Making Excuses To Strangers Is A Sign Of Self-Orientation

/10 Comments/in /by

Earlier this week, I wrote about the critical role played in the Trust Equation by the factor of Self-Orientation.   The brief version is:

The biggest killer of trustworthiness is high self-orientation – a tendency to focus too much on ourselves.

That’s the theory. Now let’s have fun with some examples.

With a tip o’ the hat to Jeff Foxworthy, who invented this peculiarly American quasi-haiku format:

·    If you find yourself making excuses to a stranger for something a good friend would have forgotten about days ago – you might be highly self-oriented.

·    If you lose more than 45 minutes of sleep re-running what you should have said in that conversation – you might be highly self-oriented.

·    If you go from thinking you’re the greatest to thinking you are worthless – and back again – within two minutes – you might be highly self-oriented.

·    If you apologize more than three times for something pretty trivial – you might be highly self-oriented.

·    If you are pretty sure that that song really was about you – you might be highly self-oriented.

·    If you immediately lose interest in a potential customer when it appears they won’t buy this month – you might be highly self-oriented.

·    If it bothers you that probably no song will ever be about you – you might be highly self-oriented.

·    If you take great pride in beating your grandmother at Scrabble (and you’re over 20, and she’s over 80) – you might be highly self-oriented.

·    If you are presenting to a client, and the client disagrees about an issue, and your pulse rate goes up 20 points – you might be highly self-oriented.

·    If you’re worried that everyone’s always talking about you – you might be highly self-oriented.

·    If it worries you that no one is ever talking about you – you might be highly self-oriented.

·    If someone suggests a change in something you did, and you respond by explaining why you did it — three times in a row – you might be highly self-oriented.

·    If you think, “wow, I just did the same thing last month” constitutes empathy – you might be highly self-oriented.

·    If a potential client says, “your prices are too high,” and it makes you feel attacked or angry – you might be highly self-oriented.

·    If you think self-flagellation is a virtue – you might be highly self-oriented.

·    If you were in charge of the company picnic and it rained, and you feel guilty – you might be highly self-oriented.

Here’s a hint. Your job is to do the best you can to help others—and to give up control over the outcome. An expectation on your part is just a pre-meditated resentment.

Is Self-Orientation Killing Your Trustworthiness

/17 Comments/in /by

When Maister, Galford and I wrote The Trusted Advisor in 2000 one of the more popular themes in the book was the Trust Equation.

 

 

 

Where:

TQ        = Trustworthiness

C            = Credility

R            = Reliability

I            = Intimacy

S            = Self-Orientation

And within that equation, the factor that has stirred the most interest over the years has been the denominator, self-orientation.   In the trust equation, since the S factor is in the denominator, a high level of self-orientation reduces trustworthiness.   A low level of self-orientation serves to increase trustworthiness.

Let me explain this further.

Self-Orientation Is About Where Your Attention is Focused

When you are standing in front of a room presenting, and your pulse rate is high, your palms sweating, your breath shallow and fast – in those moments, your self-orientation is quite high, because you are focusing on yourself.

The key to successful presenting lies first and foremost in getting out of the trap of self-orientation. You need to have the calmness, confidence and curiosity to see the audience and its needs rather than to see them as instruments of torture for you.

For synonyms or drivers of high self-orientation think self-obsessed, self-conscious, self-loathing, self-aggrandizing, full of self, un-self-confident.

When we are operating from high self-orientation, we do not hear others. We do not hear their questions, desires, fears, or emotions in general. The noise inside our own head drowns them out.

The psychology goes like this: if your level of self-orientation is low, you can pay attention to someone else. If you pay attention to someone, they experience that as caring. If someone thinks you care about them, they are likely to trust you.

Conversely, if your attention is focused on yourself, others become acutely aware of it and infer that you do not care about them. Rightly or wrongly, they then decide you are untrustworthy.

It is hard to pay attention, therefore hard to care, and therefore hard to be trustworthy if your attention is all on yourself – your self-orientation is high.

Self-Orientation Does Not Mean Selfishness

You may be selfish, in which case you are probably pretty self-oriented. But you may also be highly unselfish yet attached to the idea of others seeing you as unselfish. That is also high self-orientation.

Sometimes people equate low self-orientation with passivity or with willingness to give away business, cut price, or otherwise let the other party “win.” It means nothing of the kind.

A low self-orientation is critical to legitimate client focus. You cannot be focused on customers for the sake of the customer if you are obsessed with the moral activity in your own brain. Since client focus is a driver of profitability, this leads to a wonderful paradox: if you focus on achieving profitability by way of client focus, you will sub-optimize. Yet if you focus on the good of the client, rather than the funds you can extract from their accounts, you will achieve greater profitability – by treating it as a byproduct rather than as a goal.

Low self-orientation is not some soft form of capitalism. It is rooted in the simple psychological observation that human beings return good for good, but only money for goods. Retention economics and returns to scale in the real world are driven heavily by a sense that parties are out to help each other, not to gouge each other. Low self-orientation drives higher profitability, not lower.

I will write another blog this week giving some practical examples of high self-orientation, so that you can spot them as they arise. In the meantime, let me offer a simple practical tool for diagnosing high self-orientation:

Seek humility. That does not mean thinking less of yourself; it means thinking of yourself less.

To for continued reading check out: Trusting your colleagues will make you more trustworthy to your customers

Giving and Getting Respect

/0 Comments/in /by

Respect is a theme I run across in my work with trust. Many people say they want to be trusted. Yet they feel disrespected by those from whom they seek trust.   In such cases, “they don’t trust me” quickly breaks down into “they behave disrespectfully toward me.”   A desire morphs into a resentment. 

The unconscious implication is that “if they don’t trust me, it’s their fault, because they don’t respect me in the first place. And if they don’t respect me, then I won’t respect them either. Their lack of trust in me is their fault, not mine.”

There’s a lot going on in that little circle of mis-logic. How is it that we respect others, and that they respect us? What does disrespect have to do with trust?

Note the grammatical parallels between trust and respect. Both are used as verb, as adjective, and as adjectival phrase:

I trust you; I am trustworthy; I am trusted by you

I respect you; I am respectable; I am respected by you

Are there causal links here? And if so, what are they?

There’s an old truism: the fastest way to make a man trustworthy is to trust him. This is one truism that has been proven true to me.

Of course, there is a loose correlation between being trustworthy and being trusted, just as there is between being respectable and being respected.

But – and this is critical – there is no guarantee with either one. Not only can you not always get someone to trust or respect you, but the harder you try – the less likely you are to succeed. This is why trust-based selling is so much more powerful than linear, logic-based selling.

Giving Respect and Trusting

Both trust and respect must be freely given. If demanded or coerced, the results are the opposite–distrust and disrespect.   This is why I tell my clients never to call themselves trusted advisors—let your clients make that determination for themselves, and make it public, or not, on their own. Being called a trusted advisor is great marketing, but only if never suborned.

The ability to trust and to respect is a sign of an evolved ability to relate to others. That doesn’t make blind trust or respect a virtue: there is nothing noble about trusting a thief, or respecting a scoundrel. That’s just stupid.

But equally stupid, and more common, is a refusal to trust or to respect others. That refusal is driven by fear and, by way of paranoia, gums up the works of human interactions and commerce.

Being Respected and Being Trusted

Just as trusting others helps but doesn’t guarantee being trusted by them, so does respecting others not guarantee being respected by them. And that’s where we end up feeling “it’s not fair.”

Let’s be clear. When it comes to trust and respect, fairness is not an issue. If your spouse buys you a gift for the holidays, do you think of it as ‘fair’ or not? (Hint: the right answer is ‘no, of course I don’t, Charlie, what do you take me for!’)

Give Respect to Get It? Or Give Respect and Detach?

Too often we try to put conditions on what must be freely given. You can’t reduce trust to a controlled conditional transaction: “If you give me this, I’ll trust you to do that, but you’d better be fair.” There is no trust without risk; if you try to control the outcome, you’ll destroy the trust. 

I’m coming to think respect is the same. To respect someone is good; partly because it can make the other person feel respected–but mainly because it shows you’re the kind of person who has an evolved ability to relate to others.

The distinction becomes important when we look for others to respect us. If we crave respect from others, we are setting ourselves up for disappointment. But worst, we are trying to force (via guilt trip) others to do what we want them to

TrustedAdvisor Associates Workshops & Events, Fall 2010

/0 Comments/in /by

Join us this Fall at one or more of our 2010 TrustedAdvisor Associates events in McLean, VA; Livingston, NJ; and through globally accessed webinars!  Topics will include:  "Building a Culture of Trust and Innovation" and "How Smart Companies Make the Sale."
 
We hope you’ll be able to attend and  look forward to seeing you!

——————————

Wed. Oct. 6th        McLean, VA           Sandy Styer

For WTPF: The Business Forum for HR Professionals’ HR EDGE event, Sandy will serve as a featured guest, speaking on the topic of Building a Culture of Trust and Innovation. An all-day affair that offers entincing development and networking opportunities, HR EDGE features a line-up of exciting speakers that focus on the four aspects of the event: Engage, Develop, Grow and Execute.   Duration: All Day. Open to WTPF Members and Non-Members. The Gannett Building 7950 Jones Branch Dr., McLean, VA 22107. For more information contact: Reggie Kouba; p.703-433-9576; e. [email protected].

Tues. Oct. 26th        Livingston, NJ          Charles H. Green

For Sobel & Co’s 5th Annual Business Symposium for Privately-Owned Companies, Charlie will speak on "How Smart Companies Make the Sale." Presentation 4-6PM, cocktail reception following. Westminister Hotel, 550 West Mount Pleasant Avenue, Livingston, New Jersey. Limited seating, RSVP only to Sally Glick at 973.994.9494 or [email protected]

Balance Trust and Control for Innovation

/0 Comments/in /by

The storyline almost writes itself. Blinded by infighting and bureaucracy, both Microsoft and Nokia squandered great opportunities to innovate. In turn, they are then overtaken by more nimble competitors, particularly Apple.

While there’s truth to that simplified storyline, the lessons to be learned are less obvious. Let’s tease it all out a bit.

Microsoft: Innovation Killed by Competitive Culture?

In an editorial earlier this year (February 2010), former Microsoft VP Dick Brass ran down the list. He identified three significant technological innovations at which Microsoft had a good shot, only to be leapfrogged by Apple: tablet computers, ebooks, and smartphones.

There was no doubt in Brass’ mind about the villain: Microsoft’s powerful competitive culture. Caught between competing principalities in the kingdom, forward progress was slowed. The kingdom of MSFT was therefore bogged down itself.

Possible Hypotheses:

a.    Better to collaborate than compete?

b.    Better to have top-down direction than laissez-faire innovation?

Nokia: Innovation Killed by Bureaucratic Conservatism?

Kevin O’Brien, in an International Herald Tribune front page story on September 27, 2010, writes that Nokia showed business customers a prototype touch-screen, internet-ready phone three years before Apple’s 2007 iPhone introduction. However, because it was expensive to produce, a risk-averse management team killed it.

O’Brien cites several variations on the theme: Nokia was historically a hardware-driven, not a software-driven, firm. Its previous success made it more risk-averse. The committee-structure employed by Nokia moves decisions to lowest-common denominator design and a tendency to defer decisions.

Possible Hypotheses:

a.    Re-organize to separate mature and evolving businesses?

b.    Develop an incubator operation to nurture small-sized innovations?

These are only a few hypotheses, of course. Another way to phrase the problem might be: When do you go open-source, and when do you dictatorially shut down debate?

Greater minds than mine have been over this issue. Sometimes it gets phrased in terms of innovation; other times, it surfaces as a debate about centralization vs. decentralization. 

It also shows up as a trust issue: when do you trust, as in collaboration–working closely and openly with others. And when do you trust, as in delegation–being willing to let go, to subordinate your wishes to a greater good.

Seen this way, the right answer is probably a blend. Business innovation rarely comes from brilliant minds sitting in isolation; it grows when people are willing to openly engage with each other, rather than to identify their mission as self-aggrandizing. (Ross Smith has written about this, as has Robert Porter Lynch.) Successful innovation depends on successful collaboration at the personal and organizational level.

But a successful organization can’t live on innovation alone: great insights have to be commercialized, produced, marketed, sold, and controlled. These tasks require different skills. (Malcolm Gladwell draws an interesting parallel when he dismisses the idea that Twitter can be a tool for political revolution; looking at the civil rights movement, he suggests its power came from personal connections, not distant ones).

Ideally, then, a successful organization would manifest two kinds of ability to trust their internal teammates.

1.    the ability to trust peers—to offer up insights, and to hear criticism without shut-down and resentment; to be open to ideas from others; to be free of NIH syndrome, and to embrace others’ ideas as your own;

2.    the ability to trust superiors (or designees), to defer to a majority, to sacrifice one’s own good for a greater good; to accept another as speaking for oneself; to delegate without clawing back; to grant others control over ourselves.

These trust dimensions are not any easier than the dimensions of centralize-decentralize. It’s tempting to look at Apple and glean lessons there; after all, they are cast in the role of successful challenger in both the Nokia and the Microsoft stories.

But technology is a distinct business; and while Steve Jobs’ reputation as a controlling manager is clear, it’s not clear (to me) whether Apple’s at what time in the process a decision is made and the ‘trust me’ approach takes over from the ‘we trust each other’ approach.

My guess is—as in most organizational design issues—the ‘right’ answer consists of a carefully crafted statement of ‘it depends,’ pointing out clearly the what, how and when of ‘depends.’

Leaving Butter on the Bread

/1 Comment/in /by

I grew up in country Ireland with the saying ‘leave butter on the bread.’

I have been living in Melbourne for the last 16 years and try and get back to Ireland every year. I visited my parents in the old country a few weeks ago and continually felt a sense of community that gives without expecting anything in return: a neighbour dropping in with a gift of some freshly picked vegetables from her garden; another neighbour dropping in a big pot of homemade vegetable soup; my mother making 12 jars of raspberry jam and giving away 11 jars to neighbours.

All done without any fanfare just with a giving heart.

On this trip I had the great pleasure of dropping into New York to visit the TAA merry gang on my way back to Australia.

I encountered two experiences with big corporate institutions where one left ‘plenty of butter on the bread’ and the other left ‘dry bread’. These incidents have been playing on my mind.

I was walking down 6th Avenue between 17th and 19th West and went into a major bank to withdraw cash from the automatic teller machine (ATM). There were two smartly dressed bank officials standing at the entrance to the ATMs. One enquired if I wanted to withdraw cash and on saying yes I was told they were giving out cash prizes today and to be sure to look out for a flashing message. I thought this is wonderful how lucky am I that I walk into a bank that is giving out cash prizes. I proceeded to insert my card into the machine and at the end of the transaction a flash of $125 came on the screen. The lady who had obviously been watching my machine shouted out, “we have a winner!" I immediately thought how wonderful this bank is, New York is AND I was envisioning a new pair of shoes and said to the bank official "the luck of the Irish." The gentleman asked me to follow him into the main bank so that I could receive my prize and escorted me to a formal office. The first question he asked was “do you make many withdrawals”…"yes"  “which bank do you bank with?” “Westpac (Australian Bank) I am just visiting!”  “Oh we have a problem. You need to open a bank account here in order to receive your prize, which needs to be deposited into an account, and this will not work, as you are from overseas. I immediately said "so when anyone inserts a bankcard from another bank the machine says that they are a winner?" He could not look me in the eye and said "No, that is not the case." My trust of this financial giant was suddenly Zero. In my opinion this was misleading and deceptive conduct. He walked me out to the front door probably so that I would not tell others waiting to take cash out. I had been left without ‘butter on the bread.’

Fortunately there is a heart-warming story to tell. I spent my first day shopping at many stores including Macy’s.  I bought 3 pairs of shoes and was pleased that I received 25% off in their sale. By the end of the week I had to buy  an extra suitcase (large) to accommodate all my shopping!  I made another journey to Macy’s and found that the store had a 50% off sale. I chose a quality suitcase and was surprised at the counter to learn that as well as the 50% off I would get an extra 10% off as this was the last suitcase of its kind and had been on the floor. How wonderful.

On my way out of the store I could not resist popping once more into the shoe department. I found that the shoes I had purchased 5 days earlier were now at 50% off. Just as a throw away line I said to the assistant that if I had waited and bought the shoes today I could have saved money. She enquired if I had my receipt and if so I could take it to the counter and get the extra 25% off.  I did and am happy to report I got the refund. Both transactions within Macy’s went way beyond my expectations. Macy’s left butter on the bread and I will tell many, many people this wonderful story.

The bank, however, I never want to set foot in again.

The Revolution Will Not Be Twitterized

/13 Comments/in /by

Arguably the inventor of rap music—and undeniably a unique voice of our time—Gil Scott-Heron is today most famous for an April 1971 track called “The Revolution Will Not be Televised.” 

“…the revolution will not be brought to you by Xerox in four parts without commercial interruption…will not give you sex appeal, nor make you look five pounds lighter…will not go better with Coke…”. 

The message—as I hear it—making change is not a casual, part-time activity. Done seriously, it can be hazardous to your being.

Here’s a short video of Scott-Heron:

The Revolution Will Not Be Televised
Uploaded by mallox. – Music videos, artist interviews, concerts and more.

Decades later, Malcolm Gladwell nods to Scott-Heron to say something similar about the television of our age—New Social Media (New Yorker, October 4, 2010: "Small Change: Why the Revolution Will Not be Tweeted.")

In his inimitable style, Gladwell first digs deep into the early days of the Civil Rights movement in the US—February 1960, to be precise—to show how a 4-person sitdown strike morphed into sitdown strikes across the south involving 70,000 students. All done, as he notes, without Twitter.

Then—as usual—Gladwell brings in the counterpoint. In this case, new social media. With an undertone of annoyance, Gladwell quotes State Department officials, old media reporters, and new media darling Clay Shirky. They all gush about the power of Twitter and Facebook to affect global political events, and to mobilize masses of people behind crucial movements.

Bahh, says Gladwell. Don’t confuse getting people to contribute thirty-five cents from the comfort of their armchair with a willingness to go get your head broken in support of a cause. And, suggests Gladwell, it is the latter—not the former—that turns out to be at the heart of social change.

Change requires risk. Serious change is done in numbers; but in small numbers, with real ‘friends’ beside you. The ‘friends’ you have on Facebook don’t deliver that kind of support.

Personal and Impersonal Trust

The debate Gladwell is raising is nominally about social media. It does raise a related trust issue, however. To what extent does our extended connectivity and interdependence increase trust?

Let me go back to the Trust Equation to suggest an answer. The Trust Equation (actually an equation for trustworthiness) is

(C + R + I)

          S

Where:

C = credibility

R = reliability

I = intimacy

S = self-orientation

 When people talk about new technologies allowing for the creation of greater trust, they are often talking about the first two elements of credibility and reliability—especially the latter.

·    We ‘trust’ that the sun will rise in the east;

·    We ‘trust’ Amazon’s suggestions for us because they are hugely data-based;

·    We ‘trust’ eBay’s ratings of sellers because they are aggregated and mediated;

At the same time, that kind of trust doesn’t mean I’d introduce my daughter to anyone at Amazon or eBay, or even lend anyone there ten dollars. Because that’s not the kind of trust you get from knowing people. 

A site like Match.com is a more interesting case, because it uses large impersonal aggregation to go after the kinds of interpersonal trust that are missing in a low-dollar commercial purchase. Scale alone is a huge attraction; but the impersonality of the medium, applied to a relationship game, means the dating sites have had to evolve various ways of mimicking the very personal process we have of getting to ‘really’ know other people. Winking, poking, are a few; they mimic the range of halting gestures people make toward each other in early stages; profiles and the ‘just lunch’ concept are others.

Gladwell’s specific point about revolutionary politics is an instance of a more general point about trust: Trust Is Personal. I’m talking about the Intimacy and the Self-Orientation kinds of trust mainly. I mean the kind of trust we need if we’re to do serious interactions, one on one, or movement-on-establishment.

If I don’t ‘trust’ my Toyota, I may go find a Ford. If I don’t ‘trust’ my ‘friend’ on Facebook, I may complain about him to my other ‘friends.’

But if I’m a civil rights activist in the 1960s, or an Iranian dissident today—I’m not going to risk my behind if the only one who’s got my back is a Twitter friend. 

Said Scott-Heron, “You will not be able to plug in, turn on and cop out…the revolution will not be on instant replay…there will be no highlights on the 11:00 news…the revolution will not be…” twitterized.

The Real Stuff is still pretty Personal.

Trust based Leadership

/2 Comments/in /by

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.

Robert J. Kueppers on Trust and Regulation (Trust Quotes #14)

/1 Comment/in , /by

For most of you, Bob Kueppers is someone whose influence (high) is inversely related to the likelihood you’ve heard of him.

As Deputy CEO of Deloitte LLP, Bob Kueppers has responsibility for regulatory and public policy affairs. That means he rubs shoulders with government and industry leaders who determine regulatory and public policy matters in this country and the world. Bob Kueppers was recognized in 2009 by Directorship Magazine as one of the top 100 most influential professionals in corporate governance and the boardroom. 

Bob is refreshingly direct and candid in his interactions; combined with a mastery of a field both wide and deep, he’s a fascinating interview.

Bob has a number of other additional roles at Deloitte, but we’ll focus mainly on his perspective on trust and regulation.

CHG: Bob, I’m delighted to have you join this series. I hope you’ll forgive us delving into just two subsets of your expertise: trust and regulation. Let’s start with regulation. Regulators aren’t getting great press these days. Is it a necessary evil? Or does regulation play a more constructive role in our business and society?

RJK: Regulation in a free enterprise system is one of the essential checks and balances in three different scenarios:

1) When parties in the market may not be equals;

2) When the nature of the market activity is susceptible to fraud or abuse; and

3) When public health and safety are involved.

Even true believers in free markets must acknowledge that a certain amount of regulation actually helps to preserve the credibility of the markets, which helps the market to operate and thrive. 

The debate over regulation often has to do with striking the right balance—finding the right degree of regulation. Like with “Goldilocks and the Three Bears,” it’s hard to get it “just right.” The appropriate degree of regulation often varies depending on the times, current events, and lessons learned.

The formation of the Securities and Exchange Commission in the 1930s, following the crash and market abuses of the late 1920s, is often viewed as a regulatory success. The orderly functioning of the capital markets provided the financial fuel to fund the post World War II expansion that redefined America in the 1950s and 60s.

When things go wrong, the natural reaction is to call for more regulation. But how can you tell when you’ve gone too far? For instance, critics say the recently enacted financial regulatory reform legislation, informally known as the Dodd-Frank Act, goes too far. Others claim it doesn’t go far enough. The truth is that we still don’t know the answer and likely won’t for several years—until the hundreds of regulations needed to make the reforms operational are written and implemented.

 CHG: What should be the role of regulation in the mixed economies we have today in the US and Western Europe? 

 RJK: It depends on the priorities of the country in which that regulation operates.

For instance, the US is often viewed as having a more litigious environment than other countries; as a result, our regulatory environment can be quite different than that of other countries.

Leaving such differences aside, I see the role of regulation as twofold:

1) Help to protect the interests of stakeholders, or, said another way, help to build and maintain trust in the markets that make up the economy; and

 2) Help to improve or maximize the quality and efficiency of the product or service through the establishment of standards and the related enforcement of those standards, such as through consequences for certain instances of non-compliance.

Regarding regulation beyond our domestic borders: because there is no global government system, a truly global regulatory structure is unlikely in the foreseeable future. Differences among geographies in this increasingly global economy are inevitable. It’s natural for countries to want to reserve the right to do what they believe is in their best interest given the unique circumstances of their nation.

Nonetheless, it’s important to recognize the inter-connectedness of our global markets—reinforced by the recent financial crisis. It’s helpful for regulators around the world to collaborate and work together—through forums, organizations, or otherwise—to achieve consistency in approach. We see such coordination in my profession through IFIAR, the International Forum of Independent Audit Regulators.

Again, my own view is that regulation should serve to assist fair markets to operate because regulation helps foster trust in such markets by the market participants and the related stakeholders.

CHG: Are there several key types or roles of regulation, which vary perhaps by industry? Or is the role of regulation universal and essentially the same, whether it’s the SEC, the FDA, the EPA, or the NHTSA?

RJK:  In theory, while the consequences of failures in regulation and poor execution by the regulated vary (ranging from mere inconvenience to potential loss of money, physical suffering, and health and safety consequences), the role of regulators is similar: to help to protect consumers and stakeholders and maximize quality and efficiency.

In practice, there are differences. Think about regulation of an industry which produces goods or provides a goods-based service—like the airline or pharmaceutical industries, compared to the regulation of a profession, which generally covers standards of behavior or performance.

What these disparate forms of regulation have in common, however, is that stakeholders operate with a level of confidence that compliance with regulation—whether by an airline adhering to safety standards or a public company audit firm following professional standards—builds confidence in the markets.

CHG: Let’s hop over now to trust. What’s the relationship of trust to regulation? How does regulation help trust? Or is it a substitute for trust? Does the presence of one reduce, or enhance, the other?

RJK:   Regulation isn’t a substitute for trust, but the existence of regulation plays a key role in helping to build and maintain trust, particularly in times of crisis. Examples include the creation of the Public Company Accounting Oversight Board to directly regulate my profession following the Enron and Worldcom scandals, as well as what we are seeing now with financial services regulatory reform in response to the recent financial crisis.

This suggests we could view a regulatory failure as one that doesn’t garner trust from the intended beneficiaries of the regulation. Such an outcome may indicate that there is a cost to society, without the concomitant benefit.

Unfortunately, this seems to happen more often than we may realize. Our society goes through cycles of regulation and deregulation. But, regulation tends to be cumulative over time, and the result can be layers of regulation, not all of which may be effective. In some instances, conscious decisions are made to forgo regulation. Is that because a significant level of trust already exists or is it a perception about cost and benefit? Or, is it a combination of both?

Having said that, regulation is a large part of what makes our markets the best in the world. It helped our markets recover well from the loss of investor confidence that followed the scandals that gave rise to Sarbanes-Oxley and is aiding in the recovery from the most recent financial crisis, though we still have a long way to go.

Unfortunately, it’s really in times of crisis when the issues of regulation and trust are considered together the most. That’s when there’s pressure to act quickly, and hopefully strategically, to learn lessons and act on them. The answers under these circumstances may be different than what you’d get outside of a crisis environment.

CHG: What do you find are the biggest misconceptions that businesspeople hold about regulators? Conversely, what misconceptions do regulators typically have about business?

RJK:  Businesses may perceive that the regulator has different objectives than the regulated. They may lose sight of the fact that as a regulated entity, they generally have shared objectives with the regulator.

It is not implausible that regulated businesses may see compliance with regulation as an impediment to success in terms of competitive advantage or speed to market. Businesspeople are largely quite ethical and certainly want their products to be safe for consumers, for example. But at the same time, as a general matter, if you lose sight of the shared objectives and focus more on short-term success, rather than long-term sustainability of the business, you can become frustrated with regulations.

Regarding the regulators, it’s important that they understand the trends and developments affecting the markets or industries they regulate. It can be counterproductive to develop changes in regulation without staying in close touch with the regulated entities and other stakeholders.

This communication helps to inform issues like the cost of implementation, the need to modify proposed rules to make them more understandable, and unintended consequences of changes in the regulatory regime. There needs to be a level of trust between the regulator and the regulated to help prevent the regulator from implementing proposals that are unlikely to work in practice.

CHG: The regulation model for the public company auditing profession is interesting in that there is government oversight, but the PCAOB is a private sector body. Why does this model work?

RJK: The government, through the SEC, oversees the PCAOB, but in the Sarbanes-Oxley Act, Congress explicitly established the PCAOB as a private-sector body. The SEC’s oversight role was effectively reinforced by a recent Supreme Court decision in a case about the constitutionality of the PCAOB.

The SEC oversees the PCAOB through the appointment of PCAOB members and supervision of the Board’s activities.  This makes sense, given the public company auditing profession’s role in the capital marketsand the SEC’s overall mission to maintain fair, orderly, and efficient markets, as well as to facilitate capital formation while protecting the interests of the investing public. The main reason the model works is the alignment of the PCAOB’s mission with the regulatory mandate and statutory authority of the SEC. If there were substantive differences, it probably wouldn’t work as well as it does. 

This private-sector regulation working side by side with government regulation isn’t unique to the accounting profession. The Financial Industry Regulatory Authority is another example of a private-sector regulator that works closely with the SEC on issues important to the markets.

CHG:  Let’s forget about regulation for a moment and talk about another realm of trust—trust between professionals and their clients. It’s something you know a great deal about within your business. What’s the role of trust in client relationships?

RJK: In general, trust and mutual respect form the foundation of the most effective client relationships. Those clients who understand our role and respect it are the clients with the best relationships.

For example, clients who identify issues early in the audit, and auditors who are upfront with clients when they are not comfortable with an issue, tend to have the most effective relationships. A good client relationship doesn’t mean there are never any issues to resolve; to the contrary, it means that issues get resolved on a timely basis because they are identified early and there’s a mutual understanding of the need to work through a resolution process.

Over time, greater trust fosters a stronger and more successful business relationship. When you’re a trusted professional advisor, you can be more effective in your own responsibilities. Let me be clear, this doesn’t mean we always agree with the client. 

To the contrary, we draw the line when necessary.   Sophisticated clients—I don’t mean in terms of size and scale, but in terms of thinking and attitude—not only understand this, but appreciate it, even if it’s stressful at times. In the end, investors benefit from credible information.

Auditing is unique, though; to do our job and fulfill our professional responsibilities, we strive to thoroughly understand the client’s industry, business, and current circumstances. This requires management and the audit committee to trust us.

Yet we cannot take things at face value or trust without support; we must be professionally skeptical. Our independence and objectivity, coupled with our knowledge and experience, are key to the value that we bring as auditors and we don’t put those at jeopardy for any client relationship.

CHG: Are there a few key things that people in business can do to improve trust with their clients?  

RJK:  Here are some lessons that come from my audit background, but which I think hold true in many business relationships:

·      This one is obvious, but first and foremost, deliver high-quality services and bring the right resources to the assignment.

·      Facilitate open dialogue—the earlier, the better—if a problem looms.

·      Don’t be afraid to deliver the difficult news; in my experience, handling that candidly and proactively goes much further in building trust than delivering the good news or raising a problem at the last minute when deadlines loom.

·      Finally, stick to your guns when the going gets tough; clients respect the fact that we have to do that. They may not like it, but they will come to value it when you are clear as to the “why.”

 CHG: What about clients—not just in your service lines, but more broadly. What should they expect in terms of trust—and what should they be bringing to the party as well?

 RJK:  I think it’s the same on both sides of the equation. Both service providers and clients should bring integrity, forthrightness, and strong ethical values to the table. This is especially true when it comes to auditing, but it holds true more broadly in other instances as well. 

Finally, it comes down to people. You could have a company with a great brand and corporate reputation, but if the management team lacks integrity, you do not want them as a client.

I have worked in a partnership for over thirty years. One way I gauge people is to consider whether I would want them to be my partner. Would I trust them with our brand and our reputation? That’s the acid test for me.

CHG: Bob, thank you so much for the gift of your time. Yours is a valuable and unusual perspective, and we appreciate your sharing it with us so forthrightly.

Robert J. Kueppers on Trust and Regulation

is number 14 in the

Trust Quotes: Interviews with Experts in Trust

series.

Recent Interviews

Read the

complete Trust Quotes series

.

Are You as Credible as You Think? Probably Not.

/9 Comments/in /by

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.