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Trust as Risk Mitigation Strategy

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Forget how you usually think of the word ‘trust.’ Think instead of ‘risk mitigation.’

“Risk mitigation” means reducing risk to an acceptable level. You’re familiar with it if you work in insurance, investment banking, natural resources, infrastructure, contracting, outsourcing, or deal internationally.

It usually comes packaged as high doses of things hard and practical: legal, financial, statistical. Here’s a typical example, this one from IASTA, a supply and spend management firm, lists seven strategies for risk mitigation. Seven ways, that is, to reduce the riskiness of your supply chain.

No surprise, it includes things like dual-sourcing, price hedging, performance-based contracts, and capacity assurance. Basically, ways to make sure your supplier does what you want them to do.

Risk Mitigation is Usually Based on Control

They are all based on the assumption that unless you control your supplier or the conditions surrounding the deal, you are at risk. And the solutions all involve controlling that risk: mainly controlling that supplier.

What’s surprising about that list—shocking, if you think about it–is the absence of trust. (I’m not picking on IASTA; it’s a good list for what it is—a list of controlling strategies). It generally beats the heck out of all the other seven.

What if you could trust your supplier? What if your supplier behaved toward you in a trustworthy manner? In general, your risk mitigation efforts will then cost a lot less, and will be more successful.

Agreement by legal negotiation, and enforcement by legal, process and accounting argumentation is costly. It causes bad blood. It reduces the felt moral obligation of each party to live up to an agreement. It causes delay. And it sure is expensive.

Risk Mitigation by Trust is Cheaper, and Creates Value

By contrast, trust creation costs less than lawyers and accountants. It can often be created more quickly. And it can be far more dependable.

More importantly: if a trustor-trustee relationship is developed, it doesn’t just cut risk mitigation costs, it positively creates whole new levels of value possibilities. Things you’d never do with an arms-length supplier suddenly become possible.

This is not crazy stuff. The truth is, it happens every day: we just don’t think of it as trust. Trust as risk mitigation happens whenever a customer and a supplier keep an informal rolling ‘tab’ of who owes whom. It happens when a client and a professional honor the spirit, rather than the letter, of an agreement. Warren Buffet did it on a grand scale when he bought McLane Distribution.

Simply put, trust is as hard-nosed a business strategy as any involving the usual suspects. There is no trust without risk: trust truly is at the heart of risk mitigation.

And it’s not that hard to do.

Trust-based Risk Mitigation Requires a Change in Belief

The main thing it requires is a belief in the massively predictable human phenomenon that people do as they are done unto. If one party behaves in a trustworthy manner, the other comes to trust. And if one party behaves in a trusting manner, the other party becomes trustworthy.

The predictability of that behavior is way better than any stock market algorithm. Yet it is astonishing how many businesses have been seduced into inherently untrusting relationships. At great cost to themselves, their supply chain, their customers, and even their shareholders.

It is far more profitable to depend on the rules of trust in human behavior, than to always rely on the rule of ‘do unto others before they do unto you.’ (Which, after all, produces an equally predictable negative counter-reaction). 

The amazing thing is that so many businesses, which claim they are focused on financial returns, continually miss this huge opportunity.  I think it’s because they are also bad at personal risk mitigation: the people who run those ‘hard-nosed’ businesses are personally fearful of constructively confronting other human beings, and of speaking the truth about themselves and others. 

People vastly overrate the risk of doing the wrong thing, while they underrate the risk of not doing the right thing.  In business, as in life.  Fear, to many, seems like the sensible attitude.  In reality, trust pays far higher returns.  In life, as in business.

Why Trust is Asymmetrical, and What that Means for Trust Strategies

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Much of the talk about trust is just that – talk about “trust.” We forget that trust is a word for a relationship between two parties, each doing different things. Further, it’s an unequal relationship.

What we call “trust” results from one person (or entity) trusting another. One party trusts; the other is trusted. The result is what is properly called trust.

Unlike other relationship words (like ‘love’) the quality of trust is asymmetrical. To trust is very much not the same thing as to be trusted.  Just ask a traveler in a new foreign country.  Or a Madoff client.

The asymmetry is all about risk—the one taking the risk in a trust relationship is the trustor, the one doing the trusting—not the one being trusted. 

When we describe degrees of trusting, we use precisely that word: ‘He is very trusting.’  While an adjective, ‘trusting’ derives from a verb—it tends to describe a behavior, the act of trusting.

When we describe degrees of being trusted, we use a different word: ‘She is trustworthy.’  ‘Trustworthy’ is also an adjective, but it tends to describe character, an attribute one possesses.

If we’re going to be precise in talking about trust in a useful way—whether it’s personal trust, business trust, or social trust—we need to clear about the risk-asymmetry between the two parties to trust. Absent that simple clarity—who’s doing the trusting, who’s being trusted, and in what realm—there’s not much that can be usefully said.

Here are some examples.

Trusting Strategies.

Trusting someone is very useful—if your trust is justified. Things happen faster, better, with higher quality and lower cost.  Life is richer.  Of course, if your trust isn’t justified, you get burned. Reasonable risk assessment, then, is a valuable skill in trusting.

But trusting cannot obliterate risk, and risk management alone has its limits. To trust only those we have vetted as trustworthy is to make a mockery of trust. Ronald Reagan’s statement “trust but verify” was cynically manipulative. If you can verify, you don’t need trust–you just need an auditor.

Trustworthiness Strategies.

Being trusted by others is at least equally useful, and of course the combination is best of all.  How can one become more trusted—by customers, employees, friends? There are two basic strategies: the first is to trust the other party, the second is to become more trustworthy.

Oddly, the most powerful strategy for driving increased trustworthiness in others may be the act of trusting them in the first place.   Marlon Brando’s Godfather character knew this: so do successful networkers.  Like homeopathic medicines, a little trust given can innoculate against large doses of untrustworthy behavior by others. This is due to the deeply embedded human propensity to reciprocate–good for good, bad for bad. 

Being trustworthy toward others drives their propensity to trust you—and it’s a less risky strategy than trusting them, since most risk is borne by the trusting party.  The effect of trustworthiness on trusting doesn’t rely on reciprocity—it is a unilateral action by the trustee that alters the  risk perceived by the trustor.

Remember the asymmetry of trust is all about risk: it comes in many forms, such as asymmetry of information, or of power.  Many trust issues present as issues of the asymmetry of power: think asset managers trusting rating services, or consumers trusting credit card issuers.  It’s what’s behind jokes like, "I’m from the IRS and I’m here to help you." 

There are several ways to manage risk so that the asymmetry is acceptable to both parties. One is simply transparency: the exchange of information.

At a personal level, the decision to reveal information that would put you at a “disadvantage” in a competitive situation is an act of trust. If your client is 58, you are 32, and your client asks your age, do you say, “I’m in my mid-30s?” Or do you say, “I’m 32.” The latter is an act of trusting; it usually makes you seem more trustworthy, and of course it carries some risk.

At a business level, when companies fight greater transparency (presumably to prevent competitive advantage), they are simultaneously destroying the inclination of their stakeholders to trust them, because to withhold information for self-oriented reasons is intrinsically untrustworthy. Too many industries and companies simply do not get this, hence they invite far stronger regulation than need be the case.

I have elsewhere written about the Four Trust Principles: they apply to people and to organizations, and are largely about enhanced trustworthiness.
Personal and business approaches to trustworthiness overlap in the arena of leadership. The general who personally leads his cavalry troops into battle shows that he will take risks on their behalf; the troops’ powerful response is to trust him in return.  Trusting given yields trust returned.

Explored carefully, this simple framework tells us how to better navigate the worlds of romance, business, friendship, business regulation and socio-governmental institutions.

Increasing trust starts with asking: who does the trusting, and who is to be trusted?  Where’s the risk, and how can we manage the asymmetry?

The Trust Week in Review

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Introducing The Week in Trust: a weekly look at the world through trust-related eyes.

Part news-roundup, part mind-stretching and whimsical, part commentary that didn’t have enough zip to make it into the blog, but which needs saying.

Big Story Department.  

Regulation has got to be the story this week.   Regulation, at least to my schizophrenic view of things, represents the failure of capitalism to regulate itself.  I believe that business is a higher calling, and that it ought to be capable of long-term self-interested thinking.  But you couldn’t prove that by recent history.

According to the Wall Street Journal, Wednesday’s announcement represented “the most sweeping reorganization of financial-market supervision since the 1930s.”

Bruce Carton’s most excellent Securities Docket explains in not-that-complicated language why the WSJ is not being hyperbolic.  Credit cards, exotic derivatives, small banks, private equity, hedge funds, insurance—not to mention more energy behind enforcement.  It’s all coming down the pike.

And it’s not just the finance sector.  Let’s not forget (hey it was way back at the beginning of the week) that the US Food and Drug Administration (FDA to those who can read alphabet soup) will be regulating tobacco.  That was a long time in the making, and a milestone of sorts.

Why such a sudden glut of regulation?  On some level sure, it’s the Democrats. But Democrats can’t just regulate for the heck of it, and not all of them want to anyway.

I contend it is, as I stated above, a failure of self-regulation.  Whether it’s mortgage brokers or CFPs or regional airlines or credit card companies, what precedes regulation is a mountain of self-justifying rhetoric, aimed at short-term benefit of market players against consumers: ironically, thus harming the industry long term.

But enough about regulation, it’s Friday.  Let’s raise our sights.

Who Knew Department. 

What do you do if you’re a government with an endemic social dishonesty problem?  If you’re Indonesia, you open up 7500 ‘honesty cafes,’or food stores where the responsibility of paying the right amount is left to the customer.    I don’t know of any larger-scale attempt at testing the old saw that ‘the fastest way to make a man trust you is to trust him.’  Early returns are it’s working great in schools; in government offices, not quite so much.  

Hey, it’s the principle behind vaccines—expose them to a little bit of trusting, and they’re inoculated against being untrustworthy.  Nothing new to readers of this blog.  But way more fun.

Do guns kill people, or – does lack of trust kill them?  One of those academic studies that makes you scratch your head a bit; you know there’s some truth there even if it’s cleverly hidden behind the English language.

Trust Angles Department.

It’s one thing when a bucketshop broker or a used car dealer gets accused of being untrustworthy—right or wrong, that’s the price of being stigmatized as low-trust. Ho hum.

But what if you’re known for high trust and you get accused?  Ouch.  Big Ouch.  For example, the Canadian Conference Board. Ouch, I say.

What’s it mean to trust your babysitter?  Find out.

You may think trust is down, down, down.  After all, that’s the drumbeat du jour.  But how many of you are happily using cloud computing?  What an act of trust that is.  And sometimes, maybe it lets you down.  But–have you stopped using it?  And what does that say about your level of trust.

Your Opinion Department.

PGA pro Vijay Singh is still wearing his sponsor’s golf hat.  His sponsor, interestingly, is mini-Madoff  Stanford Financial.   Hate it when that happens. 

Is he being loyal?  Or stupid?  You be the judge.  

Please give me some feedback: should The Trust Week in Review be a regular Friday feature of TrustMatters?  Enquiring minds (ours) want to know.
 

Trust Reader Volume 2

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Greetings.

This is the second in a series of ebooks I’m releasing called The Trust Reader. Each issue will feature a full-length article on trust-related issues, plus synopses and links to two other articles.

The Trust Reader will be published roughly every few months. Articles introduced here will be available thereafter on the trustedadvisor.com website, but you’ll see them here first.

Get the Trust Reader volume 2 here

In this issue, the featured article addresses a key question: Does Trust Really Take Time? Here’s why it’s key.

Purportedly, one of the great economic advantages of trust is the time it saves in the conduct of business. I make that claim, as does Steven H.R. Covey, Jr. Yet, the phrase "trust takes time" is routinely asserted by most businesspeople—including those who agree that trust takes time.

Well, does it or doesn’t it? The lead article answers that question, and is contained in its entirety in this issue.

The other two articles are:

Discounting, Price, Value and Psychology — a look at how buyers really think about money in buying. Worried about price cutting? Read this one.

Client Focus vs. Client Focus Lite — are you really client-focused? Or just faking it. Take a hard look in the mirror before you answer, and read this one.

Both these articles are abstracted in this issue, with links provided. All three articles will now join the permanent collection of trust-related articles on Trustedadvisor.com.

The Trust Reader series joins the Trust Matters Primer series—an occasional selection of the best from from the blog Trust Matters.Download the first edition of the Trust Reader here

Trusted Advisor Associates ebook Series on Trust

You can also find previous issues of the Trust Reader here, as well as copies of The Trust Matters Primer here:

Trust Reader Volume 1

Trust Matters Primer Volume 1

Trust Matters Primer Volume 2

Trust Matters Primer Volume 3

If you would like to receive email updates for the Trust Reader and Trust Matters Primer, please subscribe here.

You can find previous articles published by Charles H. Green at http://trustedadvisor.com/cgreen.articles/

As always, if you prefer not to receive our series, simply email me or click the unsubscribe link below to let us know.

The Trust Reader Volume 2

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Greetings.

This is the second in a series of ebooks I’m releasing called The Trust Reader. Each issue will feature a full-length article on trust-related issues, plus synopses and links to two other articles.

The Trust Reader will be published roughly every few months. Articles introduced here will be available thereafter on the trustedadvisor.com website, but you’ll see them here first.

Get the Trust Reader volume 2 here

In this issue, the featured article addresses a key question: Does Trust Really Take Time? Here’s why it’s key.

Purportedly, one of the great economic advantages of trust is the time it saves in the conduct of business. I make that claim, as does Steven H.R. Covey, Jr. Yet, the phrase "trust takes time" is routinely asserted by most businesspeople—including those who agree that trust takes time.

Well, does it or doesn’t it? The lead article answers that question, and is contained in its entirety in this issue.

The other two articles are:

Discounting, Price, Value and Psychology — a look at how buyers really think about money in buying. Worried about price cutting? Read this one.

Client Focus vs. Client Focus Lite — are you really client-focused? Or just faking it. Take a hard look in the mirror before you answer, and read this one.

Both these articles are abstracted in this issue, with links provided. All three articles will now join the permanent collection of trust-related articles on Trustedadvisor.com.

The Trust Reader series joins the Trust Matters Primer series—an occasional selection of the best from from the blog Trust Matters.Download the first edition of the Trust Reader here

Trusted Advisor Associates ebook Series on Trust

You can also find previous issues of the Trust Reader here, as well as copies of The Trust Matters Primer here:

Trust Reader Volume 1

Trust Matters Primer Volume 1

Trust Matters Primer Volume 2

Trust Matters Primer Volume 3

If you would like to receive email updates for the Trust Reader and Trust Matters Primer, please subscribe here.

You can find previous articles published by Charles H. Green at http://trustedadvisor.com/cgreen.articles/

As always, if you prefer not to receive our series, simply email me or click the unsubscribe link below to let us know.

 

Carnival of Trust for June is Up

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Carnival of Trust

The Carnival of Trust is up for the month of June, hosted by Dave Stein, and it provides a wealth of perspective on the state of trust at the midpoint of 2009.

For those who don’t know him, Dave Stein  is a consummate student of sales. A former sales consultant, trainer and author, he now runs ES Research Group http://www.davesteinsblog.com/esr/ from the hardship environs of Martha’s Vineyard. Think of ESR as the JD Powers or Consumer Reports of the sales training field.
I have gotten to know Dave over the past year and found him to be ethical, smart, insightful, sober (thinking-wise anyway), and possessed of fine judgment.
Just the person to host the Carnival of Trust.

Dave has selected a tasty sampler of things trust-related. Just a few:

And that’s just five. Check the full Carnival of Trust to read those items and the other five, and Dave’s commentary on all of them.

Many thanks to Dave Stein for hosting a solid, content-rich and thought-provoking Carnival. Drop on by and treat your brain to a feast.

Ethics vs. Jack Welch at the West Point of Capitalism

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You may have heard about the recent so-called MBA Oath undertaken by some students at Harvard Business School.  Do click the link, it’s a short read, but to summarize it even more, it’s an oath to behave in ethically, non-selfishly motivated, socially responsible ways.

MBA Students For Ethics and Social Responsibility?

Here’s the May 30 NYTimes story,  as of which date “nearly 20% of the graduating class” had signed the oath.  When I read that, I resolved to blog about it in a week’s time.  It was clear to me on May 30 what I was going to say:

No biggie.  In my own class (1976) it wouldn’t have surprised me if as many as 10% would have signed such an oath.  That would suggest either a doubling or a 10 percentage point increase every 35 years.  

By that arithmetic it would take either until the year 2061 or the year 2114 for 51% of Harvard MBAs to agree with such controversial statements as “I will act with utmost integrity and pursue my work in an ethical manner."  Oath?  Much ado about nothing.

Well, shame on me, o me of little faith in my descendant classmates, because as of June 3 (according to the Economist’s story), that number was up to 400—roughly half, by my close-enough calculations. 

Now, half is considerably larger than 20%.  In fact, I think it’s more like 50%, though HBS MBAs in my day weren’t all that great at math (‘go hire one from MIT if you need it’ was the not-so-tongue-in-cheek phrase we heard).  And I am quite sure, as I mentally run down my list of classmates, that nowhere near 50% would have signed the oath back in the day.

Ethical Progress at Harvard Business School?

I’ve previously critiqued the ethics course at HBS  and b-schools in general for not getting it right, but this is different—as a whole, this manifesto gets it very right.

I don’t like using superlative buzz words, but the “sea change” metaphor comes to mind.  Or, to mimic Verizon’s FIOS ad, “This is big.”

How big?  Let’s contrast it with Jack Welch. 

Welch was recently trotted out from the dead to reprise his greatest hits at a Bloomberg/Vanity Fair economic forum.  It had a shot at being an intelligent economic dialogue until Jack popped open the coffin lid and shouted “buy or bury the competition!”  thus drawing loud applause from the over-60 crowd in attendance. 

Now, GE’s stock price when Welch left in 2001 was 50; it since dropped as low as 8.  Today it’s 14.  But don’t tell me that’s the fault of his (handpicked) successors; it’s what happens when a formerly great strategy meets seriously new times (and Imelt can’t work Welch’s old opaque GE Capital magic anymore).  That applause at Bloomberg  was the sound of the old guard waxing nostalgic, still hoping to believe in the old verities.  But they’re gone, gone. 

Jack Welch, Old School: Interconnected World, New School

Jack WelchThe old strategy?  Competition, competition.  Your customers and your suppliers are your competitors.  Be boundaryless–right up to  the boundary of your own company, where it becomes bury the enemy. 

The new strategy?  Collaboration, collaboration.  It’s a flat world; joint venture, alliance, outsource, teamwork, network, share.  Your customer is your purpose for being, and your supplier is your life partner.  We’ve finally gotten past Thomas Hobbes–and just in time to deal with global warming and global supply chains.

Which strategy is right for the times?  Look at Detroit; a fervent worshiper of the Competitive Gospel.  According to Welch, Detroit’s downfall was unions, pension laws and health care.

Booshwah; Detroit’s Achilles’ heel was an ideology that, unlike Toyota, pitted them against their own suppliers in an era where supply chain relationships proved the key to lower systemic costs; where one team measured "long term" in 3-year cycles, and the other measured it in generations.

Dealing with GE today is still like dealing with Welch.  They’d rather do reverse online auctions than engage in relationships.  They are shooting their own economics in the foot by declaring,  like old Bolsheviks, "we will bury you" at their fellow commercial travellers.

Me, I’ll bet on the new kids in town, who understand 1+1 >3,  and 1 vs. 1 <2; who say things like: 

>I will safeguard the interests of my shareholders, co-workers, customers and the society in which we operate.
and
>I will manage my enterprise in good faith, guarding against decisions and behavior that advance my own narrow ambitions but harm the enterprise and the societies it serves.

Good for you, HBS class of 2009.  I say you done us proud. 
 

Managing Trust Metrics

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Trust is hot; particularly in the last year.  Measurement has been hot for the past 10 years.  So it shouldn’t be surprising that lots of people are getting excited about measuring trust.

The question they should ask themselves is: why?

One knee jerk management mantra these days is, “You can’t manage it if you can’t measure it,” or “what gets measured gets managed.”  Well, yes—and no.

Early (by which I mean 5 years ago) trust measurements included things like buyer ratings on eBay, and they made sense.  Today, measurement/management mantras get applied in undiscriminating ways.

Trust Trends: Precisely Measuring—What?

Consider the statement: Trust in CEOs is down.  Does it mean that people are less trusting these days? Or that CEOs are less trustworthy?  Or both, and the second interpretation caused the first?

And what do you do about it?  If people are less trusting, then fixing CEOs won’t much help.  If untrustworthy CEOs are the problem, then it will.  But which is it?

My accounting professor, Richard Vancil, when asked the definition of “profit,” replied, “it’s the last line on an income statement.”  Meaning it was a question with no good answer.

I think longitudinal trust attitude questions are much the same: what they measure is the shift in answer to a given question over a period of time.  The question itself isn’t clear, nor does it suggest clear policies.

How’m I Doing?  Measuring Trust Improvement is Tricky

New York’s Mayor Koch was known for asking ‘How’m I doing?’ at every juncture.  I don’t know how it worked for Koch, but it doesn’t work so well for trust.  

You can often measure things like quality (defects per million), or efficiency (output over input) with great precision, and with great frequency.  But try asking your significant other whether (s)he loves you, in myriad ways, every hour.  It won’t take long for the process flow approach to measurement to ruin the love you were so intent on measuring.  Not to mention: just how did you define ‘love’ anyway?  What would you do with the answer?

Measuring Trust to Drive Motivation Can Backfire

A common way to use metrics is to reward certain outcomes.  Applied to trust, this can generate perverse results.  Trust is partly about unselfish attitudes and actions–think about the ethical schizophrenia that results from using monetary incentives to encourage unselfish behavior.

The Best Trust Measurement Encourages Diagnosis

If measuring ‘trust’ alone is like squeezing air; if the act of measuring alters the measurement; and if incentivizing trust metrics can destroy trustworthiness itself; then what are trust metrics good for?

I think they’re good for a great deal—if defined in terms that respect the inherent breadth of meaning of trust, and in ways that allow concrete actions to be taken to improve trustworthiness.

Want to measure trust? 

Start by defining what you’re measuring: the capacity to trust, the quality of trustworthiness, or the presence of both.  (See Trust, Trusting and Trustworthiness). 

Then clarify whether you’re evaluating personal trust, organizational trust, or social trust.  (See Realms and Manifestations of Trust)

Then ask whether respondents will gain practical insights and actions from the measurement to improve their trusting-ability, or their trustworthiness.

At the risk of appearing self-serving, the Trust Quotient is an example.  It measures personal trustworthiness in 20 inter-related ways that provide self-insight to the test-taker, as well as offering practical suggestions for self-improvement. 

The Trust Audit  is another example, this one measuring trustworthiness at the organizational level.   It too uses 20 inter-related measures—not one—that together suggest specific opportunities for improvement. 

Measuring trust is not like other measurements: it’s less like measuring liquid flow or efficiency than it is like measuring love.  It deserves its own metric system.  
 

Can Trust Be Taught?

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Let’s not mince words. The answer, pretty much, is yes.

The exception is what the academics call social trust—a generalized inclination to think well or ill of the intentions of strangers in the aggregate. That kind of trust ends up being inherited from your Scandinavian grandparents (or not, from your Italian grandparents).

The rest, let’s break it down. First, enough talk about “trust.” Trust takes two to tango. One to trust, another to be trusted. They are not the same thing.

So let’s start by asking which we want to teach: to trust, or to be trustworthy?

Trusting someone is, paradoxically, often the fastest way to make that other person trustworthy—thereby creating a relationship of trust.  People tend to live up, or down, to others’ expectations. So if you can muster the ability to trust another, you’re both likely to reap big returns quickly from the resultant trust.

However: trusting can also be a high risk proposition. The vast majority of business people, on hearing “trust,” will say “that’s too risky.” In other words, they hear “trust” as meaning “trusting,” and they turn off.

On the other hand, there is being trustworthy. If you consistently behave in a trustworthy manner, others will come to trust you, and voila, you have that trusting relationship. Being trustworthy tends to take longer than trusting, but the results are just as good. And, it’s very low risk.

Let me say that again: becoming trustworthy is a low risk, high payoff proposition. This is not a hard concept for people to get, if explained right.

What does it mean to be trustworthy? The trust equation explains it: it’s a combination of credibility, reliability, intimacy, and a low level of self-orientation. You can take a self-assessment test of your own TQ, or Trust Quotient, based on the trust equation.

So the question is: can people be taught to become more credible? More reliable? More capable of emotional connectedness? More other-oriented and less self-oriented?

The answer is yes. Big picture, there are two ways to teach these things. One is to recall Aristotle’s maxim: "We are what we repeatedly do. Excellence, therefore, is not an act, but a habit."

People can be taught truth-telling, reliability, even other-orientation to some extent by showing them the behaviors—particularly the language–of trustworthy people.

But the deeper, more powerful approach to building trustworthy people starts the other way around: by working on thoughts to drive action. As the Burnham Rosen group articulates this point  "thought drives actions which result in outcomes."

Many disciplines outside of business know the truth and power of this approach: psychology, acting, public speaking, to name a few. Business doesn’t appreciate it enough. But commonsense does.

Trust can be taught: either by teaching trusting, or trustworthiness. The latter is lower risk, hence the most attractive approach for many in business.  And trustworthiness can be taught via a mix of skillsets and mindsets

It makes sense.

 

 

 

Realms of Trust and Manifestations of Trust

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Most would agree that trust is a hot topic just now.  That’s about the only thing agreed upon about trust, however.  We can’t even decide what it means.

I wrote a post last week called Trust, Trusting and Trustworthiness.  I suggested that much writing about trust confuses these three manifestations.

Think of that post as Managing Trust Part I — Trust Manifestations. Think of this as Managing Trust Part II — Trust Realms.

There are three trust realms in all: interpersonal trust, organizational/institutional trust, and social trust.

The realms of trust are well known to academic trust researchers, not so much to business people. They do make simple common sense, however.

1. Interpersonal trust

Interpersonal trust deals with one-on-one dynamics. Most of my work has focused in this area. It’s the stuff of relationships, selling, advisory businesses, and personal risk-taking.

2. Organizational and institutional trust

This form of trust covers a wide range of issues: the organizational environment conditioning interpersonal trust relationships, the trust of individuals in their organizations and institutions, and the nature of trust relationships between organizations themselves.

Surveys that measure “trust in government” can shift dramatically and quickly, with the election of an Obama, or the humbling of an SEC, for example. In these respects—speed and personalization—organizational trust resembles personal trust. But it also deals with organizational cultures and values—undeniably group phenomena.

3. Social trust

Social trust deals with the generalized beliefs individuals hold about “other people."  Think under what conditions you’re likely to lock your car doors. Unlike the other two realms, this trust doesn’t deal with people as individuals; also, it tends to change only glacially, perhaps across generations.

If we array the realms of trust against the manifestations of trust, as shown below, we can begin to have a structured conversation about trust.

Trust Realms and Trust Manifestations

Manifestation/Realm

 Trusting

Being trusted

State of Trust
Personal      
Organizational      
Social      

 Until then, we are going to have vague, or circular, or meaningless discussions about trust.

When Steven H.R. Covey talks about how trust affects speed and cost, he is largely talking about the manifestion dimension—the presence or absence of a state of trust. But is he talking about the state of personal trust? Or organizational? Or cultural/social?

Gatehouse, a UK communications consultancy, says “business is facing a massive and global crisis of trust right now.”  But what are they talking about?  Which manifestation?  Which realm?  Or are we descending into an inevitable and inescapable downward spiral of rampant anarchy? 

Do they mean that individuals are less trusting of business? Or that more businesses are untrustworthy? Or that the state of economic uncertainty has rendered the state of trust lower?

Paul Seaman’s review of the Edelman Trust Surveys (Would you trust a trust survey?) does a nice job of taking apart the apparent meaning of trust survey data.  A small example: trust in banks is down, trust in government is up: does that mean we want the government to take over banks?

These are not word games.  Intelligent policy formulation depends on being able to clearly define problems. For example:

• When is structural regulation preferable to greater enforcement?
• For what trust issues is transparency an appropriate remedy?
• Do we have any institutions that teach the personal manifestation of trusting?
• If you change personal and organizational trustworthiness, do you have to worry about social trust?

We’re entering a period where trust has gone viral; it’s got buzz. We’re about to see more survey data, telling us with greater and greater precision whether doctors are gaining on nurses in trust ratings, who has the most trusted brand name, and whether trust in Romanian economists went up or down in October. 

Watch out for conflicts of interest: who’s paying for a ranking of trustworthy companies?   What problem is being solved?  What issues are being addressed?

Get ready for many tales, full of sound and fury, signifying—well, just what? That is the question.