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Trust & Leadership

Lisa McArthur, one of our esteemed consultants, tackles the topic of Trust & Leadership and provides practical, actionable steps you can take today to start improving both.

Into every leadership journey a little rain must fall. At some point, numbers start to head south; that key project begins to miss critical milestones. It happens to all of us. And when that rain does fall, remember that as a leader, you are defined not by your challenges – but by your response to them.

For many, missed targets or milestones trigger the instinct to micro-manage. After all, the only way to make sure you’re on top of everything is to put it all under a microscope and leave no stone unturned. Only a clear command-and-control style of leadership can help right the ship. Right?

So tempting; and yet so wrong!

The solution is not to overrule your team, it’s to get it working. Trust improves teamwork. Full stop. More reports and checkpoints will may provide more data, but chances are it is breakthrough ideas and approaches that will get you back on course. You need your team to focus on new possibilities and collectively take calculated risks.

To put it simply, they need to trust each other. Sounds simple, but as a leader, what does this mean? How can you build trust within your team? The trust equation, normally a descriptor of personal attributes, has something to add to team analysis:

1. Start with Intimacy

For those not familiar with the trust equation, intimacy is about creating safety and building a safe environment. Put yourself in a team member’s shoes. They have an idea that could help bring things back on track. Should they take a risk and offer the idea up to the group? What kind of reaction will they face? In a safe environment, new ideas are welcomed and become the seeds that can germinate true breakthough thinking.

Be honest. How does your team measure up? Are new ideas welcomed and used as building blocks or are they generally dismissed? If suggestions are met with a “we’ve tried that before” or “It’ll never work”, ideas will slowly stop coming.

As a leader, how are you building a “safe” environment to ensure that your team’s ideas are heard? At your next team meeting, try starting from a place of vulnerability. Talk about the issues at hand and your role in them. By taking a risk and being vulnerable you are showing your team that it is safe for them to take risks too!

Next, ask for help. We often resist asking for help for fear of appearing weak – but paradoxically, asking for help shows vulnerability, equality and a desire for collaboration. You’ve taken a risk (again) and shown your team that it is okay to do.

The plus – most of us are hard-wired to respond to honest requests for help. Get the brainstorming started and then listen. Really listen! Ask engaging questions, clarify and let the team build on each other’s ideas. New and innovative solutions are far more likely when everyone is fully engaged and feels safe to contribute.

2. “Check your S”

The “S” in the denominator of the trust equation is self-orientation – and a high number is not good. As a leader, you have to model low self-orientation. Are you focused on what YOU need – to report on a project’s progress or the latest operational results – or are you focused on what the TEAM needs? Even those leaders with the best intentions can find this difficult.

Acting as an “I”, we start directing and stop listening. How often have you asked for the latest sales results or project update only to then provide clear and specific direction on what you think is required?

Change your focus to “we”. Instead of the “I”, ask what the team needs to be successful – and then whatever it is, do it quickly. By changing your focus to the team, your actions will show your commitment to their success. Your commitment to the team’s success, and only the team’s success, lower’s your self-orientation. Done authentically, your team will respond in kind, re-committing themselves personally to the task at hand.

3. Build positive momentum with reliability

The biggest part of Reliability is, simply stated, do what you say you are going to do. We are all familiar with Newton’s first law of motion; “An object at rest, stays at rest. An object in motion stays in motion until acted upon by an external force.” How can you, as a leader, get the ball rolling?

Start small. Have the team set small, incremental targets. It’s important that the targets are set on the team’s terms, not yours. Make sure the targets are attainable and then celebrate each success. Suddenly, you have shifted the focus from what the team can’t do to what they can accomplish. With each small win, the team builds positive momentum and once you’re moving, no one will want to be the reason things come to a halt.

At the same time, resist encouraging sandbagging, or in its more polite form, “under-promising and over-delivering.” It’s just another form of lying to your clients, and it undercuts reliability, since it literally trains your clients to expect a disconnect between what you say and what you do. Which was the whole point in the first place.

4. Be honest

As a leader, your words have power. Now is the time to focus on clear, concise messages that your team will understand and take to heart. Now is not the time for nuanced explanations.

Words matter. If you are not sure of an answer – say so (in fact, “I don’t know” is one of the most credibility-enhancing things you can say – no one will suspect you of lying about that!). You can always go get the answer, but you won’t always get another chance to prove your honesty.

In environments where things get tough or are moving quickly, even tiny errors in facts or judgments can create large ripples in the team and create that ominous “spin” that suddenly brings all activity to an abrupt halt.

Life is full of ups and downs and rainy days; leadership is no different. Strong leaders understand how to build trust and foster an environment that encourages each team member to contribute to their fullest potential. The next time your team struggles, remember – don’t take over the job yourself – instead, lead with trust!

Trust, Inc.

Walgreens, the venerable (116 years old, second largest) US drugstore chain, has announced a new tagline as part of a new brand positioning strategy.  No longer will it be “At the corner of happy and healthy” – the new mantra is “Trusted Since 1901.

Well.

I wish Walgreen’s nothing but the best, and don’t doubt their good intentions. Nor are they necessarily wrong on the facts. And, Walgreens is hardly alone in wanting to trumpet their levels of trustworthiness, or their trusted relationships with customers.

However, the use of “trust” in corporate branding is problematic on at least three dimensions. Walgreens provides a good opportunity to explain why.

Cognitive Dissonance

I always tell people not to call themselves a ‘trusted advisor,’ and certainly not to incorporate the phrase into their advertising. It’s like saying “humility is my best quality.”

Trustworthiness is something of a virtue, and calling yourself virtuous just explodes the claim. It’s wonderful when other people use trust to describe you or your relationship with them – as long as it’s them saying it. (“Trust me” may be the two most trust-destroying words you can say).

Calling yourself ‘trusted’ is also different from calling yourself innovative, or respected, or high quality. Walgreens might want to take note that none of the ”Top 10 Most Trusted Brands” brands incorporate trust itself into their taglines.

They might also take note of how it’s worked our for “The Most Trusted Name in News,” whose tagline allows Donald Trump a convenient foil.

Risky Business

Claiming to be trusted is a bit like the Gary Hart strategy – daring the press to find otherwise. It’s like a red flag to a bull.

How many people will manage to dig up the fact that Walgreens made a substantial amount of money and growth during Prohibition by selling (legally) whiskey? Or that the pharmacy business managed to quickly carve out a very liberal interpretation of “medicinal purposes” during that period? Sorry, Walgreens, it’s what you’re setting yourself up for.

History aside, stuff happens. Ask BP about oil spills, or the old Union Carbide about explosions. Or, closer to home, J&J about Tylenol redux. Mis-steps are magnified, and stay in the press longer, for those who claim to be trustworthy in the first place.

Corporations are Not People

This is the biggest one. “Trust” is a word with much contextual nuance of interpretation. But one thing we can say for sure: personal trust is richer and stronger than corporate trust.

We trust people on an emotional level. We trust people based on our views of their intentions, their transparency, and their willingness to trust us.

By contrast, corporations’ intentions are usually very much self-oriented; transparency is little-practiced; and rare is the corporation without legal disclaimers governing their customer relationships. That’s not a criticism (well, it is a little bit); but it’s mainly just stating the difference between protein-based and legally-based entities and the ways we trust them.

Most corporate executives would probably agree with this in the abstract – but they ignore the implications in the particular. If they really believed it, they would be spending money on becoming more trustworthy, rather than on PR campaigns to be seen as more trustworthy, or on reputation management to change perceptions rather than underlying reality.

So What’s a Company to Do?

A company that is serious about being seen as trust-based would start by recognizing – it’s personal.

Trust is not created by spin, advertising, PR, or taglines. It is created by the collective personal behavior over time of corporate employees interacting with customers, suppliers and each other.

This means corporate trust is a culture-and-values issue – not a process-and-marketing issue.

A company that is serious about trust will, among other things:

  • figure out how to trust its customers and suppliers, often by taking some form of risk (because trust is reciprocal – we trust those who trust us);
  • invest in customer service by focusing on effectiveness, not efficiency; by using ROI, not budget variances, to measure success;
  • hire, train for, and role-model best practices for interpersonal trust, including emotional intelligence, strict truth-telling, and vulnerability;
  • consistently prioritize long-term, relationship-based behaviors over short-term, self-aggrandizing behaviors, in its compensation and promotion policies;
  • focus on ways to establish deeper relationships with stakeholders, rather than focusing on issues like NDAs, non-competes, or arbitration clauses;
  • make heroes out of people who model trust-based behavior.

We trust those more who do not protest how much we trust them.

 

How to Build Trust Within a Cross Functional Team

Today’s guest post is from Rick Lepsinger, President of OnpointConsulting. They are long-time friends of ours, and leaders in the field of leadership development. Rick addresses a key application for trust in the business world – cross-functional teams.

Trust is the foundation of any organization. On cross-functional teams, where collaboration between members of different functional units is a core part of effective day-to-day operations but when no one has direct authority over anyone else, trust is critical. However, it can be more difficult to build in a multi-functional team especially when team members are geographically dispersed.

Building trust among multi-functional team members is a key part of enhancing the overall productivity, profitability, and functionality of these teams.

Recognizing Trust Issues

Recognizing the signs of trust issues is crucial for diagnosing problems as well as guiding any trust-building efforts. Some of the danger signs of low levels of trust on a team include:

  • Lack of Involvement. When team members do not share information or involve colleagues in decisions that may affect them.
  • Lack of Interpersonal Interactions. When every conversation between team members is “strictly business” and team members do not connect on a personal level.
  • Talking Behind Each Other’s Backs. When team members talk about the mistakes of others to everyone except the person who made the mistake.
  • Focus on Functional Rather Than Group Goals. When team members are in it for themselves rather than helping one another meet goals for the good of the whole group.
  • Team Members Avoid Asking for Help. When team members take on too much themselves and avoid asking for help because they believe that they cannot rely on others.
  • Everyone Deflects Responsibility for Their Mistakes. When team members blame others rather than accept responsibility for mistakes or missed commitments.
  • Micro-Managing. When team leaders, and even team members, scrutinize the work and progress of others and start to tell people how to do their work.

Odds are that if trust is lacking, then you may notice several of the above symptoms among your team members. So what can people do to build trust and increase the perception of their trustworthiness?

The 4 Essential Elements of Trust

Many of the aforementioned symptoms of a team with low levels of trust can be attributed to the lack of one or more of the following components (ref the Trust Equation):

  • Credibility. How much team members believe what a person says.
  • Reliability. The extent to which team members “follow through” on commitments.
  • Intimacy. The extent to which team members empathize with others and feel they can confide in one another.
  • Self-Orientation. How much a team member thinks that someone else has his or her best interests at heart.

Actions to Build Trust

Trust takes time and effort to build on any team. Although not always easy, some methods for building trust in a cross-functional team include:

  • Arranging Face to Face Meetings. At least once early in the team’s development, arrange a direct, face-to-face meeting so everyone can put a face to a name. In addition, host online video-conferencing to replicate the characteristics of face-to-face interactions. This provides opportunities for team members to connect and build relationships.
  • Partnering Team Members. Have team members at various locations work closely together on different projects. Then, rotate the teams so that everyone will, eventually, be partnered with everyone else at least once. This provides team members with opportunities to establish credibility (by demonstrating competence), demonstrate reliability (by meeting commitments), and build relationships and demonstrate intimacy.
  • Clarifying Shared Goals and Common Ground. Self-orientation is greatly improved when the entire team is focused on the same objectives. Common ground creates a situation where it is no longer “your” goals or “my” goals but rather “our” goals, which makes cooperation and collaboration desirable.
  • Using Action Plans. Actions plans outline who is responsible for what activity and when that activity is targeted for completion. They can be seen as “contracts” that document agreements. As a result, action plans improve reliability — they increase the likelihood that commitments are top of mind and that people will deliver on their promises.
  • Celebrating Wins as a Group. Whenever a team member or the team as a whole has a major accomplishment (meets a particularly tough deadline, makes a big sale, solves a big productivity challenge, etc.), celebrate that win as a team. This provides a forum for team members to recognize the contributions of others and can enhance the perception of credibility and reliability.
  • Encourage Team Members to Voice Their Concerns. If a problem is ignored, then it won’t get fixed. Such problems eat away at productivity and erode trust over time. Creating a culture where it is expected and safe for team members to voice their concerns and complaints—and acting on them when feasible—is a major part of improving self-orientation and intimacy among the team. When concerns are constructively raised and addressed, team members will feel that they can confide in others without fear of retribution and that their interests are being taken into account.

Using these methods, it is possible to increase trust between team members on a multi-functional team.

Monitoring Team Trust

It’s important to be on the lookout for the danger signs of low levels of trust. But, identifying specific issues can be difficult for team leaders who are not co-located with all or some of the team members and for Human Resources experts who may not be active members of the cross-functional team.

One way to monitor team trust is to use OnPoint’s GRID survey to collect insights and feedback from cross-functional teams. The survey includes questions on elements that impact trust, such as shared goals and clear roles, as well as questions specifically designed to address the quality of relationships and trust among cross-functional team members to help identify problems so they can be corrected.

For more information and advice about building trust within a matrix organization, contact OnPoint Consulting!

Can You Trust Bitcoin?

In a word – no.

But the reason why is not the usual critique. Let me explain.

Origins in Distrust

Bitcoin was born of distrust. Its original fan-base was an amalgam of nerds, futurists, libertarians and survivalists. They were enticed by several features of the new crypto-currency:

  • a decentralized network, beyond the control of governments and regulators
  • a secure payment system, guaranteed by blockchain technology
  • a fixed supply (fixed by innate technological design), preventing inflation by printing press.

All of these features were and are attractive to those who distrust central authority (on some level, all of us). But while the first two features are indeed truly intriguing, the third one turns out to be a poison pill in sheep’s clothing.

Success of Bitcoin

Bitcoin has been a wild success story by most metrics, certainly including its exchange rate, which has been meteoric (see graphic). Many analysts and investors are dazzled by its success, most recently including the famed Motley Fool investor newsletter, which has just jumped on the Bitcoin Bandwagon. A few cynics, most famously Jamie Dimon, have called it a ‘fraud’ or a bubble.

But no one that I’m aware of has pointed out a fundamental contradiction at the heart of Bitcoin – one which ultimately makes the doomsayers right.

(Note: I’m not at all criticizing the underlying power of blockchain, of which Bitcoin is merely one instantiation; blockchain has immeasurably great opportunities to transform the world in powerful and positive ways).

The Role of Bitcoin

The most basic argument for Bitcoin is that it will revolutionize the world of currencies, for the reasons stated above: decentralized, secure – and that third item, a fixed supply of Bitcoin.  Never mind the side arguments about gold and international currencies – its stated value is its power as a currency.

At some point in the future, the argument goes, Bitcoin will become accepted massively as a medium of exchange. Note: the value of Bitcoin does not rest on a nation’s economy, or a valued good (like gold); it rests on its future value as a preferred medium of currency. Period.

But what if its  value as a currency is, literally, unachievable?

Read on.

The Underlying Value of Bitcoin

The proponents of Bitcoin – this Nasdaq article is a good example – will tell you that Bitcoin has value because of “the network effect.” The more people use it, the more valuable it will become. The massive volatility that exists in Bitcoin right now will settle down and stabilize as it becomes an accepted means of currency exchange around the world.

Sounds plausible, right? We’ve seen the network effect in technologies as simple as the telephone and as complex as Facebook.

But there is one massive problem, which everyone I’ve seen who writes about it tends to skate right by.

Is Bitcoin a Currency, or an Asset Class?

Most fans will tell you it’s both – and they don’t see a contradiction between the two. But there IS a contradiction, because of one of the core features of Bitcoin – its limited-by-intent supply of Bitcoins (currently 16 million, and capped by design at a maximum of 21 million).

What you want from a currency is a stable level of purchasing power. What you want from an asset class is an appreciating price.

  • An asset that has high volatility and a growth rate of 500% is called a great investment opportunity;
  • A currency that has high volatility and an exchange rate variation of 500% is called hyper-deflation.

The fact that Bitcoin is limited – by design – to 21 million bitcoin means that, by the immutable laws of supply and demand, the more popular it becomes, the higher the price is going to be. Until it is less popular, when it will drop like a rock.

In other words, the limited supply aspect of Bitcoin guarantees that it will behave as an asset class – and not as a currency.  Note this is not seen as a bug – this is pitched as a feature.

A currency that is by nature volatile is a currency that will attract only speculators – and the more volatile, the more that is true. After all – if you expect Bitcoin value to rise, why would you ever use it to buy a car, or to settle debts? You would only be incentivized to hold on to it.

And if you expect Bitcoin value to drop, why would you ever want to hold on to it? You would only be incentivized to short-sell it – or to unload it on a bigger fool. (And as any trader can tell you, the latter is better: the market can stay crazy longer than you can stay liquid).

The only exceptions are, as Jamie Dimon pointed out, international thieves for whom short-term volatility costs are outweighed by the chance to conduct illicit business and not get caught.

Bitcoin is Not a Ponzi Scheme: It’s Worse

The term “Ponzi scheme” gets overused. Technically it’s a situation where the later investors buy out the early investors at inflated valuations. This is not exactly the problem with Bitcoin.

Bitcoin is more akin to the original tulip craze. But even there, everyone saw tulips as an asset class, and the smart money either stayed out or schemed to unload an over-valued asset to the greater fool.

This is worse than tulips.  Here the scam is based on a fundamental confusion between assets and currencies. To put it simply, it’s closer to being a little bit pregnant:

You simply cannot be both a currency and an asset class.

Muddled-thinking Bitcoin fans are fond of citing gold as a counter-example. It’s not. Unlike Bitcoin, the supply of gold is not fixed; it varies with price, as known deposits become more or less economically viable. (The term “Bitcoin mining” has had the unfortunate effect of metaphorically linking Bitcoin to precious metals). Gold even has some serious industrial uses; about 10% of it is used in industry of various types. Bitcoin, by contrast, has no stated utility other than as a currency.

To those who say there are traders in all currencies, and there are ebbs and flows of price, yes – but nowhere near this order of magnitude. Currency traders swoon over volatility of a few hundred basis points. And if things were to get really out of hand with your dollar or your renminbi, you can always print more of them to stabilize the price. Not so if your currency supply is fixed, forever, by design.

The Trust Scam: Bitcoin as Snake Oil

Nearly all the talk about Bitcoin lately has been about its stellar performance as an asset class, precisely because that’s how it’s being treated. And, as I’ve argued, it always will be.

The ultimate vision of Bitcoin – the argument that Bitcoin will reach its true value as a currency – is little more than snake oil. It can never function as a currency as long as the supply is statutorily limited, because it will always be subject to the whims of supply and demand; which in turn makes it unsuitable for the most basic function of a currency, which is to serve as a vehicle of exchange. Bitcoin is a trader’s delight – a digital volatility machine – and therefore a currency user’s nightmare.

In the end, Investopedia has it right: Bitcoin only has value “because it is popular.” It may not have a central bank behind it, which some see as a plus, but it also has no economy behind it. Because of its internal poison-pill design, it is doomed to forever be treated like an asset class, based ultimately on how many people have bought into the fiction that a limited-supply currency can ever be anything other than a vehicle for speculation of the greater-fool variety.

 

It’s ironic that a high level of distrust in national currencies gave rise to the enthusiasm for  something so massively more untrustworthy.

It’s Always Risk-on for Selling

In the financial trading community, there is a concept called “risk-on, risk-off,” or RoRo for short. It refers to the general market sentiment at a point in time. Simply put, if the prevailing trend is toward more risky and aggressive instruments (e.g., stocks, emerging markets), that is called “risk-on.” If the trend is toward less risky and conservative assets (e.g., cash, developed markets), that is called “risk-off.” Traders have evolved all kinds of complex strategies to deal with this indicator.

What does that have to do with selling professional services? It’s tempting to view selling as a series of RoRo moments, where sometimes it’s appropriate to take a risk and sometimes it’s not. Maybe the client has become complacent, and you need to shake things up. Or maybe the client seems overwhelmed, and you need to back off. It feels only natural to construct our responses to situations based on our readings of “risk-on, risk-off” coming from the client.

That might seem natural, but most often it’s more wrong than right. In selling, particularly in the complicated worlds of complex or professional services, we systematically make one mistake. We err mostly in one direction. We keep doing the same thing, expecting different results. We have a built-in bias to view the world as risk-off, and we need to shift our attitude toward risk-on.

People and Risk

Adult humans have a well-developed sense of fear and suspicion. Maybe it comes from our ancestors’ close encounters with saber-toothed tigers (that food looks enticing, but I’ll pass it up if I have to walk too close to the tigers). If we view the world as full of such threats to our existence, then we behave in a risk-off mode, being very careful.

If we view the world as risk-off, we will guard against a Bad Thing Happening. And if that means we leave a Good Thing Undone, we are fine with that decision. Who wants a close encounter with a sabere-toothed tiger, anyway?

But suppose the world is risk-on, and we constantly behave cautiously. Suppose we always leave Good Things Undone, not taking a small risk, never daring to take the next step forward. Suppose we are so afraid of doing “sins of commission” that we constantly commit “sins of omission.” That can end up very badly, too.

The world of sports has plenty of adages about this situation. No pain, no gain. Just do it. Swing the bat. Nothing ventured, nothing gained. As Wayne Gretzky put it, “You’ll never miss a shot you never take.”

Finally, add the dimension of time. If the Good Things are far in the future and the Bad Thing is here-now, we are likely to focus much more on the here-now Bad Thing even if the future benefit is much greater and well worth the risk. In fact, even if the Bad Thing is far in the future and the Good Thing is here-now, people tend to be very cautious about the future negative, even if it is smaller than the positive.

Again, we have sayings: A bird in the hand is worth two in the bush. Really? Unless you’re starving, turning down a two-to-one deal isn’t very smart. A poker player who constantly folds will never lose big, but he’ll slowly bleed dry. The suitor who never asks out the enamorata is never rejected, but nonetheless always dines alone.

Risky Business

Business is full of risks, to be sure. Hiring the wrong employee, investing in the wrong market, those things are real and we are right to worry about them. But in selling, the risk of not doing the right thing is a lot higher than the risk of doing the wrong thing. We act as if we are in a risk-off world, but in selling, more often than not it’s a risk-on world.

The saber-toothed tigers we face in selling seem to come in droves: The client might be offended. I don’t want to look unprofessional. If my price is too high they might not buy. That might be inappropriate. I don’t really know that area of finance. It’s too early in the relationship. They might not like me. They might go with my competitor. My peers won’t respect me. I might be wrong. I might say the wrong thing.

So we do nothing. We take the easy way out, the path of least resistance, all the while telling ourselves that we have avoided an imminent saber-toothed tiger. And sure enough, no tiger appears. By folding our hand, we avoid catastrophic loss. But we never win, or never win much. We act like the world of sales is risk-off when in reality it is far more risk-on.

Fighting Human Nature

The world of product sales approaches the problem as mainly one of motivation. Sales books and conferences are full of admonitions to get out there and try some more, it’s a numbers game, don’t take rejection personally, read this book, listen to that motivational speaker.

You probably don’t see yourself that way. You think motivational speakers are cheesy, and losing a widget sale pales in comparison to the agony of being told that your particular service just isn’t all that good. You need something deeper, something that really changes your approach to risk-taking. And reviewing the odds isn’t going to cut it. It’s human nature we’re dealing with here, and the brain is over-matched when it’s up against the heart.

Instead, recognize the powerful-positive role that risk-taking actually plays in sales. Unlike with saber-toothed tigers, the act of taking a small risk now actually lowers the odds of a big risk later. Yes—small risk-taking mitigates big risk. If you take risks, you lower the bigger risk.

Think of a vaccine. For the small pain of a shot in the arm, we gain protection against a plague. For the small risk of a hand extended, we gain greater likelihood of a conversation to follow. For the small risk of making a phone call instead of an email, we lower the risk of later emails being left unread.

The key to taking more risks lies in taking a broader view: the risk is not the risk of one transaction now; it is part of a series of transactions to happen over time. In that broader view, taking the small risk now is the least risky thing you can do.

This is where we part ways from our product-selling brothers and sisters. They have to sell widgets, pretty much one widget at a time. It is much easier for us, selling complex services, to envision relationships and lengthy time horizons. And that is the key to mastering the risk problem.

The world of sales is far more risk-on than we think; the environment is much more welcoming of small risks than we think. The key to beating risk lies precisely in taking the small risk of making that phone call, commenting on that shared intimacy, being transparent about your experience, and being open about your price.

It’s a risk-on world out there for those of us willing to see the bigger picture.

 

The Comp System Made Me Do It (Be a Low Trust Advisor)

It happened again the other day.

A (fairly articulate) participant in one of my workshops said:

Charlie, you don’t understand our system. We can’t do the trust stuff you suggest when the incentive system is set up the way it is. We get paid on the basis of the transactions we bring in and close; we are incentivized to focus on the next deal, and to maximize our individual contributions. While no one would call it this exactly, it’s eat what you kill and kill what you eat. You can’t ask us to behave against our own interests just to be nice.

In fact, until leadership takes this seriously and changes the incentive system, this is really all very high-sounding, but you’re not going to see collaborative, long-term client-focused trust-based behavior around here. Not when it’s in our best interest to behave otherwise.

If you’re nodding your head to that argument, and think it makes sense, listen up – this is for you.

That thinking is dead wrong. And not for some ethical or happy-trust-talk reason. It is a misreading of the very incentive system you think you are responding to. If you are buying that line of argument, you are sub-optimizing by shooting yourself in your own foot.

Here’s why.

The Problem is Not the Comp System – It’s You

There’s nothing wrong with a comp system that pays by results, and that apportions pay for accountability. The problem is in you interpreting that system wrongly. You are the one making a hugely false inference, namely:

Believing that the way to optimize short-term performance is to operate from a short-term perspective.

The truth is – and it may be obvious when I put it this way – the real way to optimize short-term performance is to consistently operate with a long-term perspective.

Consider:

  • The company that changes strategy every quarter has no strategy at all;
  • Repeat customers are hugely more profitable than high-churn new customers;
  • We trust people who have our best interests at heart; we distrust those who treat us as one-off transactions.

Let’s connect the dots. If you think that because you get paid by the transaction in short time periods you must behave transactionally or in a short-term timeframe, you are sadly deceiving yourself. You are announcing to your clients – and to your fellow team-members – that you are not interested in long-term relationships, or in doing what’s right for them. Instead, you are focused on maximizing your own short-term financial interest. And they will respond accordingly.

The paradox is – because of your unenlightened focus on the short term, you are actually sub-optimizing your own short term performance. Long term client-focused behavior manifests in an ongoing display of superior short term performance.

A golf metaphor:  don’t focus on hitting the ball – instead, just let the ball get in the way of your swing.

The Solution is not the Comp System – It’s You

One of the great things about trust in business is that it’s far less dependent on top management actions than are other cultural or systemic issues. Trust is very much within range of your own freedom of motion. You do not have to wait for the CEO or the compensation committee – you can act on your own, starting right now.

Resolve to yourself that:

  • You will do what is right for your client’s long-term interests – period;
  • You will treat your partners as if you, and they, will be partners forever;
  • You will do what is long-term right for the firm, not just what is right for you in that moment;
  • You will look at your quarterly performance numbers as a time series – not as a disconnected set of discrete events.

If you do that, here’s what will happen:

  • Your clients will stay with you, refer you to others, stop pushing back on price, ask you about follow-on work, etc.
  • Your colleagues and partners will seek you out, bring you into deals, and help you with your own;
  • Your firm will note that you, as opposed to the Selfish Others, are actually helping the firm.

And most important of all – your income will go up. Not down, up. Because your short term income is maximized if you consistently behave in others’ long-term interest.

Move that gun away from your foot. Now put it away entirely. Doing the right thing pays; not because the world is a happy-talk place, but because in the real world, clients and partners reward those who play the long game – not the short game. And pretty quickly, the short game improves as a result. 

Fear and Forgiveness

This week our very own Lisa McArthur tackles the weight of fear and the weightlessness of forgiveness.

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Reading the story of Dean Otto this week, it’s hard not to reflect on the power of forgiveness.  For those not familiar with his story, Dean was seriously injured when struck by a truck while riding his bike last September.  He had no feeling from the waist down.  Against the odds, last week Dean completed a half-marathon in under 2 hours.  But what makes this story so unique is that Dean ran that marathon alongside his surgeon and the young man who hit him.

Even while sitting on the side of the road, Dean forgave the driver.  “I accepted what had happened to me.  I forgave the guy that hit me so I wouldn’t harbor any resentment and being able to do that has really helped me throughout the whole process.”

WOW!

A poignant example of forgiveness overcoming fear.  Fear holds us back and restricts us from working together and accomplishing truly inspiring things.  The ability to be gracious, to forgive, to move forward past a challenging event benefits everyone involved.  If Dean can forgive the driver of the truck that hit him…what’s stopping me? What grievances do you have in your workplace and what’s stopping you from moving past them? In a word…FEAR.

Fear makes us hold back, avoid situations and do nothing. But doing nothing has a cost a well. How do we move past our fears, forgive and build trust?

Step 1: Name your fear

Start by being explicit about what is holding you back. Here are 4 common ones:

  • Execution fear – I might make a mistake
  • Competence fear – I don’t how to do it right
  • Outcome fear – Everything might not turn out the way I want it to
  • Shame-based fear – They might not like or respect me anymore

Step 2: Write it, Read it, Say it

Once you can identify your fear, write it down, read it and say it out-loud. Don’t be tempted to skip this step. By writing things down and saying them out-loud, we move past our fight-or-flight emotional impulses and diminish the power of the emotion. I’ve often been in contentious meetings and have scribbled many such “verbalizations” in the margin of my notebook. Trust me…it works!

Step 3:  What’s the worst that could happen?

Think about your next meeting or conversation? What will you say or do? What is the worst thing that could happen? Could you be challenged? Yes. Could you be embarrassed? Possibly. What else might happen?

For many of us, the outcomes will not be life-threatening. They may be unpleasant for the short-term but will be things we can overcome. Thinking about outcomes rationally can help us maintain perspective and take the fear out of the situation.

Step 4: Identify the other person’s fear

Put your fears aside and try to see things from the other person’s perspective. Dean Otto told the young driver to not let this define or haunt him. He recognized the fear and impact of the event on both of them. Think about your personal situation…what fears might be driving the other person’s behavior? How might you be able to help them overcome their own fears?

This serves two key purposes…it may help you find new win-win ways to deal with the situation…but most importantly, it changes the sound of that little voice inside your head and lets you move beyond your fear.

Step 5:  Act

Most importantly, you need to act.

Understanding both perspectives, take honest stock of the situation, define what you can and cannot do, then take action. Remember, the fear of doing something wrong often stops us from doing something right. Be confident in your intent. As Dean said he “forgave…so I wouldn’t harbor any resentment.”

Team performance in any organization starts with collaboration. We must learn how to hold ourselves accountable to each other, get past our own fears and resolve conflict quickly. Fear holds us back and prevents us from working together. By acknowledging our fears and taking the risk of forgiveness, we create teams that can accomplish great things. What fears are holding you back from forgiveness and what risks are you willing to take to run your own version of a half-marathon?

Dealing with the Honest Majority and the Dishonest Minority: Tales from the auto industry

This is a guest-post by Matti Kurvinen, a former Accenture partner, now an independent consultant focusing on service strategy and operations and warranty management. We welcome him to Trust Matters.

This blog has recently addressed what to do when someone abuses your trust. Of course, most of our business partners are fully honest and trustworthy. Still, if you don’t know which one is which – how can you trust your partners?

The issue is not hard to frame for individuals. But what about at scale? How can you establish systemic trust-based business relationships, when you can’t directly assess the trustworthiness of every relationship at all times?

The Case of Automotive Warranty Service

A case in point is manufacturers who outsource their warranty service to external service agents – for example, automotive dealers. An automotive OEM rightfully sees dealer productivity as a key route to effective end-customer service, and dealer satisfaction as a route to end-customer satisfaction. As the OEMs put it, “It is our role to support our dealers in serving our customers and not burden them with unnecessary controls.” (The same applies to white goods, IT, mobile devices and consumer electronics in relation with their authorized service vendors).

The problem is, an OEM with thousands of service agents globally will quite likely have tens – maybe even hundreds – who will take advantage of any holes the OEM has in its warranty control.

Hence the dilemma: how to enforce trust, positive incentives, support and frictionless procedures with the honest majority of your business partners, while at the same time having adequate control and discipline to deal with the few dishonest exceptions?

The Ugly Truth about Warranty Fraud

Warranty cost is a significant factor for manufacturing companies, typically ranging from 1 to 4 % of company sales, and 5 to 25 % of company profits (sometimes enough to make the difference between profit and loss).

Most companies see warranty costs as driven mainly by product quality, and secondarily by service network efficiency. However, there is another factor to be considered  – warranty fraud. This kind of fraud ranges from opportunistic small-scale overbilling to industrial-scale fraud perpetrated by organized crime. Estimates suggest that from 3 to 15% of warranty billing is fraudulent, making it a billion-dollar issue in the USA alone.

The warranty chain is no different from any other field of life or business. For some small fraction of people and companies, the opportunity for financial gain, weighed against the likelihood and consequences of getting caught, is a calculus that leads them to take advantage of loopholes in warranty control.

Some companies take this very seriously; others are not even aware of it. Still others believe it may be an issue, but “not for us.”  Stanford professor and trust scholar Roderick Kramer states in his HBR Article Rethinking Trust: “… people underestimate the likelihood that bad things will happen to them, and detecting the cheaters among us is not as easy as one might think.”

I have witnessed this several times, with comments like, ”Yes, the numbers from this dealer look really peculiar – but I can’t just go and accuse them of being dishonest, now, can I?”

Most participants in the warranty chain are honest – but not all

The good news is that most participants in the warranty service chain are normal, honest people and companies. But this makes fraud control tricky; how to have control and discipline for the dishonest minority, while enhancing trust, positive incentives, support and frictionless procedures with the honest majority?

The same issue, of course, can be found in many other areas: think on-line commerce, credit cards, mobile payments. The challenge is to make processes fast and easy for the honest people, yet still have adequate controls and fraud prevention processes.

Both false positives and negatives are undesirable. It’s inconvenient to have your credit card refused because of a false alarm. But it’s at least as troublesome to see payments go through with stolen credit cards or identities.

Enforcing trust while managing the dishonest minority

In my experience, there is no single silver-bullet solution. However, by applying the following five principles to your business, you’ll improve the odds considerably.

  1. Trust your partners by default. The business relationship between the OEM and the service agent must be based on mutual trust. The OEM assumes that the service agent doesn’t do warranty fraud, and the OEM accepts that the service agent is entitled to earn a share of the profits for serving the end-customer. The alternative – a default assumption that the service agents are dishonest – is corrosive of all trust. Even good service agents can turn bad if you consistently suspect them of being so.
  2. Set a culture and expectation of high integrity and honest work. This should be enforced and communicated upfront – along with clear consequences of breaking the rules.

Some of our clients have been puzzled when catching fraudulent vendors – “What do we do now?” One leading automotive OEM sends a very clear message to their dealers: “We trust you, but if you violate that trust, you are out!”

This is consistent with Kramer’s advice of sending strong signals on willingness to trust others, coupled with strong promises to strike back if that trust is abused. This not only attracts other desirable trusters, but also deters potential predators, who can sniff out easy victims who send out weak and inconsistent cues.

  1. Keep core operations simple and effective. In daily operations and service vendor management activities there should be no excessive control points; the focus should be on smooth operations and minimal administrative burden for the service agent. You trust the service agent enough to let them be the interface with your end-customer – let that trust also be visible in the back-office, and help them to serve customers with maximal productivity.
  2. Use analytics and audits to support warranty control and rule-based claim validation. Use extensive analytics to detect service agents with suspicious or fraudulent behavior. But analytics alone are not enough; they should be augmented by regular operational reviews and more detailed audits – executed randomly, or as a follow-up based on the analytics findings.

It’s important to keep the human touch and judgment alongside the analytics. Beware of taking drastic actions before you are sure of the findings, and don’t settle for anomalies or suspicious cases where you don’t understand the underlying reasons. 

  1. When necessary, take determined action. Occasional sloppiness and over-charging is best dealt with directly with the service agent, with a clear expectation of corrective actions. In the case if direct fraud or several suspicious elements, take determined action according to the upfront stated policies, such as:
    • Enforcing tighter process controls. You might require additional process control points from service agents with suspicious cases or too many cases in the gray area. Be very clear about this.
    • Claiming back the over-charges. Typically, it is easier to prevent over-charges than claim them back. The circumstances and time-frames for that should be stated in the service contract.
    • Do you still feel you can trust your business partner in the future? What are your other options for warranty (and non-warranty) service? Consider having a case for contract termination or even going to court.
    • Companies are often reluctant to let others know they’ve been a victim of fraud. However, communicating the issue and the consequences enforces the message that your control processes work and you don’t tolerate wrongful behavior.

In many cases we hear clients say, “We don’t have warranty fraud, we know our service agents and we trust them,” or “We are the market leaders, our dealers don’t have the guts to cheat us.” Still, we have seen the whole spectrum from occasional sloppy procedures and over-charging to systemic criminal activities and truly large-scale fraud.

Those who dismiss this as a non-issue typically have a very expensive issue about which they are just wishfully ignorant. Those who have a clear approach without overly burdening their service agents can save a lot of money and simultaneously have a more satisfied and effective service network.

 

The Consulting Industry: the Critical Role of Interpersonal Relationships

This is the first in an occasional series on trust in particular industry verticals. This post looks at the consulting industry.

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In consulting, some things are changing. And some are not.

The biggest trend is, of course, the digitization of the firm’s service offerings. For example, nearly three quarters of one large consulting firm’s HR practice consists of moving processes into the digital age. Naturally, firms increasingly put more emphasis on technical qualifications of their consultants.

Another change, nearly as big, is the shift in business development practices (this one isn’t unique to consulting). Depending on who you talk to (Marketing BlenderGartner), something like 50-60% of the buying process is complete before the buyer meets a seller. This number is only going higher. Naturally, firms focus increasingly on managing that non-personal-contact front end of the business development process.

However, the critical role of interpersonal relationships is not going away. Paradoxically, the increasing role of technology and automation does not mean that the role of relationships is decreasing – in fact, it means exactly the opposite. Here’s why.

On the project side, expertise is a commodity. The markets for human capital are efficient, and widely accessible. On the business development side, virtually no client wants to buy a significant project without understanding, and meeting, the people who will staff it.

This is an important fact of human biology. Reducing the time spent on human interaction merely increases the leverage that such time has on final decisions. Those infrequent interactions take on geometrically more importance as their duration declines.

The implication for consultancies?  The ability to rapidly and genuinely create trust with clients is more critical than ever. You don’t have the luxury of schmooze time to establish comfortable relationships; it’s got to be done deeply and quickly, and done right.

Trusted Advisor and Trust-Based Selling workshops, are aimed at this need. 60% of our work is done in various professional services clients, with consulting a heavy component.

For a discussion about these issues, drop me (Charles Green, CEO, Trusted Advisor Associates) an email at cgreen-at-trustedadvisor-dot-com. You’ll not go onto an email list; there are no automated follow-ups; no cost, no obligation. Just let’s talk.

Don’t Confuse Your KPIs with Your CSFs

I spoke with BigCo, Inc. They wanted their B2B salespeople to become trusted advisors.

They felt (correctly) that greater trust levels with their customers would result in greater intra-customer market share and greater profitability. And they were right – as far as that goes.

But they then described to me their implementation plan. It consisted of breaking down the objectives into finer and finer components and matching them up with accountable business units – pretty standard practice.

As we dug deeper, a pattern emerged. The higher penetration levels, for example, were broken into more sales calls, more proactive ideas, and greater time spent up front. On the face of it, that sounds perfectly reasonable: if penetration were to increase, you’d probably see these changes in activities.

But there’s a causation/correlation problem here. Simply increasing the number of sales calls won’t do a thing; they have to be good calls. Simply offering more ideas won’t do a thing; they have to be decent ideas. Simply spending more time up front won’t do a thing; the time has to be well-spent. And simply assuming good calls, decent ideas, and well-spent time does not make it so.

This sounds perfectly obvious in the telling, but I have found that BigCo’s story (which is a composite of several clients) is common. It may even be the norm.

BigCo confused key performance indicators (KPIs) with critical success factors (CSFs). They confused correlation with causation. They confused measurements with the things being measured. And since we live in a management world that uncritically worships metrics (“if you can’t measure it, you can’t manage it”), this confusion has critical and strategic implications.

That’s especially true when you’re trying to implement a values-driven strategy – such as becoming trusted advisors.

Measurement and Management

Just because something sounds obvious in the retelling, it doesn’t mean it’s obvious when you’re in the middle of it. Case in point: BigCo’s flawed logic in their approach to trust-based selling.

Increasing penetration requires more sales calls, they thought, and they’re probably right. Their mistake lay in thinking that “more sales calls” was a cause. It’s not – it’s an effect.

“More sales calls” may be a KPI, but it’s not a CSF. It may be an outcome, but it’s not a driver. “More sales calls” is a metric. It is not the thing that “more sales calls” is intended to measure. That “thing” is something like “more high-quality interactions driven by mutual curiosity.”

This confusion between actions and measurements, causes and effects, and KPIs and CSFs is not just common – it’s becoming rampant. It’s a real issue for digital age businesses in some ways even more than old-line businesses. Let’s look at some examples.

Gaming the Numbers

We’re all familiar with the salesperson who knows how to tweak an imperfect system to maximize his commissions at the expense of, say, the company’s gross margins. “Hey, I’m just following the incentives you built in,” he might say. That salesperson seized on a metric that imperfectly measured the company’s intended sales behaviors. (The proper management response would be not to change the metric, but to insist on a higher set of principles that overrule one misguided number.)

The next time you get a customer service operator on the line, check to see whether they conclude by saying something like, “May we say that I gave you excellent customer service today?” You are experiencing a system that is driven by metrics to the point where operators shamelessly beg for ratings. The metrics have been pimped out to serve a goal other than the customer service they were meant to measure.

See for yourself. Go to Amazon, and search for books under any significant topic you like (e.g., sales). Make sure you sort on relevance. It’s amazing how many books are rated over four stars (out of five). The reason is simple: we have been taught to look for ratings. Of course, the emphasis on ratings suborns all kind of perjury, misleading comments, and even outright falsehoods.

It’s not just books. Look at the flood of “recommendations” on LinkedIn. Look at the massive follow-me-I-follow-you dynamic on Twitter and other media. Or just look at your own behavior. What do you do when a friend asks you to rate a book, promote a blog post, or recommend them? There is monstrous grade inflation in most customer-rated aspects of business today.

Much of this comes down to our obsession in business with metrics. It goes back to the invention of the spreadsheet and the success of books such as Reengineering the Corporation. Numbers-all-the-time is today’s secular business religion.

The Wages of Confusion

The “so what” is big indeed. Assume any metric, almost by definition, has to be a pale reflection of the “thing” that is to be measured. We accept anniversary gifts as tokens of our love, market share as an indicator of competitive success, and, in the case of BigCo, numbers of sales calls as indicators of trusted advisor relationships. But we all know an anniversary gift does not a marriage make.

The only way to become trusted advisors to your customers is to gain the trust of your customers. You do not cause trust by increasing the number of sales calls; rather, greater trust causes more invitations for you to call on prospects. Doing the dishes doesn’t cause a great marriage; instead, a great marriage results in your doing the dishes willingly.

Confusing KPIs with CSFs causes KPIs to be artificially inflated. We know this intuitively, and so we discount them – while still trying to get higher scores on more of those discounted-value KPI metrics. We all know the game is rigged, but we keep playing it faster and faster.

What’s at stake is nothing less than how we implement things like “better client relationships.” You don’t get there by measuring metrics and deluding yourself that you’re addressing root causes. You get there only by understanding what it takes to interact with your very human customers—and then doing it.

Do that, and the numbers will take care of themselves.