The Trust Primer Volume 5

Greetings, and welcome to this month’s ebook. It’s been a cold and snowy February for many Trusted Advisor and TrustMatters readers; this is our contribution to warming things up, by stimulating the thoughtful brain cells. In this edition of the Trust Primer volume 5 we feature:

  • Fixing What Ails Main Street: Ethics, or Incentives?
  • Collaboration as a Strategy, Not a Tactic
  • Making a Referral by Transferring Trust

Get the Trust Primer volume 5 here

We welcome your comments, and wish you some ambient warmth to go along with your stimulated thought-centers.

The Trust Primer Volume 5

Greetings, and welcome to this month’s ebook. It’s been a cold and snowy February for many Trusted Advisor and TrustMatters readers; this is our contribution to warming things up, by stimulating the thoughtful brain cells. In this edition of the Trust Primer volume 5 we feature:

  • Fixing What Ails Main Street: Ethics, or Incentives?
  • Collaboration as a Strategy, Not a Tactic
  • Making a Referral by Transferring Trust

Get the Trust Primer volume 5 here

We welcome your comments, and wish you some ambient warmth to go along with your stimulated thought-centers.

Financially Justifying Ethics: A Faustian Bargain?

Many readers are familiar with Goethe’s Faust  in which the protagonist sells his soul to the devil in return for having his way here on earth. Those who are not familiar with it will find the same theme echoed in Robert Johnson’s Crossroads song, in which the singer sells his soul to the devil in return for fame as a bluesman. (Still more of you may only know this through its 1986 insipid version with Ralph Macchia, redeemed through a transcendent performance by Steve Vai in the role of the Devil’s hands).

But never mind. What I want to talk about is the justification of ethical corporate behavior by referring to its profitability. It is, I suggest, a slippery slope.

Is Ethical Behavior Profitable?

Many writers and organizations suggest that socially responsible behavior is also profitable. Variations on the theme include the profitability of high transparency, candor, employee engagement, customer loyalty, green-is-good-business, etc. In the jargon, you do well by doing good.

I applaud these kinds of studies, because they highlight imperfections in market pricing: usually short-termism. To the extent they are right, they hold short-term managers’ and investors’ feet to the fire to justify their self-aggrandizing decisions. 

But they are not perfect. Ethical business propositions may get tagged as unprofitable for one of four reasons. One is market imperfection, one is venality, and a third is stupidity.

But the fourth is where I want to focus. Sometimes the “right” thing simply is not profitable. Stretch out the timeframe as far as you can, fix your cost accounting all you want, remove moral hazard to zero—and it may still not be profitable. There are simply times where the “right” thing does not work out to be profitable for the entity in question.

Enter Mephistopheles.

Justifying Ethics Financially

When faced with an ethics-vs.-profit decision, a moral capitalist like CEO Aaron Feuerstein knows the answer. You do the right thing, he said, simply because—it is the right thing. That’s why they call it ‘the right thing.’ It needs no external justification.

But they’re not listening to Feuerstein much these days. And so the CSR movement has become enamored of proving the profitability of doing good.

There’s a real risk, I would argue, when ethicists and corporate social responsibility advocates put nearly all their emphasis on this line of thought. Simply put, it becomes indistinguishable from justifying ethics on the basis of self-interested materialism. Which destroys ethics.

It’s always been an appealing argument. Think Pascal’s wager, for example, in which self-interest justifies theology. Thus cheapening the theology. Chris Maher makes a wonderful parallel case for the pernicious influence of ROI calculations on charitable giving in an unpublished article.

Perhaps nobody does the integrity-is-good-for-you argument better than Jack Zwingli at Audit Integrity. In a brief conversation with him a few months ago, we discussed this point. Jack suggests that do-gooders are howling in the wind if they don’t speak the corporate language. “It just doesn’t work,” he says, “and that’s the simple argument against it. You have to show companies and investors that there are financial consequences for behaving badly.” (my paraphrase).

As a descriptive statement, it’s hard to argue the contrary. But as a moral statement, it’s well down the slippery slope.

Let’s be clear what’s at stake. Saying “those who behave well make more money,” is a mere figleaf away from saying, “you should behave well because you’ll make more money.”

From there, it’s an easy stumble to saying, “if it’s ethical, it’s profitable,” then, “if it’s not profitable it’s not ethical.” And now we are at, “If it’s not profitable, I’m not doing it—because it’s not profitable. Period.” Ethics is completely subsumed by profitability at this point.

(And don’t give me that old ‘the purpose of a company is…’ routine; I’ll deal with that in a later post.)

Talking About Ethics Without Making a Faustian Bargain

It is surely a good thing that the pro-good analysts continue to highlight stupid, inefficient and self-aggrandizing decisions. The results of better decisions are helpful in both moral and economic terms. And in the long run and in the aggregate, the vast majority of “good” decisions also do “well.” The alignment of the economic and the moral benefits society.

But not every decision presents itself so neatly. When faced with doing the moral thing, which may not be the profitable thing, that is when the Devil comes for his due.

If you have given away your moral high ground by consistently monetizing it, then you no longer have a moral leg to stand on. Companies will flatly reject your pleas, because “it doesn’t make money. Surely you don’t expect us to lose money, do you? After all, you’ve always argued…” And they’d be right.

This is not mere theory. Look at the response of health insurance companies this summer at a congressional hearing. Asked to voluntarily give up their anti-human policy of rescissions, they demurred. Their reasoning? We don’t have to; state law doesn’t keep us from doing it, so we won’t. Why should we? We’d lose money.

Where was the moral high ground on that one?  Squandered, out doing the devil’s work by implicitly permitting moral argument from profit.

So where is the high ground? It lies in public shaming. Editorials, demonstrations, op-eds, blogs, YouTube videos, politics. Moral high ground comes from appealing to a larger set of beliefs from a larger group of stakeholders. 

Zwingli tells me, “been there, tried that, it doesn’t work.” He is surely right, at least about working in the trenches.   But public shaming in a Massachusetts election got Obama’s attention. Public shaming got Goldman’s CEO Lloyd Blankfein to drop a zero from his bonus package. Public shaming cost Tiger Woods an image, and Toyota an untarnished brand.

Real change doesn’t come from the top down. As Margaret Mead put it, “Never doubt that a small, group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.”

Ethicists and CSR advocates: don’t stop fighting the good/well fight–but don’t give up the high ground by monetizing everything either.  

Don’t sign that piece of paper out there at the crossroads.


The Real Lesson of Toyota: Cultural Insensitivity?


The obvious story about Toyota—in the US anyway–is their perceived huge loss of trust. Typical is this column yesterday by David Lazarus of the LA Times, titled Toyota: What’s so Hard About Doing the Right Thing? 

Suggests Lazarus:

“Toyota’s actions throughout this mess — the initial denials, the obfuscating, the gradual acknowledgment of safety issues — suggest that its priority first and foremost has been to cover its crankcase, not safeguard its customers.”

Well…not so fast.

Not Every Moral High Ground Looks the Same from All Vantage Points.

Take Laura Silsby, the head of the group accused of kidnapping children in Haiti. Here’s what CBS reports she said in front of the court

Silsby told the judge: "We were trying to do what’s best for the children."

When the judge asked, "Didn’t you know you were committing a crime?" Silsby quietly answered, "We are innocent."

Personally, I have very little doubt that Silsby sincerely believed what she said. More importantly, she appears to have believed that her beliefs would shared by the vast majority of the world’s population, including a Haitian court.

As it turns out—the courts in Haiti somehow saw morality differently, believing that when due process of Haitian law regarding separating families is the issue, there’s more at stake than bureaucracy.

Or take Scott Roeder, who pleaded innocent in Wichita Kansas to murdering George Tiller (an abortion doctor), because “Those children were in immediate danger if someone did not stop George Tiller…The babies were going to continue to die.” 

As it turns out, the Wichita jury took 37 minutes to view Roeder’s plea from a different viewpoint; one in which premeditated killing over a disagreement about a legal procedure constituted the crime of murder.

Toyota’s Behavior from the American Perspective

The LA Times article quoted at the outset of this post is quintessentially American. Toyota made mistakes, the narrative goes, then did the classic Watergate move, compounding the error by covering it up.

The American narrative continues.  No forthcoming comments. No transparency. Vague claims of intent to fix. Then, more bad news, dribbling it out. Even Toyota’s American dealers—behaving more like Americans than Toyota employees–bought the American narrative and withdrew advertising from ABC affiliates because they didn’t like the press coverage. 

Why did Toyota do this? According to the American narrative, the same reason as John Edwards, AIG, Merck, Enron, Lehman, and pick-your-scandal everyone else did: to line their pockets, take the money and run, fleece the average American–a quick-buck hustle.

And, in America, they’re generally right.

Except Toyota is a very Japanese company.

Toyota’s Behavior from the Japanese Perspective

I am no expert on Japanese culture. I’ve set foot there only once. I’ll gladly take corrections from those who know the culture better than I.

But here’s what I think.

The story in Japan is not one of greed, but of hubris. And not American hubris, but Japanese. 

From JapanToday we hear

“It’s a “terrible blow” for Toyota because its identity is so closely linked to quality and the company seemed slow to recognize the problems, said Kenneth Grossberg, a marketing professor at Waseda University who has lived in Japan for 16 years. 

In other words, they committed a cardinal Japanese sin: the sin of arrogance, by letting down their constant vigilance of quality. Greed? The story here is not greed; it’s something much worse in Japan—loss of face.  About the company image.  And about the national obsession–quality.  The Japanese are upset about Toyota too–just not in exactly the same way we are.

In a culture that not so many years ago considered failures like this a cause for major public self-humiliation, it is not surprising that mea culpas are taken very seriously. For one thing, when Americans don’t apologize quickly, we assume it’s because they’re legally at risk when they confess. The concepts are distinct in Japan–you can apologize without risking legal consequences.

This is not a simple analysis. Brooke Crothers, who knows more than I do, attributes it in part to another Japanese trait—a desire for denial

Whatever your view, it’s hard not to ascribe our own unconscious belief systems to others. 

Hard, but pretty important nonetheless.


The Bigger the Bank, The Lower the Customer Satisfaction?

That’s what seems to be the finding in this interesting study:

Customers of the biggest banks in the United States are the least likely to believe their financial institution does what’s best for them as opposed to what’s best for the bottom line, according to a new report from Forrester Research.

To put the rankings in perspective, large banks have generally been at the bottom of the list since the survey was initiated seven years ago, and many of the banks have alternated between the bottom spots year to year, said a Forrester vice president…

Here’s my question: how do you explain this?

And I’d like to pose the question to two classes of people: economists, and the wishful thinkers (me often included) who like to point out that trustworthy behavior is business-successful behavior.

The fact is: it’s not easy to square certain beliefs with certain data. Let’s climb up to 30,000 feet and look at this in broad, simple terms.

Bank Data vs. Economists’ Assumptions

I’ve got to be careful here because I’m not an economist. But I’ll go out on a limb and say that nearly all economists believe a few things. 

All else equal, people in a free market buy the lower-priced good. 

All else equal, satisfied customers in a free market reward the better company with higher profits and growth.

Higher size yields lower costs, thus greater profits and/or lower price and/or better quality.

Roughly right? Then how do we account for a situation where lower customer satisfaction correlates with higher size?

Here are some of the logically possible answers to the conundrum.

  1. It’s not a free market at all; never has been. And if you believe removing regulations to make it more ‘free’ will improve customer satisfaction ratings, I’ve got a bridge to sell you. (I give this explanation the highest probability)
  2. All else is never equal; things like ATM availability, extra-bank fees and aggressive marketing give big banks an advantage;
  3. The survey identified the wrong customers; the ‘real’ customers are institutional with strong ties to the big banks, and they are very, very satisfied.
  4. It’s an aberration due to recent market conditions. Um, no. Not over 7 years. That goes back to 2002. Nope, this is pretty solid.
  5. The biggest firms didn’t grow by organic growth from satisfying customers, but by acquisition of failed banks. Maybe, but that should have resulted in lower costs. And economists think lower costs drive customer satisfaction. The conundrum remains. 

Help an economist today; what are some other explanations that cover this seeming anomaly?

Bank Data vs. “Doing Well by Doing Good” Theorists

There are lots of studies to suggest strongly that trustworthy behaviors like focusing on customer service and data transparency are not only socially valued, but result in higher profitability too. I cite those studies, and so do others.

And then there is data like this, which most of us feel in our guts to be true. It really does raise the question, “Just where is the link between good-citizen behavior and good economic results?”

I hear from almost every trust cynic: they simply do not believe that behaving in a trustworthy manner is profitable. It is too risky, they say; and contrary to wishy washy thinking, behaving nicely results in getting your butt kicked in the market.

For that point of view, here’s Case Exhibit I. How can DWBDG theorists explain their way out of 7 years of uncorrelated satisfaction and market performance?

The logically possible answers to this conundrum, I suggest, are identical to the answers for the economists, 1-5 above.

But what about you? How do you explain the data? And what are the policy implications of your explanation?



February Carnival of Trust is Now Up!

For those unfamiliar, the Carnival of Trust is a monthly collection of the most compelling and thought-provoking posts dealing with the subject of trust within the blogosphere. Each month, the Carnival is hosted by an experienced blogger—who has his or her own strong ideas on the subject of trust. The definition and selection of which posts make the grade is left to the host; each host infuses the selection and commentary with their own perspective and thoughts on the overall subject at hand. The result? A few minutes of great reading.

This month Bret has collected some juicy blogposts that delve into the concept of interpersonal relationships, especially those in a work setting, answering the following questions:

  • How do you improve your relationship with your team?
  • Do you protect your friends?
  • How do you earn respect as a leader in the workplace?
  • What does the decline of peer trust mean for social marketing?
  • Is there a short-cut to trust in a business start-up?

You’re not going to find this much consolidated brain-power anywhere else! Sit back, relax and treat yourself to some brilliant insights into the world of earning, establishing, and gaining trust.

Many thanks to Bret L. Simmons for hosting this month. If you liked this month’s Carnival of Trust, you might enjoy looking at past Carnivals as well. And if you’d like to see your blogpost up there in the lights, please do contribute your post (or someone else’s you’d like to nominate) at this site.

Again, enjoy the February Carnival of Trust!

Whom Can You Trust? How Can You Know?

This blog mostly writes about how businesses and people can become more trustworthy, and more (intelligently) trusting. What we don’t write as often about is who not to trust.

How do you spot a con? Should you trust your instincts? What’s the role of credentials? Who do you trust? (This blogpost will deal mainly with personal trust).

I must lead with two caveats: there is no trust without risk, and there is no riskless world available to any of us. There is only so much you can do to avoid risk. That said, let’s talk about it.

The following 17 rules are mostly exclusionary: violation of one rule may be enough to blacklist, but the absence of violations isn’t enough to guarantee no risk. Just as there are codes, there are codebreakers. There are always Bernie Madoffs, con men who know how to use all the rules of trust against us.

The Trust Equation comes in very handy here. Since it is a formula for trustworthiness, let’s reverse-engineer it to define what the anti-trust equation looks like.

Let’s imagine you are looking for a pediatrician, a financial planner, a gardener, a lawyer, an events planner. How do you know you can trust them?

Trust Equation Component 1: Credibility

1. Credentials. If someone has no credentials, while others in their business do, they have a lot of explaining to do. You probably have better things to do. Move on.

2. Clarity. If the person can’t explain it to you clearly, and we’re not talking about nuclear physics, move on. That includes lawyers and financial planners.

3. Fine print. If there’s a lot of it, that’s not good. And if they say ‘you don’t need to worry about this, you can just sign it,’ that’s definitely not good.

4. Does it feel ‘almost too good to be true?’ Listen to that feeling; it’s probably right, it is too good to be true.

Trust Equation Component 2: Reliability

1. Track record. Do they have a track record at all? If not, not good.

2. Integrity. Do they say what they’ll do and then do it? Do you know? Does anyone know? Do they have a reputation at all? If no, keep walking.

3. Are they unprepared for meetings, and wing it, and you know it?

4. Do they show up on time? Call to let you know they’re running late?

Trust Equation Component 3: Intimacy

1. Do you feel personally at ease with them as a human being, not just an expert? Not star-struck, or blown away—just comfortably at ease. If not, you can do better.

2. Did they do most of the talking? That’s not good, you know. Move along.

3. Does your child or pet like them? Not like them? (Not limited to pediatricians and veterinarians).

4. Do they share others’ secrets with you to ingratiate you? That means you can’t trust their discretion.

Trust Equation Component 4: Self-Orientation

1. Did they engage you in conversation about your problem? Letting you talk about it? If not, that’s not a good sign.

2. Do they blame others for their shortcomings? A sign of not taking responsibility.

3. Do you feel pressured by them to act quickly? Be wary of “we can only keep this open for one more week,” or “we’re only taking a few more investors.”

4. Check your own motives. Are you looking for a quick fix, a special deal? Then you’re the ideal con target. You might as well wear a target.

5. Maybe most important of all: Did you feel guilty about asking questions? About not moving along at the seller’s speed? Did you feel pressured to give certain answers, or to offer certain information? Check your gut: your own feelings of guilt or pressure are serious warning signs. Ignore them at your peril.

Postscript: I was tempted to write this post as a 100-point quiz.  You know, deduct so many points for each “bad” answer, and end with “if your potential trustee scored between X and Y, you probably should…”  You know the type.  And it would probably be more popular.

But I don’t think that’s right in this case. The idea that you can precisely put a meter on trust is a dangerous idea. There’s  more than enough false precision out there already. Let’s just leave this at the personal, your-mileage-may-vary level: it’s meaningful if it’s meaningful to you.

Virtues and Values: Building a High-Trust Organization

Let’s assume a High-Trust organization is highly desirable, and focus on how we get there.

A High-Trust organization is made up of people who are trustworthy (and appropriately trusting) in an environment that enables trust.

Let’s use the word ‘virtues’ to describe what high-trust people do. And let’s use ‘values’ to describe what guides their organizations.

What are those virtues? And what are the values that support them?

The Virtues of Trust

The virtues of trust are personal—our level of trustworthiness, and our ability to trust.

The Four Virtues of trustworthiness are contained in the trust equation: Credibility, Reliability, Intimacy, and Low Self-orientation. If someone exhibits those traits, we call them trustworthy.

We consider it virtuous for someone to tell the truth, to behave dependably, to keep confidences, and to be mindful of the needs of others.

The virtues of trusting-ness are the ability to take emotional risks, and an inclination to look for, notice and create positive potential. We consider it virtuous for someone to be generous, and to lead with generosity rather than fear in dealing with others.

The Values of Trust

The virtues of trust are personal; the values of trust are institutional. A person’s virtues ought to be consistent with (and reinforced by) an organization’s values.

There are Four Values of trust (I have called them Principles of Trust elsewhere). They are:

  1. Customer/client focus for the sake of the customer/client;
  2. A habit of collaboration;
  3. A focus on the medium-to-long term, on relationships rather than transactions;
  4. A default stance to transparency, except where illegal or injurious

The Trust Values in a high-trust organization drive the organization’s external relationships, leadership, structure, rewards and key processes.

Each of those four values speaks to the nature of relationships—because trust is about relationships.

The High-Trust Organization

The high-trust organization knows how to define and find people who can trust. It helps people grow their own trustworthiness. (See our own Trust Quotient as an example of a diagnostic and development tool built around the four virtues of trustworthiness).

A high-trust organization is not shy about using a term like “virtue.” It is hard to define the level of virtue inherent in a single act by a single person; but in the aggregate, it is very easy.

Trust is, at root, a moral concept. A high-trust organization is an organization whose people behave ethically simply because it’s the right thing to do, and which itself supports such ethical behavior—not just particular policies, but ethical behavior itself.

The high-trust organization is clear about its values. It may or may not use the specific Trust Values outlined above, but those it has will be relationship-relevant.

A high-trust organization believes that high economic performance and social responsibility are both maximized by the consistent pursuit of trust-based relationships over time.

The goal of a High-trust organization is not economic performance; but high economic performance is very often the outcome.

Dealing with Pricing Objections: Podcast with Charles H. Green on

When I talk about trust-based selling, the question closest to the surface for most listeners is:

"What do I do when my client says to me, ‘your price is too high’?"

I sat down with Peter Clayton, of TotalPicture Radio to talk about just that.  If you want to settle back and listen, you can hear that conversation in the podcast interview that resulted. 

If you prefer your experience visual rather than aural, you can click below the "Listen to the Podcast" box to read the transcript.

Here’s a taste, beginning with Peter’s intro:

"If you’re like most professionals, you’re not comfortable with selling. It’s not easy fighting the feeling that hyping yourself is somehow inappropriate. And it’s worse when you have to deal with objections, doing presentations, and getting rejections — or waiting for the phone to ring." — Charles H. Green

Welcome to a Success Strategies podcast on TotalPicture Radio, with Peter Clayton reporting. When I came across Charles H. Green’s article in RainToday (a fabulous sales and marketing resource), I immediately contacted Charlie and asked him share his insights with us. He is founder and CEO of Trusted Advisor Associates based in West Orange, NJ.

Charlie is the author of Trust-based Selling and co-author of The Trusted Advisor. Centering on the theme of trust in business relationships, Charles works with complex organizations to improve trust in sales, internal trust between organizations, and trusted advisor relationships with external clients and customers. He is a speaker and executive educator on trust-based relationships and trust-based selling in complex businesses.

We’re all in sales today. And for sales adverse people such as myself, learning how to present yourself, and your expertise using positive, "deal winning" sales skills has become a matter of survival.

Listen to the Podcast Now

Read more

Innovation: The Critical Link to Trust

You know how sometimes you hear a theme every once in a while, and you don’t make much of it? But then you hear it five times in a week, and suddenly you say whoah, something’s going on here!

That’s how it is for me with trust and innovation. I have now seen enough about their connection that I notice it.

Got problems with innovation? R&D not giving you much bang for the buck? Suffering from same-old service offerings? Product un-differentiation got you down? Read on.

Observation: Pessimists Don’t Innovate, Nor do they Trust

In Why Victims Can’t Invent Anything, Michael Maddock and Raphael Louis Viton suggest a simple test for the ability to innovate: the old glass is half full, half empty test. If you are optimistic, you are a creator.  If you are pessimistic, you are a victim. Guess which one wildly out-innovates the other?

Now marry that up with the profile of trusting and non-trusting people from Eric Uslaner, arguably the world’s leading academic expert in trust. Paraphrasing, high-trusting people believe that life is good, and that they are in control of their lives. Non-trusting people believe life is fundamentally unfair, and that other powers are in control of their lives.

You want to increase innovation? Hire optimistic, high-energy people; shun conspiracy theorists. And why does this work? Because they trust each other.

Diagnosis: More Trust Yields More Innovation

Let’s follow this logic further. Trusting each other means people are open to each others’ ideas. Robert Porter Lynch explains the link. 

Creativity happens, he says, very little by sitting around contemplating. Rather, it comes about from our interaction with others. In particular: people different from ourselves, who think in fundamentally opposite ways from the way we think.

If we’re not open to others—if our fundamental approach to others is fear-based, if we come from anger or ego or fight/flight responses—we shut ourselves off from the creative forces that come through sharing those different perspectives. We see them as threats.

The bridge is trust. If we can trust the other person, then we can hear and consider their perspectives, as they do ours. Net: communication, creativity, new ideas, innovation.

Trust and Innovation: Does It Work in the Real World?

Forget the thinkers: who does this? One who can speak to this directly is Ross Smith at Microsoft.  When in charge of the Windows Security Team, Ross and wingman Mark Hanson realized they had some incredible talent on the team that was under-utilized. They needed to innovate. As Ross studied innovation, he began to realize trust was the key to getting there.

Does it work for Ross? He’ll answer a resounding ‘yes.’

In the course of the next month, you’ll be hearing from several of these people: Eric Uslaner, Robert Porter Lynch and Ross Smith in particular, as well as others. I think you’ll enjoy reading what they have to say.

For now, let’s just notice what they all agree on: the road to innovation goes through trust.