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

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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. 

Four Principles of Organizational Trust: How to Make Your Company Trustworthy

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This week, as we get ready to say goodbye to 2012, we’re going to be posting some of what we call “Golden Oldies,” great posts from our Trust Matters vault. We hope everyone has a safe and happy holiday and wonderful New Year.

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iStock_000018524776XSmallTrust, in case you hadn’t noticed, has gotten “hot” lately. But much of it sounds very vague—soft, fluffy, nice-to-have, the buzzword du jour.

I’d like to do my part to make it real.

To me, that means breaking it down and making it sound; tapping into the strategy and mysticism, but also staying grounded in the tactical and the practical.

So let’s review some context; then talk about four specific operating principles a business can hone in on to improve its trustworthiness.

Putting Trust into a Workable Context

I’ve suggested elsewhere that “trust” is too vague a term to work with. To do something practical, we need first to identify the trust realm: are we talking about personal trust, or business/organizational trust, or social/institutional trust?

The next question is about the trust role: are we working on being more trusting? Or more trustworthy? They are not the same thing.  And “trust” is the result of them both interacting.

Building a Trustworthy Business

In the realm “personal” and the role “trustworthy,” we can point to personal beliefs and behaviors as indicated in the Trust Quotient. But in business, trustworthiness is built through a set of daily operating principles. Trustworthiness is built from habitually behaving in accordance with a set of commonly shared beliefs about how to do business.

I suggest they can be boiled down to four.

The Four Trust Principles

1. A focus on the Other (client, customer, internal co-worker, boss, partner, subordinate) for the Other’s sake, not just as a means to one’s own ends.  We often hear “client-focus,” or “customer-centric.” But these are terms all-too-often framed in terms of economic benefit to the person trying to be trusted.

2. A collaborative approach to relationships.  Collaboration here means a willingness to work together, creating both joint goals and joint approaches to getting there.

3. A medium to long term relationship perspective, not a short-term transactional focus. Focus on relationships nurtures transactions; but focus on transactions chokes off relationships. The most profitable relationships for both parties are those where multiple transactions over time are assumed in the approach to each transaction.

4. A habit of being transparent in all one’s dealings.  Transparency has the great virtue of helping recall who said what to whom. It also increases credibility, and lowers self-orientation, by its willingness to keep no secrets.

Executing on the Trust Principles

What are the tools an organization has at its disposal to make itself more trustworthy? Any good change management consultant can rattle off the usual suspects, but for trustworthiness, the emphasis has to shift somewhat.

The usual change mantra includes a heavy dose of behaviors, metrics and incentives. Some of that works here, but only to a point.

For example, Principle 1, focus on the Other, is contradicted by too much extrinsic incentive aimed at leveraging self-interest–it undercuts focus on the Other.  And Principle 3, relationship over transaction, forces metrics and rewards to a far longer timeframe than most change efforts employ.

Another great shibboleth of change is that it must be led from the CEO’s office. But with trust, it ain’t necessarily so.  Trustworthiness is a great candidate for infectious disease change strategies; guerrilla trust strategies can work at the individual level, and individual players can lead. Behavior in accord with these principles cannot be coerced; the flipside is, it can be unilaterally engaged in.

The most powerful tools to create a trustworthy organization are things like language, recognition, story-telling, simply paying attention to the arenas where the principles apply—and the will to apply them.  Role-modeling helps; some skill-building helps.  But most of all, it is the willingness to notice the pervasive opportunities to work in accordance with this simple set of four principles.

Trustworthiness breeds trusting (the reverse is true too); the combination is what leads to trust. Which, by the way, is quite measurable in its impact on the bottom line.