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Why Trust is Asymmetrical, and What that Means for Trust Strategies

Much of the talk about trust is just that – talk about “trust.” We forget that trust is a word for a relationship between two parties, each doing different things. Further, it’s an unequal relationship.

What we call “trust” results from one person (or entity) trusting another. One party trusts; the other is trusted. The result is what is properly called trust.

Unlike other relationship words (like ‘love’) the quality of trust is asymmetrical. To trust is very much not the same thing as to be trusted.  Just ask a traveler in a new foreign country.  Or a Madoff client.

The asymmetry is all about risk—the one taking the risk in a trust relationship is the trustor, the one doing the trusting—not the one being trusted

When we describe degrees of trusting, we use precisely that word: ‘He is very trusting.’  While an adjective, ‘trusting’ derives from a verb—it tends to describe a behavior, the act of trusting.

When we describe degrees of being trusted, we use a different word: ‘She is trustworthy.’  ‘Trustworthy’ is also an adjective, but it tends to describe character, an attribute one possesses.

If we’re going to be precise in talking about trust in a useful way—whether it’s personal trust, business trust, or social trust—we need to clear about the risk-asymmetry between the two parties to trust. Absent that simple clarity—who’s doing the trusting, who’s being trusted, and in what realm—there’s not much that can be usefully said.

Here are some examples.

Trusting Strategies.

Trusting someone is very useful—if your trust is justified. Things happen faster, better, with higher quality and lower cost.  Life is richer.  Of course, if your trust isn’t justified, you get burned. Reasonable risk assessment, then, is a valuable skill in trusting.

But trusting cannot obliterate risk, and risk management alone has its limits. To trust only those we have vetted as trustworthy is to make a mockery of trust. Ronald Reagan’s statement “trust but verify” was cynically manipulative. If you can verify, you don’t need trust–you just need an auditor.

Trustworthiness Strategies.

Being trusted by others is at least equally useful, and of course the combination is best of all.  How can one become more trusted—by customers, employees, friends? There are two basic strategies: the first is to trust the other party, the second is to become more trustworthy.

Oddly, the most powerful strategy for driving increased trustworthiness in others may be the act of trusting them in the first place.   Marlon Brando’s Godfather character knew this: so do successful networkers.  Like homeopathic medicines, a little trust given can innoculate against large doses of untrustworthy behavior by others. This is due to the deeply embedded human propensity to reciprocate–good for good, bad for bad. 

Being trustworthy toward others drives their propensity to trust you—and it’s a less risky strategy than trusting them, since most risk is borne by the trusting party.  The effect of trustworthiness on trusting doesn’t rely on reciprocity—it is a unilateral action by the trustee that alters the  risk perceived by the trustor.

Remember the asymmetry of trust is all about risk: it comes in many forms, such as asymmetry of information, or of power.  Many trust issues present as issues of the asymmetry of power: think asset managers trusting rating services, or consumers trusting credit card issuers.  It’s what’s behind jokes like, "I’m from the IRS and I’m here to help you." 

There are several ways to manage risk so that the asymmetry is acceptable to both parties. One is simply transparency: the exchange of information.

At a personal level, the decision to reveal information that would put you at a “disadvantage” in a competitive situation is an act of trust. If your client is 58, you are 32, and your client asks your age, do you say, “I’m in my mid-30s?” Or do you say, “I’m 32.” The latter is an act of trusting; it usually makes you seem more trustworthy, and of course it carries some risk.

At a business level, when companies fight greater transparency (presumably to prevent competitive advantage), they are simultaneously destroying the inclination of their stakeholders to trust them, because to withhold information for self-oriented reasons is intrinsically untrustworthy. Too many industries and companies simply do not get this, hence they invite far stronger regulation than need be the case.

I have elsewhere written about the Four Trust Principles: they apply to people and to organizations, and are largely about enhanced trustworthiness.
Personal and business approaches to trustworthiness overlap in the arena of leadership. The general who personally leads his cavalry troops into battle shows that he will take risks on their behalf; the troops’ powerful response is to trust him in return.  Trusting given yields trust returned.

Explored carefully, this simple framework tells us how to better navigate the worlds of romance, business, friendship, business regulation and socio-governmental institutions.

Increasing trust starts with asking: who does the trusting, and who is to be trusted?  Where’s the risk, and how can we manage the asymmetry?

The Trust Week in Review

 

Introducing The Week in Trust: a weekly look at the world through trust-related eyes.

Part news-roundup, part mind-stretching and whimsical, part commentary that didn’t have enough zip to make it into the blog, but which needs saying.

Big Story Department.  

Regulation has got to be the story this week.   Regulation, at least to my schizophrenic view of things, represents the failure of capitalism to regulate itself.  I believe that business is a higher calling, and that it ought to be capable of long-term self-interested thinking.  But you couldn’t prove that by recent history.

According to the Wall Street Journal, Wednesday’s announcement represented “the most sweeping reorganization of financial-market supervision since the 1930s.”

Bruce Carton’s most excellent Securities Docket explains in not-that-complicated language why the WSJ is not being hyperbolic.  Credit cards, exotic derivatives, small banks, private equity, hedge funds, insurance—not to mention more energy behind enforcement.  It’s all coming down the pike.

And it’s not just the finance sector.  Let’s not forget (hey it was way back at the beginning of the week) that the US Food and Drug Administration (FDA to those who can read alphabet soup) will be regulating tobacco.  That was a long time in the making, and a milestone of sorts.

Why such a sudden glut of regulation?  On some level sure, it’s the Democrats. But Democrats can’t just regulate for the heck of it, and not all of them want to anyway.

I contend it is, as I stated above, a failure of self-regulation.  Whether it’s mortgage brokers or CFPs or regional airlines or credit card companies, what precedes regulation is a mountain of self-justifying rhetoric, aimed at short-term benefit of market players against consumers: ironically, thus harming the industry long term.

But enough about regulation, it’s Friday.  Let’s raise our sights.

Who Knew Department. 

What do you do if you’re a government with an endemic social dishonesty problem?  If you’re Indonesia, you open up 7500 ‘honesty cafes,’or food stores where the responsibility of paying the right amount is left to the customer.    I don’t know of any larger-scale attempt at testing the old saw that ‘the fastest way to make a man trust you is to trust him.’  Early returns are it’s working great in schools; in government offices, not quite so much.  

Hey, it’s the principle behind vaccines—expose them to a little bit of trusting, and they’re inoculated against being untrustworthy.  Nothing new to readers of this blog.  But way more fun.

Do guns kill people, or – does lack of trust kill them?  One of those academic studies that makes you scratch your head a bit; you know there’s some truth there even if it’s cleverly hidden behind the English language.

Trust Angles Department.

It’s one thing when a bucketshop broker or a used car dealer gets accused of being untrustworthy—right or wrong, that’s the price of being stigmatized as low-trust. Ho hum.

But what if you’re known for high trust and you get accused?  Ouch.  Big Ouch.  For example, the Canadian Conference Board. Ouch, I say.

What’s it mean to trust your babysitter?  Find out.

You may think trust is down, down, down.  After all, that’s the drumbeat du jour.  But how many of you are happily using cloud computing?  What an act of trust that is.  And sometimes, maybe it lets you down.  But–have you stopped using it?  And what does that say about your level of trust.

Your Opinion Department.

PGA pro Vijay Singh is still wearing his sponsor’s golf hat.  His sponsor, interestingly, is mini-Madoff  Stanford Financial.   Hate it when that happens. 

Is he being loyal?  Or stupid?  You be the judge.  

Please give me some feedback: should The Trust Week in Review be a regular Friday feature of TrustMatters?  Enquiring minds (ours) want to know.
 

Trust Reader Volume 2

Greetings.

This is the second in a series of ebooks I’m releasing called The Trust Reader. Each issue will feature a full-length article on trust-related issues, plus synopses and links to two other articles.

The Trust Reader will be published roughly every few months. Articles introduced here will be available thereafter on the trustedadvisor.com website, but you’ll see them here first.

Get the Trust Reader volume 2 here

In this issue, the featured article addresses a key question: Does Trust Really Take Time? Here’s why it’s key.

Purportedly, one of the great economic advantages of trust is the time it saves in the conduct of business. I make that claim, as does Steven H.R. Covey, Jr. Yet, the phrase "trust takes time" is routinely asserted by most businesspeople—including those who agree that trust takes time.

Well, does it or doesn’t it? The lead article answers that question, and is contained in its entirety in this issue.

The other two articles are:

Discounting, Price, Value and Psychology — a look at how buyers really think about money in buying. Worried about price cutting? Read this one.

Client Focus vs. Client Focus Lite — are you really client-focused? Or just faking it. Take a hard look in the mirror before you answer, and read this one.

Both these articles are abstracted in this issue, with links provided. All three articles will now join the permanent collection of trust-related articles on Trustedadvisor.com.

The Trust Reader series joins the Trust Matters Primer series—an occasional selection of the best from from the blog Trust Matters.Download the first edition of the Trust Reader here

Trusted Advisor Associates ebook Series on Trust

You can also find previous issues of the Trust Reader here, as well as copies of The Trust Matters Primer here:

Trust Reader Volume 1

Trust Matters Primer Volume 1

Trust Matters Primer Volume 2

Trust Matters Primer Volume 3

If you would like to receive email updates for the Trust Reader and Trust Matters Primer, please subscribe here.

You can find previous articles published by Charles H. Green at http://trustedadvisor.com/cgreen.articles/

As always, if you prefer not to receive our series, simply email me or click the unsubscribe link below to let us know.

The Trust Reader Volume 2

Greetings.

This is the second in a series of ebooks I’m releasing called The Trust Reader. Each issue will feature a full-length article on trust-related issues, plus synopses and links to two other articles.

The Trust Reader will be published roughly every few months. Articles introduced here will be available thereafter on the trustedadvisor.com website, but you’ll see them here first.

Get the Trust Reader volume 2 here

In this issue, the featured article addresses a key question: Does Trust Really Take Time? Here’s why it’s key.

Purportedly, one of the great economic advantages of trust is the time it saves in the conduct of business. I make that claim, as does Steven H.R. Covey, Jr. Yet, the phrase "trust takes time" is routinely asserted by most businesspeople—including those who agree that trust takes time.

Well, does it or doesn’t it? The lead article answers that question, and is contained in its entirety in this issue.

The other two articles are:

Discounting, Price, Value and Psychology — a look at how buyers really think about money in buying. Worried about price cutting? Read this one.

Client Focus vs. Client Focus Lite — are you really client-focused? Or just faking it. Take a hard look in the mirror before you answer, and read this one.

Both these articles are abstracted in this issue, with links provided. All three articles will now join the permanent collection of trust-related articles on Trustedadvisor.com.

The Trust Reader series joins the Trust Matters Primer series—an occasional selection of the best from from the blog Trust Matters.Download the first edition of the Trust Reader here

Trusted Advisor Associates ebook Series on Trust

You can also find previous issues of the Trust Reader here, as well as copies of The Trust Matters Primer here:

Trust Reader Volume 1

Trust Matters Primer Volume 1

Trust Matters Primer Volume 2

Trust Matters Primer Volume 3

If you would like to receive email updates for the Trust Reader and Trust Matters Primer, please subscribe here.

You can find previous articles published by Charles H. Green at http://trustedadvisor.com/cgreen.articles/

As always, if you prefer not to receive our series, simply email me or click the unsubscribe link below to let us know.

 

Why Trust Improves Your Bottom Line

Let’s just face it head on.  Many of you think all the recent hoo-ra about trust is lefty-liberal, softy, wishful thinking. Nice to have, but not the stuff of serious bottom line impact.   

If only the world could be freed of terrorists and Madoffs and Wall Street’s relentless pressure for quarterly performance, then maybe we could afford some trust; but right now, with this economy?  Gwanwidja, Charlie, it ain’t happening.

Or, the most common variation: Hey Charlie, I’m down with the program, but the problem is my boss.  Or the Executive Committee.  Fix them first, then come talk to me.

Well, this is the blog to forward to your boss and the Executive Committee.  Because whoever doesn’t “get” the raw economic power of trust isn’t acting in the best economic interests of the organization.

Let’s break it down into the economic benefits of

•  trusting
•  being trusted (not the same thing)
•  building an organization along trust principles.

How Trusting Adds to the Bottom Line

If you trust someone, you greatly increase the odds of their behaving reciprocally—that is, they become trustworthy.  Don’t trust me on that, read Robert Cialdini, who posits reciprocity as the number one factor driving influence.

If you trust, and the other party behaves reciprocally, all kinds of time and cost can be cut out—mostly time and cost that was engineered in to protect against untrustworthy people.

Specifics?

Trust your suppliers: with advance order information, with cost information, with pricing, with materials requirements, with new design information.  (Don’t, by contrast, create enemies of them by using purchasing as a blunt instrument). 

Trust your customers: develop price and product quotes together with them, share your advance product information, make a point of listening to them, allow them to spend time with you at your offices, get your people to theirs.  (Don’t, by contrast, create enemies of them by surprising them or trying to squeeze the last nickel out of each contract).

What you gain by trusting:  Less due diligence time and cost, shorter elapsed time-to-market, better design quality, higher sales hit rates, lower sales investment cost, more forgiveness of errors, better pricing, higher customer retention.  (Steven HR Covey Jr.in Speed of Trust focuses heavily on the trusting part of trust).

That all adds up to real money.

How Being Trustworthy Adds to the Bottom Line

Take a look at the Trust Equation; take the Trust Quotient self-assessment test yourself.   Being trustworthy means being credible, reliable, safe to be with, and focused more on others than yourself.

Trusting people may be the fastest route to being trusted, though it’s also higher risk.  Being trustworthy also produces reciprocal trustworthiness—it may take a little longer, but it’s lower risk.

Specifics?

Tell the whole truth, don’t just don’t lie.  Don’t over-perform, or under-perform—just do what you said.  Be prepared to recommend a competitor if it’s the right thing.  Don’t manage your earnings, just be transparent about your accounting policies.  Don’t try to control others.  Comment on feelings—yours and others’. Do your level best to actually care—don’t fake it.  Don’t Always Be Closing.  If you don’t know something, say so.  (There are a raft of specific things to do in response to your Trust Quotient, free).

What you gain by being trustworthy: Higher sales closing rates; shorter sales time, more repeat business.  Higher employee retention.  Customer loyalty.  Fewer lawsuits.  More honesty from others.  Fewer competitive bids, more likelihood of your advice being taken.  Higher confidence in your quarterly earnings statements.  Higher customer sat ratings. 

That all adds up to real money too.
 

How Building a Trust-Fostering Company Adds to the Bottom Line

I have suggested  four Trust Principles: these work at the individual as well as the organizational level. The principles are:

1.    Other-focus for the sake of the other
2.    Collaboration
3.    Relationship, not transaction, focus
4.    Transparency

These are not new concepts. If your company conducts all its affairs with these principles in mind, then you live in an organization that creates trusting and trustworthy people, processes and relationships.  And makes a ton of money.

Unless you have brute monopoly pricing power, and don’t care about your reputation or your legacy in the world, then trusting and being trusted at the personal and institutional level is about the best profit guarantee you can get.

It may sound like a Buddhist mantra or a Beatle song, but it’s also an economic model.  Trust pays—as long as you treat profit as a byproduct, not the goal itself.  

Who’s Minding the Store in Corporate America?

Sometimes you get one of those, waddya call ‘em, iconic moments.  Bush standing at the Twin Towers with the megaphone.  (Bush standing next to “heckuva job” Brownie).

We got a classic on the evening news today.  The Chief Executive Officer.  Of the Bank.  Of America.  Saying with a straight face the most amazingly truthful truth in front of Congress: namely that he didn’t run his own bank—his securities lawyers did.

First, the facts, as reported by the Wall Street Journal:

[lawmakers] pressed Mr. Lewis on why Bank of America did not inform its shareholders of its growing concerns with the losses at Merrill Lynch if the issue was serious enough for Mr. Lewis to fly to Washington and speak with federal officials about abandoning the deal by invoking the "material adverse change" clause.

"If there is an event that you consider so significant that it may allow you to invoke the [MAC] do you not think that same event is of interest of shareholders and requires you in your fiduciary duty to disclose it?" Rep. Peter Welch (D., Vt.), said.

"I leave that decision to our securities lawyers and our outside counsel … I’m not a securities lawyer," Mr. Lewis said.

As one Congressman pointed out, the deal was approved by shareholders in December and cost the US taxpayer $20B the next month.  But, as Mr. Lewis implied, his lawyers advised him what to do, and of course, like a good little CEO, he took his lawyers’ advice.  Don’t tell.  After all, you might get in trouble for leading.

Who’s minding the store in corporate America?  CEOs or lawyers?  Or–is it even worse than that?   

This is a veritable Where’s Waldo book of things wrong: I’ll just focus on one.

Where is Accountability in Business?

Nowhere near Mr. Lewis, that’s clear.  But as we said, he is iconic.  An avoider of truly Madoffian proportions does not achieve that status alone; he stands on the shoulders of previous avoiders and a system of avoidance.

It starts with a “mistakes were made” kind of attitude. (See Charles Baxter’s classic 1994 essay here). 

Lack of accountability gets reinforced by a subtle shift from “ethics” to “compliance,” as brilliantly described by Harry Markopolis, the Madoff whistleblower: “The SEC’s main focus is to mindlessly check to see if registered firms’ paperwork is in order and complies with the law as written.”

But it’s business programs too.  The lack of accountability ironically traces back to a great intellectual achievement—the multi-industry success of business process re-engineering.  In industry after industry, business processes have been broken up into pieces and stitched back together by contracts linking outsourcers to purchasing departments.  All done by lawyers.  And all lacking a sense of commercial commitment or relationship between buyer and seller.  (And taught proudly in business schools as "best practices" and "benchmarking").

I’m fond of quoting Phil McGee’s dictum: all management problems boil down to two: a tendency to blame, and an inability to confront. 

An inability to confront the truth, facts, accountability, responsibility, obligation, fiduciary duty.  All these are terms that are far too visceral and human to be captured adequately in the cold rational phrases of the law.  Which is why the best jurists always know the “rule of law” should leave a lot unsaid.

I am painfully aware that our only MBA president will almost certainly appear more inept at management than the lawyers who preceded and followed him.   But I’d argue that Clinton and Obama each know what Bush—and his contemporary, Mr. Lewis at B of A—did not.  That the law should have limits.  "Leading by the law" is nearly oxymoronic; perhaps it even takes a lawyer to fully appreciate how foolish it is. 

It’s galling enough that Mr. Lewis, I suspect, is being disingenuous.  He doesn’t really follow the opinion of his lawyers in managing the company.  He employs them to provide convenient cover.   What’s really galling is that the lie he tells—that he does manage by following their advice—is a lie that has become socially acceptable.  No one calls him on that lie.  Invoking "MBL" (management by lawyers) has become the unassailable high ground of management and leadership. 

We have moved from a “buck stops here” standard of leadership to one based on “I didn’t commit a crime,” a standard now smugly on display by our corporate leaders.  

Where’s the shame?
 

Great All-Time Trust-based Selling Insights, #17

I’m going to hand over the space today to a guest-blogger: Walt Shill at Accenture.  Walt does a weekly internal blog for ACC, and was kind enough to grant us permission to slavishly “re-tweet” his recent blogpost.

If you’re wondering just how to make sense of Trust-based Selling, or to see the power of low self-orientation in the Trust Quotient, I can’t think of a better story than the one Walt shares here.   (Look for the ZZ Top reference).

Take it away, Walt.

Bob and his Two Simple Questions

Years ago I was assigned to work with Bob – a senior Director. I was a struggling manager. People whispered about Bob and many avoided working with him … You see, he had an unusual style that was reminiscent of Columbo – the brilliant TV homicide detective from the 70s played by Peter Falk.

Bob was never accused of being a sharp dressed man …. He always seemed a bit disorganized and seemingly slow to pick up key points …. Bob was unfailingly polite, but he had a way of asking clients odd questions at awkward times… I must admit, as I started I was a little embarrassed to be with him.

I did most of the grunt work of analysis and preparing decks for Bob, but I also accompanied him to many meetings in the C Suites of half a dozen companies…. And just like Columbo’s (and Steve Jobs’) famous line, “Just one more thing”, Bob somehow managed to always ask some version of two simple questions in every meeting……

How’s business? As a meeting started Bob would casually ask “So… How’s business ?” The client would start with a basic answer, but Bob cleverly teased out evermore detail by mumbling: “uh huh”, “yea”, and innocently asking over and over again – “hmmm, so why is that?”

He never, never, never responded that we could help…. in fact he hardly spoke at all… he was just listening very, very intently… and asking gentle questions with such childlike curiosity that the clients could not resist telling him more.

Sometimes the entire hour would pass with Bob’s wandering questions and we would have to reschedule. …Frequently I had been up all night preparing a document for the meeting –and I would get angry that he was wasting valuable time that I could use to impress the client with my brilliant charts and precise data and blinding insights…..

Weeks or even months later, we would follow up on the key issues. …. And our proposals were always spot on – Bob had an incredible insight to the core issues facing the company…..

I began to realize that Bob’s simple question – “How’s business?” had been creating a massive pipeline for us.

How are YOU doing??  As we were wrapping up a meeting, Bob would innocently ask, “So, how are you doing ?” If the client started talking about the company or business, Bob would gently interrupt them and say, “no, I meant how are YOU personally doing ?” ….followed by his usual “why is that ?” ..his odd style conveyed genuine interest and caring … After just 2 or 3 meetings Bob had started a deep personal relationship because of how much the client had revealed about their aspirations, frustrations and personal lives… all of which were filed somewhere in the recesses of Bob’s complex but powerful brain.

My respect for Bob grew ……and today I marvel at how he faithfully served senior leaders on their most critical issues, grew a very big practice and built his career (and helped mine!) … all by simply asking and then intently listening and genuinely caring about the answers to two simple questions:

“So, how’s business?”

“So, how are YOU doing?”

———

What Walt said. 

 

Carnival of Trust for June is Up

Carnival of Trust

The Carnival of Trust is up for the month of June, hosted by Dave Stein, and it provides a wealth of perspective on the state of trust at the midpoint of 2009.

For those who don’t know him, Dave Stein  is a consummate student of sales. A former sales consultant, trainer and author, he now runs ES Research Group http://www.davesteinsblog.com/esr/ from the hardship environs of Martha’s Vineyard. Think of ESR as the JD Powers or Consumer Reports of the sales training field.
I have gotten to know Dave over the past year and found him to be ethical, smart, insightful, sober (thinking-wise anyway), and possessed of fine judgment.
Just the person to host the Carnival of Trust.

Dave has selected a tasty sampler of things trust-related. Just a few:

And that’s just five. Check the full Carnival of Trust to read those items and the other five, and Dave’s commentary on all of them.

Many thanks to Dave Stein for hosting a solid, content-rich and thought-provoking Carnival. Drop on by and treat your brain to a feast.