Building the Trust-based Organization, Part II
In my last post, Building the Trust-based Organization Part I, I suggested that approaches to trust at the organizational level fell into several categories. Like the parable of the blind men and the elephant, all captured some part of the puzzle, but none grasped the entirety of the issue. The five categories I listed were:
1. Trust as communication
2. Trust as reputation
3. Trust as recipe
4. Trust as rule-making
5. Trust as shared value.
I suggested a holistic approach would have a Point of View, a Diagnosis, and a Prescription. Here is my attempt to offer such an approach.
Organizational Trust: A Point of View
Trust relationships are asynchronous – one party, the trustor, is the one who does the trusting, and who takes the risks. The other party, the trustee, is the one whom we speak of as being trustworthy. “Trust” is the result of a successful interaction between these two actors.
Trust is largely an interpersonal phenomenon. Trustworthiness is mostly personal, though we do speak of ‘trustworthy’ companies as having a track record or being reliable. Trusting, however, is a completely human action, not a corporate one.
Risk is necessary to trust: if risk is completely mitigated, we are left only with probability.
It follows that the most powerful meaning of “organizational trust” is not an organization that trusts or is trusted, but an organization that encourages personal trust relationships:
A trust-based organization is an organization which fosters and promotes the establishment of trust-based relationships between various stakeholders – employees, management, shareholders, customers, suppliers, and society.
Organizational Trust: Diagnosis
What is needed to create a trust-based organization? Since ‘trust’ is such a broad concept, it’s clear that themes like communications, regulations, and customer relationships will have a role. But to avoid a mere laundry list, what’s needed is some kind of primus inter pares relationship; or perhaps some necessary vs. sufficient distinctions.
My nomination is simple: an agreed-upon system of Virtues and Values. Virtues are personal, and represent the qualities sought out in employees and managers. Values are organizational, and reflect basic rules of relationship that ought to govern all relationships within the organization.
Some typical trust-based virtues include: candor, transparency, other-orientation, integrity, reliability, emotional intelligence, empathy.
I have suggested elsewhere Four Trust-based Organizational Values. They are expressed below in terms of customer relationships just to be specific, but they apply equally to relationships with suppliers, fellow-employees, and so forth.
- Lead with customer focus – for the sake of the customer. Begin interactions with other-focus rather than self-focus.
- Collaboration rather than self-orientation. Assume that the customer is a partner, not in opposition to us. We are all, always, on the same side of the table.
- Live in the medium-to-long term, not the short term; interact with customers in relationship, not in transactional mode. Assume that all customers will be customers in perpetuity, with long memories.
- Use transparency as the default mode. Unless illegal or hurtful to others, share all information with customers as a general principle.
Advocates for Values. I am not alone in citing Values as lying at the heart of the matter. McKinsey’s Marvin Bower put values at the center of his view of business, and McKinsey for many years was run from his mold. As Harvard Business School Dean McArthur said of Bower, “What made him a pioneer was that he took basic values into the business world.”
In 1953, Bower said, “…we don’t have rules, we have values…”
In 1974, he wrote, “One of the highest achievements in leadership is the ability to shape values in a way that builds successful institutions. At its most practical level, the benefit of a managed value system is that it guides the actions of all our people at all levels and in every part of our widespread empire.”
Bower’s biographer noted that Bower believed that “while financial considerations cannot be ignored, business goals must not be financial; if they are, the business will fail to serve its customers and ultimately enjoy less profit.”
The alumni of McKinsey – some, anyway – learned well. Harvey Golub said, “[values are] a powerful way to build a business…it worked for McKinsey and it worked for IDS and for American Express.”
IBM’s Lou Gerstner said: ‘“I believe that I learned from [Marvin] the importance of articulating a set of principles that drive people’s behavior and actions.”
[Note: McKinsey itself had some noticeable hiccups post-Bower. In my view, this is not an indictment of values-based management, but a sad example of how it requires constant values-vigilance].
The Case for Values. The use of values as the basis for management is well-suited to the subject of trust, and this advantage shows up in numerous ways.
- Values scale, in a way that performance management systems never can do.
- Values are about relationships, in a way that incentives never can be; this makes them highly suitable to the subject matter of trust.
- Values are infinitely teachable, in a way that value propositions or communications programs alone cannot aspire to.
- Values are among the most un-copyable of competitive advantages.
Organizational Trust: Prescription
Managing a values-based organization will center around keeping the values vibrant. This is pointedly not done mainly through compensation and reward systems, corporate communications plans, or reputation management programs. Instead, it is done through the ways in which human beings have always influenced other human beings in relationship. To name a few:
- Leading by example: trustworthy leaders show the way to their followers by their actions, not just their words
- Risk-taking: trusting others encourages them to be trustworthy, and, in turn, to themselves trust others
- Discussion: principles undiscussed are principles that die on the vine. Discussion, not one-to-many communication, is key to trust
- Ubiquitous articulation: trust principles should underpin many corporate decisions and actions; trust-creating leaders seize the opportunity for teaching points in every such case
- Recognition: Public praise for values well-lived is intrinsically motivating
- Confrontation: Trust-building leaders do not hesitate to overrule business decisions if they violate values, and to do so publicly in ways that teach lessons. Values, not value, are the ultimate arbiter of all actions.
To sum up: it’s a simple concept. Trust in a corporate setting is achieved by building trust-based organizations. Trust-based organizations are built to consciously increase the levels of trusting and of trustworthiness in all organizational relationships. The best approach to creating such an organization is values-based management and leadership. This is different from most approaches to management and leadership in vogue today.
The quotes about Marvin Bower were taken from:
Edersheim, Elizabeth Haas (2007-12-10). McKinsey’s Marvin Bower: Vision, Leadership, and the Creation of Management Consulting. Wiley.
Charlie- Kudos on a great post!
I would add that it is the job of the CEO to remain on the front line. He/she must be the constant and consistent voice and reminder of the organization’s values.
I would also add that in a public company, it is the job of the BOD to ensure that the values created are long-term and carry over from one CEO to the next, regardless of their tenure.
So Charlie, I will ask you, this seems like Trust 101, so why do so few companies follow this model? Here’s a short list!
1. Quarterly earnings pressure. What you are describing requires a long-term strategy that may impact short-term performance.
2. The “wrong” CEO.
3.. Competing interest among stakeholders
4. Failure to get BOD buy-in
5. Inconsistencies in hiring, or disconnect between personal values of the employee and the values of the organization
6. Giving a “pass” to values offenders
What’s missing? Maybe it’s as simple as the need for more case studies in support of values based organizations.
[from Rich Sternhell, via email]
Charlie, an interesting piece. You are asking a great deal from your reader in this one. An issue with blogs in general is that they lend themselves to oversimplification. You have packed this full and run the risk of losing your reader along the way. I’m not sure it needed to be quite as dense to get your point across.
There is one line that I either don’t understand or disagree with (I’m not sure which): “Risk is necessary to trust: if risk is completely mitigated, we are left only with probability.” I would agree that risk or vulnerability is an inherent part of a trust relationship. The absence of risk isn’t probability, it is certainty.
I disagree that trust is “largely” an interpersonal phenomenon….it is completely an interpersonal phenomenon. While some may speak of “trustworthy” companies, I doubt that anyone actually believes in them. At best, I will give the benefit of the doubt to a company I have had a positive relationship with. It doesn’t at all mean that I trust them. I expect Amazon to deliver my packages when they say they will. I don’t “trust” them to do that.
A trust-based organization fosters…..trust-based relationships among (not between) various stakeholders. Here again, it is what the leadership of the organization values, talks about and rewards. You don’t talk about negative consequences for violating the values. To me, the most effective messages come when a successful salesperson or executive is demoted/terminated for a success that came at the expense of the firm’s values. I’ve seen that happen twice in my career and the power of the message was awesome.
I also disagree with your statement that trust relationships are asynchronous; I believe that both parties in a trust relationship are taking a risk. Trust is a two way street. I don’t think of it as trustee and trustor. In a sales situation, both the customer and the sales person have to make themselves vulnerable in order for the necessary communication to take place that will result in an optimal outcome.
Sorry for the rambling nature of this as well as its critical tone. You have crammed a great deal into it and I think the sheer volume overwhelmed the space.
Thanks Rich, great comments. Actually we agree on quite a bit here.
–You are a bit more a purist than I am on whether the word “trust” can be applied to companies; I say 10%, you say 0%. Tomato tomahto?
–We agree that both parties must be vulnerable, though I tend to describe the risk-taker role as being passed back and forth multiple times. Regardless, each must play trustor and trustee roles.
–You say the absence of risk is certainty. I agree, noting that certainty falls in the realm of probability; we both agree it’s outside the realm of trust.
Thank you for noting the power of negative consequences for values violations. I know of a few highly visible firings based on values – one of those is more powerful than a hundred empathetic attaboys. Just saying what something is loses value if you’re not also willing to say what it’s not.
Yes, this one asks a great deal from the reader. Obviously you are up to the challenge. Thanks.
Creating trust-based organisations is so important,not only for corporates,but other organisations too.I think values based management is an area,where some organisations are strategically well-positioned to play an important role in building up trust.These organisations are cooperatives,and no doubt due to their high trust quotient,they did not face the rigours of recession,when other corporates faced down-sizing and other economic pressures A comparative study of organisations of all types must be undertaken..
Incredibly thorough Charles. Thanks for the thoughtful article. Ian
P.S. – Not sure I mentioned this yet, really like the new site design.