Trust, Conflicts of Interest and Death Bonds

You trust your brother- in-law, and tell him you want to buy a used car. He says his cousin knows cars. You talk to his cousin, who recommends you buy a Saab. He finds you one; you buy it. All is good.

Then you learn the cousin is a used car dealer, and the car came from his inventory. Next, you learn your brother-in-law received a referral payment from his cousin for your business.

Now there are at least two people you trust a lot less. And the phrase “conflict of interest” becomes personal. But how, exactly, are the two related?

When I wrote (with Maister and Galford) The Trusted Advisor, we introduced the Trust Equation:

T = (C+R+I) / S, where
C=credibility, R=reliabilty, I=Intimacy, and S=self-orientation.

(To be precise, it’s a formula not for trust, but for trustworthiness of the one who would be trusted.)

The numerator factors are pretty clear. It’s the denominator that gets most readers’ interest, and rightly so—it’s the most powerful.
On a personal level, we trust someone if their focus and interest is about us: we do not trust them if their focus and interest is about themselves.

It’s why we’re sceptical of used-car dealers, telemarketers, and other stereotypes of sellers—people who clearly want our money, but less clearly have our interests at heart.

Conflicts of interest are fuel for the fire of self-orientation. How we choose as a society to deal with them says a lot about our view of government, and of humanity.

Arrayed in increasing order of social involvement:

Seven Responses to Conflicts of Interest: 

    by Level of Social Involvement

  1. Level one is caveat emptor. Society doesn’t have an interest compelling enough to create a solution beyond “deal with it.”
  2. Level two is ethical. Rely on collective shame heaped on used-car dealers to enforce behavior.
  3. A third is professional. The Association of Used Car Dealers should develop and enforce guidelines. (The Association for Brothers-in-Law is a less likely candidate for this approach).
  4. A fourth is enforcement. Vote for whatever district attorney will prosecute the hell out of the guilty parties using whatever laws are on the books.
  5. A fifth is required disclosure. As long as your brother in law and his cousin tell you their interests, the problem reverts to level 1.
  6. A sixth is regulatory. The National Used Car and Brother-in-Law Exchange Commission will do what the industry failed to do.
  7. Finally, there is structural reform. Separate the evil-doers so that they are not only free from temptation, but can never conspire to develop their nefarious schemes.

Society evolves. Big Tobacco went from level 1 to level 7 in mere decades. Sarbanes-Oxley was a level seven solution after many years at level three. Elliot Spitzer got elected governor of New York because of his activity at level four. Glass-Steagall’s repeal went from level seven back to levels five and lower.

Senator Herb Kohl of Wisconsin has been holding hearings about the pharmaceutical industry’s role in medical research; many researchers are funded by pharmaceutical industry money. The question is: what to do about it?

Kohl is inclined to recommend level five—disclosure. The Pharmaceutical Manufacturers Association says leave it at level three. Doubtless there are other views covering the others.

The July 30 2007 cover story in BusinessWeek is about Death Bonds—securitized life insurance policies, the same thing we’ve seen with mortgage-backed securities. The idea is individuals can cash in their life insurance policies to investors, and benefit. Along with the investors. The sooner the insured dies, the faster the investor makes money.

Right now, 26 states require professional licensing for "life settlement brokers"—level six.  Several investment banks have founded the Institutional Life Markets Association to lobby for appropriate regulation—level three. New York is prosecuting Coventry First—level four.  (Data from the BW article.)

What is the right role of society in mitigating conflicts of interest to foster greater trust?

How Marketing Can Destroy Sales Trust

I like to believe there can be professionalism in sales.

So I was struck the other day when I ran across an article that talked about “selling on message.” (Pharma Voice, May 2007).

It has always seemed a curious phrase to me—sort of the opposite of customer focus.

Who talks that way? The three Ps, it turns out—that’s who.

The first P is politicians. Robert S. McNamara, Secretary of Defense during the Vietnam War, gave this advice for dealing with the press: “Never answer the question they ask; only answer the question you want to talk about.”

McNamara’s view has since been echoed by Clinton (“it’s the economy, stupid”) and by Bush ("it’s 9/11, stupid!"). Good politics? I’ll defer to others. But it sure isn’t trust-enhancing—look at pols’ polls.

The second P is public relations and marketing. Google “selling” with “on message” and you get “A major concern for marketing and sales executives is that they are always ‘on-message’ with all of the communications that reach their prospects and customers—helping to create, establish and build a customer relationship that will ‘competition-proof’ their customers.”

This seller-centric view of sales comes from a self-described “provider of sales-oriented public relations and marketing services—” which, ironically, lists a “customer-centric selling program” as a key client.

Another source from the same search says, “Less than 27% of CMOs report confidence in having adequately prepared sales to be on-message,” and "How do we enable salespeople to be “on-message” and empower marketers to do what they do best? "

(Those darn salespeople, always wandering off to what customers want to talk about, when they should be doing marketing’s bidding.)

This helps explain the third P, which is the pharmaceutical industry. The article quoted at top, “Sales Training: Moving Beyond the Message,” says “it’s become vitally important for sales representatives to provide value beyond the marketing message.” It quotes Peter Sandford, “in the regulated healthcare environment in which we work, selling on message is vital, but it is the additional knowledge that the representative has that can also be useful to the physician. This allows them to essentially sell beyond the message, but still within the guidelines.”

A May, 2006 article in the same publication called “Rebuilding the Trust—Sales Managers Lead the Charge,” says, “… representatives need to differentiate themselves by delivering more distinct messages, tuned to the needs of the healthcare providers they’re dealing with. They also need to better understand what creates value and align the messages with that goal.”

All this is the language of a sales culture and community that has been mugged and drugged by marketing. Only in such a business can it actually sound radical to suggest that salespeople give customer-specific attention, as opposed to staying “on message,” or “within guidelines.” You don’t hear this kind of talk at IBM, or Nordstrom’s, or Starbucks, or Goldman Sachs.

Marketing is, by its nature, a monologue—it tells things people want to hear to the people who want to hear them.

Sales is, by its nature, an infinitely customized dialogue.

Nothing wrong with either one. Each has its place. But they are different.

When sales is overly-subordinated to marketing, you emd up with “selling on message.” Kind of like the stereotype of telemarketing, or scripted sales businesses like ballroom dancing, or pump-and-dump brokerage houses. It can create puppets reading canned speeches, or at least feel that way, because—the "message" is, above all, about the seller.

The folks at PharmaVoice are right; they are doing their bit to drag pharma sales (forward) into the late 20th century. It must be the most sophisticated business in which marketing chokes off oxygen to sales.

I suppose this is because in recent years pharma—for a variety of structural reasons—has come to be dominated by the marketing function. It has tended, then, to frame other issues—customers, trust, selling—in terms familiar to marketing and PR.

More’s the pity. Marketers do not help the trustworthiness of sales reps by urging “selling on message,” and trust isn’t something the pharmaceutical industry is long on right now.

Now, about McNamara…