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Is Building Trust More Like Baking a Cake, or Like Being a Better Person?

If you want teach someone to bake a cake, you’d give them a recipe. First, do this; then, do this. The result is ‘cake.’

You can be pretty confident of the effectiveness of your advice. Further, if someone presents you with a cake, you can confidently infer the steps they had followed to bake it.

If you want to teach someone to become a better person, it gets a little trickier. Defining ‘better’ turns out to be the least of it.  Are there Twelve Steps to Becoming Better? Why not five? Or does it take thirty? Worse yet:

  • If someone does the steps – how likely is it they’ll become “better?”
  • If someone is better – does it mean they followed the steps to get there?

And which approach characterizes trust?

Causality and Predictability

Strictly speaking, causality can never be proven. But casually, we infer it all the time. Tell any fool who doubts the power of causality to stick his finger in a flame and see what happens.

So if someone says to you, “Explain to me how you baked that great cake,” you can give an explanation that makes a great deal of causal sense.  “The key is  to whip egg whites just right,” you might say, and “make sure you bake it just a little longer than the recipe says.”

We understand immediately that whipping egg whites causes a change in consistency, and that time-in-oven affects moistness and firmness. On top of that: if they go home and whip the egg whites and bake it just a little longer, they are very likely to get the same results you did.

But if someone says to you, “Explain to me how you became a great person,” you might say, “A lot of suffering went into that.”  Or, “I read the most amazing book.” That leaves a lot unsaid.

First, a lot of people suffer without becoming great people. Suffering causes lots of things, becoming a great person being only one of many possibilities. Most importantly, does it mean that if you suffer, you will become a great person?

Ditto for reading a book. Maybe that’s how you became great, but how does book-reading in particular cause greatness?  And if I read that book, will I become great?

Becoming a great person is probably more like learning to love, or to write a song. You have to learn to be open, to listen to others, to struggle to understand what others mean when they say something. You probably have to get in touch with your feelings, feel the feelings of others, sometimes give up control.

For a million reasons, the dysfunction of our age is applying cake-baking solutions to great-people problems, rather than the reverse.

Snake Oil, Management Gurus and Trust

A lot of advice, wisdom and selling in this world exemplifies that dysfunction.

In the training business, we have baked in (pun intended) this sort of approach, by insisting that trainers supply language like “participants will master the skills and behaviors of X so they can produce results Y at a level of Q.”

But it’s hardly unique to training. Think of most self-help books, and an extraordinary number of blogposts and magazine-rack tabloids.

Here’s a generic formula you can use, with a few examples:

[Number] [Adjective] Ways to [Verb]  [Adjective]  [Object] to [Gerund phrase]

  • Six Key Ways to Attract High Net Worth Clients to Improve your Planning Practice
  • Ten Innovative Ways to Write Powerful Copy to Maximize Your Blog Traffic
  • Five Proven Ways to Attract a Super-Sexy Date to Amp Up Your Love Life
  • Twelve Most Powerful Ways to Deliver Hi-impact Coaching to Expand Your Consulting Practice

How many books do you know that propose to identify the X most critical determinants of a successful company? Can you say Good to Great? In Search of Excellence?

Cake-Bake Great People?  Or Be Great Cake Bakers?

There’s value in both approaches. But we need to be balanced about it, and as I said above, the greater danger of our time lies in mechanist explanations.

Take trust, for example. Here are two contrasting approaches.

The cake-baking example is  a new report from Edelman, on their annual trust barometer, called What Drives Trust. It uses regression analysis on survey data to suggest 16 Trust Drivers, including “offers high quality products” and “treats employees well.”

Fair enough. Of course, few companies set out to produce low quality products or treat employees badly. But there’s value in forcing them to compare their data with others. And the list of 16 as a whole tells a story, as opposed to other lists that might have been created.

More critically, though, is how the information will be used? Will it be deployed in project management fashion, assigning someone the job of treating employees better so that trust can be improved? Or is the value more heuristic in nature, making for richer discussions? In complex cases like trust, the latter is more clear.

The second approach is characterized by this Management Innovation Exchange video by CEO John Mackey, Can You Measure Trust?  He suggests Whole Foods’ primary metric is an output – morale – rather than inputs or causes.  He argues not against measurements, but in favor of feeling, intuition, instinct. We need more of this, he suggests, rather than more cake-baking metrics.  The best tool, he suggests, is to “be able to sense and feel.”

When it comes to trust, the value of metrics lie in getting us to think, rather than to task and manage. Even then, thinking alone is not nearly enough: trust also requires a bit of heart.

So do a lot of things. Not all life is like baking a cake.

Three Things You Need to Know About Trust: Part 3

There are really only three things you need to know about trust. You can pretty much deduce the rest. The three parts are:

  1. Trust is a Two-player Game
  2. Trust Requires Risk
  3. Trust is Reciprocal

Part 3: Trust is Reciprocal–and What You Can Deduce From It All

Trust is created when one party takes a risk, and the other reciprocates positively. Think of a handshake offered, and returned.

Trust is AC, Not DC

We saw in Part 1 that one player does the trusting, and the other is trusted; the one doing the trusting is the one taking the risk.  That’s true – but only for the instant of that trust transaction. Trust is rarely built on one exchange alone, and the roles cannot stay fixed.

If you focus on being trustworthy, and your client trusts you, good for you. You can play that game for a while, but eventually your client will notice, ‘Wait, I’m taking all the risks here – what’s up with that?’ And at that point, they will stop trusting you.

You cannot escape the need to trust, as well as to be trustworthy. You have to take a risk too. Virtue may be its own reward, but unless you season virtue with risk-taking, you won’t get trust out of the recipe. To use an electrical metaphor, trust is not like direct current, moving in one direction – it’s alternating current, constantly changing direction.

Trust: Deducing Everything Else

In this brief series, I’ve claimed that “all you need to know” about trust is these three propositions – trust takes two players, it requires risk, and it must be reciprocating – and that you can deduce the rest. Let’s test that claim.

Organizational trust.  You may have noticed all my points have been about personal trust. What about organizational trust – trust in corporations, congress, the professions?

House Speaker Tip O’Neill famously said, “All politics is local.” In the same sense, all trust is personal. Trusting is something we do with our hearts and brains, one by one, personally; and trustworthiness is an attribute we ascribe almost entirely to individuals. (An exception is reliability: it makes linguistic sense to say that “GE is reliable,” or not. It is nonsense to say “GE is emotionally intelligent.”)

You can design corporate cultures to either encourage or discourage trusting and/or trustworthiness. And that’s pretty much it. Corporations may legally be people, but in the court of human nature and trust, they are largely environments which condition trust – they are not agents of trust themselves, only people are.

Trust, Virtues, Values, and Risk. The tools of individual trustworthiness can be found in the Trust Equation. The tools of individual trusting are about socially acceptable risk-taking. The tools of organizational trustworthiness and trusting – because organizations are environments for trust enhancement – can be found in the celebration of virtues and values.

Virtues are the personal attributes of trustworthiness – encouraged socially.  Values, or principles, are a set of guiding beliefs that govern interactions with others. Since trust is about relationship (remember Part 1), values drive the environment that creates or hinders trust. Among the most powerful trust-enhancing values are collaboration, transparency, and a long-term perspective. Organizations run along those lines create trust wherever they touch.

Trust Recovery. The business world frequently confuses “trust” with reputation, image, or poll ratings. This leads companies with trust problems to seek PR firms to focus on improving their reputation.

  • When your real trust levels exceed your reputation, you have a communications problem.
  • When your reputation exceeds your real trust levels, you have something a lot more serious, and throwing communications-only solutions at it is like throwing water on a grease fire.

Trust broken can be recovered, by the three basic principles above. It requires engagement by both parties, it requires risk-taking (particularly on the part of the offender), and it must be reciprocal. The biggest threats to trust recovery are an inadequate acknowledgement of the degree of rupture, and a refusal to accept the values required to change the state of trust.

Restoring Trust. The social issues facing us from lack of trust are real, and important. They can be addressed using the three principles above.

First, our trust crisis is not due to a global increase in the birthrate of morally impaired people. As noted in Part 1, trust is two-party game. It is about relationship. Trust failures are failures of relationship. Where we have lost trust, we have lost the ability to interact in relationship with others.

There are many reasons for this, including business thought leadership, an over-reliance on market solutions, and increased wealth disparity. All of them have emphasized the individual over the group.

The way to restoring social trust does not lie in better gun laws, tweaked incentives, stepped-up financial sector enforcement, or religion in the schools. It lies in Gandhi’s dictum to ‘be the change that you want to see in the world.’

It lies in the three trust facts: trust is a 2-player game of reciprocal risk-taking.  That means:

  • Trust is a personal job, not just one for leaders
  • Leaders must lead personally – by example, not by exhortation
  • Design environments that encourage people to trust and be trusted
  • Trust is about relationship – the Golden and Platinum rules apply
  • Trust is about relationship – anti-trust behavior is immature and socially poisonous
  • No pain no gain – there is no trust without risk
  • Trust is AC, not DC – you can’t always just be trusted, sometimes you have to trust
  • Trust is reciprocal – to make someone trustworthy, trust them
  • Blame and an inability to confront are the death of relationships and of trust
  • Run your life like you’d be proud to have it on the front page of the paper

If a trust issue sounds complicated, you’re over-thinking it. Go back to basics. There are only three things you need to know about trust, the rest you can deduce.

 

 

 

Find the Fear and Swim Upstream to Trust

Fear is the root negative human emotion. Scratch the surface of other negative feelings, and you will find fear at the core.

Fear Drives Behavior

If you accept this description of fear, it means you can roadmap people’s emotions. It also means you can diagnose your own.

Fear is the main driver of dysfunctional human behavior. When you see people being passive aggressive, secretive, avoiding, combative, resentful, backstabbing, gossiping, or otherwise misbehaving, teach yourself to ask, “What are they afraid of?” This drives good consulting and coaching.

Fear is a major driver of organization behavior. A culture that uses negative norms (think “that’s a career limiting move”) to enforce compliance is an organization that is fear-based. Learn to notice negative norms, so you can  envision alternatives.

Fear motivates much buying behavior. B2B marketers are taught to “find the pain point.” B2C marketers know the desire to join the in crowd is trumped by the fear of being in the out crowd; “you smell” out-shouts “you can smell nice.”

Fear plays a huge role in politics, as the daily papers demonstrate daily.

In all these cases, fear is the enemy of trust. And trust is the antidote to fear.

Trust Drives Relationship

At root, fear is the fear of a bad relationship—an Other who will hurt us. The effect is to keep us out of relationship.

Trust is the hope of a good relationship. It inclines us to seek relationship with an Other, so that we can gain the benefits of relationship.

You create self-trust by facing and overcoming your own fears. You create trust with Others by trusting them – by being the one willing to first face the fear.

You create interpersonal trust by taking a risk, encouraging the Other to reciprocate. You create organizational trust by creating an environment that encourages emotional risk-taking, dissipating fear.

Trust in politics comes from uniting, not from dividing. Trust in government comes more from principled policies and sharp enforcement than from finely detailed procedures, prohibitions and protocols.

Trust in a culture comes about by ten thousand daily acts of etiquette, courtesy, and generosity, each taken with no calculated return on investment aforethought – and each returned in the same spirit.

Trust in all these relationships rests on an ability to directly confront and speak the truth to each other.  Not speaking truth is the functional equivalent of lying; it feeds fear and alienation, and is the first step to trust-rot.

(Thanks to Seth Godin for jogging my brain on this one)

Disclosure Is Not Transparency

Most people see transparency as a good thing, and disclosure an obvious way to get there.  Often, we don’t distinguish between them.

But they’re not the same thing. And confusing them just lets bad behavior sneak back in through the back door.

What’s the difference between disclosure and transparency?

Transparency and Trust

Besides “able to transmit light,” the dictionary defines transparent as:

  • easily seen through, recognized, or detected: transparent excuses.
  • manifest; obvious: a story with a transparent plot.

In the simplest business terms, “transparent” means you can tell what’s going on.

If the link between transparency and trust isn’t self-evident, here are a few citations to help clarify it:

If I can see what’s going on, I know that I am not being misled. Motives become clear. Credibility is affirmed. Transparency is indeed a trust virtue.

Disclosure

Disclosure is a time-honored tool of regulators to achieve transparency. Food and pharmaceutical manufacturers are required to disclose ingredients, medical authors are required to reveal payment sources, the SEC frequently proposes disclosure as a tool, and so on.

Certainly you can’t find out what’s going on if information is actually hidden.  So disclosure is a necessary condition for transparency. But it’s hardly a sufficient one.

I don’t have much to say about the cost/benefit trade-off of greater disclosure in pursuit of transparency. Sometimes the benefit is obvious, other times not so much, sometimes not at all.

What’s more interesting to me is how the blind pursuit of disclosure can actually reduce transparency – even reduce people’s awareness of the distinction.

Over-Disclosure

Is it possible to have too much disclosure? So much disclosure that information gets lost in the blizzard of data?

On the face of it, disclosure is the handmaiden of transparency. But if disclosure becomes the end rather than the means, if regulators and consumer advocates become fixated on indicators rather than on what they indicate, then disclosure can actually become self-defeating.

Lawyers know that massive responses to discovery requests can overwhelm opposing counsel. Cheating spouses know that the best lies are those that disclose the most truth. Consumer lenders know to fast-talk the disclaimers at the end of radio ads, much like the small print on the ads and loan statements.

If disclosure isn’t accompanied by an ethos of transparency, it can be positively harmful. It is like crossing your fingers behind your back, taking movie reviews out of context, or word parsing a la “it depends on what the meaning of the word ‘is’ is.”

A trustworthy person, team or company will not settle for disclosure, but seek to offer transparency. A competent regulator will always remember that disclosure is just evidence. And a wise buyer will always look for the transparency that may, or may not, underlie the disclosure.

Trust relies on both data and intent.

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Many Trusted Advisor programs now offer CPE credits.  Please call Tracey DelCamp for more information at 856-981-5268–or drop us a note @ info@trustedadvisor.com.

Trusting Delta

From Delta Airline’s Website, Delta’s Force for Global Good

“Delta is firmly committed to our environment, safety, and social responsibility. We demonstrate these commitments in hundreds of ways throughout the world on a daily basis as we partner with our employees, vendors, customers, civic, and non-profit organizations to make a difference in the communities where we live and work. Many of our programs are award-winning and industry-leading. We don’t do them for the awards. We do them because they’re the right thing to do.”

Richard H. Anderson
Chief Executive Officer, Delta Airlines

From the Atlanta Business News, July 27, 2011

Airlines Spoil Fliers’ Unplanned Tax Holiday

Airlines have complained for years that taxes added to ticket prices drive up the cost of travel. But when those tax collections stopped last weekend and airlines had a rare chance to give fliers a break, most opted to keep prices the same and pocket the difference.

For Atlanta-based Delta Air Lines, that amounts to be $4 million to $5 million a day in extra revenue, the company said Wednesday.

A Congressional stalemate led to a partial shutdown of the Federal Aviation Administration Saturday, preventing the agency from collecting about $200 million a week in ticket taxes.

Delta and other major carriers then increased base fares to cover the lapsed taxes, saying they need the extra money to cover high fuel costs. The result is that travelers are paying roughly the same total price as before, instead of getting a discount from the unplanned tax holiday.

“It just seems like it was the perfect chance for the airlines to throw a bone in consumer satisfaction,” said FareCompare.com CEO Rick Seaney…

…Delta’s official statement on the matter: “Given the high cost of jet fuel, Delta has been competitive with other airlines that increased their base fares following the expiration of funding for the Federal Aviation Administration to adjust for the taxes no longer being collected.”

How the Mortgage Crisis Made Us Immoral

If you own a house and I’m your neighbor, I’ll respect your property rights. It’s just the right thing to do. (Though if there’s a fire at my place, I might break in to borrow your fire extinguisher).

If you live in a nice neighborhood, you have little to fear from the more modest parts of town. (Though if your neighborhood doubles its average income, and the modest part of town doubles its unemployment rate, and you start putting gates around your community—well, you might be a little more fearful).

Which leads us to this US headline from Fannie Mae’s Quarter 1 National Housing Survey:

“Nearly twice as many Underwater Borrowers (27%) think it is okay to walk away from a mortgage if they face financial distress than in January 2010.”

Is this a moral issue? What does it mean that the frequency of the opinion has changed? That it has doubled in a year?

Economics and Morality

Most people still think it’s immoral to walk away from a debt. But those who think otherwise—that defaulting on a payment to a nameless morass of long-since-tranched, securitized asset-owners is as amoral as it gets—have grown by 100% in just over a year.

That’s pretty high growth for the amoral team.

It’s one thing to say that morality should have nothing to do with economics. And indeed, the sense of honor and justice and trust that underpins most moral behavior is socially useful. If we all acted solely in our immediate self-interest in every situation, the world would be a greedy, dangerous, Hobbesian mess.

At the same time, economic disparity writ large spells social unrest. In Greece, they riot in the streets. In Rio de Janeiro, they have a street crime problem.

In the US, we are witnessing a small version of things. People who used to feel a moral obligation to repay a debt are saying to themselves, “Heck, the big guys and companies do this all the time—if things aren’t working out, they just default, take the insurance payment, write it off, whatever. There’s nothing moral or immoral about it—it’s just dumb to do otherwise.”

Economics Can Wear Down Morality

You may think that honoring your debt is a moral issue. You may think it’s not. What’s clear, though, is that the ratio of those two views is being driven by economic changes.

The credit ratings services will take note of this, calling it a likely increase in the default rate, and a cause for downgrading securities.

But the people on the street—in both the nice and the modest neighborhoods—will experience it as a moral casualty of the economy.

It’s just one more area of human relations that will no longer be governed by the rules of “rightness,” but rather by the least common denominator, Darwinian terms of the marketplace.

And that’s not a change to be happy about.

Are your company values important enough to fire people over?

Warning: Rant ahead.

Odds are the company you work for will fire employees for serious criminal conduct. And maybe for sexual harassment, or BSIP (Behaving Stupidly In Public).

But does your company fire people for VVs (values violations)? You know, values like respect and integrity (from Enron’s values list), or performance, innovation, progressive, and green values (from BP’s Lubricant Business).

———–

I got a call recently from a BWKC (Big Well Known Company); it employs many VSPs (Very Smart People). Here is what they said:

We have a group of VHPS (Very Highly Paid Salespeople). They’re mainly commission-paid and very successful. Problem is, they don’t pitch-in on corporate initiatives—recruiting, people development, internal sessions.  They prefer to focus just on making more money. 

We want to incent and motivate them to be more participative. We’re looking for ideas from other commission structure industries that have figured out how to keep the high-pay but incent and motivate team behavior.

OK. This is like meat to Pavlov’s dogs. There is such a feast of things wrong with that statement: where, oh where, to begin! 

 

1. “Incenting Values” is an Oxymoron

The call came from a staff person. Which means somewhere, there’s an RDB (Really Dumb Boss) who is thinking, “How do I motivate my employees to live the company values?” Here’s what that boss should be saying:

“It has come to my attention that y’all are not showing up to do some real basic stuff. Further, I understand this is because you’re not ‘motivated’ or ‘incented’ to do these things.

“Instead, y’all are getting rich at the corporate buffet by cutting in line. You’re eating scrambled golden eggs while you’re starving the goose that lays them. You’re suckling at the teats of the money-pig and refusing to clean up the pen. So I got some motivatin’ for you.

“First, TCSRN (This Crap Stops Right Now). Starting today, if I see any more of this, it’s LDHYWGLSY (Let the Doorknob Hit You Where the Good Lord Split You). Adios. 

“And if that’s not incentive enough for you, I can OUCOWA (Open Up a Can of Whup Ass) and show you the door.

You don’t “incent” values. Values are Jacks for openers, table stakes. If you’re not motivated to live by your company’s values, your company should tell you that you’ve got the wrong company. If you insist on incentive for living your company’s values, your company should politely suggest that your employment contract should be incentive enough.

This company basically has three choices:

1.    Exempt the salespeople from the values, and say so publicly; at least that’d be honest;

2.    Tell the salespeople this is non-negotiable, and a firing offense (fat chance); or,

3.    Just keep the values on the website where they belong, away from the money, now walk away, nothing to see here…

2. When Did We Start Calling Boneheadedness “Smart?”

This company is hardly unique—and you all know it. We have an epidemic in Corporate America of what I’ll call behavioralism, the beliefs that:

a.    nothing’s real if you can’t measure it;

b.    management consists largely of placing the correct amount of cheese in front of just the right rats at just the right points of the maze;

c.     really ‘smart’ people are the ones who can model, quantify and produce metrics with respect to cheese, rats and mazes.

Push this line of thinking far enough and you get entire BWKCs, with lots of VSPs, who don’t have the commonsense to spot a values issue when it personally insults them to their face. And yet we call them ‘smart.’

The word ‘smart’ has come to be, in the anthropological dictionary that is daily corporate usage, synonymous with high SAT scores, good colleges, spreadsheet-dexterity, quantitative skills and a belief that human-life-is-messy-but-fortunately-we’re-figuring-out-the-neuro-secrets-behind-it-all-and-we’re-nearly-there. 

How else to describe VSPs (and the companies who hire them) who have no other mental construct for management besides money-cheese-rat-metrics? Concepts like wise, commonsense, intuition, curiosity, empathy, relationships—these have no place in the world of VSPs.

Let’s all just give up on ‘smart;’ that word’s been co-opted. Let’s find something else. May I suggest we take ‘wise’ for a spin. And start by not using it lightly.

3. Tactics Are Not Management

Three years ago I wrote about The CEO vs. the Bankers. The CEO was an MBA from the late 1970s and was, as he put it, amazed at how little the newer MBAs seemed to know. He was talking about VSPs, too—from, as he put it, “Goldman Stanley, Morgan Sachs.” 

It’s a great read, I don’t want to spoil it for you, but the gist of it was: the new MBAs had been taught analytical techniques—tactics. The CEO had learned strategy: the wisdom kind, not the numbers kind. And when you read his story, you realize that in the real world, all those ‘smart’ models were dead wrong, and he was dead right.

Not only do we over-celebrate ‘smart,’ the concepts our ‘smart’ people are focusing on are not—systemically—wise. Our best and brightest are learning to do things that aren’t good.

What things? Looking at transactions, not systems. Believing that everyone only pursues their own interest. Believing that letting those who do pursue only their own interest somehow magically produces wealth and happiness for all. Believing that human emotions are most effectively dealt with through physical abstractions like chemistry and behaviors. 

Most of all: believing that values are something for which you can incent or motivate people.

What’s to be done? A good start would be to find out if anyone ever got fired for a values violation in your company. And if not, to seriously question how seriously your company takes its values. 

OK, end of rant-warning. All clear. Thanks for listening.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

· A firmwide commitment to operate on principles rather than incentives

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

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

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

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

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

CHG: How about trust between employer and employee?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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This is number 13 in the Trust Quotes series.

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

Recent posts in this series include:

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

Trust, Honesty and Authenticity

A few months ago, Deborah Nixon posted an interesting question on LinkedIn. She asked: “Is there a difference between authenticity and honesty?”

She got about 35 answers, and they all make for interesting reading. Here’s what I sent in:

Deborah, I’m sure you would agree the two terms cover a lot of territory in common. The trick with these definitional things is not to discover some underlying reality, because there is none; these are conceptual models that help us explain the world. They are good or bad insofar as they help us; so I’d suggest starting there. What’s the most useful way to distinguish the two?

One way might be to say that authenticity is largely passive, and honesty is largely active. When we say someone’s honest, we usually mean they tell the truth, and go out of their way to do it.

Sometimes we also mean that they don’t tell a lie–but that’s far from all the time. You often hear someone way ‘well, he was honest–he didn’t actually tell a lie.’ In such a case, ‘honesty’ just means I didn’t utter an untruth; it’s perfectly consistent with covering up all other kinds of truth. So the casual use of ‘honest’ may rule out sins of commission, but not sins of omission.

That’s why the legal language "the truth, the whole truth, and nothing but the truth" is required in court; to prevent the ‘honest’ witness from conveniently leaving something out, or snow-jobbing the court with irrelevancies.

Authenticity, on the other hand, I think usually implies a lack of attempt to control another’s perception. It means letting others see us as we are, warts and all. I think it also goes one more step: it means letting everyone see us in a way that’s no different from how anyone else see us: that is, we don’t play favorites in terms of constructing alternative fictions to respective people.

At a corporate level, a company might support a claim of honesty by pointing to the truthfulness of its statements, or the lack of court cases against it. Again, ‘honesty’ conveys a sense of ‘never knowingly told an untruth.’ Whether it includes consciously allowing other people to make incorrect inferences by not telling them something–well, that’s not entirely clear.

Authenticity is a whole ‘nother level. It means not hiding out, opening the door in things that are not excluded through standard rules of privacy, letting the chips fall where they may. Further, I think it usually entails a commitment to be authentic, not just a convenient lifestyle.

Seems that of the two, we might say that authenticity is broader (i.e. it encompasses being honest, but goes beyond that to proscribe sins of commission).

On a practical level, people who strive to be honest often talk of it as a struggle: to resist temptation, to not gossip, to say things that can be embarrassing if they are true.

People who choose to be authentic have, in a way, an easier time of it.  For someone who is authentic, the daily default way of life doesn’t involve decisions or will power: the default is openness, there is no issue of control vs. transparency.

Things are what they are, and there is no threat about them.

What’s trust got to do with it?  To trust a person or a company, honesty is table stakes.  If you suspect they’re lying, trust is stopped dead in its tracks.  But even if they’re honest, that’s nothing compared to authentic.  Think how much more BP, Toyota or Goldman would have been trusted even in the presumably honest statements they made, had they not created an historical pattern of inauthenticity. 

A Tale of Two Books: Jill Konrath’s SNAP Selling, and The MBA Oath

If you’re a regular Trust Matters reader, I believe you expect high standards from this blog. I’m not about to let you down by recommending weak books. Here are two new books of which I think highly.

SNAP Selling, by Jill Konrath.

I know Jill. She is smart, sassy, Midwest-values based, Minnesota-friendly—and in-your-face New York blunt. It shows in her books, her blog, and her articles. 

Jill is a salesperson turned sales consultant, trainer and author. She has all the tactics and specifics you’d hope for from a good sales book—but she’s grounded in the kind of deep, ethical perspectives on sales that I respect.

SNAP stands for Simple, iNvaluable, Aligned, and Priority. Okay, another acronym; but a good one. Her premise is that everyone is hard-pressed these days, thus every interaction has to count. Every interaction has to meet those criteria.

Jill has tons of practical advice; but I confess I’m even more drawn to the premise underlying all her work. For example: she’s down on ‘always-be-closing’ tactics; sales is ‘no longer a numbers game,’ and my favorite: “sales is an outcome, not a goal.”

I believe you can judge an author by the people who agree to write a blurb for the book itself. Here are a few for whom I have great respect: Mike Schultz,  Keith Ferrazzi, Mahan Khalsa, Dave Stein, Sharon Drew Morgan. And I’m honored to be on that list too.

The MBA Oath, by Max Anderson and Peter Escher.

I first wrote about the MBA Oath a year ago, in early June, 2009. I was very favorably impressed.

I later sought out Peter Escher, co-author, and interviewed him last November. 

In January of this year, I participated in a “pro-con” Debate Room article on Businessweek.com. I took the position that the Oath would be effective. 

I have to confess, I was shocked at the vehemence of the cynicism reflected in the responses to that article. They accused the oath-propagators of being cynical, stupid, venal, naïve, ignorant, and—in one case—anti-capitalist. 

Well, this book—The MBA Oath—is the answer to every one of those complaints, if the complainers will only take the time to read it.

I expected this to be a quick book; it was hurriedly written and produced—but it has depth way beyond books written over years.  

Perhaps this is due in part to the early influence on the authors of the faculty member who’s just been elected Dean of Harvard Business School, Nitin Nohria, a man who had considered just such an oath years ago.

I also suspect the influence of a legend in publishing, Adrian Zackheim.

Anderson and Escher are generous in their acknowledgements to these and many others. But there’s no denying a truth: these two have written a helluva thoughtful book. There are a dozen places in this book touching on topics I’ve blogged about where I thought, “Darn, they said it better than I did.” 

To many, the most powerful part of the book is the second part, where the Oath’s statement of purpose and 8 promises are detailed, with a chapter for each. These are thoughtful, nuanced discussions about issues like ethics and the law, man’s relation to man, and the purpose of business.

They are as comfortable citing Immanuel Kant and John Rawls as they are taking apart Milton Friedman, while still knowing their marketing history and staying current with Michael Jensen and Dan Ariely

But I find Part I, The Profession, the most compelling. Here the authors diagnose just what went wrong. None of these insights are unique, but they are very well assembled. Consider:

Markets rely on rules and laws, but those rules and laws in turn depend on truth and trust. Conceal truth or erode trust, and the game becomes so unreliable that no one will want to play…We will be left to rely increasingly on governments for the creation of our wealth, something that they have always been conspicuously bad at doing. Charles Handy

Sociologist Robert Merton argued that codes have enormous influence on behavior because they provide guidelines. They can produce negative emotions of shame when the code is broken or positive feelings of pride when it is kept…

In 1908, when Harvard began the world’s first two-year masters program in management education, it was called a “great, but delicate experiment” by Lawrence Lowell, who went on to become president of the university…

When HBS opened its campus in 1908, Owen Young, the president of General Electric, said… “Today the profession of business at Harvard formally makes its bow to its older brothers and holds its head up high…Today and here business formally assumes the obligations of a profession, which means responsible action as a group, devotion to its own ideals, the creation of its own codes, the capacity for its honors, and the responsibility for its own discipline.

In other words, the foundation of Harvard Business School sounded one helluva lot like The MBA Oath.

The authors brilliantly point out a major inflection point: major reports by the Ford Foundation and the Carnegie Corporation in the 1950s. They examined business education, and found it wanting. Specifically, they said it needed to look more like regular academic education.

That was the beginning of the end. As the authors put it:

The purpose of business schools changed. It was no longer to turn management into a profession; it was to turn management into a science. Professors became more like academics elsewhere, researching increasingly narrow and obscure areas so they could publish and win the esteem of their peers. The focus on training leaders who could competently and responsibly manage complex organizations was almost lost in a new age of training analysts with the newest financial formulas. The “great, but delicate experiment” of turning management into a profession had ended.

This book deserves a lot more readership than its admittedly necessary title will probably grant it. Anyone with interest in corporate ethics, regulation, the law, general education, industrial economics, corporate strategy and general management would in my opinion be well-advised to read it. 

Among other things, the book itself goes a good way to restoring the moral currency of the MBA degree.