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Trust, Honesty and Authenticity

A few years ago, Deborah Nixon posted an interesting question on LinkedIn. She asked: “Is there a difference between authenticity and honesty?”

She got about 35 answers. Here’s what I sent in:

Deborah, I’m sure you would agree the two terms cover a lot of territory in common. The trick with these definitional things is not to discover some underlying reality, because there is none; these are conceptual models that help us explain the world. They are good or bad insofar as they help us; so I’d suggest starting there. What’s the most useful way to distinguish the two?

One way might be to say that authenticity is largely passive, and honesty is largely active. When we say someone’s honest, we usually mean they tell the truth, and go out of their way to do it.

Sometimes we also mean that they don’t tell a lie – but that’s far from all the time. You often hear someone way ‘well, he was honest – he didn’t actually tell a lie.’ In such a case, ‘honesty’ just means I didn’t utter an untruth; it’s perfectly consistent with covering up all other kinds of truth. So the casual use of ‘honest’ may rule out sins of commission, but not sins of omission.

That’s why the legal language “the truth, the whole truth, and nothing but the truth” is required in court; to prevent the ‘honest’ witness from conveniently leaving something out, or snow-jobbing the court with irrelevancies.

Authenticity, on the other hand, I think usually implies a lack of attempt to control another’s perception. It means letting others see us as we are, warts and all. I think it also goes one more step: it means letting everyone see us in a way that’s no different from how anyone else see us: that is, we don’t play favorites in terms of constructing alternative fictions to respective people.

At a corporate level, a company might support a claim of honesty by pointing to the truthfulness of its statements, or the lack of court cases against it. Again, ‘honesty’ conveys a sense of ‘never knowingly told an untruth.’ Whether it includes consciously allowing other people to make incorrect inferences by not telling them something – well, that’s not entirely clear.

Authenticity is a whole ‘nother level. It means not hiding out, opening the door in things that are not excluded through standard rules of privacy, letting the chips fall where they may. Further, I think it usually entails a commitment to be authentic, not just a convenient lifestyle.

Seems that of the two, we might say that authenticity is broader (i.e. it encompasses being honest, but goes beyond that to proscribe sins of omission).

On a practical level, people who strive to be honest often talk of it as a struggle: to resist temptation, to not gossip, to say things that can be embarrassing if they are true.

People who choose to be authentic have, in a way, an easier time of it.  For someone who is authentic, the daily default way of life doesn’t involve decisions or will power: the default is openness, there is no issue of control vs. transparency.

Things are what they are, and there is no threat about them.

What’s trust got to do with it?  To trust a person or a company, honesty is table stakes.  If you suspect they’re lying, trust is stopped dead in its tracks.  But even if they’re honest, that’s nothing compared to authentic.

Don’t Treat Clients Like Competitors! The Four Principles Of Trust-Based Selling

The words “trust” and “selling” are rarely mentioned in the same sentence, and some people feel that “trust-based selling” is an oxymoron. That says something about the relationships between sellers and their clients.

And it’s one reason that professional services firms don’t like the “S” word. We prefer euphemisms like “business development,” itself phrased in the passive voice as if to distance ourselves as far as possible from the crassness of commerce.

Trust-based Selling® is a principled way of approaching the commercial relationship between two parties. It is not a methodology, or a process model; it can coexist with existing methodologies or processes, as long as they are not manipulative or selfish.

People—including sophisticated clients—are overwhelmingly disposed to buy what they need to buy anyway from someone they trust. They trust people who are trustworthy— worthy of trust. Trustworthiness can be defined as behavior in accord with certain principles.

There are four such principles. Trust-based Selling means applying these principles across all stages of the sales process, all aspects of selling, and all characteristics of the client/professional relationship. Those principles are:

  1. Client focus for the sake of the client;
  2. Medium to long-term perspective;
  3. A habit of collaboration with the client; and
  4. Transparency in all things with the client.

In total, the principles of Trust-based Selling define an alternative to the heavily competition-based paradigm that defines most approaches to selling.

Let’s look first at each principle and its applications.

Client Focus For The Client’s Sake

A lot of what goes by the name “client focus” or “customer-centric” these days is a bit misleading. It is client-focused, all right—but in the same sense that a vulture is client-focused. The focus benefits the seller, not the buyer.

For example, loyalty programs are designed by paying very close attention to exactly what clients are looking for. CRM systems are designed (and sold) to allow very fine analyses of client behaviors and preferences. But in each case, their ultimate purpose is to enhance the bottom line of the seller – not the client.

The more refined and the more pervasive those measurements become, the more obvious it becomes to the client that “having his needs met” isn’t really about him at all. Instead, it’s about getting a greater share of his wallet. When we treat clients like we treat supply chains, they will feel like supply chains. They become means to the seller’s ends, rather than valued as ends in themselves.

Client vulture focus comes from the competitive paradigm: a semi-conscious belief that selling is a zero-sum game in which we compete with our clients.

In Trust-based Selling, client focus is practiced for the sake of the client. This doesn’t mean we are oblivious to the impact on us as sellers, but it does mean we approach clients in fundamentally different ways.

Medium to Long-Term Perspective

A lot of firms feel that their time perspective is reasonable—a bit short-term, perhaps, but not out of line. But look at behaviors.

Most approaches to professional selling are derived from industrial process models; they all have a few things in common. For one, they all have arrows, going from left to right. For another, the last step is almost always “closing,” followed by a feedback loop that says “go back to start and repeat.” That is a short-term model. It’s a transaction model whose end is closing. How much reward does your firm give to maintaining the relationship and how much to the sum of the year’s transactions?

Trust-based Selling focuses on the relationship, not the transaction. This longer-term focus takes care of much of the concern that some people have over the client focus principle. They need not worry that the client will take advantage of free services and bleed the provider dry.

In the long term, it is not just unfair but infeasible for the provider to lose money and the client to make money. In the long term, unequal relationships are simply unsustainable. The discipline of thinking long-term forces provider and client alike to think in terms of win-win or lose-lose, rather than the competitive paradigm of win-lose or lose-win.

A Habit of Collaboration

In most approaches to selling, the firm and client spend most of their time apart from each other. Firms spend the majority of their time imagining what the client might be thinking, how the client might react to our guess about what they might be thinking, and even more time developing elaborate “what-if” scenarios about how to respond to and control the client’s reactions to our guesses. What an elaborate substitute for simply asking clients what they think and talking about it!

Again, the paradigm underlying the usual belief is competition. We act like face time must be “managed,” as if client interactions are theatrical events which require staging and rehearsal.

Trust-based Selling demands collaboration. Significant selling acts are undertaken together. The next time you write a proposal, instead of doing it back at the office and emailing them files, what if you were to book the conference room or set up a videocon and actually write the proposal with the client – with each of you bringing to the process all the information needed to prepare the best proposal possible?

That is collaboration. It doesn’t guarantee you get the job. That’s not the point. The point is to help the client get the best possible proposal while you are secure in the belief that, if you behave consistently in a trustworthy manner, you will get more than your fair share of the business—in truth, much more.

Again, the resistance to collaboration comes from our internalized beliefs that somehow we are in competition with our clients.

Transparency in All Things

Being trustworthy means, above all else, having the client’s best interests at heart. One way to demonstrate this is to be open with them in all our affairs. Conversely, the biggest reason a client might suspect we don’t have their best interests at heart is a sense that we are hiding something. So – make sure your policies are right and then don’t hide anything.

In particular, be willing to discuss sensitive issues like pricing policies, reasons for discounts, leverage models, overhead models, staff assignment models, even billing rates. And be prepared to insist that if you share such information, the client will give you adequate time to do a good job of putting that information in its proper context.

Most firms find transparency the most radical principle of all: “There’s no way we’d tell them our billing rates. They’d freak out!” But they already know you have billing rates and make their own guesses without any context to understand them. Remember your feelings when you first heard your billing rate? Most likely initially you were overwhelmed with responsibility. Later, you started wondering where all that money went.

It’s the same with clients. The solution isn’t to keep secrets from them; it’s to explain reality to them. You gain three benefits by being transparent:

  1. You show you’ve got nothing to hide;
  2. You distinguish yourself by so doing;
  3. If your policies are weak, wrong or inconsistent, you’ll find out fast and have to fix them so they’re stronger—in which case, repeat the first two benefits.

Why do we resist transparency? Again, the culprit is the competitive mindset we bring to bear in selling. In this case, we’re afraid that if we share certain information, the “other party”—in this case, a potential client—will use that information against us, or we will lose advantage. That is the language of competition, not of trusted relationships.

We have to stop viewing our clients as our competitors. What we fear, we empower. If we treat our potential clients as competitors during the sales process, we will end up with competitors.

The cycle has to stop with us. We need to sell from principles of trust, rather than from principles that create more competitors in the very process of gaining clients. Trust begins in the sales process, if we have the courage to put it there.

 

Disclosure Is Not Transparency

Transparency, most of us would agree, is a positive thing.  And disclosure is an obvious way to get there.

But transparency and disclosure are not the same thing. And confusing them can actually harm transparency.

So – what’s the difference between disclosure and transparency?

Transparency and Trust

Besides “able to transmit light,” the dictionary defines transparent as:

  • easily seen through, recognized, or detected: transparent excuses.
  • manifest; obvious: a story with a transparent plot.

In the simplest business terms, “transparent” means you can tell what’s going on.

If the link between transparency and trust isn’t self-evident, here are a few citations to help clarify it:

If I can see what’s going on, I know that I am not being misled. Motives become clear. Credibility is affirmed. Transparency is indeed a trust virtue.

Disclosure

Disclosure is a time-honored tool of regulators to achieve transparency. Food and pharmaceutical manufacturers are required to disclose ingredients, medical authors are required to reveal payment sources, the SEC frequently proposes disclosure as a tool, and so on.

Certainly you can’t find out what’s going on if information is actually hidden.  So disclosure is a necessary condition for transparency. But it’s hardly a sufficient one.

I don’t have much to say about the cost/benefit trade-off of greater disclosure in pursuit of transparency. Sometimes the benefit is obvious, other times not so much, sometimes not at all.

What’s more interesting to me is how the blind pursuit of disclosure can actually reduce transparency – even reduce people’s awareness of the distinction.

Over-Disclosure

Is it possible to have too much disclosure? So much disclosure that information gets lost in the blizzard of data?

On the face of it, disclosure is the handmaiden of transparency. But if disclosure becomes the end rather than the means, if regulators and consumer advocates become fixated on indicators rather than on what they indicate, then disclosure can actually become self-defeating.

Lawyers know that massive responses to discovery requests can overwhelm opposing counsel. Cheating spouses know that the best lies are those that disclose the most truth. Consumer lenders know to fast-talk the disclaimers at the end of radio ads, much like the small print on the ads and loan statements.

If disclosure isn’t accompanied by an ethos of transparency, it can be positively harmful. It is like crossing your fingers behind your back, taking movie reviews out of context, or word parsing a la “it depends on what the meaning of the word ‘is’ is.”

A trustworthy person, team or company will not settle for disclosure, but seek to offer transparency. A competent regulator will always remember that disclosure is just evidence, and partial evidence at that. And a wise buyer will always look for the spirit of transparency that may, or may not, underlie the act of disclosure.

Trust relies on both data and intent.

 

Why We Don’t Trust Companies Part IV: The Solution

Solving The PuzzleMy last three posts – here, and here, and here – were about why we don’t trust companies. To review the bidding, I’ve said it’s because:

  • Trust is predominantly personal in nature – a fact most companies don’t recognize
  • Corporate missions, motives and mindsets are all tainted by zero-sum, competitive ideologies
  • Trust requires risk, while companies abhor risk.

Stripped down – companies see trust as impersonal, ideologically suspect, and too risky.

Now, if I am right about that, then we would want to see solutions in the business world that recognize the personal nature of trust, incorporate trust-enhancing ideologies, and embrace risk-taking to enhance trust.

Surprise surprise – that’s not what we see.

The dialogue about corporate trust is consistently mis-framed. It is not companies that trust, or are trusted. It is the people in the companies who trust, or are trusted. The challenge is not to make companies trust or be trustworthy – it is to create corporate environments in which people can trust and be trusted.

In the trust game, the company is an agent, an enabler – not a primary actor.

The Usual Recommendations to Increase Corporate Trust

I spend a lot of time reading reports on how trust in business can be improved. Here are a few examples;

Believe me, there are hundreds more.

These are all reasonably good pieces of work (there are certainly worse). But even from these top-drawer sources, the top-line recommendations are bloodless, abstract, and cold – because they’re focused at the corporate level. (Curiously, the right answers in all four of these cases are in fact contained in the reports – they’re just buried deep.)

Typical topline recommendations look like these (taken from the sources above):

  • Increase adherence to ethical codes and standards
  • Create a set of values that define and clarify what your enterprise and its people are at root, and work to ensure that these values are adhered to consistently across your enterprise.
  • A well-defined, repeatable roadmap for the conversation…more transparency about fees and costs
  • Communicate frequently and honestly on the state of the business.

Again – there’s nothing wrong in these recommendations. But taken alone, they are sleep-inducing; they sound like Charlie Brown’s teacher’s Mwah, Mwah, Mwah.

Where is the personal? The belief system? The risk-taking? Where’s the people?

The Right Answer for Increasing Corporate Trust

Again, not that there’s anything wrong with the suggestions above, but they don’t get to the heart of the matter. Here are some recommendations that do.

1. Trust is personal – so lead by example.

Role model it. Everyone, not just the top leaders.  And to be sure what “it” is, identify hundreds of situations and the appropriate responses for each (not to memorize, but to ensure understanding). Talk about them – endlessly.  Get coaching. Do brainstorming sessions. Talk about what you’re doing with employees, and with customers. Identify key vocabulary terms you’ll use, and use them. Publicly praise and private counsel appropriate personal examples of trust-based interactions.

The way to get a trust-based company is not to fix the company – it’s to fix the people and the environment they live in so that the people can trust and be trusted in all their affairs.

2. Articulate and preach the trust ideology.

Reject zero-sum thinking. Think long-term relationships, not short-term transactions. Make transparency a default state in all conversations (except where illegal or harmful). Emphasize win-win solutions with customers, employees, and other stakeholders. Believe that trust relationships are more profitable over the medium and long-term, that they are complementary not opposed to corporate success.

3. Teach Social Risk-taking

People can’t learn to trust if they have no degrees of freedom to do so. People are more likely to be trustworthy if they are trusted. Human relationships are formed by the constant reciprocal taking of small risks; the result is long term risk mitigation.

There are personal relationship skills that drive trust. They can be taught, and the teaching of them gets to the heart of a trust-enhancing organization.

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The route to a high-trust organization is through its people. That route starts not with corporate policies per se, but with human interactions.

 

 

Why We Don’t Trust Companies, Part II – the Three M’s

light bulb: Mission, Motives & MindsetsYesterday I wrote about three fundamental reasons that most companies aren’t trusted: trust is mainly personal, most companies don’t understand trust, and they make bad choices of tools to enhance trust. Let’s call that Level I of  the Corporate Book of Being Trusted. Now let’s look at Level II.

Most companies, even if they do reasonably well at Level 1, are still not very trusted. It’s often due to what we might call the three M’s – mission, motives and mindset. If your goals, beliefs and attitudes are all anti-trust – even if you think you mean well – then no matter what you say, it will bleed through. People can tell. And it’s people that do the trusting.

Mission.

I’m using the term “mission” loosely here, to include terms sometimes defined as distinct – vision, goals, and the like. Basically, what a company says it’s trying to do.

And despite the ringing statements of companies like Coca Cola (“…to inspire moments of optimism and happiness…”) and Enron (you really must read it for yourself), most companies in the past few decades would cop to “achieve sustainable competitive advantage,” (often dressed up as “be the best X in the Y business”).

Sustainable competitive advantage. Never mind whether that’s true, or whether the true underlying motive is to maintain the bureaucracy until the incumbent management has had its way. Let’s assume it is true. What does “sustainable competitive advantage” (hereafter, SCA) imply?

It says above all that business is a contest, and a largely zero-sum contest at that. It’s about winning, and what I win, I win by dint of you losing. And vice versa. As was very well articulated by the strategists from the 70s and 80s, this is a Hobbesian view, in which everyone is a competitor lying in wait to conquer us. And so we must conquer them first.

Much more could be said about this as a mission, but let’s stick with one observation – it is extremely hard to believe in all that and believe at the same time in the power and desirability of trust. People who believe in SCA are hard-pressed to believe that they might make alliances with suppliers, customers and even competitors, that they might benefit by greater transparency, that taking risks can be desirable, and that another goal besides winning might actually exist.

Most corporate people  just can’t wrap their heads around that.  And so they, and their companies, behave in anti-trust ways.

(There is, of course, a great irony here. Companies which actually do a better job of being trusted end up being more profitable and successful. But the power of the ideology is such that most corporations refuse to believe it).

Motives.

It’s almost an axiom in business that the purpose of a company is to make a profit. And even though few people now believe it as dogmatically as Milton Friedman asserted it’s pretty much an important goal, and rightly so. The problem comes from those who have boiled it down, stripped it to the bones, and turned it into Management Mantras Lite.

They have put a lot of emphasis on two beliefs: the primacy of shareholder value, and the short term perspective. As to shareholder value, Cornell Law School Professor Lynn Stout says, “the ideology of shareholder value maximization lacks any solid foundation in corporate law, corporate economics, or the empirical evidence.” So the belief is unnecessary, and unfounded. Yet it continues.

It is also anti-trust, because it subordinates the goals and desires of all other stakeholders.  Who can trust an entity that uses others as means to its own ends – and brags about it!

Short-termism is a long topic in itself. Let’s just note that the passage of time is a requirement for many forms of trust. Game theory shows distinctly different results if a game is played once, vs. many times. Over time, we can establish patterns, mutual obligations, track records and character.

Short-termism hobbles trust considerably; the accompanying belief in transactions rather than relationships is enough to strangle trust.

Mindset.

Some mindsets flow naturally from the missions and motives outlined above; see how many you have heard:

  • I’ll be gone, you’ll be gone – do the deal
  • Do unto others before they do unto you
  • It’s a dog eat dog world.

There is one other mindset I want to identify; I’ll write about it separately in this series. It is risk. In the Hobbesian corporate world we have created, risk is a no-no, a negative, something to be mitigated and hedged. Risks are to be laid off, written into supplier contracts so they’re transferred, and are not to be taken if they might result in legal or financial exposure – hence never admit guilt. Hence “nobody ever got fired for hiring IBM.” And so forth.

Yet trust requires risk. There can be no trust without risk. And a mindset that abhors risk is not a mindset that will easily tolerate trust.

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In short: at Level I, we saw that most companies are impersonal, and don’t understand the workings of trust. At Level II, we see that many mental constructs in today’s corporations are inimical to trust.

Is it any wonder that most companies are not trusted?

 

Financial Advisory Services: Interview with Mark Barnicutt, CEO Highview Financial Group

The term “financial advisor” covers a wide range of activity, from insurance sales to asset manager to broker to financial planner, and many more. Both providers and consumers of financial advisory services are well advised to get some perspective about this business.

To help, I chose to interview Mark Barnicutt, a well-respected member of the industry in Canada. I first heard Mark speak last year, and was impressed with the breadth and common sense nature of his perspective.  With no shortage of issues, I tried to keep it big picture focused.

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Charlie Green: Mark, give us just a bit of background. How do you come by your viewpoint?

Mark Barnicutt: I was the COO for the High Net Worth business of one of Canada’s Banks. I have also been a private banker, an investment counsellor, ran a US SEC-regulated advisory business, and now run Canada’s second largest family wealth/fiduciary management firm. I have an MBA and a CFA.

Charlie: For the non-Canadian readership, how does your experience in Canada compare with that of the US, the UK, and Australia?

Mark: I think that the issues in Canada are the same as those around the world today. With the growing concern amongst many investors about meeting their future funding obligations, many clients are seeking truly independent and objective advice in which client interests are truly placed first and the costing of all services are made fully transparent.

Charlie: Mark, what are the biggest issues facing your business today?

Mark: The biggest is the movement toward fiduciary management, for which we’ve prepared ourselves. It’s happening globally.

Charlie: OK, we can’t avoid definitions. Help us out?

Mark: A Fiduciary Manager (also known as an Outsourced Chief Investment Officer) is a securities registered investment professional who typically has no proprietary investment product to offer clients; instead, their sole focus is on being the architect of client portfolios in order that they truly match each client’s investment objectives and tolerances for risk. The implementation of each portfolio is done through the research & due diligence of specialized money managers, who are contracted through the Fiduciary Manager, for the benefit of clients.  As a result, there is complete objectivity and transparency of advice.

Charlie: Who has been governed by fiduciary standards and who hasn’t? How big a deal is it to change, culturally, for firms who haven’t been?

Mark: As in the United States, the issue of ‘who is’ an investment fiduciary exists in Canada. Typically, those investment professionals who have ‘discretion’ over client portfolios are recognized as investment fiduciaries, while those who do not have discretion – i.e. brokers – are not considered investment fiduciaries and are typically held to a lower standard of care (i.e. Duty of Care).

The cultural issues for firms that have operated under a Duty of Care Standard to move to a Fiduciary one are huge.  It’s a monumental shift – especially for firms who simply ‘sell products’ to clients – as it is a cultural shift that impacts the whole organization when one decides to become an investment fiduciary.

Charlie: You say this is happening globally; is it more evident, or does it have a stronger momentum, in some countries more than others?

Mark:  I understand from studies in recent years (Casey Quirk) that the Outsourced CIO industry is almost a $500 billion industry.  In Canada, it’s much more niche, but those few firms in Canada who are fiduciary managers are experiencing solid growth (according to our anecdotal information) given the ongoing challenges that so many investors are facing today.

Charlie: What’s driving this move? What’s been the customer experience of the financial advisory business over the past 30 years? The past 10?

Mark:  For investors…it’s all about working with someone who will truly place their interests first. They are tired of having ‘investment product’ pitched at them and then watching as the many promises rarely materialize. They are also tired of being gouged for excessive fees, which so many times are not transparent, but often times are embedded in various financial products.

Charlie: What do you see as salient now?

Mark: The objectivity and transparency of advice and services.

Charlie: Let’s stay with customers: what are the biggest misconceptions that customers have about the financial advisory business?

Mark:  They think that just because someone is licensed that they have a legal obligation to place client interests first…say, like a doctor or accountant.  As I mentioned earlier, this is not the case unless they are licensed as a discretionary portfolio manager.

Charlie: Similarly, what are the biggest mistakes you see customers making?

Mark: Because there are so many different types of advisors in the marketplace today, clients really need to do their homework and find advisors who truly want to place their interests first. This is unfortunately easier said than done, but I have met several clients over my career who have developed a deep assessment approach for finding the right advisor for them.  As part of their search process, they’ve spent time researching how a potential advisor would actually manage their assets to meet their unique needs, as well as service them.

Charlie: What is the ultimate, best-case, customer value that a great financial advisor can provide? What does a client gain from a really great financial advisor?

Mark:  Becoming a true advisor/partner with clients in helping them actually reach their various investment goals (which are typically some form of current and/or future consumption) but within each client’s capacity and willingness for risk.

Charlie: Thanks very much for taking time with us to help clarify this emerging issue.

Mark: My pleasure.

 

Books We Trust: The 3 Power Values by David Gebler

This is the tenth in a series called Books We Trust.

The 3 Power Values is, simply, an excellent book. Author David Gebler’s unique talent is to combine a Big Idea, such as the need to remove roadblocks as the key to performance, with precisely defined linkages between values, culture and behavior. He brings needed commonsense to the often vague, un-actionable, and fog-sculpting enterprise known as organizational effectiveness.

David is a consultant and educator, with 20 years experience helping leaders understand how to use their organization’s culture to improve performance and to stay out of trouble.

The Interview

Charlie Green: David, we spoke a couple of years ago about why companies have so much trouble getting a handle on ethics issues and it seems like things are getting even worse.

David Gebler: I agree. Ethics scandals fill the papers every day. We don’t see change because we’re not dealing with the real issues that lead people to do bad things. We think that regulations will define outer boundaries to actions and that morals will guide us inside those boundaries. And that just isn’t the case.

Charlie: Why not? You would think that following the rules and knowing right from wrong would be enough.

David: What doesn’t get factored in is the environment we work in. Whether we follow the rules, even what we think is proper, is heavily influenced by the culture. Social norms tell us whether it’s OK to flout the rules. The norms also tell us whether to feel entitled or remorseful when we cheat or do something wrong.

Charlie: When is it OK to violate rules?

David: Charlie, even you have driven over the speed limit. But you wouldn’t call it morally reprehensible, I suspect. We have normalized that speeding, up to a certain point, is something we all do. So even if it’s illegal, we don’t see it as a moral issue.

Charlie: Did you say that moral issues are also subjective? What do you say to those who say morals are morals, right is right, and wrong is wrong?

David: The truth is, even our definition of what is right is subjective. Leaders in behavioral economics, such as Dan Ariely, point out that everybody has the propensity to be dishonest, and almost everybody cheats—just by a little. The behavior of almost everyone is driven by two opposing motivations.  On the one hand, we want to benefit from cheating and get as much money and glory as possible; on the other hand, we want to view ourselves as honest, honorable people.

What determines whether we feel good about ourselves is the environment we’re in. If we’re in a culture where cheating is frowned upon, people will cheat less, because cheating impacts their sense of self. But if the culture is to take advantage and win at all costs, then cheating and cutting corners becomes just the way we do business.

Charlie: So if the key factor is culture, why do so few leaders tackle this issue head on?

David: Culture is so intangible that leaders hesitate to dive in – not even just to understand it, much less to tweak it. Many leaders haven’t focused on measuring and managing culture, not realizing that they can. Most don’t understand whether their culture hinders or supports performance, much less the implementation of strategies. And finally, many leaders don’t even know whether their culture encourages unethical or illegal conduct.

Charlie: In the book you explain that three “Power Values” are essential to get a handle. What do you mean by that and what are those values?

David: Twenty years of work with companies showed me that three values – integrity, commitment and transparency – stand out in fostering identification and community. I call these the power values because they can influence specific behaviors that in turn positively influence an organization’s culture. The chain is: values > behaviors > culture. It is the behaviors that nudge the organization’s cultural components (goals, principles, and standards) into alignment.

By focusing on the specific behaviors that make up integrity, commitment and transparency, you can transform negative behaviors impeding performance into positive behaviors supporting performance. This is how you measure and manage culture as a way to rev up performance and reduce risk.

Charlie: What if employees in the organization don’t understand these values?

David: Most employees already hold these three power values personally. When the power values are highly visible in an organization, they clarify the organization’s intentions and give employees a unifying sense of purpose and direction.

Employees who share their principles, goals, and outlook – the essence of the power values – can let their guard down a bit. They can trust that they will be understood, that there will be fewer booby traps, and that their leaders and coworkers will generally act in a predictable way, consistent with their shared values.

Charlie: What’s the connection between these power values and the kinds dysfunctional cultures we were just talking about?

David: In a positive corporate culture, employees feel good about themselves and their work (commitment).  They raise issues and freely ask questions (transparency).  They don’t feel challenged by unfair or inconsistent work processes, because people take personal responsibility for their actions and live up to their commitments (integrity).

When the elements of culture are out of alignment, frustrations arise. If principles are unaligned with goals, employees disengage and don’t feel a vested interest in their work (lack of commitment). When goals are out of sync with standards, unfairness arises as managers and employees “do what they have to do” rather than what they have said they would do (lack of integrity). And when standards are aligned with values, employees see that the organization’s actions are inconsistent with its principles, and it becomes hard to ask uncomfortable but important questions and ensure that the truth is heard (lack of transparency).

Charlie: How can you foster a positive corporate culture right from the start?

David: Organizational culture isn’t something that can be faked – or “implemented” – by leadership. The culture is simply the way the organization and its people conduct themselves. Organizations have cultures from their outset, though few start-ups spend time defining their culture when they’re small and everyone knows everyone.

When a culture goes bad, it’s not a sudden event; it’s a case of of slow erosion over time. Things begin to change. At the beginning it’s little things, e.g. a business decision made in the heat of the moment when the decision-maker didn’t feel the urgency to deal with the long-term impact at the time of the decision.

Leaders who understand the role organizational culture has in shaping behavior and performance, however, will be mindful of the early warning signs of trouble. Successful culture management means that leaders recognize the first steps down the proverbial slippery slope, and take actions to address them when they’re still small.

To do that, leadership must have a clear sense of a) what kind of culture is needed to achieve the organization’s goals, and b) what behaviors are needed to ensure that the desired culture is sustained. Successful leaders know that the small things matter greatly, and that veering off course is not to be done lightly or without serious plans to right the ship.

Charlie: Thanks, David, for sharing your insights. Until reading this, I also didn’t have a good idea of how one could actually manage culture.  You have managed to educate me greatly!

David: A pleasure, Charlie .

Blow Up Your Budgeting Process

If you work in a large organization – This Blog’s for You.

You know what season is coming soon – you dread it. ‘Tis the season of Planning & Budgeting; the annual ritual of much time, many iterations, and little meaning – full of sound and fury, signifying not much.

What if you could radically revolutionize that process? Almost blow it up? All in a socially and politically acceptable manner, of course.

Resource Allocation is So Last Millennium

Planning and budgeting processes are about resource allocation. Partly that’s to coordinate plans. But partly it’s about predicting the future – of markets, the economy, technology – so we can intelligently place resource bets. So that we can plan on having umbrellas in case it rains.

We have built processes to worry about the future so that we can place resource bets in advance. But what if we didn’t have to place those bets in advance? Who cares about predicting rain for tomorrow if I know there will be an umbrella within arm’s reach when I need it?

What if you always had access to an umbrella? What if you did not have to make capital investments, hire and train people, develop new products – until the day before you needed to? And you were then able to do so with the snap of a finger?

You wouldn’t waste time predicting the future – you’d just deal with it on arrival. And increasingly, that’s what the world looks like.

The umbrellas, it turns out, are right within our grasp, right when we need them – if we just know to look for them. And there are three places to look.

The Three Sources of Umbrellas When You Want Them

Old style planning and budgeting assumes scarcity of resources – few umbrellas. We need to re-think; to recognize the umbrellas are already there, and we’re just facing a sourcing or distribution problem.

The three keys to changing that problem definition are speed, collaboration, and transparency.

Speed. You probably budget for headcount. If so, you assume a certain elapsed time for a category of employee – let’s say, a three-month cycle.

What if you could cut that to three weeks? To three days?  Think contracting, outsourcing, working virtually, across time zones, modularizing work. It’s the way software and movies and consulting and projects get done now, why not extend it to “core” hiring?

Speed attacks the need to plan for umbrellas, because it reduces your exposure to time-spent-without-umbrella.

Collaboration. You probably budget for facilities and equipment – because you assume you must own or have first call on assets. But what if you could get all the access you need just by sharing with others? And save tons of money at the same time?

After all, you rent a room at the Marriott in Chicago instead of owning a condo there. Push that thinking further; it’s like doubling your proven resource reserves without spending a penny on exploration.

Why own a car when you can use Zipcar? Why are you paying Microsoft for software to sit on your PC getting old when you can access cloud software, always updated, for less? Why are you buying books instead of renting them? Why are you spending money on dedicated office space when you could share it out with other tenants? Why are you driving alone?

Collaboration attacks the need to plan for umbrellas, because it changes a resource scarcity problem to a capacity utilization problem, while expanding perceived capacity.

Transparency. You probably budget for knowledge management and IP development – because you think your organization must carefully nurture its precious wisdom. But what if you could generate more knowledge, and more know-how, by openly sharing what you have with everyone else?

This is the logic behind meet-ups, networks, communities of interest, affiliate marketing, tribes, wikis, webinars, curating, mash-ups, and Spindows.

Transparency attacks the need to plan for umbrellas, because it sensitizes everyone to the presence of more umbrellas, to the availability of umbrella substitutes, and to rain-control initiatives.  

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Help free your organization from the tyranny of old-think resource-constrained planning and budgeting processes. Ask yourself how to get your group’s work done faster, more collaboratively, and more transparently.

This is how to be a socially and politically acceptable business revolutionary.

(Props to my mastermind group of @StewartMHirsch, Scott Parker and John Malitoris for this post) 

Making Collaboration Work

I’ve got a problem. Once or twice a week, someone approaches me and says:

I really like what you do. I do something very similar. We should talk and figure out ways to do things together.

The problem: this almost never works.  Let’s figure out why.

Intent is Necessary but Not Sufficient

I’m glad people want to collaborate with me. I increasingly have little patience for those who won’t.  And when I’m the one who won’t, I know I should hit the reset button and start the day over. After all, collaboration is the new competition.

But intent alone doesn’t cut it. I can feel it in my schedule. I hate to be rude, but I just can’t take any more meetings based on goodwill and karmic synchronicity. Millions are in sync with me; I’m in danger of feeling boring, not lonely.

A Clear Vision is Necessary but Not Sufficient

If you don’t know where you’re going, any road will get you there. From a false assumption, any conclusion logically follows. So clearly you’ve got to be clear.

But clarity alone is worth not much. 20 years in strategy consulting taught me that a brilliant strategy and four quarters is worth a dollar. Despite what the Hegelians and the authors of The Secret will tell you, thought alone will not move matter.

Action Steps are Necessary but Not Sufficient

Before nearly every keynote address I give, someone says, “What our people really want are tangible action steps they can begin using the very next day.”

Okay, here you go. Tell the truth. Tell your spouse you love them. Make lists with five bullets. Fix your attitude. Meditate. Exercise. Be kind to dogs. Read your client’s industry newsletter. Listen better. Take two aspirin and call me in the morning.

Yes, that’s what people want. But try just giving action steps, and see if you get paid.

The Three Pathologies of Collaboration

If you’ve only got one of these three factors working, you’ve got bupkus.

More frequently, you’ve got two factors working.  But if you’ve only got two, you’ve got a pathology.  There are three pathologies:

  • Spinning Wheels. You’ve got Intent and Vision, but no Action Steps. You get no traction. You keep on talking, but it’s always to the same people, and you’ve already convinced each other. You need some action steps.
  • Grinding It Out. You’ve got Intent and Next Steps, but no Vision. You’re all processes and metrics and execution and best practices, but you never get anywhere, because you never figured out how to aim, align, coalesce, define a purpose, set a goal, do the vision thing. You’re only running a ground game, and it’s wearing down your offense.
  • Passive Aggression. You’ve got Vision and Next Steps, but no Intent. Your team is talking the talk, but blame-throwing behind the scenes. You’re all brains and no heart. You’re stuck in a 70s military strategy game, all Machiavelli and no truth-telling. You need some positive Intent.

Those people who call me up and offer to work together?  Wheel spinning. The solution, I’m finding, is to say, “Fabulous; you come up with one great Action Step, and I’ll buy lunch. Until then, let’s not “do lunch.”

Do you work in a grind-it-out organization? Swallow your subject-matter-expert pride and hire a motivational speaker. It’ll do you good.

Do you work in a passive aggressive organization? You’re far, far from alone. Go sit in on a 12-Step program and realize that you do not have to be co-dependent.

 

What do you think? What does it take to make collaboration work?

Note: if Anne Evans or Howard Schwartz are reading this, big props to you for an earlier version of the pathologies. And if you’re not reading it, write me and explain why.

Real People Real Trust: Transforming a Business from the Inside Out

Ron Prater has worked in government consulting firms for almost 20 years, including three years with Arthur Andersen LLP. In 2007, he set out with partner Alan Pentz to create a company that would apply real entrepreneurial curiosity to find new ways to solve the U.S. government’s biggest problems. The result is Corner Alliance. Find out how this organization, triggered by a crisis in its formative years, applied the principle of collaboration to devise a new and different kind of corporate culture.

Leadership Lessons

Ron and I have known each other through other people for years. A few months ago I was talking with Corner Alliance Director Sarah Agan, a mutual colleague and veteran consultant. I was intrigued by the unusual ways she described a recent all-hands meeting. “We practice ‘inner voice’ all the time,” she said. “And we have an explicit value to eat our own dog food.” Needless to say, I was intrigued by Sarah’s word choice and even more so by her animation. I wanted to find out more. So I set up some time to talk with Ron and Sarah together.

Ron explained it to me, “‘Eating our own dog food’ means we operate the way we advise our clients to—we follow the same processes and approaches we recommend to them.” “Essentially, we practice what we preach. It can be harder than it sounds when you’re trying to balance helping clients succeed while also trying to grow a sustainable business. And it hasn’t always been that way, even in our company’s short life.”

Learning the Hard Way

Corner Alliance had some growing pains in its early years. “We had a really tough time a few years ago when we lost a project that led to a serious financial struggle,” Ron confided. “I, along with my partner, Alan, and our Director of Operations, Brandi Greygor, responded in typical ways. Privately, we talked daily about how much money we had left in the company’s line of credit and what to do if we maxed out what the bank would loan us. Publicly, we sent a general message to staff that we all needed to ‘increase billability’ but we were afraid to state the full reason.

“We thought we were doing the right thing by keeping the true stress from our staff. The MBA books say it’s important to protect the people from the stress of running the business. And the HR consultants told us we had to follow proper procedures to avoid lawsuits if we did have to lay people off. So we kept things hidden.”

Going contrary to conventional business wisdom, Ron and the other principals listened to their own inner wisdom. “It’s not how our guts said to handle it. We faced a real inner conflict every day for months. How do you form a company of trust and transparency when it seems like all the advice you get—from grad school, friends, lawyers, and more—says to withhold information?

“Looking back,” Ron said, “I grew more personally from that very tough time than from every great year I had. While it was hard, the learning from those six months led to one of the most positive and significant turning points for Corner Alliance.”

Eat Your Own Dog Food

Out of the crisis came a big transformation for the company. “With cost-cutting, along with full transparency with our staff, we managed to stabilize our operations,” Ron said, “And we realized that, on the heels of such a hard and painful time, we had a real opportunity to fundamentally re-think and re-vision.

“So Alan and I announced to our staff that he and I would map out a new company strategy,” Ron elaborated, “including our top three strategic priorities. We told people at an all-hands meeting that we’d start by focusing on which clients to talk to and what to offer them. That message landed with a thud. Within the first few minutes of the meeting it was clear we had made a huge mistake and needed to rethink the approach.

“Our people said, ‘That’s not how we advise our clients to develop strategy. So why are we doing it that way?’”

That uh-oh moment led to a dramatically different plan to create the company’s strategy. “We realized we’d be stronger if we engaged the whole company in the company,” Ron continued. “And instead of starting with what we do and where we want to go, we started with who we are and what we wanted to stand for as a company,” Ron explained.


Put Values First

The group put first things first. “We focused first on our values, and to do that we created a conversation rather than creating a task,” Ron said. “We also found a way to make it a truly collaborative process, not just a collaborative process led by one person. We’ve never been about one-person trust—not at our core—so we found a way to define our values that would reflect that we all have to trust everyone else in the company.

“Since we’re a virtual company with staff in five different states, we selected an on-line tool to help us create the conversation. Everyone could contribute real-time, see each other’s inputs, make comments, and vote.”

Take Your Time

The process of defining yourself takes time Ron learned. “We allowed three weeks to generate ideas, and it took us about four months to solidify our values. If we had tried to get results in a one-day strategy session, our output would have been more generic—even with everyone participating,” Ron added. “People needed time to digest and think through what they stood for and then internalize that in relation to the company. The elapsed time allowed people to contribute at their best, and allowed the most important things to materialize organically.”

They ended up with 10 explicitly stated corporate values that are the foundation on which Corner Alliance continues to be built. Not surprisingly, “Eat our own dog food” was on the short list.

It’s a value that Sarah especially endorses. “We live that value even beyond our approach to strategy development,” she added. “Everyone takes turns running our internal meetings—everyone. We share leadership that way, and expand our capacity as leaders and facilitators at the same time. People get to experiment, practice, and learn in a safe environment, and they get real-time feedback. Just like the leaders we serve, we have to be willing to take risks and make mistakes to learn.”

Sarah continued, “It’s okay for things not to go well. What’s not okay is not learning from it. One of the greatest gifts we give each other is feedback. We are deliberate about creating a culture where we all recognize we’re both perfect and imperfect, where we can bring our whole selves—who we are and who we aren’t.”

Tell It Like It Is

Financial transparency is another key value that emerged from Corner Alliance’s collaborative strategy process. “Alan was instrumental in moving us to open-books management,” Ron said. “We now share just about everything with all employees every quarter, the exception being salary information. We have bi-weekly company-wide calls where everyone sees each other’s billability, our revenue, where we are exceeding or falling short of revenue projections.  We don’t hide anything bad or anything good.”

Ron is clear that the effect is palpable. “It has made a massive difference in everyone understanding the business impact of their decisions,” he stated. “It also supports one of our other corporate values, which is sustainability. I believe the whole firm really understands the state of Corner Alliance and can see that we have a really strong foundation for growth right now.”

Be Bold with Clients

That kind of transparency also now extends to Corner Alliance clients—in a bold and differentiated way. The stated value “inner voice” is about people sharing their internal dialog as much as possible, recognizing that’s often where the truth lies. Corner Alliance staff is encouraged to not leave important things unsaid.

“This is definitely not easy,” Ron emphasized. “It takes a commitment to practice over time with our clients and with each other. We actually label it, as in, ‘Using my inner voice, I’d like to say I think there are serious organizational risks associated with what you are considering.’ This makes it easier to do and hear as the person listening now knows that the person speaking is taking a risk.

“Our people know they’ve got the organization behind them every time they venture into inner voice territory,” Ron affirmed. “As Alan points out about using inner voice, ‘It’s a personal risk to reveal what you’re thinking but not saying. It’s a risk to the organization if you don’t.’ But we all also recognize it’s important to apply this value wisely, appropriately, and thoughtfully.”

Perhaps the most unexpected result from this dedication to speaking the truth is that clients have begun to pick up both the practice and the lingo. Ron explained, “When our clients started saying to us, ‘My inner voice is saying xyz,’ we knew we were onto something bigger.”

Reap the Rewards

The list of indicators that Corner Alliance is onto something is long, and now includes growing staff, secure multi-year prime contracts in place, and work with key government executives who have budgets in the billions. “Corner Alliance is poised for an incredible year in 2012,” Ron said with pride. “Not only are we making a difference in the business of government, but we get emails from clients saying, ‘You’ve changed my life.’”

The focus for 2012? “Helping people thrive by doing creative, meaningful work, and living the life they want—not just the work life they want,” said Ron.

The Bottom Line

Ron feels very strongly that what Corner Alliance has created was not led by or done by one person. “Featuring me for this article is actually counter to our culture,” Ron stressed. “Corner Alliance has been led by a collaborative approach using values as our core, and that’s precisely what will lead us into the future.”

And a promising future it is.

Connect with Ron on LinkedIn.

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The Real People, Real Trust series offers an insider view into the challenges, successes, and make-it-or-break-it moments of people from all corners of the world who are leading with trust. Check out our prior posts: read about Chip Grizzard: A CEO You Should Know; Ralph Catillo: How One Account Executive Stands Apart; Anna Dutton: A Fresh Perspective on Sales Operations; Heber Sambucetti: A Learning Consultant’s Approach to Leadership; Janet Andrews: What Trust-based Strategy Consulting Looks, Feels, and Sounds Like, and John Dunn: An Entrepreneur Wins with Partnership.