Taking Trust for Granted

While trust is experienced personally, it also happens within a given social context. Sometimes we take the context for granted. Other times, it intrudes on us in ways that make us re-frame trust.

Blog-reader Martin, a semi-retired general management consultant who now resides in the Caribbean, points out how things can differ when, for example,

…the laws are poor, enforcement weak (and politically influenceable), transparency is a dirty word and ethical behavior is tied up in a wonderful concept of ananci (simple translation is trickster and the basis of most ‘smart guys’). Religion is still a strong force for many people who are disgusted by what they see going on. So your points are fine in the context of the US but maybe less relevant as you decline in legality (and don’t forget while America is often a legal place it is rarely a moral place).

Marc Gunther wrote in Fortune a few weeks ago about Anwar Ibrahim:

…a rising star in Asian politics during the 1990s as Finance Minister and then Deputy Prime Minister under Malaysian Prime Minister Mahathir Mohamad. But in 1998, after leading a campaign against government corruption, Ibrahim was thrown in jail on trumped-up charges and held in solitary confinement for six years.
He has since become an advocate for democracy, a teacher at Georgetown University, and honorary president of AccountAbility.

Ibrahim points a way between complete cultural relativism and some kind of standards. He suggests:

…business can tend toward cronyism, corruption and other poor practices in the absence of a free press, a vibrant civil society and effective law enforcement…Certainly there may be regional variations in how business is done, but accountability, universal human rights, an independent judiciary and a free press are not Western or Eastern values. They are universal values that we should all embrace.

George Packer, writing in the Nov. 13 issue of The New Yorker (“The MegaCity,” not available online), describes the shocking dynamics of what is now the world’s 6th largest city, Lagos, Nigeria. While Packer suggests that other writers (Stewart Brand, Robert Neuwirth) see in Lagos some exciting new patterns of social development, Packer vividly describes millions of people living in a social structure built on pure power relationships:

Every group of workers—even at the stolen-goods market in the Ijora district—has a union that amounts to an extortion racket…The patronage system helps the megacity absorb the continual influx of newcomers for whom the formal economy has no use…It amounts to a predatory system of obligation, set down in no laws, enforced by implied threat.

Those Nigerian “share my inheritance with me” email scams are not isolated events, but perfect reflections of this culture. High trust? Hard to see how.

Finally, there is “Pastor Ted” Haggard, a home-grown American who publicly and egregiously violated the trust of his family and congregation; “egregiously” because he was at the head of an institution which pointedly attacks drugs, homosexuality, and lying. As he put it, according to the AP:

“I am a deceiver and a liar. There’s a part of my life that is so repulsive and dark that I have been warring against it for all of my adult life,” he said…”because of pride, I began deceiving those I love the most because I didn’t want to hurt or disappoint them.”

Low Trust and High Trust Cultures

Francis Fukuyama, in Trust: The Social Virtues and the Creation of Prosperity, talks about low-trust and high-trust cultures. It is not easy to go against culture, to trust someone in a low-trust culture. The essence of low trust is that the interests of oneself are seen as opposed to the interests of others.

How does Pastor Ted fit in here with the cultural issues? Because the cultural demands for moral perfection became unbearable for him, and he “began to deceive…because I didn’t want to hurt or disappoint them.”

Lying belongs right up there with corruption and blatant self-interest as a driver of low trust—they all drive a wedge between people. If someone lies to you the way Pastor Ted did, it means they have chosen to appoint themselves as managers of your life, with no input from you. Pastor Ted’s motives in such a case are unlikely to redeem his actions. In this regard, stealing, cheating and lying are all of the same cloth, that of opposition.

 

The Four Ways to Increase Trust in Business

We trust individuals (or not). We also say we “trust” (or not) institutions—the SEC, Citibank, physicians (as a class), or business in general. Let’s talk about the latter. (Insert your favorite version of “trust in business is at an all-time low.”)

Take the scandal du jour—options backdating—as an example (it’s tough to choose, what with mutual funds, reinsurance, mark-to-market accounting, influence-peddling, capitalizing expenses, and looting for personal gain all vying for attention—but I digress).

Four broad approaches to dealing with low trust in business

a. enactment of laws or regulations, particularly re conflicts of interest;
b. enforcement of existing laws or regulation;
c. an increased transparency or visibility of transgressions;
d. an increase, in for lack of a better term, the ethical behavior of individuals.

All have their role, but it seems to me that—at least in the US—we have become too reliant on the first, and not enough on the latter three.

1. Enactment. Think Sarbanes-Oxley. There is no shortage of critics about its cost (Going Private blog is a good one); it also has its proponents (e.g. Annette Nazareth, SEC Commissioner, Business Week’s Ideas: Outside Shot, “Keeping SarbOx is Crucial”, November 13, 2006). Enacting our way into trust can be a massively expensive proposition—a serious cost of a low-trust business environment. But it’s also a mistake to phrase the debate solely in terms of efficiency.

The even bigger issue is whether reliance on the blunt instrument of the law saps the societal and cultural will required for other approaches to low trust. This is particularly true of conflicts of interest.

When Sarbanes-Oxley (or Glass-Steagall, decades ago) legislated barriers between kinds of business (accounting and consulting, merchant and investment banking), it said, “human beings cannot reasonably be expected to behave well towards each other in this circumstance—our baser instincts of selfishness will win out.”

This assumption puts a cynical ceiling on the expectations we hold out for individuals. Not that the cynicism hasn’t often been justified. Then again, low expectations are often self-fulfilling.

2. Enforcement. Think Eliot Spitzer. Not Spitzer the politician, or heavy-handed cop, but Spitzer the AG who single-handedly brought about some serious change. He didn’t invent any new laws, he just enforced. Enforcement has the great virtue of efficiency, but it also increases the integrity of the law, by taking it seriously.

The SEC has been active here on the issue of options backdating. Chairman Chris Cox says of options backdating, "this fact pattern results in a violation of the SEC’s disclosure rules, a violation of accounting rules and also a violation of the tax laws." If I’ve got it right, Sarbanes Oxley did not create the regulations that companies are running afoul of. Sarbanes Oxley made mandatory the disclosure which allowed violations to be discovered.

3. Transparency. Think whistle-blowers like Sherron Watkins; investigative journalism at its best; the increasing power of blogs. The options backdating scandal was first brought to light not by new legislation, or by the SEC, but by an academic whose studies showed that many companies’ options dates were statistically suspect in the extreme.

Like enforcement, transparency leverages existing agreed-upon norms. But it has the added power of galvanizing social groups around social norms, not just legal ones.

(In a fascinating bit of speculation, Joe Nocera’s NYTimes article (Talking Business, Sept. 23, 2006, "Curiosity Has its Merits and Its Profits") suggests that much of the haste of options abusers to crawl out from under the rocks and confess is due not to classical whistle blowers, but to corporate arbitrageurs who used the academics’ insights to catch the bad guys in a classic squeeze between being in violation of bond covenants, and paying the arbs to get out. This is one for free-marketers to love— a classic case of Gordon Gecko as Robin Hood.)

4. Individual behavior. At its simplest, business “ethics,” if it means anything other than “don’t get caught,” implies a beneficial relationship between businesses and people. Not just adversarial—beneficial.

Just educating people about the law succeeds only in teaching them to make informed guesses about what they can get away with. If that’s all we mean by “business ethics”—and judging by some educational programs, it is—then we’re just handing out sheep’s clothing to wolves.

“Values,” too, is a dodgy term. It is often either code-speak for religious right-wing belief systems, or a watered-down politically correct mantra (next time you see the word “values,” check to see if any specific value is mentioned—when the term exists only in the plural, it has no teeth)

The only valid way to change individual behavior is to reclaim business from its servitude to the idea of “competitive advantage” it has suffered under for the last three decades. We need to reframe business as being about commerce, not competition. The central organizing relationship in business has to change: from the relationship between competitors to the relationship between supplier and customer. Without a sense of that positive mutual relationship, there is no basis for expecting “good” behavior.

The problem isn’t in business ethics courses; it’s in the strategy and marketing courses. As long as we believe the goal of a company is to beat its competitors (and its suppliers and customers, a la Mike Porter), then we will have to rely on laws and enforcement to protect us from the implicit base motives we ascribe to people. Aiding the forces that increase transparency helps us to examine common goals—a good thing. And if we change the goal of business—if we begin to teach, and demand, that companies exist to serve customers in particular—then we have a shot at internalizing a higher order of corporate behavior in business people, the most desirable of the four roads to restoring trust .

 

 

Customer Focus, Culture Vulture and Gaining Trust

Customer focus” has achieved the status of unquestioned business virtue. Hundreds of books and gurus attest to the power of customer focus to improve sellers’ business results.

Customers benefit too by getting what they need. Ain’t it grand, how the invisible hand turns greed into social welfare?

That’s the theory—but theory is getting stress-tested. A lot of “customer focus” is in fact destroying the trust of customers.

Destroying Customer Trust

When customer focus becomes merely a sales tactic—a means to the seller’s end—then it comes the customer focus of a vulture.

A vulture is “customer-focused”—but entirely for its own purposes. When it comes to trust, motives make a difference.

Bad motives are having an impact. When was the last time you filled out one of those endemic “rate how we’re doing” hotel forms?

We no longer even notice the lie, while waiting on hold, in the message “your call is very important to us.” How do you feel when a CSR is scripted to ask you, “have I provided you with excellent customer service?” clearly in order just to collect self-serving performance metrics?

If this were only about used cars and telemarketing, then no biggie. But the vultural perspective is taking over sophisticated B2B interactions in big, complex businesses.

You can see it in highly refined incentive comp systems that tightly link extrinsic and self-serving rewards to ostensibly client-serving actions; in the use of “sustainable competitive advantage” as the baseline for justifying "client service;" in the use of depersonalizing business language like “human capital.”

When Real Customer Focus Results in Higher Trust

Customer focus is a wonderful thing when it includes betterment of the customer at the top level of goals. But when the customer is just a poker chip in a competitive game, a body count for keeping score between competitors, then customer focus has turned cynical.

The irony is, true customer focus—for the customer’s good—results in higher trust, better relationships, and better profitability, than purely self-oriented initiatives.

Emulate not the vulture.

 

 

Trust Tip 13: Giving Speeches, Listening Skills

Suppose you had to give a speech. To which audience would you rather present?

  1. The National Speakers Association
  2. The International Listening Association
  3. Microsoft

The NSA might sound the most intimidating. Then again, they’d probably empathize.

Microsoft would probably be the worst—doing email and blackberries throughout.

Which makes me think, “hey, the ILA would probably be a great audience!”

Yes, there is such a group (the other two also exist, but that’s another post). Ever wonder where people get those statistics about “X% of what people hear is non-verbal,” or “Y% of people’s time is spent communicating …” You can find it here.

How about a new book titled “Sex, Politics and Religion at the Office.” It’s by John Boogaert and Douglas Noll, who say, “create a sustainable competitive advantage in your company with sex, politics and religion.” Attention-getting title, to be sure, but their thesis also makes sense; organizations that are scared to talk about combustible issues will fail.

A Key Competitive Advantage: Listening

And guess what one key is to that competitive advantage? That’s right, listening. Not a connection I had made by that route before—but I buy it.

But don’t listen to me, google “listening skills” yourself. You’ll get lots of practical advice. Listen for content not style. Engage in eye contact. Mirror body language. Stay active by asking open-ended questions. Sit near the front. Be responsive. Understand your own style. Listen with a purpose. Be interested. Look for non-verbals. And so on.

It’s all good on some level, but here’s my number 1 recommendation—part 1 of a 2-parter. It’s based on the assumption that a lot of what passes for listening is really just waiting for the other person to finish and shut up so we can start looking smart again.

Part 1 is do nothing but pay attention. Nothing. We’re way beyond no blackberries. Don’t think about body language. Don’t think about your next question. Don’t think about the implications of what you’re hearing. Don’t—think. Just. Pay. Attention.

Paying attention is paying respect. Attention is a scarce resource—we all crave it. To pay attention is to give a scarce gift. Empathy, caring, understanding, problem-solving, diplomacy, selling—all start with paying attention. IF you listen by paying attention, others will then pay attention to you—it’s a reciprocity thing. And it is a choice you have the power to make. You don’t have to play that other game.

Part 2 answers, “but how do I stop thinking about all that stuff so that I can pay attention?” Check back in a week for that one; there is an answer.

 

Corporate Culture: Your Competitive Advantage

David Maister has written almost despairingly of the absence of trust and other aspects of enlightened management in the business of law (e.g. in American Lawyer earlier this year). He suggests only shifting client needs will change things:

Many firms have collections of great lawyers. The time may be coming when clients will expect them to go beyond this and become effective organizations. Without a prior, explicit agreement on minimum standards, and the resolve to enforce them, many law firms will not function well as firms but will remain what they are today: bands of warlords, each with his or her followers, ruling over a group of cowed citizens and acting in temporary alliance—until a better opportunity comes along.

So it’s especially intriguing to run across the occasional exception to the pattern.

Trust and Law Firms

I had the pleasure of speaking last weekend to the partners of Bennett Jones LLP, Canada’s 13th largest law firm at about 300 lawyers, plus staff.

They ranked number 6 on Hewitt Associates’ list of Best Canadian Employers. That puts them ahead of other Top-50 Canadian employers like Enterprise Rent-a-Car, Johnson and Johnson, and Procter & Gamble.

Their #6 ranking was up from #18 in 2005; up from #26 in 2004; #34 in 2003. And, I believe, no other Canadian law firm has ever made it to number 50.

Hewitt makes clear the financial implications of best employer practices. In Canada, best employers have 20% better five year total returns to shareholders than do their industry comparables. In Australia, growth rates of best employers are double that of the rest, and in Asia, they’re 50% higher. Lower employee turnover, higher engagement rate, etc. Others have also written at length about such issues—again, Maister, as well as Jim Collins and Marcus Buckingham.

Bennett Jones’ partners are visibly collegial. Chairman John Cordeau and Managing Partner Hugh MacKinnon lead their speeches with statements of the firm’s values, and their commitment to enforcing them—particularly collaboration—for growth from their original regional and energy-industry base. As they put it, “we used to think that our competitive advantage was energy. We now think it’s our culture.” I think they’re right.

Bennett Jones doesn’t prove Maister wrong, they probably support his point. Market-based realities—the need for talent attraction and retention, the need to grow into new markets and to integrate—can drive even law firms to embrace management practices shown to work elsewhere, if they have leadership willing to make the commitment.

Who’d a thunk it, eh?

UPDATE: On December 29, 2006, Bennett Jones was voted #4 in Canada’s top 50, up from #6 the year before when the above article was written. An even more remarkable performance. Congratulations to them.

Marketing Myopia and Selling Revisited

One of Harvard Business Review’s all-time best-selling articles is Ted Levitt’s “Marketing Myopia.” It sold 850,000 reprints from its 1960 publication to Levitt’s death earlier this year.

Re-read today, it looks more like strategy than marketing. His claim that the railroads failed to see they were in the transportation business is bigger-picture than what most marketing has become.

The article has aged well—except for Levitt’s aside about marketing vs. sales. Listen to how he defines selling:

“The difference between marketing and selling is more than semantic. Selling focuses on the needs of the seller, marketing on the needs of the buyer. Selling is preoccupied with the seller’s need to convert the product into cash, marketing with the idea of satisfying the needs of the customer…”

Now here’s a fairly typical quote from 2006: Ann Armstrong, in a B2Bonline.com interview about the role of sales at her company:

MB: FCW has an unusual setup for selling integrated media, with general managers for print, online and events working with seven media consultants. How does this work?
Armstrong: The term media consultants reflects a real change in the role of the salesperson. Their first job now is to listen, to find out the customer’s goals and objectives. Then they come back and create an integrated media plan that’s tailored to that particular customer."

The Evolution of Sales and Marketing

Sales has taken a 180-degree turn in the 45 years between those two quotes. Because all products now have major services components, and because of mass customization, sales has usurped the customer focus role from marketing, and the product development role from R&D or engineering. Sales, not marketing, is the source of connection to the customer.

An updated definition of “sales” would position it as the critical interface between seller and buyer in a commercial relationship—not the agent of product flogging in a competitive relationship. Willie Loman, peddlers and hustlers are well out of date, even if many hang on.

"Customer focus” has for too long been turned by marketing types—who increasingly look like finance types—into code for increasing returns to the seller. Meanwhile, in industry after industry, it is the customer relationship contact—a.k.a. sales—which ends up translating the voice of the buyer.

Is Sales the new Marketing?

Update: This post was featured in the Carnival of Capitalists.

Trust Tip #27-How to Prevent Useless Conflicts

I want to make sure to get tactical and practical every few posts. This is Tip #27, but I’m publishing it first, out of sequence, because I think it’s so provocative.

First the rule: then examples: then explanation. Here we go.

Rule 27a: get rid of the verb "to be" in all its forms;

Rule 27b: speak only in the first person, or in the third person impersonal.

That may sound a little weird; let me give you some examples.

Instead of, "That was a lousy movie," say, "I didn’t like that movie." (rule 27a)

Instead of, "You’re not getting my point," say, "what we have here is a failure to communicate." (rule 27b)

Instead of, "It will not be acceptable to them," say, "I’m concerned about the odds of them accepting it." (rule 27a, 27b)

Preventig Useless Conflicts

These simple rules help prevent useless conflict. 27a (if you’ll pardon some philosophical jargon) basically says "all ‘is’ statements are metaphysical, and unprovable." They are bald assertions with the potential to inflame argument rather than to help collaboration.

27b helps us remember that the only inarguable statements we can make are those about our own feelings, or about inanimate objects. Statements about "you" or "him" invite unnecessary confrontation, because someone so inclined can read blame or judgment into it.

Combined, the two rules make us speak in a way that takes responsibility, and invites others to do the same. At the extreme, "You’re an idiot!" becomes "wow, we really see this differently, don’t we? Tell me more about your view?"

Then, as Portnoy’s shrink finally said, perhaps we can begin.

Full disclosure: I didn’t invent this, I heard it—as best I can recall—about 15 years ago on National Public Radio, and can’t recall who the originator was. I’d be grateful if anyone knows the origin.

 


 

 

 

Trust and Risk—Ronald Reagan Redux

Ronald Reagan, speaking of diplomacy and the Soviet Union, famously said, "trust—but verify."

The statement never made sense to me (except as politics). If you’re going to resort to verification, you’re not dealing with trust, but with risk management. Trust without risk ain’t trust.

Something related comes to us from a fascinating interview with Stanford’s James G. March in the October Harvard Business Review. (Thanks to the 1-800-CEO-READ blog for the link).

HBR: In your film on Don Quixote and leadership, you say that if we trust only when trust is warranted, love only when love is returned, and learn only when learning is valuable, then we abandon an essential feature of our humanity. How do we lose part of our humanity?*

 

March: We justify actions by their consequences. But providing consequential justification is only a part of being human. It is an old issue, one with which Kant and Kierkegaard, among many others, struggled. I once taught a course on friendship that reinforced this idea for me. By the end of the course, a conspicuous difference had emerged between some of the students and me. They saw friendship as an exchange relationship: My friend is my friend because he or she is useful to me in one way or another. By contrast, I saw friendship as an arbitrary relationship: If you’re my friend, then there are various obligations that I have toward you, which have nothing to do with your behavior. We also talked about trust in that class. The students would say, “Well, how can you trust people unless they are trustworthy?” So I asked them why they called that trust. It sounded to me like a calculated exchange. For trust to be anything truly meaningful, you have to trust somebody who isn’t trustworthy. Otherwise, it’s just a standard rational transaction. The relationships among leaders and those between leaders and their followers certainly involve elements of simple exchange and reciprocity, but humans are capable of, and often exhibit, more arbitrary sentiments of commitment to one another.


March doesn’t use the word "trustworthy" the same way I do; for him, it smacks of the "verification" part of Ronald Reagan’s formula. No matter: the core of his message is that reliance solely on "consequential justification" (I love that line) strips trust of its essence.

Makes sense to me!

Paint by Numbers Management

Ten days ago, the Wall Street Journal headlined HP’s boardroom clash between no-longer-chairman Patricia Dunn and Director Tom Perkins. It’d be a great made-for-TV movie.

There’s venture capitalist and Silicon Valley legend Tom Perkins (as in Kleiner, Perkins, Caulfield), an early HP employee himself, used to getting his own way, his reputation apparently exceeded only by his own self-image.

Then there’s Dunn. Dunn had a very tough life, her career success a tribute to her strong will. But her route to the top was mastery of “the book,” as in “doing things by…”

“Failure avoidance has been a large motivator my whole life,” Dunn says in the article—an astonishing comment from any leader, much less one in the tech sector. “She became fascinated with the way Wells Fargo used academic theories to whittle away the role of human judgment in investment decisions.”

Indeed. Those pesky humans gum up the works every time. HP’s board was clearly dysfunctional, but the impact of leaks on Dunn was outsized. She set about making things orderly again, seeking salvation in process. The Journal says, “adamant in her desire to ‘fix’ the leak problem, she succumbed to tunnel vision.”

She’s not alone in the tunnel. The dominant thinking in business today reinforces her instinctive attraction to things quantitative, impersonal, process-based, statistically measurable, and susceptible to management-by-procedures.

No surprise, then, that Dunn said, before Congress, “I do not accept personal responsibility for what happened.” The absence of a sense of the human in business leads almost inexorably to the denial of personal accountability. (See Tom Peters’ blog for a refreshing rant of outrage at Dunn’s comment).

How can you trust someone who appears not to grasp the concept of accountability? Responsibility can be delegated; accountability cannot. It is a distinction apparently lost on Ms. Dunn—and again, she’s not alone.

From “management by numbers” to “paint by numbers management” is a slippery slope. Perkins may have his flaws, but he apparently has the great virtue of being human.

You can trust people. You can’t trust human calculators.

Update: This article was also in the Carnival of Business.

Faking Trust

Today’s issue of The Wise Marketer suggests that corporate honesty will be the number one key alternative marketing trend for 2007. Here’s how they put it:

"While marketers are constantly watching for alternative methods that can give them a competitive edge in over-crowded markets, Drew Neisser, CEO for Renegade Marketing explained to us the ones that will rise fastest in 2007. First among Neisser’s observations in looking for the key trends for 2007 is the idea that corporate honesty will take centre-stage, helping brands and products recover from potential disasters…"

On the one hand, a plus for increased trust in the business world. Transparency, openness, honesty, etc.—can’t complain about that.

On the other hand—check the motives implicit in the way it is positioned. When honesty is portrayed as the best policy in order to achieve self-oriented goals, we have to wonder about the depth of trust implicit in the honesty we’re offered.

The Value of Honesty and Trust

Honesty—or trust, even moreso—built on nothing but contingent results doesn’t resonate with us much. If the only reason someone isn’t lying to me is that they might get caught otherwise, then I "trust" that person only insofar as the enforcement mechanisms are in place. I’ll make sure to stay out of dark alleys and private conversations with such a person, because—you never know.

Good motives have a lot to do with trust. Which is why the preferred mode of motivation these days—behavioral short term results linked to incentive compensation—rings so hollow when it comes to issues of trust. If you behave the way you do because you get more money for doing it, then I’ll only trust you so far.

Motives matter—fake it and you won’t make it.