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Trust based Leadership

With all the trust surveys proliferating out there, I’m sure one of them includes questions that rhyme with “do you trust leadership of __?” And if so, I’m pretty sure the numbers have declined over recent years.

And I think most C-suites would agree that leadership—at corporate and institutional levels—would benefit greatly from being more trusted. In other words, the times scream out for a clear approach to trust-based leadership.

So—here are the headlines. 

Trust-based Leadership: the Top Ten List

1.    Don’t Fake It. The best way to be trusted—by far–is simply to be trustworthy. Reputation follows trustworthiness—not the reverse. The best PR comes from publicizing good things, not from spinning them. Don’t put your marketing, PR, or communications in charge of trust; you are in charge of trust, 24-7, by your own thoughts and actions. Don’t confuse the metrics with what they are supposed to measure.

2.    Your Ego is Not Your Amigo. Being driven can be OK. So too can being impatient, customer-obsessed, product-obsessed, design-obsessed, or people-obsessed. What cannot be OK is being obsessed with yourself. If you can’t check your ego at the door, seek professional help; stop taking it out on others. It is Not About You. If you think it is About You–you might be a bad leader.  

3.    Collaborate, Don’t Compete. No one is the enemy. Not your customer, not your supply chain, your employees, the union, not even your competitors. If you think you are competing with anyone, you are focused on gaining advantage over others; you are making yourself the center of things. (See Rule 2 above). Let others obsess with competing. You be the one to go think about what you can do for [customers, employees, your supply chain, even your competitor]. She who adds the most value lives best. And longest, at least in terms of client loyalty.

4.    Leading is Emotional. Choose your own leader; not one of the Usual Suspects. Now ask: were they passionate? My guess is they were, and their moments of passion were the source of much of their influence. Leaders lead, which means others follow them, and emotional passion is a big driver. Very few people follow the numbers-only guy or gal.

5.    Integrity Means Wholeness. You can’t be all things to all people. The more you try, the less integrity you appear to have. What you can do is to be the same person, at all times, to all people. That makes you whole, entire, integral—one who has integrity. A leader is unafraid to show his whole self.

6.    Be Transparent. A trust-based leader welcomes reality. The goal is to change reality, not to spin it. To see things as they are and to change them is noble. To see things as they aren’t and talk about them as you think you would wish others to see you as talking—well, that’s just BS. Don’t go there.   A leader knows that reality is her friend.

7.    Play Long Ball. You can’t be transactional and be trusted. Transactions can only be trusted in packages. Time is the key. Never cut a deal with someone—cut the 27th deal in a chain of 132 deals you intend to cut with them. That way you build a relationship—reliability, connection, mutual obligations, and the business vocabulary to express them. A leader is always thinking and acting in the long term.

8.    It’s Personal. The Godfather line, “It’s not personal; it’s business” was precisely wrong. It is both. Leadership can’t be trusted unless leaders are trustworthy. Companies aren’t trusted (except for the narrow case of reliability); people are. Trust can be engineered; but at the end of the day, all trust is experienced as personal.  A leader exemplifies it.

9.    Trust is Relationship. Robinson Crusoe didn’t need trust (before Friday, anyway). Trust is like ballroom dancing—you need two to tango. One trusts, the other is trusted. One by itself isn’t even the sound of one hand clapping. It’s non-trust. You can’t be trusted if you don’t trust back.  There is no trust without both parties in relationship. A leader knows how to play both roles; by trusting, he becomes trusted. By being trustworthy, he invites trust.

10.There is no Trust without Risk. Trust mitigates risk, but only by taking another risk. Ronald Reagan’s ‘trust but verify’ was good politics, but bad trust. Verification destroys trust. Trust is risk freely-taken, for the greater advantage of both. It is paradoxical, which is why risk-mitigation techniques end up destroying it. A leader knows that sometimes, she’s just gotta take a leap.

Are You as Credible as You Think? Probably Not.

There are lots of ways to build trust with others (four, by our count) and Credibility is a big one. In our Trust Quotient research, Credibility shows up as second only to Reliability as the most favored way to build trust. (‘Most favored’ doesn’t mean ‘most effective,’ but that’s another blog, another day.) 

This makes sense, given the emphasis that most business people naturally place on increasing trustworthiness by demonstrating credentials, experience, and know-how.

The risk is that we stop there or—even worse—spend too much time there. Picture the March of 1,000 Slides.

There’s more to Credibility than meets the eye.

Three Dimensions of Credibility

When thinking Credibility, we mostly think words, as in what you say and how you say it. That means that having information, perspectives, opinions, and recommendations are all important—especially for people in professional services whose very existence depends on high quality advice-giving.

But there’s more. Speaking the truth matters too. A lot. As does delivering your message in a way that makes it easy for others to understand and relate to.

Top Ten List of Ways to Build Credibility

Here’s a Top 10 list of tried-and-true Credibility builders, categorized by Credibility’s three main dimensions.

Feature your expertise and credentials:

1.    Be diligent about researching your customer;

2.    Know about industry trends and information, as well as business news;

3.    Write about your areas of expertise—articles, blogs, white papers;

4.    Host events that bring key stakeholders together.

Improve your delivery:

5.    Use metaphors and stories to illustrate your point;

6.    Practice your delivery so you are clear … and clearly relaxed;

7.    Combine your words with presence—a firm handshake, eye contact (when culturally appropriate), a confident air.

Demonstrate your truthfulness:

8.    Offer your point of view when you have one;

9.    Respond to direct questions with direct answers;

10.   Be willing to tell a hard truth when it’s the right thing to do—including “I don’t know.”

 And as a bonus:

11.   Never ever lie. (This includes tiny little white lies and lies by omission.)

This last category, truthfulness, gets at one of the paradoxes of trustworthiness: The thing we’re most afraid to say is often what will build the most trust.

By the way, our clients tell us the truth-telling part pretty much applies to all cultures. Even in Asian countries, where saving face is paramount, the Trusted Advisor’s dilemma is generally less about whether to tell the truth and more about how to deliver the truth in a respectful and culturally-appropriate way.  

Credibility-Building Can Happen Lightning Fast

This expanded view of Credibility is good news for anyone new to a profession or new to a relationship. This part of trust–building your Credibility–doesn’t have to take time; being refreshingly honest can build trust in an instant.

Most clients and customers are so used to spin they will immediately take note. So you can actually leave the PowerPoint deck back at the office (or bring it as a leave-behind) and focus on engaging in a genuine, transparent, and honest conversation. Heck, you might even build some Intimacy in the process.

Take Stock and Take Action

Feeling stuck in a particular relationship? Do a credibility check. Start with the honesty dimension—it’s the least comfortable and highest payback. Ask yourself what you’re thinking and not saying, or saying to some but not to all.

 Then do something about it. You’ll be glad you did.

Rich Sternhell on the Evolution of Trust in Business (Trust Quotes #13)

Rich Sternhell was a Managing Principal at Towers Perrin, now Towers Watson, until his retirement last year. He was a Towers Perrin Board member, and chaired Board committees including client relationships, technology and quality; he not only consulted, he managed. He ‘sat in many chairs,’ as he puts it.

His career, post-MBA, covered four decades that saw radical shifts in employee compensation, consulting, and the role of management. Now free to indulge the thoughtful side of what he has seen, he agreed to share some insights with us.

CHG: Rich, thank you for sharing your thoughts with the Trust Matters audience. You’ve got some big-picture perspectives for us, so let’s dive right in. You started work post-MBA at New York Life in 1970. What are the biggest changes in business you’ve seen since then?

RS: Almost all the changes in business can be related to technology and the resultant increase in what I’ll call the velocity of business. Perspectives are shorter. What is often seen as “quarter to quarter” management, I would describe as management of metrics, rather than of the business. Whether it’s stock price, market cap, EBITDA or cash flow, the focus on metrics that are market-visible has monopolized management attention. We have moved from management that is passionate about products to management that is passionate about the numbers they report.

The focus on acquisitions, divestitures, etc., that can increase price multiples has created a loss of shared understanding between employees and management as to the source of value for the organization. This has also created a generation of management that is focused on management of their careers rather than their companies.

There is also a loss of organizational connectedness. Fellows in their 50’s and 60’s who would take the time to coach a young newcomer. They told stories about the past and made people who were long gone part of that newcomer’s memory bank and connection to the organization. I see very little of that today.

That newcomer is planning career moves through moving around rather than moving up. The few old-timers left have lost interest in mentoring young’uns who will be moving on to more fertile fields.

CHG: Let’s take that first one, management by career, not company. Say a little more about that?

RS:Those who have made it to the C Suite often have spent their energies making sure their resume gets them there. It becomes hard to change perspective to become passionate about a business you didn’t grow up in, have limited long-term relationships within and compensation highly leveraged to stock performance that has the potential of creating generational wealth.

CHG: Let me be devil’s advocate a bit here; isn’t it also a good thing that we’ve developed an ethos of mobile, project-oriented work, that fits very well with a fluid, collaborative kind of organization of work for the future?

RS: A mobile workforce is absolutely essential in an economy as technology driven as ours is. At the same time, company cultures have become fragile. But the bond that existed between management and the workforce doesn’t have the strength of shared experiences over long periods of time.

My favorite set of questions on employee engagement surveys has to do with leadership. There are always questions like, “Does leadership care about the associates?” “Does company leadership act in the long-term best interest of the organization?” Inevitably, scores on these questions come in significantly lower than questions that relate to the individual employee’s location or sphere of responsibility.

Managements fret about these results a great deal but then take comfort in the normative data that says that other companies score equally poorly. Almost inevitably a corporate communications campaign begins with messages from leadership about how much they really care.

I think these campaigns are self-defeating. Employees want to know that the management they see has “signed on” and take ownership of the messages. The direct communication from senior leadership has allowed middle management to abdicate their role in communication. When middle managers snicker at senior management messages the result is worse than if no communication had been made at all.

CHG: Many Trust Matters readers have little perspective on another major shift you’ve seen—the decline of the defined benefit plan. It can sound awfully arcane, but I’ve heard you say it was one of the tragedies of our time. Explain?

RS: The defined benefit plan was a bet by the workforce and a commitment by the company to the long-term health of the business. It was an obligation taken on by company ownership in return for the loyalty of the workforce. It provided a degree of security to employees at all levels that allowed them to think about the long term.

While our culture places a high value on individual responsibility we are asking employees to make decisions on matters for which they are woefully unprepared. The 401k has been sold as a replacement for pensions while it is clear that the numbers simply don’t work that way. In my early days as a pension consultant we talked about defined benefit plans as a company tool that enabled employees to be retired from a company with the security that they wouldn’t embarrass the company they worked for by being out on the street.

Companies no longer feel that embarrassment, and employees have been led to believe that somehow the DC plan will provide for their retirement. It can’t provide the same level of income replacement. Management looks to stock options to fund their retirement…employees don’t have the same opportunity.

Employees don’t trust the security of their job, their health insurance or even social security. In the absence of tools to manage for the long-term they act for the short term. It has become all about self-preservation.

CHG: Given those perspectives, what do you have to say about trust as it has evolved in business? Let’s start with headlines: what do the Goldman and BP headlines have to tell us about trust?

RS: Trust in business has many different components, all of which link to each other. There is trust between co-workers, trust between employee and supervisors, trust between salesman and customer, trust between salesman and production. BP is a great example of the disconnect that can grow.

Let’s start from the premise that for a business to survive and thrive it must create value for customers, and a return for its investors. It also must function within the framework of legitimacy established by societal norms. To the extent it enhances the communities within which it operates, goodwill is created which can be turned to competitive advantage.

On the other hand, damage to the community results in a destruction of the trust essential to maintaining not only a customer base, but the relationship with all the constituencies on which a business depends. This isn’t just a business case issue, justified internally by the needs of the business–it is about the underlying linkage of communities in a free market society.

Trust is fundamental to the achievement of all business objectives and its absence is the greatest threat to our business community as well as our broader society. Unfortunately, there are strong forces at work that have the effect of weakening our society’s trust in our business community and its leaders.

The village blacksmith was well aware that each implement he fashioned was critical to future orders. The quality and timeliness of his product determined his position in the community. To the extent he failed to meet his customers’ expectations, he created the opportunity for competition. To the extent he failed to manage his costs, his family starved. He didn’t manage his business for quarterly results, but for the well-being of his family, i.e., "long term selfish". The community he served also knew that their well-being depended on his success.

Common approaches to this problem are often mistaken. Accountants tend to quantify risk, giving equal weighting to probability and severity providing a reasonable estimate of quarter to quarter financial impact. Actuaries, on the other hand, give significantly greater weight to severity, recognizing the long term economic impact of the high-severity risk. Not surprisingly, the accounting perspective has gained precedence in recent years.

The re-establishment of trust among all stakeholders at every level is central to rebuilding business legitimacy. The risk of breaking trust, whether through cutting costs on deep water drilling platforms or breaking faith with customers, needs to be seen as a fundamental attack on business legitimacy, not just a cost-benefit analytic.

It’s been said that for an organization to claim a value, it must be non-negotiable….without exceptions. What does this look like? Examples include:

· A firmwide commitment to operate on principles rather than incentives

· A commitment to honor values over strategies, even successful ones

· An instinct to forgive the mistake….but to terminate for the cover-up

· A culture that commitments are sacred, whether to a colleague or a client

· A shared understanding that the long-term success of the organization must override the short-term benefit to an individual or unit

Building a trust-based organization from the bottom up and the top down is a serious commitment, but well worth the investment.

CHG: How about trust between employer and employee?

RS: John Bogle, the founder of Vanguard, has spoken often about the shift from ownership capitalism to management capitalism. My sense is that an employee’s understanding of the interest of a business owner was intuitive. The employee may not have liked the owner but intuitively he/she knew that they had an interest in the preservation of the business.

This is not true about the employee’s relationship to management, particularly when they see a revolving door in the C Suite of people from other businesses and industries who do not share the same long-term interest in the organization’s well-being. The increasing gap in pay between senior management and the average employee has exacerbated that gap in trust.

CHG: You’ve told me before you take a somewhat dark, pessimistic view of people, but it often comes out pretty optimistic. What is it that you think motivates people in business, and what does that mean for management?

RS:I truly believe most people want to find fulfillment in their work. In today’s world, concern about security—job, health, wealth–is an enormous distraction to engagement. It is an enormous challenge for management to overcome and often creates an internal conflict for the employee. Should I take the risk of doing “the right thing” or should I “keep my head down”? The more clearly management articulates “the employment deal”, the greater the opportunity for increased engagement and the creation of long-term value. I have seen values based management at work and have little doubt that there are organizations out there making it work today.

CHG: What does that suggest for management-by-numbers?

RS: The numbers are critical. Management won’t stay in place very long if they can’t deliver results. But management only by the numbers isn’t enough. Values will trump strategy over time.

The real challenge is the friction cost that loss of trust has on a business, our economy and our society. Loss of trust means an increase in a myriad of costs through due diligence requirements, procurement processes, government regulation and litigation. Sales take longer to close. Contracts take longer to negotiate. The legal aspects of operating a business have exploded.

None of these areas have anything to do with increased value of the product or service a business produces but the costs imposed are a direct result of decreased trust. Thus we have an ever-increasing number of workers who don’t contribute to creating value, but are essential elements in today’s business environment.

CHG: What can an individual TrustMatters reader do to enhance his or her ability to trust, their personal trustworthiness, or the level of trust in the business world of today?

RS: The need and desire for trust is universal. The challenge comes when we believe that it is important to act in a trustworthy manner in some situations and not in others. Understanding our interdependence with vendors, customers, employees and other stakeholders is essential. To the extent we employ situational ethics and call a violation of trust a business judgment we weaken the trust framework of an organization. Each individual has the capacity to ask themselves the critical question in every business judgment they make as to whether they are acting in a principled manner.

CHG: What do you think of the MBA Oath movement that began last year?

RS: It is certainly a worthy aspiration…much like any approach to ethical behavior. It is discouraging that such an oath would be perceived as necessary. The implication of the MBA Oath movement is that there is some degree of career sacrifice entailed with living up to the oath. That in itself is demeaning to business people.

CHG: What’s the best business book you ever read? The best advice you ever got? And what’s the one thing you’d recommend to a new MBA today?

RS: I can’t give you just one Charlie, but I’d put your book Trusted Advisor up with the best. It is the first book I recommend to anyone entering sales, consulting or professional services. My daughter is a doctor and my son an attorney. I have made sure that both of them have copies and have read it.

Another is by your co-author, David Maister. David’s writing has been formative in my thinking as a consultant and manager for almost 30 years. I’d pick True Professionalism as my favorite. A recent read has been General Eisenhower’s Report on Operation Torch. I only wish I had read it 30 years ago. Anyone who has to manage a merger or a large project with a multidisciplinary team should be required to read it.

Finally, a new book by a professor at Columbia, Sheena Iyengar, The Art of Choosing. The Art of Choosing is a fascinating book from a pure marketing perspective, but even more interesting as probably the most helpful thing I’ve ever read in understanding cultural differences.

For the new MBA I would say that business is an honorable profession as long as you practice it honorably. Every decision is a choice and knowing that the choices you make have earned you the trust of your colleagues and your clients is the greatest reward you can hope to receive.

CHG: I’m blushing, but I know you’re serious, so I’ll leave it in. And many thanks to you for spending time and sharing wisdom with us, we greatly appreciate it.

——–

This is number 13 in the Trust Quotes series.

The entire series can be found in our Trust Quotes section on TrustedAdvisor.com

Recent posts in this series include:

Trust Quotes #12: Martha Rogers and Don Peppers Interview
Trust Quotes #11: Jim Peterson
Trust Quotes #10: David Gebler

Why Trust Statistics Can Be as Misleading as Crime Statistics

In each pair, guess which city has the higher violent crime rate? 

Lexington, KY vs. New York City    ___

Tucson, AZ vs. Los Angeles, CA    ___

Tulsa, OK vs. San Jose, CA           ___

St. Paul, MN vs. San Antonio, TX   ___

Memphis, TN vs. Detroit, MI           ___

Minneapolis, MN vs. Houston, TX ___

As you might have guessed, the data are a bit counter-intuitive. In each pair, it is the smaller City (listed first in each pair) that has the higher crime rate. Data are from the FBI and the US Census Bureau.

The FBI goes to some trouble to warn against using their data in precisely the ways I just did—to rank cities by their crime rates.   The FBI says:

For example, one city may report more crime than a comparable one, not because there is more crime, but rather because its law enforcement agency, through proactive efforts, identifies more offenses. Attitudes of the citizens toward crime and their crime reporting practices, especially concerning minor offenses, also have an impact on the volume of crimes known to police.

They are quite right to warn. During the Nixon administration, the US government founded the Law Enforcement Assistance Administration within the Justice Department. On the statistical front, the LEAA developed the National Crime Victimization Survey, an antidote to the FBI’s Uniform Crime Reporting. The UCR had simply measured police reports; the LEAA took a survey approach, by contacting the whole population. Results varied widely, particularly in cities like Philadelphia, with police forces long suspected of under-reporting crime stats.

Trust Measurement and Definitions

Trust statistics are even more suspect than crime statistics, I suggest. In part this is due to definitional issues. On Edelman PR’s Tweetlevel tool, the New York Times twitter account scores 94.2 on trust—lower than Perez Hilton (94.3) and Justin Bieber (the King of Trust, at 97.5).

Trust Measurement and Volume vs. Frequency

But more importantly, human beings are likely to confuse buzz, spin and hustle with underlying reality; raw numbers with frequency.

Ask yourself: compared to ten years ago, with how many people outside your immediate family and co-workers do you interact daily?

# of Daily Interactions

a. 10 yrs ago

b. today

Walking around

   

Phone

   

Email

   

Facebook

   

Twitter, Linked-In

   

Customers

   

Suppliers

   

Industry

   

Retailers

   

  Total

   

 Now:then (b:a)

   ————-

 

Go ahead, fill it in. And let us know what your two columns added up to, this could be an interesting social statistic. (My own scores were 43 vs. 225, for a now:then ratio of 5.23).

Your now:then ratio indicates the number of Trust-Pointä opportunities you have in a given day: in my case, over five times what I used to have.

My bet is that, on any given day, I will have more instances of distrust than I had ten years ago. And yet—on any given day, I will be disappointed by far fewer people proportionately than I was ten years ago. 

Now: suppose I answer a trust survey that asks me, “How trustworthy do you find people these days?” 

·    How many of us answer “not as much as before” because we’re thinking of the increase in the absolute number of untrustworthy interactions?

·    How many of us answer “more than I used to” because we’re thinking of the decrease in the frequency rate of untrustworthy interactions?

I honestly don’t know the answer to that one. Nor, I suspect, do the people answering the survey themselves. Which suggests, if anything, that the people doing the survey haven’t got much of a clue either.

Caveat statisticator!

Carnival of Trust for July, 2010

Welcome to the July edition of the Carnival of Trust.

This month we are graciously hosted by the hardest working man in the compliance business, Doug Cornelius. Doug resides at compliancebuilding.com. He’s a Boston lawyer, with serious experience in real estate, private equity, knowledge management, and–of course–compliance and corporate ethics. He’s Chief Compliance Officer at Beacon Capital Partners, a real estate private equity firm, though the views expressed in his blog are his alone. Trust is a central subject matter for those in the compliance business, many of whom read Trust Matters. Doug is a consistently thoughtful observer of things trust-related, and I’m delighted to have him as host. The Carnival of Trust is a highly subjective listing of key blogposts related to trust. The choices are made by rotating hosts–Doug, in this case. They make the choices and write the commentary. This way you get a seasoned voice, other than mine, on the key subject of trust. Click on over to Doug Cornelius’ Compliancebuilding.com, and give a read of his selections and commentary this month. I assure you, you won’t be disappointed.

Constructive Hypocrisy and Trust

A stimulating conversation over on LinkedIn, sparked by Adam Turteltaub of the Society of Corporate Compliance and Ethics, leads me to explore the relationship of hypocrisy to trust, authenticity and truth-telling.

How can there by such a thing as “constructive hypocrisy,” you ask? Well, it’s a good term to describe how we handle the uncomfortable no-man’s land between the letter of the law and the nuanced nature of the world.

Example: The 55 mph speed limit. Enforcement kicks in at about 65. We say “about” because it has to stay loose, else it becomes the new 55. How can you justify people driving 57 when the limit is 55? You can’t. But we do all the time. Constructive hypocrisy.

Bill Bennett wrote about constructive hypocrisy as key to social functioning back in the 90s.  The brilliant (and outrageously controversial) Herman Kahn used the term to describe the social value of plausible deniability (“A rural American man doesn’t want his daughter to be able to buy pornography at the corner store; and if she does, he wants to be able to say he didn’t know about it.”)

But we don’t need no stinkin’ highfalutin definitions. Here are two that’ll do fine. Have you ever said:

“I’ll call you right back in 1 minute.” Which means between 3 and 5 minutes.

“Let’s do lunch,” which of course means ‘let’s don’t do lunch.’

If you’ve said those things, then you’re a constructive hypocrite.  Sometimes, anyway. Congratulations.

The Role of Hypocrisy

Constructive hypocrisy gives us breathing room from the constant cacophonous confrontation between the puritanical rule-givers among us, and the anarchistic forces just waiting to destroy civilization. 

·    What does the flight attendant do when the announcement says ‘turn off your cell phones now’ and the passenger covers up the screen to finish the email? Constructive hypocrisy (for a while).

·    What does the cop say when it’s a first violation and the person is clearly not a trouble maker, and the violation was narrow? I’ll let you off this time with a warning….Constructive hypocrisy.

·    What are sentencing guidelines for judges, except constructive hypocrisy?

Here are some situations where the world could use more, not less, constructive hypocrisy:

·    Gay marriage

·    Three strikes you’re out sentencing rules

·    Abortion (oh boy, I can see the emails now)

·    the Middle East

On the other hand, there are limits to constructive hypocrisy—at some point it becomes denial. Think of US immigration policy, for example, or municipal pension funding. Over a decade ago, don’t ask/don’t tell was constructive hypocrisy; as time passed, it became uncomfortable denial. The policy didn’t change; society did.

 Hypocrisy, Authenticity and Trust

On the face of it, you’d think trust can’t co-exist with hypocrisy. But on closer examination, I think they are complementary, maybe even interdependent.

Constructive hypocrisy is a socially acceptable way of agreeing to disagree. We both choose to look the other way, rather than insist on a constant confrontation of values. Done in the right proportion, it is the triumph of relationship over principle.  

Can I trust someone who’s being hypocritical? In many cases, yes, precisely because their willingness to be hypocritical rather than provoke a confrontation over principle means they actually value my relationship over one of their opinions. 

What about authenticity? Only in a narrow sense are they in conflict. For me to indulge in constructive hypocrisy doesn’t mean I’m being inauthentic about my beliefs; it means I’m being authentic about the balance of my principles and the need to get along with others in the world. 

Alfred Hitchcock knew that imagination trumped vision (the shower scene in Psycho); other directors know that a bit of clothing is more erotic than pure nudity.  In the same sense, a bit of hypocrisy lubricates social interactions better than does undiluted truth.  

If you’d like to talk more about this concept, maybe we could do lunch?  

Loyalty Programs Shoot Selves in Foot

I have for some years now followed a UK newsletter called the Wise Marketer, which does a pretty thorough job (or so it seems to me) of covering the world of loyalty programs. 

Loyalty programs are generally thought of as having been invented in the 1970s by the airlines (particularly American Airlines, I believe—someone confirm?). They have always had a dual purpose: to reward and encourage exclusive buying behavior, and to provide a source of data about buying behavior.

They have also generated a new approach to marketing, one aimed at tapping a latent desire for status among many consumers. An anthropologist would be fascinated by the psychology and behaviors of, say, management consultants around the airport gates and airline clubs. Certainly companies have spent a great deal of money on these programs, trying to make their program distinct in their ability to confer status and prestige.

So this paragraph in the most recent newsletter made me raise my eyebrows:

Clearly, the loyalty market has reached a state of maturity in the airline, hotel and car rental industries, with very few such loyalty programmes today being able to claim genuine competitive differentiation. Simply matching the proposition offered by the competition is not enough to create lasting customer loyalty. When all programmes within a sector are basically the same (e.g. they all have online enrolment, an award chart, a welcome bonus, double miles promotions, and so on), customers tend to react with indifference. 

This isn’t really new; I remember hearing ‘customer loyalty in the airline business is about 20 minutes,’ 15 years ago. But it’s jarring nonetheless, because if one of the primary purposes of a marketing program is to differentiate the company, and the net result of several decades of that program is to eliminate differentiation among the companies—well, that’s a marketing poster child case for foot-shooting, isn’t it?

Michael Porter pointed out something similar years ago: the tendency to seek out industry ‘best practices’ is anti-strategic. That’s because even if the practice is ‘best,’ if everyone does it—then no one is strategically different. And part of the essence of strategy is to be distinct.

I’m a little bemused by all this, because the term ‘loyalty’ has long been abused in business. ‘Loyalty’ implies an intensely personal relationship, and what ‘loyalty programs’ have devolved to is anything but personal.

Ironically, the one thing in today’s business world that truly is differentiable is also that which is truly personal. You can copy someone else’s programs, policies and procedures—but you can’t copy their relationships. Those are sui generis, unique. 

Back in the early 1990s one of the truly prescient business books of our time was published: The One to One Future, by Don Peppers and Martha Rogers. It made the very sound observation that technology would allow us to combine scale and customization, at the individual human level. Market segmentation would max out—at a one-to-one level.

I remember being very excited to hear that insight. This was around the same time that Loyalty was being talked about by Fred Reichheld and people at Harvard Business School. Connecting the dots back then would have suggested that the way to successful companies would be to create great relationships, which then resulted in loyal feelings, behavior, etc.

What’s happened, of course, is not that at all. We have succeeded instead in publicizing the private, trivializing the profound, and pretty much turning the potential of one-to-one relationships into a cacophony of mechanical, status-climbing must-haves. Think platinum cards, ring-tones, ‘how’m-I’-doing’ online CSR surveys. 

The irony is: at a time when every loyalty program looks alike, when ‘personal’ service is mechanized, and when everyone is a VIP—that’s the very time at which truly personal, one-to-one relationships really stand out. They are even more differentiable than ever, because most companies have forgotten what that really means.

Dare to be real. You might be shocked to find out how much your customers like it.  

Handling the Risk of Trusting Others’ Motives

I ran across this the other day:

I am not a victim of others, but rather a victim of my expectations, choices and dishonesty. When I expect others to be what I want them to be and not who they are, when they fail to meet my expectations, I am hurt.

When my choices are based on self-centeredness, I find I am lonely and distrustful. I gain confidence in myself, however, when I practice honesty in all my affairs. When I search my motives and am honest and trusting, I am aware of the capacity for harm in situations and can avoid those that are harmful.

A friend said something similar:

When I meet people, I bring an implicit contract. In that contract, I agree to treat them with the utmost respect, in ways that I would wish to be treated. And in return, all I ask is that they treat me with the utmost respect, in ways that I would wish to be treated.

Frequently, I find they end up in breech of contract. Of course, I haven’t presented them with the contract for them to read. And so it goes without saying, they haven’t signed it. D’ya think there’s something wrong with my contracting procedures?

Looked at from this angle, to trust someone is a unilateral decision to seek a bilateral relationship. When the other responds, then you’ve got a basis for something joint—or you don’t. 

But at the outset—when the trust-risk is first taken—there is no obligation. There is thus no basis for dashed expectations, disappointment at outcomes, or resentment that people didn’t do what we had wished they would do.

Most of the time, trust offered gets reciprocated. But not all of the time. That’s why they call it trust, it always and by definition comes with risk. To expect a particular outcome in a particular instance is to insist on changing the laws of probability. You can bet that 5000 coin tosses will produce roughly 2500 tails. But if the very next coin-flip turns up heads—how crazy is it to be upset? 

This is the meaning of “an expectation is a pre-meditated resentment.” 

Do You Trust a Robot? To Do What?

Do you trust a robot?

Well, you might say, it depends: that depends on who did the programming. 

We do use the word ‘trust’ that way. We can ‘trust’ a robot to do the same thing, over and over. It doesn’t have bad motives, bad days, or bad blood. It does what it’s programmed to do.

But we would never say we’d trust a robot to “do the right thing,” or to “keep its owner’s best interest at heart,” or to “have a conscience.” That would just be silly. A robot is a machine. And silicon is not protein.

Yet much thinking about social trust amounts to nothing more than programming the robot. Got problems on Wall Street? Tweak the incentives. Oil drillers behaving badly? Rewrite the programmer rules of the MMS.

Much of that’s necessary. But it’s not sufficient. What’s to be done about all the non-robotic parts of society?

Sister Rettinger Uses Non-robotic Trust to Shame a Thief into Restitution

Writing programs for robotic trust is pretty simple. Go read one of the economists or psychologists who boil down all human behavior to the consistent pursuit of self-interest, and borrow their formula. Define a few processes, insert rules and conditional reward/pain payoffs, and voila—robotic trust.

But that won’t explain Pittsburgh’s Sister Lynn Rettinger: or the thief she undid with her voice:

Rettinger didn’t even have to break out a ruler for man who reached into an open window and stole a wallet from a car on Tuesday. She just needed the voice honed by nearly 50 years in Catholic schools.

After a teacher saw the man swipe the wallet, the 5-foot-3 principal of Sacred Heart Elementary School in the Shadyside neighborhood went outside and firmly told the man, "you need to give me what you have."

The unknown thief turned over the wallet, apologized and walked away.

Rettinger says she merely said what she says to students when she knows they have something they shouldn’t.

Let’s be clear: the Sister called out a stranger for misbehavior: and he responded. While strangers, they shared a moral code. While he was a lawbreaker and she just a little old woman, she trusted that he would not harm her, and that he would do the right thing.   And so he did.

The rules of interpersonal conduct—or morality, or trust, or conscience—are often considered to be far ‘softer’ than the rules governing physics, or programs governing robots. But Sr. Rettinger had enough confidence to calmly place a bet on their power. And she was right.

There is a power that exists between human beings, a binding web of mutuality, that we have systematically denied—to our own detriment.

5th Pillar in India Challenges Bribe-takers to Cease their Demands

Vijay Anand, chairman of 5th Pillar, has printed up over a million zero-rupee notes. The notes are to be given by poor people to officials who try to extort them for basic services.

When confronted with a demand for a bribe, the citizen offers up a zero-rupee note. This act turns out to have serious, positive consequences. In one case, “a corrupt official in a district in Tamil Nadu was so frightened on seeing the zero rupee note that he returned all the bribe money he had collected for establishing a new electricity connection back to the no longer compliant citizen.”

When engineered properly, the power of the force that binds people to each other can overwhelm the selfish power that economists presume drives us all.

Selfishness Is Over-rated: Trust is Under-Rated

I’m getting tired of hearing it cited routinely, over and over, as if it were self-evident, that people are selfish and will behave badly unless stopped or otherwise incented, especially if they work for companies.

They are not. People are vastly flawed and far from perfection; but they are also selfless and capable of great acts of generosity.

Dr. Robert Hoyk lists a number of ways we can think about increasing trust, many of which don’t involve behaviors and incentives. David Gebler suggests that culture drives trust , which seems perfectly obvious when you just put it that way. Then we catch wind of a headline and we’re off to the behavioral sanctions route once again.

Programming the robot; what does it get you? The same thing, over and over.   There’s a lot to like about dependability and reliability. Just don’t claim that’s all there is to trust.

What Reality TV Can Teach Us About Trust: You’re Cut Off

As we’ve been hearing endlessly, various measures of trust have been declining for some years now. If and when the tide turns—what will we notice first? Here’s an interesting possibility: a shift in the tone of reality TV.

I am not a fan of reality TV shows. Most appeal to low-grade prurient interest (think Jersey Shore as an incestuous offspring of Jerry Springer). Others—Survivor being the prototype—just feature winning-at-all-costs competition.

I confess to having instantly liked two, however. One was American Idol, and I can explain why in two words: Simon Cowell. Not because he was snarky, but because he was the truth-teller, the voice of standards and quality and reality that everyone else wished they could wish away, but that ultimately ruled.

And, I was fascinated by the first year of The Apprentice. Then bored to tears by year two. I still have no idea why, but suspect Omarosa had something to do with it.

Well, here’s number three. I stumbled (honest!) upon a new VHS1 show called You’re Cut Off, and I’ll go out on a limb and make two predictions: first, this one’s going to be a hit. Second, it might be a harbinger of better times for trust.

Episode 1: Revenge of the Have-Nots

9 of the United States’ most selfish, preening, snobby, self-obsessed, narcissistic 20-something women are brought to Hollywood under false pretenses: that they’ll participate in a reality TV show called The Good Life. In a brilliantly contrived bit of theater, they are all filmed in a Rodeo Drive type luxury store simultaneously having their credit cards refused, and being sent to customer services.

Once gathered in customer services, they are informed that this is an intervention. The host of the show, a professional life coach, shows them video clips of their parents, husbands, and other enablers (none of these ladies are self-supporting) telling them, “It’s over, dear, you’re on your own; I hear Mickey D’s is hiring, you should go apply—because you’re cut off.” The looks on their faces are low-rent, bottom-feeding reality TV show at its best/worst, and you can’t help gloating over the public face-slapping these women have received.

But the ignominy is just beginning, as they’re driven away in vans (“a van? Do people actually drive in these? Where’s my limo?”) to a suburban house (“OMG, we’re in the ghetto…not even my housekeeper lives like this…”), where they proceed to descend even deeper by attacking each other.

At episode’s end, the life coach tells them the deal: they are to lose their evil ways, or they may lose their families for good. Even in episode 1, you can see the glimmer of insight in two pairs of eyes; and the power of continued denial in several more.

Episodes to Come: Redemption

The show is nicknamed “princess rehab,” and it’s apt. This is where I think the producers showed genius. There are only a few possible endings. The best ending is actually the most likely; that most of these basket cases achieve some level of self-realization and become at least willing to try to turn their lives around. 

Using an actual rehab, I suspect, wouldn’t work. Filming real interventions and real rehabs would require watching drug addicts and alcoholics, who would appear largely unsympathetic to a TV audience. But neither could we easily hate real addicts and alcoholics; the stories are too tragic and too real. And real world recidivism rates are depressingly high. It just wouldn’t work as TV.

Enter princess rehab: problem solved. We have no problem hating the self-absorbed, parodies of materialistic abuse that these ladies represent. And I suspect we will be drawn to a tale of a true convert. Any of the 9 who undergoes a Saul on the road to Damascus realization—or even shows big hints of getting it—will probably be welcomed by all of us.

As they (hopefully) renounce their wicked ways and tearfully join humanity, we will gladly accept them back, for they will have endorsed basic American values of self-reliance and humility. We’ll love them for having become just like us (or, more properly, just like what we like to think others think of us as being).

The show is set up to be about redemption; which makes it unlike any other I can think of (Biggest Loser seems tinged with self- and other-pity that I hope this show can avoid). What would it mean to have a reality TV show that is not about winning, beating others, outdoing each other in performing disgusting acts, forming backstabbing alliances, or faking love? That instead, is about redemption?

Lessons for Trust

I don’t think we’d have seen this show a few years ago. The mood of the country is cynical, mistrustful, especially about the rich and powerful, and these 9 young ladies will do very well as proxy lightning rods for the venting.

But the show is not set up to stop at revenge. Unlike all the others (including Biggest Loser) this one has the potential to be win-win-win. If most of the ladies learn to not take others for granted, to clean up their own kitchens, pick up after their dog, and think occasionally about the needs of others—well, there is no loser in that.  They all win. Society wins. 

And trust would win. The biggest destroyer of trust is extreme self-orientation.  These ladies exhibit that in spades at the outset. I suspect we’ll all be watching: first, to leer at the train-wreck of their lives; later, to see if they can redeem themselves.