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Operating Transparently

Transparency is one of the Four Trust Principles for creating trust-based organizations. The other three are other-focus, collaboration, and a medium-to-long term perspective (aka relationships over transactions). Here’s the business case for transparency.

The article Is Transparency Always the Best Policy? first appeared a few years ago in Harvardbusiness.org. The article is about Paul Levy, President and CEO of Beth Israel Deaconess Medical Center, and the answer to the blog’s question, based on this sample of one, would appear to be a resounding ‘yes.’

In matters great and small, Levy has simply made it an operating practice to behave transparently. His great results may surprise many, but they make a great deal of common sense.

If you are transparent about your activities, you are saying you have nothing to hide. If you have nothing to hide, then people trust what you do.

If you are transparent about what you say, then you don’t risk saying one thing to one person and another to another. You don’t appear to be two-faced; you appear to have integrity—you say the same thing to all persons. (And, it’s a lot easier to remember what you said if there’s only one version).

If you are transparent about what you think, then people can observe your thinking, and see that you are not editing what you say. They feel you are available to them, that you are not segmenting them off.

If you are not transparent in your actions, your words, and your thoughts, then people wonder about your motives. Why are you doing what you’re doing?

What is it you really mean when you say something? And what are you really thinking when you’re thinking?

Suspicion about motives colors every aspect of trust—it affects your credibility, your perceived reliability, and the degree to which people confide in you. The antidote to a bad case of suspicion is transparency. It’s as true in the financial and regulatory world, in the world of negotiation, and in the world of accounting, as it is interpersonally.

So Why Aren’t We All Transparent?

With all the obvious advantages that transparency conveys—why aren’t we all more transparent more often?

There are a thousand answers, varying in particular, but with some common threads in general. At the root of it, I think, is fear.

Fear that others will take advantage of us. Fear that we will be misunderstood, or shamed. Fear that others will see the true inner “me” and thus steal the faux power we foolishly think we maintain by being opaque.

Transparency is both a result of lowered fear, and a cause of lowering fear. Sharing information with another encourages another to share with us. Disclosing information within a company—as Paul Levy did so frequently—begets teamwork and lowers suspicion.

The willingness to be transparent in negotiation helps the other party figure out what it is that you want—so the paradoxical result of taking a risk is that you increase the odds of getting what you want.

Transparency is an invitation to collaboration and connection. It lowers fear, it increases trust.

It feels like taking a risk, but it’s really risk-mitigation in disguise.

Operating transparently isn’t just a hospital procedure.

Relationships or Metrics? I Haven’t Got Time for Both

Why is it that, in today’s age of instant gratification, we feel like we never have enough time? Emails fly across our inboxes – we get instant responses. Someone reaches out via text, and we expect a reply so fast that we are caught watching the tiny ellipses flash about as we wait.

Life and technology go much faster now. Why is it then that we keep saying there’s not enough time? We connect faster; shouldnt there be more time to create trust?

The truth is – there’s still plenty of time. And it doesn’t take much.

I heard it again today. I hear it in almost every workshop I do, and in every – bar none – big company sales organization I work with. It sounds like this:

I believe in trust and relationships, but it’s a luxury problem. Here in the real world, the pressure’s on. I don’t have time to do all that nicey-nice stuff, I’ve got to hit my numbers. And even if I did have that kind of time, my clients don’t. The days of easy-going ‘what’s keeping you up at night’ conversations are over – they’ve got as much pressure as I do, and maybe more.

I just don’t have time to build trust-based relationships. Hopefully, someday I will.

But with that attitude, that day will never come. Because trust-based relationships don’t come when you’ve got plenty of time – they’re forged when you don’t have time, and have to trust someone. The whole relationships-vs.-metrics debate is based on four false beliefs. When will you get rid of them?

Myth Number One: You Don’t Have the Time

Maybe you’re old enough to remember an old ad for Fram Oil Filters: “You can pay me now – or you can pay me later.” It stuck because it rang very true – if you refused to pay for a cheap oil filter, you’d end up paying for much more expensive engine repairs later.

It’s the same here. Every phone call, conversation and meeting that you cut short to “save time” puts a label on your head. The label says, “I’m a transactional sales guy; I will never invest in my customer, and I’ll blame you for being the busy one.”

As Aristotle said, you become what you practice. If you never take time for relationships, if all you do is transact, then you become a transactor. And nobody suddenly decides one day out of the blue that they really want to have a trust-based relationship with someone who’s been transacting with them since forever.

The truth is, a little time taken now, up front, results in far more efficient use of time down the road – even just next month. Trust-based relationships aren’t just more effective, they’re more timely and less costly.

You do have the time; you’re just constantly refusing to invest it for returns in future time.

Myth Number Two: Your Client Doesn’t Have the Time

How do you know? Because they told you so? Get real. What client is about to tell you they’re not busy? They want to control their time with you, not give control over to you.

And the same logic applies: our customers are as short-sighted as we are, constantly failing to invest a bit of time up front for future gains of time. So they tell you they don’t have the time, and you believe it, and the two of you race off so as to cut the elapsed time of your transaction. And then do it all over again the next time you meet.

They have as much time or as little time as you do; and if neither of you breaks the vicious cycle, the cycle will stay unbroken.

Who should break it? That’s easy – you should.

Myth Number Three: Trusted Relationships Take Time to Create

The truth is, people form strong impressions of trust and relationship very, very quickly. Initial impressions get formed in much less than a second.

Think about someone you trust. If asked why, your first thought is not, “our trust has grown over the last 6 years.” It’s far more likely something like, “One day we were talking about XYZ and he said an amazing thing…ever since…”

Because trusted relationships are step functions, not continuous curves. They are based on events, moments, instances. Trust gets created in those moments. If you never let yourself be open to those moments, it will never happen.

Trust doesn’t take time. The only sense in which it does is the creation of a track record. All qualitative aspects of trust take virtually no time at all.

Myth Number Four: Relationships are Built on Quantity of Time

Wrong. Relationships are built on quality, not quantity. It’s true with your dog.  It’s true with your five-year old child. And it’s equally true with your client.

The quality of your time matters far more than the quantity. An hour on the golf course or hoisting a beer doesn’t hold a candle to sincerely asking a difficult question, and conveying to your client that you care about the answer, and that you’re a safe haven in discussing it.

A lot of the “I don’t have time for relationships” line is frankly a cover-up for fear of customer intimacy. Invariably, the workshop participants who tell me they haven’t got time are the same workshop participants who tell me that customer intimacy is too risky, and potentially unprofessional. Meanwhile, their compatriots who understand the qualitative basis for relationships are selling circles around them.

Haven’t got time to form relationships and still meet your metrics? If that’s what you’re saying, you don’t understand how to meet your metrics. In any medium timeframe, the person with the relationships will outperform on all business metrics the person without the relationships.

And being busy’s got little to do with it.

Why Listening to Sales Experts May Be Hazardous to Your Sales

A sales expert, I’m not. A trust expert, I think I’ve become. And it turns out, there’s a big overlap.

One of the interesting points in Neil Rackham’s classic SPIN Selling is that certain techniques developed for small-item selling – notably closing – actually backfire when applied to larger, more complex sales. In other words, “sales expertise” of a certain kind may actually be hazardous to your sales health.

That may not seem like much of an insight more than 25 years after the book’s publication. Since then, we have seen major growth in thinking about B2B sales, as well as the transformative impact of the internet on the sales function. Nowadays no one would be caught dead trying an “assumptive close” in a modern B2B sales interaction.

But does that mean all sales expertise these days works more or less? I don’t think so. In fact, there’s a glaring assumption at the heart of almost all sales systems, which, if not properly understood, will actually decrease your sales effectiveness just as much as improper closing techniques.

It is the assumption that the point of selling is to get the sale.

What Is the Point of Selling?

That may seem like a stupid question, with an obvious answer. What else could the point of selling be except to get the sale? And I’m not talking about the difference between single transactions and repeat business either. I’m talking about the very purpose, the underlying goal, aim, and objective of the salesperson, sales process, and sales function. What else could the purpose be except to get the sale?

The alternative purpose, may I suggest, is to help the customer. That is not a trivial distinction; it’s a meaningful one. It’s also a powerful distinction, and it’s one easy to achieve. But if you do achieve it, you’ll do better on many dimensions – including sales.

To see why, let’s first explore what it would mean to have a different purpose for sales – a purpose other than to get the sale.

Design Implications of Helping the Customer as a Goal

Suppose your primary purpose was to help a customer.  Just suppose, just for a minute. What exactly would you do differently?

You’d be less concerned about whether you won or lost the sale. You’d spend a little more time on situations where you thought you could help – and a little less time where you thought you couldn’t. You’d take more time with leads to help them determine the best way for them to get help. You would often end up referring them out to other related-service providers where you thought they might get better help.

You’d seek out slightly different leads and targets than if you focused solely on where you thought you could sell. You’d view your competitors differently – as alternative offerings to help your customers get what they need. You’d give up your time and expertise on occasion if you felt it would help your customers advance a key cause. Conversely, you might be quicker to embrace value-billing in cases where you clearly bring value to the table.

You’d talk less about your own capabilities, and more about what would be good for your customer. You’d be naturally curious about what your customer needed and what would make their business better. Your curiosity would extend outside and beyond your company’s service offering to include those of other firms.

If your organization similarly supported a goal of helping the customer, then the metrics you operate under would be changed as well. Instead of an emphasis on quarterly sales results, progress against closing, and forecasted probabilized backlog rates, you’d see consumer-focused metrics that speak to customer performance and result of that performance. Noticeably absent would be much of the fine-toothed combing by lawyers enumerating the thou-shalt-nots of the relationship.

Operationalizing a Customer-Helping Goal

Looking at the above statements, you’re probably having one of three thoughts:

  • “Those aren’t that bad, actually. We could do with a bit more focus like that.”
  • “Yes, but you have to make money.”
  • “Yes, but you can’t let customers just take advantage of you.”

Note that thoughts two and three have an implicit assumption: that if you don’t focus on getting the sale, you probably won’t get the sale. And that’s where the miracle happens.  Because precisely the opposite is true.

People don’t like to be told what to do. People don’t like to feel controlled. People respond positively to a sense that they are being listened to, and to people whom they feel have their best interests at heart. We respond positively to generosity, and we respond negatively to greed. We tend to return favors and avoid those who have burned us.

In short, we reciprocate. The lessons of game theory, marriage therapy, and political organization all point in one direction: favors done, attention paid, and interest shown all beget the same in return. This simple truth is deeply embedded in our simplest human interactions (think handshakes and smiles) and our most complex ones as well (cultural affinities and political alliances).

The main result of reciprocation is – more reciprocation. If you listen to me, I will listen to you. If you treat me well, I will keep coming back. If I buy from you and you respond well, I’m likely to keep buying from you.

Unless, that is, the seller gets selfish. All bets are off to the extent that we perceive the seller as self-oriented, selfish, manipulative, and driven only by his own needs. If we as buyers feel objectified, treated solely as walking wallets by the seller, then we reciprocate. We coldly calculate the value of the seller to us and become willing to walk partly because we also feel insulted by such behavior.

The Paradox at the Heart of Great Selling

The best sales come from interactions where the sale is not the goal, but a byproduct – where the sale is a natural outcome of an attitude of other-focus, genuine concern, and focus on the other. Where the attitude is long-term, not transactional, and built on an assumption of win-win rather than of scarcity.

There’s a paradox here. You do your best selling when you stop trying to sell, when you simply focus on doing right by the customer. That doesn’t mean you turn into a non-profit charity. There is still a role for profitability metrics, CRM systems, and funnel statistics. But they must become subordinate to the broader goal: helping your customer. Dial them back 90%, lengthen their timeframe, and don’t think of them while interacting with customers.

Are there customers who’ll take advantage of you? Sure, though not nearly as many as you think. And those who act that way are the ones you gift to your competitors.

If you help your customers, they’ll help you. That’s a rule that doesn’t need your thumb on the scale to work. Don’t force it. Make customer help your goal.

 

Trust is Down? Wait – What Does That Even Mean?

Today, it seems nine out of ten stories in the general media are variations on one theme: trust is down. Whether it’s trust in the media, trust in politics, trust in business – it all seems to be heading in one direction.

But wait – what does that even mean?

We hear it all the time. Trust in banking is down. Trust in Congress is down. Trust in the educational system is down. We hear these statements, we say, ‘tut-tut what’s the world coming to,’ and we go on about our business – in large part, because we don’t know what to do about them.

Well, no wonder.  These seemingly obvious statements mask a fundamental confusion about the nature of trust – a confusion that prevents us coming up with basic solutions.

The problem is this. When trust in banking is down, does that mean:

a. that banks are less trustworthy than they used to be?  Or,

b. that people are less inclined to trust than they used to be?

Those are very different problems. Typical solutions to the problem of trustworthiness have to do with ensuring the behavior of the trustee.  Think regulations, penalties, enforcement, behavioral incentives and the like.

We too often neglect the other side of the equation – the propensity to trust. The problem is simple enough to state: you may be the most trustworthy partner in the world, but if the other party is unwilling to trust you, nothing will happen.

The propensity to trust is critical. It amounts to risk taking. Despite Ronald Reagan’s famous quote to the contrary, there is no trust without risk. The dictum to “trust but verify” in fact destroys trust by sanctioning acting on suspicion.

The Hitchhiking Problem

In the 60s, hitch-hiking flourished. By the late 1980s, it was dead.  Partly, hitchhikers were afraid to hitch; but mainly, drivers were afraid of hitchhikers. And it wasn’t due to an epidemic of violence; it was due to a fear of violence.  We lost a great deal when we lost hitchhiking – economically and culturally.  (The move to collaborative consumption, interestingly, is a contemporary resurrection of that idea).

Why is hitchhiking relevant to trust in banking?  Because one common response to low trustworthiness – perceived or otherwise – is a reduced propensity to trust. Which will kill trust just as surely as will low trustworthiness.

There is a huge cost to low propensity to trust; look at The Cost of Fearing Strangers by the Freakonomics folks. We are great at articulating the risk of doing something; we are awful at noticing the cost of doing nothing.

Want a really Big Example? Next time you’re in an airport, look at the social cost of us not being able to trust grandmothers from Des Moines on their flight to Fargo.

The Laws of Trust

To people schooled in free-market economics ways of thinking, trust is hard to make sense of. If the propensity to trust declines, you’d think the market would respond by creating more trustworthy offerings. In fact, just the opposite happens. Suspicious people tend to attract con artists; skeptics get sucked in by fakes.

The reason is simple: trust is not a market transaction, it’s a human transaction. People don’t work by supply and demand, they work by karmic reciprocity. In markets, if I trust you, I’m a sucker and you take advantage of me. In relationships, if I trust you, you trust me, and we get along. We live up or down to others expectations of us.

We have been teaching and practicing business according to the wrong Laws of Trust. The solution for low trustworthiness is not necessarily to trust less, but to trust more, and more intelligently. Maybe you’ve heard, “The best way to make someone trustworthy is to trust them.”

We’re Teaching the Wrong Laws

Our public education and culture is loaded with the free-market versions of trust. We teach, “If you’re not careful they will screw you.” We passcode-protect everything. We are taught to suspect the worst of everyone, be wary of every open bottle of soda, watch out for ingredients on any box.

Then in business school, we are taught that if customers don’t trust you, you need to convince them you are trustworthy – partly by insisting on our trustworthiness.  You can’t protest enough for that to work: in fact, guess the Two Most Trust-Destroying Words You Can Say.

By teaching distrust and confusing trust recovery with messaging, we are teaching entire generations to be suspicious of anyone and everything. By teaching suspicion and distrust, you can make book on it: what we’ll get is a reduction in trustworthiness. Read the Tale of the Thieving Convenience Store Managers.

This doesn’t mean we shouldn’t teach trustworthiness; much of my career has been built heavily around that. But by itself it’s not enough.

We need also to be teaching risk-taking, relationships, and the values of being connected to other human beings –not just than calibrating the dangers of hitchhiking.

Don’t tell me there’s no data.  The General Social Survey has been collecting data on the propensity to trust since 1972. One interesting finding: the propensity to trust is strongly correlated with educational attainment.  What does that say about the social and economic costs of cutting educational investment in the name of lowering taxes?

And don’t tell me I’m naive. I recall a trip to Denmark a few years ago. I left my wallet in a taxi. By the time I discovered it, my client had left me a message to say the taxi driver had returned it to their offices, and they’d paid him to bring it to my hotel. Which he did.

I expressed amazement at how well it had all worked out. My client said, “Nothing to be surprised at. Anything less would have been surprising.”

And I bet the Danes hitch, too.

Sometimes the Best Marketing Looks Like Sales

I got an email. It was from a 50-ish owner of a small CPA firm – call him “Jose” – with three competing offers to buy his practice, and a few complicating life factors. He wanted advice, and wondered if we could talk.

I don’t do much coaching or consulting, and he almost surely couldn’t afford my rates. Nor am I an expert in life planning, or in valuations.

But I said sure, call me in the morning, we’ll talk – no charge.

We had a very good chat for about 45 minutes.

I think I helped him. I know it was useful for him to talk to a third party able to comprehend his situation. I believe he’ll make a better decision, and I’m sure he’ll feel better about it. Value was created for him in our talk.

But what about me? I knew going in there was no chance of a sale from him – not now, not in the future, not anytime. And my rate was zero. Was this a foolish, impetuous, soft-hearted, flakey thing to do?

No. I like doing nice things, but I’m not a saint. Nor did I consider Jose a pro bono case.

Yes, it was a nice thing to do. But, I would argue – it was also good business.

Sometimes a sales lead that we would otherwise screen out can be a good marketing investment. Sometimes you can do well by doing good. Sometimes we need to let sales leads bleed into marketing budgets.

“Jose” will never buy from me (though other Jose’s might). But he will remember what I did for him; even more, that I was willing to help.

Jose is someone who cared enough to identify alternatives, choose me, and seek me out. He spent time to find out who I was, what I did, whether and how I might be useful to him. He was probably willing to pay for consulting. He was an educated, willing buyer, a near-client with influence on other potential clients.

For me, he was not a qualified sales lead. But – he was one helluva marketing resource.

He now knows me – the sound of my voice, how well I think on the spot, the way I interact, my sense of humor. He knows me better than one of 200 people in an audience for a speech; much better than 500 people reading this blog, or an article of mine.

Total investment: 45 minutes. Most sales people will tell you that’s an extravagant waste of sales time, an inefficiency that is off-scale. Just think of the waste in extrapolating such activities to scale!

But most salespeople would be wrong. This is not about efficiency in selling: this is about effectiveness in marketing.

The return is that Jose will tell X people about our discussion. That’s X people who will hear first-hand about a 1-to1 interaction. That’s a powerful testimonial.

The choice is not between being “good” or making money; they often go together.

Try, for just a few hours per month, shifting your sales practices to subsidize your marketing by investing in a lead.

Don’t get lost in charge-back accounting. The benefits will eventually accrue to your firm, and to you personally. Both.

 

The Traveling Salesman? Or the Prisoner’s Dilemma?

The Prisoner’s Dilemma is a classic conundrum in game theory. It purports to explain why two people might not cooperate, even if it is in both their best interests to do so.

It turns out that the solution to The Prisoner’s Dilemma is also the solution to a great many sales problems—those in which your customer doesn’t trust you. Are you living in the Dilemma? Or are you living in the solution?

The Dilemma of the Prisoner

Here is a classic version of The Prisoner’s Dilemma:

Two suspects are arrested by the police. The police have insufficient evidence for a conviction and, having separated the prisoners, visit each of them to offer the same deal:

  • If one testifies for the prosecution against the other (defects) and the other remains silent (cooperates), the defector goes free and the silent accomplice receives the full 10-year sentence.
  • If both remain silent, both prisoners are sentenced to only six months in jail for a minor charge.
  • If each betrays the other, each receives a five-year sentence.

Each prisoner must choose to betray the other or to remain silent. Each one is assured that the other would not know about the betrayal before the end of the investigation. How should the prisoners act?

What’s a poor prisoner to do?

If you analyze the situation rationally (the way a game theorist or economist defines that term), your odds are a lot worse if you remain silent – either you get 10 years or six months. But if you rat on your partner, you either get out free or, at worst, five years.

So, reasons the economist, Option A’s average “value” is five years and three months in prison. Option B’s average is two and a half years. “Ah ha,” says the economist’s rational player, “I’ll go for Option B.”

Of course, the other player does the same math and comes to the same conclusion. As a result, each gets five years in prison—a total of 10 prison-years between them.

The dilemma is that – if only the prisoners had cooperated with each other, they could have each gotten out with just six months in prison – a total of one prison-year between them.

The question is: why don’t they cooperate?

At least, that’s the economists’ question. In the real world, cooperation is quite common.

So the real question is: why do so many people listen to economists?

The Dilemma of the Salesperson

Before answering the Prisoner’s Dilemma, let’s note the similarity with The Salesperson’s Dilemma.

The salesperson has a similar series of trade-offs. For example:

  • “I could take some extra time to study up on tomorrow’s sales call, getting to know more about the prospect. That would improve the odds of my getting a sale tomorrow.”
  • “On the other hand, I could make another cold call with the time saved if I don’t spend it studying up for tomorrow’s call.”

Or, another example:

  • “I could tell them we have very little experience in this area, which would increase their sense of my honesty, which would help me in the long run.”
  • “On the other hand, experience might be the key in getting this job, so perhaps I should make the best case I can and fudge the rest.”

Still another:

  • “I could share a lot of my knowledge with them, which would really impress them and make them grateful to me.”
  • “On the other hand, if I give it all away in the sales call, they might just steal my knowledge and not pay me for it – perhaps I should wait until after we have a signed contract.”

And one more:

  • “I could go out on a limb and make some really far-sighted observations that would help them—it would go way beyond what they asked for.”
  • “On the other hand, we don’t have much trust built up yet. They might see that as presumptuous or unprofessional; I’ll just answer the questions they asked.”

Just as with The Prisoner’s Dilemma, if the salespersons continually choose Option B, they will sub-optimize. They will do cold calls, leading with no relationship, taking no risks, treating the customer like a competitive enemy, and offering no great help.

In other words, they’ll lose. Just like the prisoners.

In theory, the prisoners are identical, whereas the salesperson and the customer are distinct. But that’s theory. In the real world, sellers somehow tend to find buyers who are similar to them. Sellers who are fear-driven and guarded somehow often find buyers who justify their worst fears. (Or, what amounts to the same, sellers project fear, and buyers reciprocally return the same – as humans are wont to do).

Both seller and buyer often operate from the Prisoner’s script. And the result is just as sub-optimal.

The Prisoner’s Solution

As postulated by economists and game theorists, The Prisoner’s Dilemma is usually presented with two key assumptions:

  1. The game is played only once
  2. The players do not know each other

The solution lies in changing each of those assumptions. If you tell the players the game will be played 10 times, cooperative patterns begin to emerge. If it’s played 100 times, cooperative strategies take over.

If the players are given information about each other, they become less abstract to each other. If the information is personal, then the relationship changes tone as well.

These two dimensions – time and relationship – are critical. Without a sense of continuity over time, and without a sense of personal relationship, those playing the game will opt to “rat out” each other – even knowing that the result, system-wide, is negative for them on average. But given time and relationships—the optimal solution emerges. Everyone is better off.

In other words, the solution to behaving stupidly is to develop personal relationships over time. Now let’s see how that insight applies to selling.

The Sales Solution

The sales solution should look pretty obvious now. Suboptimal behavior is the result of short timeframes and shallow relationships. In a Prisoner’s Dilemma world, both buyer and seller fear each other, suspect the worst, don’t have relationships beyond the transaction, and are interested primarily in their own self-aggrandizement, without regard to cost to the other party.

If that sounds familiar, just look at what sales topics are hot these days: sales automation, lead screening, CRM, social media lead generation, predictive analytics, search-based prospecting, multi-channel messaging. Think about the last step in nearly every sales process model you’ve seen—closing.

What all these subjects have in common is a view of selling that is a) transactional and b) impersonal. In other words, they have short timeframes and weak relationships—two things sure to hurt sales.

Selling benefits from longer timeframes and better personal relationships. If you can stop thinking like an economist and work to eliminate the fear you and your buyers have, you’ll benefit from the long-lasting trustworthy relationships that develop as a result.

When to Offer a Lower Price

Few decisions in business have such dramatic effects on customer perception as how you handle your pricing – in particular, when and how you offer discounts.

People may evaluate your products, or your service offerings, by averaging out multiple experiences. But drop your price just once, and see how hard it is to recover. For a large-scale example, recall Bill Ackman’s painful failure to revamp the image of JC Penney—away from frequent discounts to everyday low prices as a strategy. For a more personal example, just ask yourself – how often are you able to recover your normal pricing rates after having given an initial discount?

Yet in professional services and complex businesses, we play with offering discounts all the time. We tell ourselves, ‘The client wants it.’  ‘We might lose without it.’  ‘The competitor is cutting rates.’ ‘We can’t look inflexible.’  ‘What’s the big deal, how often do we get full rate anyway?’

Yet you’re right to be suspicious about the effectiveness of random hip-shooting when it comes to offering a lower price.  Shouldn’t we have some kind of strategy?

Don’t Just Stand There: Stand for Something

There is no one “right” approach to offering discounts. Your approach will vary with your business, your objectives, and your markets. But there are some things every approach should do:

  • You should have a rule for when to discount
  • That rule should be easily explainable to clients
  • You should be willing to live by the rule.

That may sound obvious. But how often have you heard things like, “Don’t tell Bill that we gave XYZ got that price; it’ll only encourage him to want it,” or “Those guys’ll do anything to get the business.” Those statements indicate a lack of policy – which is death on your reputation.

What to Stand For

Again, your business will vary. Here’s what I decided for mine. I run a high-end professional services business, offering speaking, training, coaching, and related services. I want to be known for solid relationships, high quality, professionalism, and subject matter expertise. And in my case, because the subject matter is trust, I also need to be seen as completely above suspicion.

It’s clear, then, that I need to articulate and live by some rules about when to discount. Here’s what I came up with over the years.

1. Frequency. I want to be at the opposite end of the spectrum from a JC Penney strategy of frequent discounting. I don’t want clients looking for bargains. If they’re looking to price shop, I want to send a not-so-subtle message that they’re in the wrong place.

2. Exceptions. To help that message, I need to be very clear about when and where discounts are appropriate. In my business, I can clearly state three such situations:

Volume. In my business, perhaps the biggest cost is cost of sales (the time, expense, and investment it takes to generate professional fees). It stands to reason that if someone can reduce my cost of sales, I have room to pass some of those savings along in lower prices.

The biggest example of that is simply a volume discount. The economics of selling one training session to 10 clients vs. selling 10 training sessions to one client are pretty clear. I am happy to receive multiple orders, and I’m happy to offer volume discounts to reflect it.

For me, volume discounts are easy to explain and easy to justify.

Special SituationsFor Me. Sometimes I want to work in a new industry or with a novel offering.

Those situations are as important for me as they are for the client. In those cases, I will offer a significant discount. I don’t want to shave nickels; I want to send a message about what is important and what isn’t. And in those cases, it’s about the learning. Those kinds of discounts rarely happen.

Special Situations—For the Client. Non-profits never have the kind of money that corporations do; most associations are limited as well. I don’t say yes to all those requests, but when I do, it’s only reasonable to price “off-label.” (Government is a special case, and one I won’t go into here.) And yes, there are a few ‘friends’ discounts from time to time.

3. Non-Exceptions. That’s about it. That leaves a lot of other situations where I choose not to discount. It’s worth pointing them out:

Pleas for budget. Sorry, I have a list of charities I contribute to: corporations with a squeezed budget are not on the list. Make that ‘never on the list’ if you’re in the pharmaceutical or financial services industries, or if you have office space in midtown Manhattan.

Bargaining. I have a simple way of declaring that this is not a bazaar: transparency. I explain my business model, explain when and how I give discounts, and – that’s it. I recall one client who, after our initial phone call, said, “I assume that if we go ahead, you’ll grant us our customary 20% discount.” He assumed wrongly.

The Positive Alternative. “Just say no” may (or may not) be a good strategy for drug usage, but it’s not a satisfactory answer to a client on the receiving end. None of us like to be told no, even with a great explanation.

Over the years, I developed another business practice that turns out to have a great side benefit: making people appreciate my saying “no” to discount requests. That practice is to simply take a few minutes extra to talk with them about their situation and refer them to someone else who can help them.

I am a very small player in all the markets I play in. I am far from the only one providing great service. If someone doesn’t happen to fit my business model, they may be caviar and champagne for someone else’s model.

It costs nothing to spend a little time thinking about alternatives for clients who don’t quite fit with my needs, and it generates huge amounts of goodwill. It’s a small investment with a big marketing return: they may come back when they have a need that is a fit with me, and they may speak well of me to others. Not to mention, they’re no longer complaining about how I don’t discount.

Again, my model is not the only one. You have to decide what’s right for you. But whatever it is, it should be clear, it has to be explainable, and you should be willing to live by it.

What Your TQ Score Really Says About You

I’m Kristin Abele, head of Trust Diagnostics at Trusted Advisor Associates.  I want to share some findings with you based on my eight years working with the TQ Trust Quotient Assessment tool.

The TQ (like IQ, and EQ, in case you didn’t catch that already), is based on the Trust Equation. The Trust Equation is a four-factor statement of the components of trustworthiness, first laid out in the book The Trusted Advisor. Here’s a brief video explaining the elements of the equation.

The TQ gives you a chance to self-assess your trustworthiness in a 20-question online format. It takes only a few minutes, and you get instant online feedback.  The basic test is free; there is a paid option for advanced results.

Go ahead, give it a go.  I’ll wait.

The assessment gives you a few key insights and numbers: your TQ score (a numerical score that says where you fall on a graph of trustworthiness), your strongest trust factor, your biggest area for opportunity, and your Trust Temperament (TM).

Let me help you interpret a few of the results.

What’s in a Number?

Your actual TQ score ranges from 0 – 15. The average score from the 70,000+ people who have taken the TQ to date, is  7.1 on the scale. So, what’s that mean? Is 7.1 the basis for deciding if you’re trustworthy? Is any score below that not-trustworthy? Is any score above that ranking among the Gods of Trust?

It’s tempting to be hard on yourself if your score is below 7.1 (or celebrate if it’s above); tempting, but not necessarily right. Your absolute score can be influenced by your tendency to be hard (or easy) on yourself.

But that’s not the end of the story. Breaking down the TQ score tells you quite a bit.

It’s All About the Factors

The big take-aways from your TQ report are your strengths, your areas for opportunity and your Trust Temperament.

Trustworthiness is made up of four key components: Credibility, Reliability, Intimacy, and Self-Orientation. After completing the TQ, you’ll be shown which factor is your greatest strength, which could use more of your attention, and a little bit about your personality when it comes to trust (your Temperament).

These results are what speak volumes about you – and your overall trustworthiness. Are you highly credible but avoid building any intimacy with your colleagues and clients? Does everyone know just how reliable your are but you tend to always put yourself before your peers?

This is what speaks volumes about the ways in which you are trustworthy – and how you are building trust with co-workers and clients.

 

 

 

The Biggest Trust Myth of All Time

A lot of casual bloggers out there – and a few not-so-casual writers, even some famous people – are fond of quipping about trust in ways that at first blush sound wise. 

But often, these aphoristic musings turn out on closer inspection to be untrue.  They are pop wisdom, bubble gum sayings, reflecting a failure to apply critical thinking to the subject of trust.  They belong more to the genre of inspirational wallpaper postings on Pinterest

Case in point: the common claim that “trust takes years to build, and only minutes to destroy.”  It may be the Biggest Trust Myth of All Time. 

First, let’s point out some of the myth-purveyors – then we’ll get to why it’s a myth. 

The Ubiquity of the Biggest Trust Myth

A simple Google search finds the following:

“It can take years to create trust and only a day to lose it.”Angus Jenkinson,  From Stress to Serenity: Gaining Strength in the Trials of Life    

“It’s [sic] takes years to build trust and minutes to lose it.” @Relationsmentor, with 66,000 Twitter followers

“Trust takes years to build, seconds to break, and forever to repair.”Amy Rees Anderson, Balancing Work and Family Life Blog

“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”Warren Buffett, America’s favorite billionaire

“Trust is not something you can take for granted. It takes months – sometimes years – to build. Unfortunately, you can lose it overnight.”...Michael Hyatt, author, virtual mentor, online leadership platforms

“Although [trust] takes a long time to develop, it can be destroyed by a single action.”…Frank Sonnenberg, author, leadership expert

“It takes time to build trust and just seconds to blow it away.”Dunham+Company, strategic marketing and fundraising services provider

“It takes years to build trust and minutes to lose it.”Vontae Davis, 2X Pro Bowl cornerback for the Indianapolis Colts

“It takes time to earn [trust in leadership] but it takes no time to lose it.”Building Blocks of Agency Development: a Handbook of Life Insurance

“It takes years to build trust and a single moment to lose it.”Steve Adams, Children’s Ministry on Purpose: a Purpose-driven Approach to Lead Kids Towards Spiritual Health

All right, you get the idea. Note there are a few respected names on there, along with all the casual opiners. Now let’s see what’s wrong with it. 

Myth Busting: The Relationship of Trust and Time

Let’s chip away at this myth a piece at a time.

First, a lot of trust doesn’t take time at all. Most trust gets created in step-functions, in moments-that-matter, in our instantaneous reactions to what someone says or how they comport themselves. We humans are exquisitely tuned relationship detectors, finely honed over eons of evolution to rapidly assess a host of factors revealing others’ good or bad intentions toward us. We make snap judgments because we’re built to do so (and we generally do them well).

Second, the kind of trust that does take time is just one very particular subset of trust: the kind of trust that depends on reliability, dependability, predictability. Almost by definition, the assessment of reliability requires the passage of time, because it requires repetition – and repetition only happens in time. 

But reliability is far from the only, or even most powerful, form of trustworthiness. There is credibility, the sense that the other party is smart, capable, expert, competent – an expert. There is intimacy, the sense that the other party understands us deeply, respects our innermost feelings, and is a safe haven for personal issues. There is other-orientation, the sense that the other party has our best interests at heart, rather than just being focused on themselves. 

When time-based trust is up against the other types of trust, it is a weak force. When Bernie Madoff’s clients saw a brief hiccup in results, they didn’t lose all trust in him: after all, he had credentials. He understood them (or so they felt). And he donated to their charities. What’s a little blip in his track record, with all that to  fall back on?

When a West Virginia lab reported that Volkswagen’s on-the-road emissions results varied massively from those in the lab, Volkswagen didn’t “lose trust in an instant.” On the contrary: the Great Volkswagen successfully denied the obvious (credibility), and had a long-standing positive consumer image. It took years for that fatal data to be acknowledged. 

Third, time-based trust is relatively thin trust. I trust Amazon in large part because they have a great track record of delivering my packages correctly and on time. But if my trust is solely based on reliability, it can be overwhelmed – one way or the other – by other factors.  Suppose I have a wonderful customer service experience with Amazon: I’m likely to trust them even more, even if they miss a few deliveries. Suppose I have a terrible customer experience with Amazon: my trust will go way down, even if they continue excellent delivery. Time is not the factor it’s cracked up to be.

The Heart of the Matter: It’s Not Time, It’s Quality

The heart of the matter is this: comparing trust gained and lost isn’t a function of time, it’s a function of quality. 

If I have a deep level of trust in you, and you screw up a little bit – I’m likely to forgive you, give you another chance, cut you a break. Of course, if you screw up a lot – enough to use up the reservoir of trust we’ve developed – then that’s another matter entirely. 

Think about your friends. If you screw up a little bit – forget to bring the salad for the picnic, show up late for the movies, do that annoying thing they asked you not to – do you instantly lose all their trust? Of course not. Only if you betray a deep confidence, or gossip about them behind their back, or conspire to keep them from getting that promotion, will you lose their trust in an instant.  

Because it’s the quality of trust gained and trust lost that matters – not the passage of time.

Think Volkswagen; BP; Wells Fargo. Was trust lost “in an instant?”  First of all, the ‘instant’ was more like months or longer, but never mind – that’s a pretty short time if you’d previously had years of good reputation. So how do we describe that?

First of all, reputation is not trust. Having a “good reputation” doesn’t say much about trust. For most of us, ‘trusting’ a company just means we like their products, or ‘trust’ them not to violate laws. That’s a pretty low bar. 

When a scandal emerges, we lose trust in those companies quickly – not because trust loss is quick, but because there wasn’t much trust there to begin with. 

• If I trust you deeply, you’re going to have to do a lot to lose my trust. 

• If I trust you shallowly, you can easily lose my trust. 

• Whether trust loss happens quickly or slowly is a function of how much trust we had, and how bad was the violation: it is not a function of the calendar. 

The next time someone tosses that platitude about ‘trust takes a long time…” at you, try this:

Tell them they’re dead wrong – but that you still trust them. It’s a great counter-example: because if they’re so wrong about trust itself, then shouldn’t their error mean you’d instantly lose trust in them? 

——-

By the way, Barbara Kimmel has a similar take on this issue: see The Quote that Does Trust a Disservice.

Are You Selling to Vulcans?

Nowhere am I so desperately needed as among a shipload of illogical humans.

Mr. Spock in ‘I, Mudd’

The iconic Mr. Spock from Star Trek was half-Vulcan, half-human. It’s the former we first notice in Spock – Vulcans are governed entirely by logic and rationality, unencumbered by emotions.

But it’s his human heritage that takes Spock from caricature to character. Spock mirrors our own schizophrenic, rational / emotional natures. He is the sock puppet for humanity, allowing us to look at ourselves afresh.

That much is evident to the casual sci-fi viewer, or any fan of The Big Bang Theory. But you wouldn’t know that from looking at economists, strategy consultants – or much of the B2B sales literature. They suggest that people – particularly smart business people – are mostly rational decision makers, persuaded by well-established rules of scientific evidence, logic, and the inexorable rules of mathematics.

In other words – they treat buyers like Vulcans. Only trouble is, at most, they’re like Spock – half-human. And truth be told, most B2B buyers are even less Vulcan and more human than Spock.

My Brain’s Bigger than Yours

I’ve now spent four decades working with B2B sales organizations.  Lately, I’m reminded even more of how much businesspeople have bought – hook, line and sinker – the idea that customers buy through rational decision-making. The economists’ models are live and well in sales training programs.

Feeding the ratiocinating Vulcan side of buyers is necessary. But it is almost never sufficient. The true role of the intellect in B2B buying is as follows: Buyers scan options rationally, but they make their final selection with their emotions – then rationalize that decision with their brains. In other words, buying is a sandwich – rationality is the bread, but the meaty filling is a rich, emotive set of feelings, finely honed over eons of civilization.

The cognitive role in buying is vastly over-stated. Brains don’t rule. Spock is not 100% Vulcan. Neither is your customer. Not even by half.

Your Customer is Not a Vulcan

Question: What do the following things have in common? Value propositions; challenger selling; strategic fit; problem definition; pricing; negotiation; objection-handling.

Answer: In B2B sales, they usually center around analytical economic value, assuming that the rational resolution of each issue is the key to helping a buyer achieve a decision. Look for these buzz-phrases; clients buy results, show the bottom line, demonstrate value, value proposition, business case, and so forth.

Nothing wrong with that list – it’s all necessary. But it’s not sufficient. What’s missing are the things that actually trigger a buyer’s decision – not just justify it. Those include, for starters:

  • confidence that the seller can deliver what (s)he promises, and
  • the resulting ability to sleep through the night
  • integrity
  • belief that the seller will adjust their commitment to accommodate changing circumstances
  • character
  • commitment to principle
  • a long-term relationship focus
  • a sense that the seller has the buyer’s interest at heart
  • the seller’s ability and willingness to defer gratification
  • vulnerability of the seller
  • a set of values beyond the purely economic
  • a sense that the seller is a safe haven for conversation.

In short – trust in the seller.

Your customer is not a Vulcan. Your customer is barely even Spock.

The Cognitive/Emotive Disconnect

I spend my time with smart, complex-business, B2B professionals. Every single one of them will acknowledge the importance of the above list. Yet every one of them lives in an organization where 90% of attention is focused on the buyer’s Vulcan side, doing slide decks, spreadsheets, valuations and scenario0

Buyers often (rationally) screen sellers. But they quickly form favorites, unconsciously, and usually before the sellers have even had a chance to address the issue. All the Vulcan-targeted approaches are aimed either at forming a buyer’s opinion (too late, already done), or changing a buyer’s preformed opinion (already set in concrete).  It rarely works.

Proof? Ask yourself how many times your customers failed to see the brilliant case you had made, because they were somehow biased against you. You tried to sell to the Vulcan in your Spock-customer; but that human side kept rearing its ugly head.

How Complex B2B Buying Really Works

Very few buyers will tell their boss, “Gee, I guess I bought from those guys because, you know, I really trust them.” That’s career suicide. Buyers need the air-cover (and, to be fair, the reality check) of a rationality-based argument. It’s our job as sellers to deliver that rationale to them, bullet-proof and logic-tight as it can be.

Because in business, we all need to pretend we’re Vulcans.

But deep down, we all know what’s really going on. People buy with the heart, and rationalize with the mind. Brains are a necessary but not a sufficient condition. Being right, by itself, is a vastly over-rated proposition. Being right too soon just pisses people off. All else equal, a trust-based sell will always beat a rationality-based sell.

The truth is, our emotional instincts are extremely powerful (not to mention frequently accurate). We make our decisions first based on those emotions, and then struggle to justify them according to the rules of the game.  Unlike Spock, we lead with the human, and bring in our Vulcan sides as a check.

Many, many of my clients say: “That may be true for lots of people, but not for my [boss] [client] [customer]. They’re completely Vulcan, data-based, just-give-me-the-facts people. You’ve got to treat them like Vulcans, because they demand it.”  But the fact that they demand to be treated like Vulcans is 95% about ego – and that’s their human side.

Ironically, all this is especially true for those who believe the world works on brains. They are prone to buy even more emotionally, because their self-worth is tied up in thinking that emotions don’t matter – which renders them oblivious to their own human decision-making process.

Even if your customer thinks they’re a Vulcan – treat them at least like Spock. Address the human side – then give them Vulcan-food to justify their feelings.

It is curious how often you humans manage to obtain that which you do not want.

– Mr. Spock in ‘Errand of Mercy’