. But you’ve been there, tried that.

You could also ditch the whole idea and just stop making resolutions. Avoid goal-failure by eliminating goal-setting. Effective, but at the cost of giving up on aspirations.

I heard another idea: replace the New Year’s Resolution List with a New Year’s Gratitude List. Here’s why it makes sense.

First, most resolutions are about self-improvement—this year I resolve to: quit smoking, lose weight, cut the gossip, drink less, exercise more, and so on. All those resolutions are rooted in a dissatisfaction with the current state of affairs—or with oneself.

In other words: resolutions often have a component of dissatisfaction with self. For many, it isn’t just dissatisfaction—it’s self-hatred. And the stronger the loathing of self, the stronger the resolutions—and the more they hurt when they go unfulfilled.  It can be a very vicious circle.

Second, happy people do better. This has some verification in science, and it’s a common point of view in religion and psychology—and in common sense. People who are slightly optimistic do better in life. People who are happy are more attractive to other people. In a very real sense, you empower what you fear—and attract what you put out.

Ergo, replace resolutions with gratitude. The best way to improve oneself is paradoxical—start by begin grateful for what you already have. That turns your aspirations from negative (fixing a bad situation) to positive (making a fine situation even better).

Gratitude forces our attention outwards, to others—a common recommendation of almost all spiritual programs.

Finally, gratitude calms us. We worry less. We don’t obsess. We attract others by our calm, which makes our lives connected and meaningful. And before long, we tend to smoke less, drink less, exercise more, gossip less, and so on. Which of course is what we thought we wanted in the first place.

But the real truth is—it wasn’t the resolutions we wanted in the first place.  It was the peace that comes with gratitude.  We mistook cause for effect.

Go for an attitude of gratitude. The rest are positive side-effects.

Trust, Inc.

Walgreens, the venerable (116 years old, second largest) US drugstore chain, has announced a new tagline as part of a new brand positioning strategy.  No longer will it be “At the corner of happy and healthy” – the new mantra is “Trusted Since 1901.

Well.

I wish Walgreen’s nothing but the best, and don’t doubt their good intentions. Nor are they necessarily wrong on the facts. And, Walgreens is hardly alone in wanting to trumpet their levels of trustworthiness, or their trusted relationships with customers.

However, the use of “trust” in corporate branding is problematic on at least three dimensions. Walgreens provides a good opportunity to explain why.

Cognitive Dissonance

I always tell people not to call themselves a ‘trusted advisor,’ and certainly not to incorporate the phrase into their advertising. It’s like saying “humility is my best quality.”

Trustworthiness is something of a virtue, and calling yourself virtuous just explodes the claim. It’s wonderful when other people use trust to describe you or your relationship with them – as long as it’s them saying it. (“Trust me” may be the two most trust-destroying words you can say).

Calling yourself ‘trusted’ is also different from calling yourself innovative, or respected, or high quality. Walgreens might want to take note that none of the ”Top 10 Most Trusted Brands” brands incorporate trust itself into their taglines.

They might also take note of how it’s worked our for “The Most Trusted Name in News,” whose tagline allows Donald Trump a convenient foil.

Risky Business

Claiming to be trusted is a bit like the Gary Hart strategy – daring the press to find otherwise. It’s like a red flag to a bull.

How many people will manage to dig up the fact that Walgreens made a substantial amount of money and growth during Prohibition by selling (legally) whiskey? Or that the pharmacy business managed to quickly carve out a very liberal interpretation of “medicinal purposes” during that period? Sorry, Walgreens, it’s what you’re setting yourself up for.

History aside, stuff happens. Ask BP about oil spills, or the old Union Carbide about explosions. Or, closer to home, J&J about Tylenol redux. Mis-steps are magnified, and stay in the press longer, for those who claim to be trustworthy in the first place.

Corporations are Not People

This is the biggest one. “Trust” is a word with much contextual nuance of interpretation. But one thing we can say for sure: personal trust is richer and stronger than corporate trust.

We trust people on an emotional level. We trust people based on our views of their intentions, their transparency, and their willingness to trust us.

By contrast, corporations’ intentions are usually very much self-oriented; transparency is little-practiced; and rare is the corporation without legal disclaimers governing their customer relationships. That’s not a criticism (well, it is a little bit); but it’s mainly just stating the difference between protein-based and legally-based entities and the ways we trust them.

Most corporate executives would probably agree with this in the abstract – but they ignore the implications in the particular. If they really believed it, they would be spending money on becoming more trustworthy, rather than on PR campaigns to be seen as more trustworthy, or on reputation management to change perceptions rather than underlying reality.

So What’s a Company to Do?

A company that is serious about being seen as trust-based would start by recognizing – it’s personal.

Trust is not created by spin, advertising, PR, or taglines. It is created by the collective personal behavior over time of corporate employees interacting with customers, suppliers and each other.

This means corporate trust is a culture-and-values issue – not a process-and-marketing issue.

A company that is serious about trust will, among other things:

  • figure out how to trust its customers and suppliers, often by taking some form of risk (because trust is reciprocal – we trust those who trust us);
  • invest in customer service by focusing on effectiveness, not efficiency; by using ROI, not budget variances, to measure success;
  • hire, train for, and role-model best practices for interpersonal trust, including emotional intelligence, strict truth-telling, and vulnerability;
  • consistently prioritize long-term, relationship-based behaviors over short-term, self-aggrandizing behaviors, in its compensation and promotion policies;
  • focus on ways to establish deeper relationships with stakeholders, rather than focusing on issues like NDAs, non-competes, or arbitration clauses;
  • make heroes out of people who model trust-based behavior.

We trust those more who do not protest how much we trust them.

 

Pain, Brain, or Reframe: How Do Buyers Really Buy?

Sometimes when it comes to sales, we approach it as if there were some specific model or equation to follow in order to result in closed business. A + B must equal C. So, many of us tend to look for this equation over and over again. If we didn’t get it right – it must be because the equation is wrong. We’re missing something. So we take to the white board afresh as if we were Einstein moments away from solving the theory of relativity.

But, what it seems we have yet to admit to ourselves is – there isn’t a set equation. And that’s because there are always variables at play. And mostly, that always comes down to the players: who is doing the buying and who is doing the selling.

If you’re interested in selling, you might plausibly start with trying to understand how buyers buy. It’s a simple enough question. But then why are there so many answers?

Three of the most common answers to that question are:

  • People buy when they strongly feel a desire to alleviate a negative situation.
  • People buy as a response to a clear value proposition.
  • People buy most from those who offer differentiated, out-of-the box, creative solutions.

For short, let’s call those Pain, Brain, and Reframe, and examine them in turn.

The Pain Model

Many sales writers say things like these two quotes:

“The customers that are most likely to convert have a pain that they need to alleviate. Now.”

or

“Solid, smart sales are focused on our clients’ pain points, not on the tech demo.”

Within the Pain category, there is an internal debate about whether the prospect of a better situation can be as motivating as alleviating a painful situation. (One solution: reframe the gain as alleviating a potential pain.)

The Brain Model

Many other salespeople consider “value propositions” to be the key driver. Consider, for example, Investopedia’s definition of value proposition:

“A business or marketing statement that summarizes why a consumer should buy a product or use a service. This statement should convince a potential consumer that one particular product or service will add more value or better solve a problem than other similar offerings.”

Or consider this one from a sales training firm:

“Customer contact professionals must be engaged and expected to adapt a financially oriented value proposition to the customer or prospect.”

Many fans of value propositions suggest they are best used as conceptual maps for marketing and not as sales collateral. But this distinction is lost or ignored by a great number of salespeople.

Note that nearly the entire economics profession is built around the idea of rational economic choices. In my experience, greater exposure of salespeople to economics or MBA programs translates to greater reliance on the Brain model of selling.

The Reframe Model

One constant need among buyers is to de-commoditize their business. “What have you got that’s new?” is a powerful and relevant question for them, and sellers who have an answer will generally get a hearing.

The Challenger sales approach is a good example of this model:

They have “a deep understanding of the customer’s business and use that understanding to push the customer’s thinking and teach them something new about how their company can compete more effectively.”

This approach has some justification in business strategy, where the attempt to gain differentiation is an alternative to the low-cost producer strategy.

So, what is the truth? Are buyers motivated by the desire to remove pain? By a rational statement of value? By a compelling new way of articulating issues?

What’s best? To soothe the pain, appeal to the brain, or reframe the game?

Making the Buying Decision

If clients make buying decisions because of rational calculations, then the Brain model would appear to be the best. If buyers are looking for access to new, differentiated ideas—and the people who bring them—then the Game-reframe model looks best. And if buying is mainly motivated by emotional issues, then the Pain model is best. The question, therefore, becomes: which underlying psychological model best explains the process buyers undergo.

Of course, simple choices like A, B, or C often end up being solved only by rephrasing the question. This is no exception. For example, consider the buying decision as a multiple-step decision, or a multiple-psychology decision, rather than a single-step decision.

Different Buying Stages: In The Trusted Advisor (written by David Maister, Charles Green, and Rob Galford), we note that complex services buying decisions are typically two-step decisions. The first step is screening to identify plausible sellers. The second step is selection. Bill Leigh of the Leigh Speakers Bureau tells the story of one client’s decision process to hire a speaker for a major corporate event:

“They quickly narrowed it down to two—either Michael Porter, a major business strategist, or Lester Thurow, a prominent economist. They went back and forth until finally they agreed on a solution—ex-Chicago Bears football coach Mike Ditka.”

The first step is a relatively rational process of data-gathering. That process sounds very much like the Brain model.

But the selection step is taken much more emotionally, involving a complex set of cross-currents. That sounds more like the Pain model. (Or if you consider Ditka a redefinition of the problem, it’s more like the Frame model.)

Different Buying Psychologies: Another approach to splitting the A/B/C dichotomy comes from a large study by Bill Brooks and Tom Travesano, reported in You’re Working Too Hard to Make the Sale. Looking over thousands of sales across several B2B buyer types, their conclusion was summarized in one powerful sentence:

People buy what they need from those who understand what they want.

In other words, the identification of needs (systems, audits, legal advice) is fairly straightforward—the Brain model. But the actual choice is made on the basis of which seller most deeply taps into buyer wants—fears, hopes, aspirations, wishes, desires. It is not necessary that those wants be satisfied; it is enough that they are recognized, understood, and acknowledged. Doing that drives the decision to buy what, after all, has to be bought anyway.

Integrating Buying Psychologies: Neil Rackham, via his classic SPIN Selling, offers yet another insight, one that integrates the various models. SPIN (Situation, Problem, Implications, Needs-Payoff) operates at one level on a buyer’s emotional needs by forcing sellers to listen to the customer before they start offering solutions. At another level, it is a very rational model, methodically identifying both pain points and alternative, potentially breakthrough conclusions.

What’s the Answer?

Perhaps the last word may come from science fiction author Robert Heinlein, who is credited with saying, “Man is not a rational animal: man is an animal who rationalizes.” Putting it into sales terms, “People buy with their heart and rationalize it with their brains.”

That is not to minimize or discount the role of rational decision making. We all acknowledge rational analyses as important checks against the mistakes we might make if we rely solely on the emotions. At the same time, it recognizes the powerful role that emotions play in human decision making, of which the buying decision is just one.

The most useful answer is, “Develop a rich, insightful, trusting relationship with your client, and be prepared to offer them all the legitimate backup they’ll need to defend their decision to buy from you.”

Fear and Forgiveness

This week our very own Lisa McArthur tackles the weight of fear and the weightlessness of forgiveness.

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Reading the story of Dean Otto this week, it’s hard not to reflect on the power of forgiveness.  For those not familiar with his story, Dean was seriously injured when struck by a truck while riding his bike last September.  He had no feeling from the waist down.  Against the odds, last week Dean completed a half-marathon in under 2 hours.  But what makes this story so unique is that Dean ran that marathon alongside his surgeon and the young man who hit him.

Even while sitting on the side of the road, Dean forgave the driver.  “I accepted what had happened to me.  I forgave the guy that hit me so I wouldn’t harbor any resentment and being able to do that has really helped me throughout the whole process.”

WOW!

A poignant example of forgiveness overcoming fear.  Fear holds us back and restricts us from working together and accomplishing truly inspiring things.  The ability to be gracious, to forgive, to move forward past a challenging event benefits everyone involved.  If Dean can forgive the driver of the truck that hit him…what’s stopping me? What grievances do you have in your workplace and what’s stopping you from moving past them? In a word…FEAR.

Fear makes us hold back, avoid situations and do nothing. But doing nothing has a cost a well. How do we move past our fears, forgive and build trust?

Step 1: Name your fear

Start by being explicit about what is holding you back. Here are 4 common ones:

  • Execution fear – I might make a mistake
  • Competence fear – I don’t how to do it right
  • Outcome fear – Everything might not turn out the way I want it to
  • Shame-based fear – They might not like or respect me anymore

Step 2: Write it, Read it, Say it

Once you can identify your fear, write it down, read it and say it out-loud. Don’t be tempted to skip this step. By writing things down and saying them out-loud, we move past our fight-or-flight emotional impulses and diminish the power of the emotion. I’ve often been in contentious meetings and have scribbled many such “verbalizations” in the margin of my notebook. Trust me…it works!

Step 3:  What’s the worst that could happen?

Think about your next meeting or conversation? What will you say or do? What is the worst thing that could happen? Could you be challenged? Yes. Could you be embarrassed? Possibly. What else might happen?

For many of us, the outcomes will not be life-threatening. They may be unpleasant for the short-term but will be things we can overcome. Thinking about outcomes rationally can help us maintain perspective and take the fear out of the situation.

Step 4: Identify the other person’s fear

Put your fears aside and try to see things from the other person’s perspective. Dean Otto told the young driver to not let this define or haunt him. He recognized the fear and impact of the event on both of them. Think about your personal situation…what fears might be driving the other person’s behavior? How might you be able to help them overcome their own fears?

This serves two key purposes…it may help you find new win-win ways to deal with the situation…but most importantly, it changes the sound of that little voice inside your head and lets you move beyond your fear.

Step 5:  Act

Most importantly, you need to act.

Understanding both perspectives, take honest stock of the situation, define what you can and cannot do, then take action. Remember, the fear of doing something wrong often stops us from doing something right. Be confident in your intent. As Dean said he “forgave…so I wouldn’t harbor any resentment.”

Team performance in any organization starts with collaboration. We must learn how to hold ourselves accountable to each other, get past our own fears and resolve conflict quickly. Fear holds us back and prevents us from working together. By acknowledging our fears and taking the risk of forgiveness, we create teams that can accomplish great things. What fears are holding you back from forgiveness and what risks are you willing to take to run your own version of a half-marathon?

Dealing with the Honest Majority and the Dishonest Minority: Tales from the auto industry

This is a guest-post by Matti Kurvinen, a former Accenture partner, now an independent consultant focusing on service strategy and operations and warranty management. We welcome him to Trust Matters.

This blog has recently addressed what to do when someone abuses your trust. Of course, most of our business partners are fully honest and trustworthy. Still, if you don’t know which one is which – how can you trust your partners?

The issue is not hard to frame for individuals. But what about at scale? How can you establish systemic trust-based business relationships, when you can’t directly assess the trustworthiness of every relationship at all times?

The Case of Automotive Warranty Service

A case in point is manufacturers who outsource their warranty service to external service agents – for example, automotive dealers. An automotive OEM rightfully sees dealer productivity as a key route to effective end-customer service, and dealer satisfaction as a route to end-customer satisfaction. As the OEMs put it, “It is our role to support our dealers in serving our customers and not burden them with unnecessary controls.” (The same applies to white goods, IT, mobile devices and consumer electronics in relation with their authorized service vendors).

The problem is, an OEM with thousands of service agents globally will quite likely have tens – maybe even hundreds – who will take advantage of any holes the OEM has in its warranty control.

Hence the dilemma: how to enforce trust, positive incentives, support and frictionless procedures with the honest majority of your business partners, while at the same time having adequate control and discipline to deal with the few dishonest exceptions?

The Ugly Truth about Warranty Fraud

Warranty cost is a significant factor for manufacturing companies, typically ranging from 1 to 4 % of company sales, and 5 to 25 % of company profits (sometimes enough to make the difference between profit and loss).

Most companies see warranty costs as driven mainly by product quality, and secondarily by service network efficiency. However, there is another factor to be considered  – warranty fraud. This kind of fraud ranges from opportunistic small-scale overbilling to industrial-scale fraud perpetrated by organized crime. Estimates suggest that from 3 to 15% of warranty billing is fraudulent, making it a billion-dollar issue in the USA alone.

The warranty chain is no different from any other field of life or business. For some small fraction of people and companies, the opportunity for financial gain, weighed against the likelihood and consequences of getting caught, is a calculus that leads them to take advantage of loopholes in warranty control.

Some companies take this very seriously; others are not even aware of it. Still others believe it may be an issue, but “not for us.”  Stanford professor and trust scholar Roderick Kramer states in his HBR Article Rethinking Trust: “… people underestimate the likelihood that bad things will happen to them, and detecting the cheaters among us is not as easy as one might think.”

I have witnessed this several times, with comments like, ”Yes, the numbers from this dealer look really peculiar – but I can’t just go and accuse them of being dishonest, now, can I?”

Most participants in the warranty chain are honest – but not all

The good news is that most participants in the warranty service chain are normal, honest people and companies. But this makes fraud control tricky; how to have control and discipline for the dishonest minority, while enhancing trust, positive incentives, support and frictionless procedures with the honest majority?

The same issue, of course, can be found in many other areas: think on-line commerce, credit cards, mobile payments. The challenge is to make processes fast and easy for the honest people, yet still have adequate controls and fraud prevention processes.

Both false positives and negatives are undesirable. It’s inconvenient to have your credit card refused because of a false alarm. But it’s at least as troublesome to see payments go through with stolen credit cards or identities.

Enforcing trust while managing the dishonest minority

In my experience, there is no single silver-bullet solution. However, by applying the following five principles to your business, you’ll improve the odds considerably.

  1. Trust your partners by default. The business relationship between the OEM and the service agent must be based on mutual trust. The OEM assumes that the service agent doesn’t do warranty fraud, and the OEM accepts that the service agent is entitled to earn a share of the profits for serving the end-customer. The alternative – a default assumption that the service agents are dishonest – is corrosive of all trust. Even good service agents can turn bad if you consistently suspect them of being so.
  2. Set a culture and expectation of high integrity and honest work. This should be enforced and communicated upfront – along with clear consequences of breaking the rules.

Some of our clients have been puzzled when catching fraudulent vendors – “What do we do now?” One leading automotive OEM sends a very clear message to their dealers: “We trust you, but if you violate that trust, you are out!”

This is consistent with Kramer’s advice of sending strong signals on willingness to trust others, coupled with strong promises to strike back if that trust is abused. This not only attracts other desirable trusters, but also deters potential predators, who can sniff out easy victims who send out weak and inconsistent cues.

  1. Keep core operations simple and effective. In daily operations and service vendor management activities there should be no excessive control points; the focus should be on smooth operations and minimal administrative burden for the service agent. You trust the service agent enough to let them be the interface with your end-customer – let that trust also be visible in the back-office, and help them to serve customers with maximal productivity.
  2. Use analytics and audits to support warranty control and rule-based claim validation. Use extensive analytics to detect service agents with suspicious or fraudulent behavior. But analytics alone are not enough; they should be augmented by regular operational reviews and more detailed audits – executed randomly, or as a follow-up based on the analytics findings.

It’s important to keep the human touch and judgment alongside the analytics. Beware of taking drastic actions before you are sure of the findings, and don’t settle for anomalies or suspicious cases where you don’t understand the underlying reasons. 

  1. When necessary, take determined action. Occasional sloppiness and over-charging is best dealt with directly with the service agent, with a clear expectation of corrective actions. In the case if direct fraud or several suspicious elements, take determined action according to the upfront stated policies, such as:
    • Enforcing tighter process controls. You might require additional process control points from service agents with suspicious cases or too many cases in the gray area. Be very clear about this.
    • Claiming back the over-charges. Typically, it is easier to prevent over-charges than claim them back. The circumstances and time-frames for that should be stated in the service contract.
    • Do you still feel you can trust your business partner in the future? What are your other options for warranty (and non-warranty) service? Consider having a case for contract termination or even going to court.
    • Companies are often reluctant to let others know they’ve been a victim of fraud. However, communicating the issue and the consequences enforces the message that your control processes work and you don’t tolerate wrongful behavior.

In many cases we hear clients say, “We don’t have warranty fraud, we know our service agents and we trust them,” or “We are the market leaders, our dealers don’t have the guts to cheat us.” Still, we have seen the whole spectrum from occasional sloppy procedures and over-charging to systemic criminal activities and truly large-scale fraud.

Those who dismiss this as a non-issue typically have a very expensive issue about which they are just wishfully ignorant. Those who have a clear approach without overly burdening their service agents can save a lot of money and simultaneously have a more satisfied and effective service network.

 

How You Use Your Smarts Is What Attracts Clients

You’ve heard, “It’s not what you know; it’s who you know.” You’ve also heard the reverse.

You’ve heard, “You’ve got a limited amount of time to impress them; use it.” But you’ve also heard, “Let the client do most of the talking.”

And you’ve probably heard, “You’ve got to be just a little smarter than your client.” But you’ve probably also heard, “Don’t think you know more about your client’s business than your client does.”

So, what’s the role of smarts? How important is it to be smart? And, by the way, what does that even mean?

Let’s be clear. I’m not talking about emotional intelligence, political savvy, or so-called street smarts. I’m talking about what we usually mean by “smart” in business, which generally boils down to three things:

  • Native intelligence, IQ-ish talent
  • Subject matter mastery
  • Industry knowledge

But let’s also be clear: being smart is less about what kind of smart you are and more about how you use your smarts. And usage, in turn, deconstructs into timing, amount, and context.

Kinds of Smart

I’ll use “IQ” as shorthand for some measure of native intelligence, mindful that there’s a lot of debate about its validity. IQ is seen as an innate form of smarts—you’re supposed to be born with it.

People with high IQs tend to think highly of high IQs, but that doesn’t mean everyone else does. In fact, if clients perceive someone as more clever, sharper, quicker, adept than them, it can be perceived as a negative—particularly if you’re selling.

“Watch out for this one,” the client thinks. “He might pull the wool over my eyes and outwit me.”

Subject matter mastery is different. It’s not an innate kind of smart; it’s derived from experience.

“I could be as smart as him,” thinks the client, “if I had chosen to work in that area.”

In fact, it’s that mastery that clients seek. A client hires a lawyer who knows the law precisely because the client doesn’t know it as well. A subject matter expert with a slightly lower (perceived) IQ than the buyer is even better. They are seen as knowledgeable but unthreatening.

Like subject matter mastery, industry smart is derived, not innate. But unlike subject matter mastery, its presence isn’t a plus so much as its absence is a minus. Clients, particularly those in professional and financial businesses, look down on “generalist” subject matter experts and functional specialists. There’s a general feeling that “our people won’t accept advice coming from you unless you have industry smarts” (though the speaker usually refers to ‘our people’ and not to himself).

In general industries, it is believed that management is management and sales is sales, that the know-how is transferable across industries. That isn’t the case in the professions—rightly or wrongly. You won’t win fighting that feeling; it runs deep.

Timing: When to be Smart

The time to show your IQ smarts is before you meet. Show it in your resume, qualifying documents, and your website’s “About Us” section. That’s because IQ smarts are the only kind of smarts that are potentially embarrassing to the client. The client doesn’t want to be over- or under-estimating you in real time; they’d prefer to know what kind of person they’re dealing with up front, in advance of meeting you. That way they feel much more in control, which is a good thing.

Once you’re in a meeting or interacting with the client, never mention IQ smarts again. Don’t bring up your resume, your degrees, your globe-hopping upbringing, or the brilliant circles in which you travel unless, of course, you’re asked a direct question.

You also want to show a little bit of subject matter smarts and industry smarts in advance of a first meeting or interaction—enough to assure the client they won’t be wasting their time and that they might well benefit from meeting you.

In short: be IQ-smart before you meet. And in face-to-face meetings, be subject-matter and industry-smart.

Amount: How Smart Should You Be?

No one likes to feel condescended to. Fortunately, it’s easy to avoid being condescending in subject matter and industry smarts. The main place to worry is in IQ smarts. If you really think your IQ is so much higher than your client’s, remember that your client is likely to resent or fear you if you make a point of it. Go work on your emotional quotient.

For subject matter and industry smarts, there is no natural upper bound. You’re being hired in part for your expertise, and your client will respect high levels of knowledge of your industry without fearing it. Your biggest challenge here is to be gracious in revealing how smart you are.

Context: Being Gracious about Your Smarts

The single most common sales error regarding smarts that professionals make is to think they have to show how smart they are. They somehow believe that a goal of client interaction is to demonstrate how smart they are. This is almost always unfounded, and frequently it accomplishes the very opposite of what’s desired. It makes the client feel you are self-centered and ego-driven and that you’re only out to make the sale.

Instead, the rule should be to use your smarts as necessary in support of the right thing for the client:

  • If it’s useful to mention that a particular recommendation has been followed successfully by three other clients, then say so. But if you say so just to demonstrate your clout, it’s better to leave it unsaid.
  • If it might be useful to the client that you know so-and-so, a big industry player, then mention it. If you do it only to prove your industry smarts, don’t.
  • If a question is asked to which you clearly know the answer, answer it. But if it’s another question that was asked, and you’re piling on to that question to answer another one, unasked, stifle yourself.

Following that simple rule demonstrates that your driving motivation is client service, not the pursuit of the sale and not your search for ego gratification. And if you’re worried about not knowing the answer to an occasional question, remember a client would rather hear an honest “I don’t know” than a transparent struggle to fake your way through an answer.

The smart call is to use your smarts only in service to your client.