Posts

Carnival of Trust for June is Up

/0 Comments/in /by

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.

The Banality of Bad Behavior in the Financial Planning Business

/11 Comments/in /by

My eye was caught by a headline in registeredrep.com: “When Bad Firms Happen to Good Advisors.”

Some well-regarded experienced financial planners, the story said, signed on with the most recent mini-Madoff–Sir Allen Stanford and his Stanford Financial Group. Then they got burned.

Interesting story, I thought; even really good, ethical planners got sucked in, it seemed. Here is Bob Hogue, a Houston planner looking to move from Bank of New York:

Stanford offered service providers he knew well: Lockwood Financial’s platform of money managers, with which he had already built his business on, top-notch client and data management technology provided by Odyssey Financial Technologies (a leading European vendor), and a custodial relationship with Pershing, the custodian he was already using. Adding to the appeal, Pershing guaranteed easy transition of client data, no change in account numbers, if Hogue and the three FAs in his Dallas office moved to Stanford. “There weren’t any other firms offering all that,” says Hogue. He and the three other Bank of New York financial advisors joined Stanford’s Dallas office in November, 2007.

There was all the hooplah, too—yacht cruises, fabulous food, beautiful facilities. But Hogue et al weren’t seduced by that.

Or were they?

What Passes for Good Behavior in the Financial Planning Business

Stanford advisors got incentives for selling the CDs, including a 1 percent commission and, depending on the size of the sale, eligibility for a 1 percent trailing fee for each year on the CD’s contract, as well as trips and bonuses and invitations to the annual sales meeting, awarded based on how much money an advisor funneled into Stanford International Bank. [italics mine]

Wait a minute. What do CDs yield– – 3-4%? At those rates, commissions would eat up half the owner’s yield. We cry “usury” at credit card charges in the 20% range–how about 40-50%? And on a CD?

And, if these CDs were in fact yielding higher—7%, 8%–then they were far outside the normal risk range of the usual buyers of CDs.

What kind of a financial planner rakes 50% off the top of a “conservative” product that his customer could buy for nothing at an FDIC-insured bank? Or sells a highly risky product to people looking for conservation of wealth?

According to registeredrep.com, apparently the answer is “good advisors.”

50% fees on CDs? Good? In what dictionary? Let’s get real.

What Good Behavior in Financial Planning Should Look Like

A financial planner friend tells me that when she gets calls from wholesalers pitching products for her to sell, after they describe their new product, their next line is typically “let me tell you how much commission you can make on this.” When she says, ‘never mind that, what’s the yield for the customer?’ the response is usually, ‘uh, hang on a minute, let me look that up.’

That’s the normal pitch. Wholesalers are not stupid. This means: the average financial planner is not in it for you, they’re in it for themselves; that’s why the wholesalers lead with commissions, not benefits to clients.

The same planner tells me she often finds clients who have been put 100% into a variable annuity product, for example, when they have near-term needs for retirement or college expenses. “It makes no sense,” she says. Until you check out how the previous planner made 5%, 6%, 7% commissions up front by selling them this concoction. Then it makes a ton of sense. For the advisor.

Earth to registeredrep.com–bad advisors do this, not “good” advisors! This is the banality of evil. The incessant trickle-down of selfish, anti-customer, opaque behavior eventually makes routine, daily ripoffs get termed “good.”

Madoff and Stanford are anomalies. But the daily, garden-variety, grinding low-ethics, customer-hustling, devious behavior is all too common. See, for example, Michael Zhuang’s comment on a blogpost of just last week.

Can Ethical Behavior Be Increased in Financial Planning?

There are many ethical, customer-focused, honest, trustworthy planners. I know some of them, they do exist. They are as good professionals as in any industry. And there are seedier, greedier industries out there.

But so what? Since when is “he’s worse” an excuse for unethical behavior? Just last month the SEC charged a former President of NAPFA, one of the industry’s two professional associations, with kickbacks.  (Well, at least he wasn’t a Madoff….)

What can you do as a consumer? Search hard for the good planners. Don’t let yourself get snow-jobbed. Ask a lot of questions. Do not be intimidated. This is still a caveat emptor business. So caveat.

But–if you run a financial planning firm, you can make a real difference. Dare to be above average. Look at client-focused behavior in other industries. Talk to highly successful firms who are known for straight dealing. You know who they are in your business–emulate them. Read up on trust. Conduct focus groups. Talk to your critics. Steep yourself in the literature on how short-term anti-customer behavior kills long term shareholder wealth. Dare to do good!

Call me naïve, but I still believe that a critical mass of people in the financial planning business know the difference between today’s norm of selfish, short-term anti-client mindset and the longer-term client-focused strategy that is possible, and that in fact creates loyalty and mutual profitability. 

If I’m right about that, then it just takes some concerted courage by a few to speak up and start making a difference. And if you’re still reading, maybe you resemble that remark.

Ethics vs. Jack Welch at the West Point of Capitalism

/5 Comments/in /by

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

/0 Comments/in /by

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?

/6 Comments/in /by

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.

 

 

 

Call for Submissions to June Carnival of Trust

/0 Comments/in /by

 

Just a reminder: midnight Thursday June 4 is the due date for submissions to the June Carnival of Trust.

In the nearly inconceivable case that you’ve not heard of the Carnival of Trust, it is a compilation of the Top Ten blogposts of the past month having to do in some way with the subject of trust: trust in relationships, business, politics, or society.

The host-ship of the Carnival is rotated each month. The host plays a critical role not only in selecting the blogposts for inclusion, but in adding some value of their own by commenting or adding context. Kind of like a really concise, insightful movie review.

This month we’re delighted to welcome sales savant Dave Stein.  Reporting from the urban wilds of Martha’s Vineyard, Dave is a big-picture observer of the field of sales and sales training.  Check him out at the cleverly titled Dave Stein’s Blog or at his company, ESR Research (think the JD Powers of sales training).  Dave and I are one of those connecctions made through social media (Social Media Today, to be precise), and we have come to know and respect each other.  I look forward to his being able to share his wisdom with Carnival of Trust readers.

You can submit your post for inclusion here. Good luck!

Have We Learned from the Financial Crisis?

/3 Comments/in /by

Most people would agree that something went awry with large parts of the global financial system.  Most would also agree with some broad-brush characterizations of just what went wrong.  A bit too much greed, self-orientation, short-termism.  A bit too little customer focus, ethics, regulation.

Hopefully some of the overheated sectors learned something, or were at least chastened.  Then again: don’t hold your breath.  Here are some anecdotal samplings from the home lending and the financial advisory segments.

Ethical Improvements in the Home Appraisal Business

In an April story the Center for Public Integrity reports:

In a 2007 study by October Research, a real estate news provider, 90 percent of more than 1,200 appraisers polled reported feeling pressure to change property values, usually from lenders, mortgage brokers or real estate agents.

How much pressure?  All too often, if appraisers didn’t come up with numbers that fit what lenders wanted, they found themselves blacklisted.  How overtly?

Amerisave, one of the largest online mortgage lenders, has close to 12,000 appraisers on its “ineligible appraiser list,” which was removed from the Atlanta-based company’s website after the Center made inquiries about it.

Actions taken?  NY Attorney General Cuomo did some vigorous investigation; one results was a Freddie Mac new “Home Valuation Code of Conduct” to go into effect May 1. 

Who opposed it?  Why, the National Association of Mortgage Brokers, of course. 

The same people who, when JPMorgan Chase’s Jamie Dimon said his failure to terminate the company’s mortgage broker business was the “biggest mistake of his career” responded by saying Dimon’s remarks “clearly reflected his poor understanding of the mortgage industry.” 

Uh, NAMB vs. Jamie Dimon? Tthat’s one you lose on credibility alone, NAMB.

NAMB’s excuse for its role in the mortgage debacles?  Others did it too.  So much for ethical learnings.

Ethical Improvements in the Financial Planning Business

There are principled, ethical, customer-focused financial planners; I’ve met many, and know a few well.  At the same time, I think few would argue that the sector is a hotbed of high ethical behavior.  RegisteredRep.com reports:

According to a recent study by Prince & Associates…15 percent of the wealthy left their financial advisors in 20087 and 70 percent took at least some of their assets out of the advisor’s hands.

Why?  False advertising, says Cerulli Associates in the same article: what an advisor says he offers and what he really does aren’t in sync.   Bill Bachrach, a respected (by me as well as by the industry) consultant in this space says:   

“It’s been way too easy for former stockbrokers to gather assets and dump them somewhere and call themselves wealth managers…If asset management is all you do and you can’t point to some other way you make money, you have nowhere to hide when performance goes south.”

What’s the industry response?  Here’s Ken Fisher, a mega-marketer of financial services, responding to two former sets of clients who are suing him for failing in his fiduciary responsibilities:

The lawyers who are representing the clients in both matters are “similarly incompetent."  Both cases “will run into a concrete wall.  The person who will be sorry in the end is the client, who will wind up spending money on lawyers and getting nothing.”  [Fisher said he wanted to teach one lawyer] “a lesson he won’t forget.” 

Now there’s a client-focused kind of guy.  The kind you’d want out front promoting responsible behavior on behalf of your industry. Customer satisfaction?  Let them sue for it, then endear them to you through public insults and threats.  Great strategy, Kenny boy. 

Then there’s the case of Jeffrey Forrest,  fired by his broker dealer, sued by the SEC to keep him from working as an investment advisor.  He continues to run an RIA firm in California, and is licensed to sell insurance there.  In March, he and Associated Securities, for whom he was a top producer, were found guilty by a FINRA panel. 

Associated Securities—surprise surprise—is appealing.  Another great customer lesson: never admit you’re wrong.  Especially when you are.  Goebbels had that one down pat. 

Last but not least.  Finally, after all the Madoff hoopla—some concrete action:

SEC commissioners on May 14 voted 5 to 0 in favor of a proposal that would require the roughly 6,000 federally registered investment advisory firms that deduct their fees from client accounts to undergo surprise audits. The move is part of a wider effort by the regulator to crack down on advisers with direct custody over client holdings.

Exactly.  Bernie made off with all the money by skulking in the gray spaces between regulators: for example, he custodied his own investments and no one checked on them. 

So, surprise audits?  You betcha, right on, about time. The industry should applaud this effort to help improve its reputation.  Thank you SEC!

But, wait.  The proposal is opposed by the FPA, NAPFA  and the IAA. 

Why the resistance?  Here’s a taste:

A surprise audit would likely cost his firm about $3,000 a year, said Ben Baldwin…That fee would likely be passed on to clients, he said.

“There should be an uproar because it’s going to hurt a lot of consumers,” Mr. Baldwin said.

Others contend that the proposal would force smaller firms to stop deducting fees from their clients’ accounts — a move that would require them to wait for clients to reimburse them for their services.

A National Board member of NAPFA elaborates further:

“When you deduct your fee from the client’s account, you have no cash-flow problems.”

And that, I guess, would be why NAPFA opposes the SEC’s proposal.  Because it would force advisors to send invoices instead of directly deducting fees.  Thus slowing cash flow.

More Madoffs?  An occasional small price to pay if it helps protect advisors’ cash flow.

There are simply too many players like the ones quoted in this post who still see regulation as a hateful intrusion on their god-given right to extract cash from customers’ wallets unless expressly forbidden by federal law.

And there are simply not enough players who see regulation as the regrettable consequence of the presence of the former group of players.  They do business based on the simple idea that you should treat people, and most certainly customers, decently.  It can’t be easy for you to watch the first group so demean your industry’s reputation.

Many from that first group must have read a blogpost of mine from two and a half years ago: How to Get Your Industry Regulated in 6 Easy Lessons.  They’re executing the six lessons marvelously, and I have no doubt they’ll succeed beyond their wildest dreams very soon now.
 

Ethics and Compliance: What’s Trust Got to Do With It?

/5 Comments/in /by

I believe words matter.  They affect the way we think, therefore the way we perceive, therefore the way we act.  Words are not passive things, acted upon by our blind behaviors; they are cultural repositories of memory.  Ontogeny recapitulates phylogeny in language as well as in biology.

So it has always bothered me to hear “ethics” and “compliance” in the same phrase.

I’m aware I’m in the minority; it is casual usage to combine the two. 

  • There is the Society of Corporate Compliance and Ethics and their Institute. 
  • Back in 2005, a speech by the SEC talked about the decline in ethics and compliance.
  • Corpedia Corporation “offers a wide variety of innovative and user-friendly compliance and ethics solutions.” 

So, it’s commonly used.  Then again, we also live in a world that obsesses over Britney Spears.

Defining "Ethics" and "Compliance"

Let’s try the dictionary.  First, ethics:

1. (used with a singular or plural verb) a system of moral principles: the ethics of a culture.
2. the rules of conduct recognized in respect to a particular class of human actions or a particular group, culture, etc.: medical ethics; Christian ethics.

Now, compliance:

1. the act of conforming, acquiescing, or yielding.
2. a tendency to yield readily to others, esp. in a weak and subservient way.

These two words don’t live together easily.  In fact, if we try to substitute “Wall Street” for “medical” or “Christian” in the ethics definition, we get what most people would call an oxymoron: Wall Street ethics. 

I would argue this is a serious issue.  Entire industries—financial and pharmaceutical come to mind—have come to conflate the two words, and we are all the worse for it. 

When “ethics” becomes a soul-less matter of ticking the boxes, when we substitute acquiescence for a conscience and subservience for principles, we have lost a great deal.  In particular, any meaningful sense of the word “trust.”

How can a financial planner aspire to being a fiduciary through procedures alone?  How can a company achieve client focus through quarterly behavioral competencies alone?  How can we create trusted regulatory agencies if all they do is enforce processes and paperwork?  How can you give multiple choice ‘tests’ that ‘certify’ people as being ‘ethical?’  But that is generally how "compliance" programs are executed. 

That way lies Bernie Madoff, and a thousand other example of people who have lost track of simple guidelines like be transparent, tell the truth, serve your clients, and work for the long run. 

You Can’t Comply Your Way into Ethical, or Trustworthy, Behavior

A focus on compliance alone can never create ethical behavior.  Perversely, all it does is incent slightly bent people to become more bent by focusing on exploiting the inevitable gray areas that crop up in any set of behavioral rules.   There are plenty of professionals who are 100% compliant with their industries’ lax standards, and are, by many customers’ judgment, highly untrustworthy, selfish sleazeballs.

Law schools can take some blame here; law is the only profession in which the notion of ‘truth’ is non-existent, replaced by ‘evidence.’ 

MBAs are hardly blameless; their mindless pursuit of markets, transactions, and micro-measurements have fueled the replacement of “character” with “observable behaviors that achieve sustainable competitive advantage.”

But that’s too easy.  We’ve all gone along with it.  We’re all infatuated with “science,” neuro-proof, lawsuits and fix-it drugs. Ethics?  Get with it, dude.  

I know this sounds like an old-fart rant, and in part it is.  But there are plenty of businesspeople who behave well, and even prosper because of it.  And they’re also to blame for tolerating the shades of gray. 

We don’t have a crisis of trust and ethics so much as we have moral sloppiness–a willingness to tolerate mediocrity.  Most of us have remarkably similar instincts about what’s right and what isn’t.

What we’ve all got to do is get mad about how far we’ve strayed.

And compliance is not an excuse.
 

The Trust Roadmap

/0 Comments/in /by

While trust is an issue that never goes away, the last couple years have been seen a collapse in the trust that the public, employees and even companies have for corporations and many other organizations. Many organizations recognize that without trust from their key stakeholders, they can’t operate properly.

However, once the leadership recognizes a problem, the next step is often to measure it. And trust is notoriously difficult to measure.

So, here at Trusted Advisor Associates, we’ve been analyzing, well, how to analyze trust. Today we’d like to talk about what we’ve come up with and are planning to introduce in the next few weeks: The Trust Roadmap.

Trustworthiness at the Organizational Level

I’ve been writing recently about a comprehensive approach to thinking about trust. Think of it as a two by three matrix.

On one axis, we have those who trust and those who are trusted; trusting, and being trustworthy. See for example Trust, Trusting and Trustworthiness.

On the other axis is “where” we find trust: interpersonal, organizational/institutional, and social.

We’ve talked a lot about being trustworthiness interpersonally. For example, if you haven’t done so already, click to find your Trust Quotient™, your TQ™.

But how can we trust a business? What can an organization do to be trusted? To regain trust? And so forth. What’s needed is the organizational equivalent of the TQ quiz: what’s needed is a Trust Roadmap. And it’s finally just about here.

For some time, Trusted Advisor Associates have been developing a tool aimed at assessing trustworthiness at the organizational level. We’re announcing it now, even though it’ll be a few weeks before it’s website-deployed and open for business.

Introducing the Trust Roadmap

The purpose of the Trust Audit is to allow a company to take a systematic, high level look at its trustworthiness. More organizationally savvy than a financial audit; more market-focused than an employee engagement survey; and more culture-focused than a reputation survey.

The Trust Roadmap is not:
a. a longitudinal survey purporting to track trust over time
b. a public database
c. a best practices database

It is none of those things because we believe trust is situational, for organizations as well as for individuals. We are interested not in academic research per se, but in teeing up meaningful issues in a meaningful way for our clients.

What is the Trust Roadmap? The Trust Roadmap is private; results are known only to the company contracting for it. The Trust Roadmap is aimed at leadership teams, top management teams and Boards who are interested in taking a serious, objective look at how trustworthy they are seen to be, and at what they can do to improve.

The end result “deliverable” of the Trust Roadmap is a survey-based discussion around a Heat Map—a map of where the organization’s biggest trust threats and trust opportunities lie.

Conceptually, The Trust Roadmap is built from the four Trust Principles (client focus, transparency, medium-to-long term focus, and collaboration), and from a modification of Weisbord’s model of organizations – external relationships, leadership, structure, rewards, processes. Think a 4×5 matrix (come on you, you knew we’re ex-consultants, you knew what to expect).

Mechanically, the Trust Roadmap starts with an online survey—20 questions, just like the TQ, one for each cell in the matrix. Respondents will come from external (customers, suppliers) and from internal (employees, leaders). There is no set number of respondents.

From the survey, the Heat Map is generated, and richer discussions (we have up to five areas to explore in each of the 20 cells) are held around the opportunities indicated.

If you’re interested in learning more, stay tuned to this station, and/or contact Sandy Styer at [email protected]

Collection Agents: Trusted Advisors, or Creepy Hustlers?

/0 Comments/in /by

Good salespeople, psychologists and counselors know one basic truth: people are influenced by (and buy from, and take advice from) those who listen empathetically to them before selling, advising, etc.  (This beats approaches like value propositions, for example.)

So what happens when these techniques are used by credit card collection agents seeking repayment from people who are seriously underwater with their credit card? See What Does Your Credit Card Company Know About You?

First, it works. Second, it’s hard to avoid feeling creeped out.

My question: how do we reconcile these two observations? Can you use “good” trust-building techniques for “bad” ends? Does it mean these techniques are manipulative? Or does it mean collection agents are getting a bad rap, and actually raising positive karma in the world?

I mean the question more seriously than you might think.  It has implications for how we try to restore trust by regulation in the financial sector. 

Therapist, or Credit Collections Agent?

Consider Donna Tiff, a 49-year-old Missouri woman who owned $40,000 on multiple cards. Tiff became adept at countering aggressive collection agents by threatening suicide.

And then Tracey came along. She worked for a company that today is a subsidiary of Bank of America. Tracey had talked to Tiff several times and noticed that there was a mistake on her account — an automatic payment was going to be deducted twice from her checking account. If that happened, Tiff’s other checks would bounce.

“I told her, thank you so much for catching that,” Tiff recalled. “And then we talked for over an hour about my problems and raising kids. She was amazing. She was so similar to me. She gave me her direct number and said that I should call her directly anytime I had any questions or just needed to talk about what was going on.”

Over the next three years, Tiff paid off the entire $28,000 she owed Bank of America and spoke regularly with Tracey, she said. And the $12,000 she owed on other cards? Well, those companies didn’t have a Tracey. They never got fully repaid.

It’s a heartwarming story. Unless you’ve seen how people like Tracey are schooled in the art of bonding. What are the odds that the random customer assistant who dealt with Tiff would have so much in common with her and manage to strike such a close bond? I tried to call Tracey myself, using the information Tiff provided. But I was told she didn’t work there anymore.

I asked Tiff if she ever asked Tracey to write off the late fees and the interest charges.

“Oh, no,” she told me. “She was so kind to me. How could I ask her for something like that?”

I remember when Bill Clinton was first running for president in New Hampshire, and his nickname “slick Willy” was brought up. He reportedly asked a friend, with all the sincerity he could muster, ‘am I really a slick Willy?’

I took that story to mean that someone as smart and as good at empathy as he was ultimately had to wonder about his own motives, and whether he himself could tell the difference.

Or, take Bernie Madoff. He flawlessly imitated nearly every aspect of the trust equation. Does that mean that being credible, reliable, intimate and other-oriented are bad things?

Take the classic Turing test.  If you communicate, via a computer keyboard and screen, with two closed boxes—one with a real person inside, and one with a computer—just how do you tell the difference?

And if you can’t, does that mean the computer is human? We want to say of course not—but try explaining just why.

Trusted Behaviors Without Intentions are Empty

In this case, most of us would say the difference has to do with motives.  Does Bank of America intend to help raise the psychic health of credit-battered Americans, and get paid in the process? Or is it in the business of extracting wealth from people to whom BofA sold their credit cards in the first place, cynically using Maslow’s hierarchy as a tool to get there?

It isn’t just hypothetically relevant. It goes to how we regulate trust in society. It shows the bankruptcy of ever and ever-greater reliance on purely behavioral and metrics-based approaches to trust.  Trust without motives is the computer in the box.

If legislators and regulators cannot figure out a way to put integrity into regulation instead of dealing solely with procedural “compliance,” there will always be a Madoff who figures out how to mimic acceptable behavior.  (See Harry Markopolis’ congressional testimony for a far more workable approach).

You can’t strip trust down to behaviors alone without squeezing the soul out of it. When it comes to trust, intent is relevant.