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Riding the Shark: Vanquishing Fear in Selling. Part 1 of 4

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photo by: Steve GarnerThis is the first of a four-part blogpost series. In Part 2, we’ll discuss the 4 types of fear. In Part 3, I’ll go over how to fend off the sharks of fear. And in Part 4, you’ll learn how to shark-proof your market and vanquish fear altogether.

There are many ways to think about sales and selling. You can focus on value propositions, sales processes, sales management, motivation, techniques, and models. I’d like to focus on something else that’s common in sales – fear.

Just When You Thought It Was Safe to Go Back in the Market 

Remember the first time you saw the movie Jaws? The tale of a giant shark tapped into a primal human fear. The follow-on, Jaws 2, raised the ante with one of the most famous taglines in movie history – “Just when you thought it was safe to go back in the water.”

Who could look at the beach again without some kind of shiver? Selling has some of that same flavor. We’ve all had some negative experience in selling – and like Jaws, it keeps some sort of control over us ever after. “Just when you thought it was safe to go back in the market…” is all too real.

All kinds of selling involve some fear. Some forms of selling involve more fear than others.  Fear comes in many flavors; the form it takes varies by industry, by products being sold, and of course by the individual salesperson. There are multiple ways to deal with fears. None is always better than the others; and often more than one approach is necessary to overcome fear.

Fear is the Enemy

But with all this diversity around fear, one thing is unambiguously clear: fear is the enemy. Fear destroys sales. It separates you from your customers, makes you behave in narrow ways, lowers the value you can add, and in a thousand ways cuts your sales effectiveness.

Some may disagree.

  • Some say, “Fear helps keep me on edge, sharp, focused.” But if you require fear to keep you sharp and focused, then you lack any positive customer-based motivation. That means you’re sub optimizing – for your customers, and for yourself.
  • Some say, “Fear keeps me on my toes, always looking around for new trends and issues.” But if you seek new trends and issues only to assuage your own fears, then simply feeling comfortable will make you oblivious to trends and issues.
  • Some say, “Fear gives me adrenaline, energy, passion, things that my customers pick up on and love.” Note that drug addicts and alcoholics also believe that they are flat, boring and uninteresting unless hopped up. Are you different?

No. Fear, in all cases, is the enemy. If you’re fearful, you’re not selling as well as you can. And if you’re not selling as well as you can, someone else will. And you should be afraid of that. (And if you are, you increase the odds of precisely the thing you fear, because fear of fear is just as destructive as any other kind).

Unless you can ride the shark – vanquish your fears – you will always be sub-optimal and at risk – always afraid to go back in the water. It’s a lousy way to live.

It also doesn’t have to be that way. That’s what this four-blogpost series is about.

In the second post, The Four Sharks, I’ll tell you where to look for fear in sales. The first rule in shark-fighting (unlike Fight Club) is – we talk about Sharks. I’ll go through the Four Fears – the Big Sharks that account for about 95% of our fears. That should give you an acute sense of pain for just “where it hurts most” in terms of your fears, and help you zero in the issues unique to you, in your business, in your industry.

In the third post, Riding the Shark, I’ll go through solutions.  There are four of them, but they don’t match up one-on-one with the Four Sharks. Instead, they are comprehensive, and offer differing ways to fend off “shark attacks,” making you less vulnerable and more able to sell correctly.

In the last post, Shark-Proofing Your Market, I’ll write about what you need to replace fear – to stop being vulnerable to shark attacks altogether. Because you can’t just fight defensive battles all your career – you need to come from a place of security and confidence.

Stay tuned for the next three parts: and I welcome your comments about the subject in the meantime.

Why Trust In Our Institutions Is So Low

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Heads? Or Tails?The headlines, surveys and news stories are everywhere. Trust is down – in world leaders, in legislatures, in financial institutions, doctors, even religious leaders and educators. It is very, very easy to draw one conclusion from all this – that we have a crisis of trustworthiness.

Not so fast. That is a half-truth.

Trust is a Two-Sided Coin

One of the tragedies of discussions about trust is that the very language we use is flawed. Consider this simple, self-evident truth:

Trust is a non-symmetrical interaction between a trustor and a trustee. One trusts, one is trusted. One does the trusting, the other is the one who is trusted. To trust someone is different from being trusted by someone.

It would seem obvious that if there is a failure in trust, we should look at both sides to determine where the problem lies: is it in paranoid trustors, or in untrustworthy trustees?

And yet – the presumption we all make when reading those news stories is always about the latter – “It’s those lying ___’s, you can’t trust any of them, none of them are trustworthy.”

But what about the other side of the trust relationship?  What’s up with trusting?

The Problem of Low Propensity to Trust

I used to hitch-hike. Who does that anymore? I’m sure the proportion of people who lock their doors habitually has gone up. The proportion of people who buy guns for self-protection has gone up, just as crime has gone down. All these are daily indicators of a decline in propensity to trust.

At a business level, consider the enormous growth in lawyers. Consider the increasing length of contracts, for the most trivial transactions. Consider the ease with which people resort to civil lawsuits. Ask yourself what happened to the handshake deal?

At the national political level, I’m seeing articles about how President Obama might be lying to the world about chemical warfare in Syria. Let’s review the bidding, in reverse chronological order:

  • George W. Bush told us there were weapons of mass destruction in Iraq
  • Bill Clinton said he didn’t have sex with “that woman”
  • George H.W. Bush said, “Read my lips – no new taxes”
  • Ronald Reagan said, “Trees cause more pollution than cars”
  • Jimmy Carter said he had left Georgia with a budget surplus – far from true
  • Gerry Ford lied about discussing East Timor with Suharto; not to mention Nixon’s pardon
  • And Nixon? Well, enough said
  • Turns out even George Washington’s cherry tree “I cannot tell a lie” story is itself apocryphal.

And the press? Well, what about the entire wink-wink/nod-nod approach to Presidential sexual liaisons back in the day of John F. Kennedy? That level of tolerance in the fourth estate is unimaginable today.

My point is not that society has become more trustworthy rather than less – my point is that people have, in many ways, simply become less willing to trust.

Low Trust: A Chicken and Egg Problem

Consider in your own life the truth of this quote: “One of the best ways to make someone trustworthy is to trust them.”  Or, “Whether you think good or ill of someone – you’ll be right.”

The principle of reciprocity underlies a great deal of human relations. We return good for good and evil for evil. The simple nature of etiquette is a way of ensuring that we practice reciprocity in all our daily doings.

So it’s only fair to ask: when there’s a crisis of trust – how much of it is due to lower trustworthiness?  And how much of it is due to our reduced propensity to trust?

You don’t have to be a Pollyanna about trustworthiness to see this. All that’s required is we stop being crybabies repeating endlessly, “Well Johnny did it to me first!”  Get off the paranoid pity pot.

At its extreme, a low propensity to trust descends into paranoia, resentment, low expectations, cynicism, tribal clannish behavior, lower levels of generosity and charity, and a “raise the gates” mentality. It’s not going too far to say that the roots of civic morality lie in the willingness to trust others.

What Can I Do?

Of course we can all do a better job of being more trustworthy. But that’s almost a passive activity, waiting to build up a track record that others can see. Interestingly, it’s a lot easier to practice trusting.  Here are just a few ideas to practice on in your daily life:

  • Smile at someone on the street, and don’t look away immediately
  • Ask someone at the coffee shop to watch your computer while you go to the restroom
  • Think what tool you have that a neighbor might benefit from using, and lend it to them
  • Join some form of the sharing economy
  • Practice not locking your car so often (not everywhere, I know)
  • Ask somebody for advice on something – then immediately take it
  • Ask a stranger to hold your briefcase while you tie your shoes
  • Ask a stranger to take a photo of you and a friend while on a trip

What else? What are some actions you can take to help increase the level of trust in the world? Please add your suggestions to the comments below.

After all, it’s better to light a candle than to curse the darkness.

Selling to Mr. Spock

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Nowhere am I so desperately needed as among a shipload of illogical humans. –Spock in ‘I, Mudd’

Star Trek’s  iconic Mr. Spock was half-Vulcan, half-human. It’s the former we first notice in Spock – Vulcans are governed entirely by logic and rationality, unencumbered by emotions.

But it’s the latter that takes Spock from caricature to character. Spock mirrors our own schizophrenic, rational / emotional natures. He is the sock puppet for humanity, allowing us to look at ourselves afresh.

Of course, you wouldn’t know that from looking at economists, strategy consultants – and much of the B2B sales literature. They suggest that people, particularly smart business people, are mostly rational decision makers, persuaded by well-established rules of scientific evidence, logic, and the inexorable rules of mathematics.

In other words – they treat buyers like Vulcans.

But as with Spock, the truth for buyers is far more complex.

My Brain’s Bigger than Yours

In recent weeks I’ve spent a lot of time with B2B sales organizations. I’m reminded of how much businesspeople have bought – hook, line and sinker – the idea that customers buy through rational decision-making. The economists’ models are live and well in sales training programs.

Feeding the ratiocinating Vulcan side of buyers is necessary. But it is almost never sufficient. The true role of the intellect in B2B buying is as follows: Buyers scan options rationally, but they make their final selection with their emotions – then rationalize that decision with their brains.

The cognitive role in buying is vastly over-stated. Brains don’t rule. Spock is not 100% Vulcan. Neither is your customer.

Your Customer is Not a Vulcan

Question: What do the following things have in common? Value propositions; challenger selling; strategic fit; problem definition; pricing; negotiation; objection-handling.

Answer: In B2B sales, they usually center around analytical economic value, assuming that the rational resolution of each issue is the key to helping a buyer achieve a decision. Look for these buzz-phrases; clients buy results, you’ve gotta show the bottom line, the key is to demonstrate value, and so forth.

Nothing wrong with that list; but what’s missing are the things that actually trigger a buyer’s decision – not just justify it. Those include, for starters:

  • confidence that the seller can deliver what (s)he promises, and
  • the resulting ability to sleep through the night
  • integrity
  • character
  • commitment to principle
  • a long-term relationship focus
  • a sense that the seller has the buyer’s interest at heart
  • the seller’s ability and willingness to defer gratification
  • vulnerability of the seller
  • a set of values beyond economic value
  • a sense that the seller is a safe haven for conversation.

In short – trust in the seller.

Your customer is not a Vulcan. Your customer is Spock – partly human.

The Cognitive/Emotive Disconnect

I spend my time with smart, complex-business, B2B professionals. Every single one of them will acknowledge the importance of the above list. Yet every one of them lives in an organization where 90% of attention is focused on the buyer’s Vulcan side, doing slide decks, spreadsheets, valuations and scenarios.

In the real B2B world, all those rational items are the (necessary) justifications for customers looking to rationalize their (emotional) decisions. But they aren’t the decision-driver.

Buyers often (rationally) screen sellers. But they quickly form favorites, unconsciously, and usually before the sellers have even had a chance to address the issue. All the Vulcan-targeted approaches are aimed either at forming a buyer’s opinion (too late, already done), or changing a buyer’s preformed opinion (already set in concrete).  It rarely works.

Proof? Ask yourself how many times your customers failed to see the brilliant case you had made, because they were somehow biased against you. You tried to sell to the Vulcan in your Spock-customer; but that human side kept rearing its ugly head.

How Complex B2B Buying Really Works

Very few buyers will tell their boss, “Gee, I guess I bought from those guys because, you know, I really trust them.” That’s career suicide. Buyers need the air-cover (and, to be fair, the reality check) of a rationality-based argument. It’s our job as sellers to deliver that rationale to them, bullet-proof and logic-tight as it can be.

Because in business, we all need to pretend we’re Vulcans.

But deep down, we all know what’s really going on. People buy with the heart, and rationalize with the mind. Brains are a necessary but not a sufficient condition. Being right, by itself, is a vastly over-rated proposition. Being right too soon just pisses people off. All else equal, a trust-based sell will always beat a rationality-based sell.

The truth is, our emotional instincts are extremely powerful (not to mention frequently accurate). We make our decisions first based on those emotions, and then struggle to justify them according to the rules of the game.  Unlike Spock, we lead with the human, and bring in our Vulcan sides as a check.

Many, many of my clients say: “That may be true for lots of people, but not for my [boss] [client] [customer]. They’re completely Vulcan, data-based, just-give-me-the-facts people. You’ve got to treat them like Vulcans, because they demand it.”  But the fact that they demand to be treated like Vulcans is 95% about ego – and that’s their human side.

Ironically, all this is especially true for those who believe the world works on brains. They are prone to buy even more emotionally, because their self-worth is tied up in thinking that emotions don’t matter – which renders them oblivious to their own human decision-making process.

Even if your customer thinks they’re a Vulcan – treat them like Spock. Address the human side – then give them Vulcan-food to justify their feelings.

It is curious how often you humans manage to obtain that which you do not want.  – Mr. Spock in ‘Errand of Mercy’

Nice Place Here, Shame if Anything Happened

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copyright Nate Osborne 2013It’s the opening to dozens of gangster movies. The mob guy with a rakish hat and a sneer sidles into the hard-working good citizen’s retail establishment, knocks some cigarette ash on the floor, and says, “Nice little business you got here, mister. It’d be a shame if something were to happen to it, know what I mean?”

And we do know what he means, and so does the terrorized citizen. It’s the protection racket. If you pay, then indeed, nothing happens. If you don’t pay, well, it’s amazing how bad stuff just happens.

Of course, that doesn’t happen in business today.  Right?

The White-collar, Fully-legal, Hands-clean Shakedown, Corporate Edition

In fact, something much like that does happen – though it’s highly sanitized. It’s legal; no individual has bad or evil intentions; and it’s justified as a business best practice. But the effect is the same – the business at the end of the food chain pays a lot of “insurance” for bad events that don’t look like happening. And instead of mobsters getting rich, it’s lawyers and insurance companies.

A simple example. My firm recently sold a single, one-day, off-the-shelf learning program to a corporate client. The contract and statement of work proposed by the client ran to over 10 pages of fine print.

On our end, it went through the hands of four people, including our lawyer, who I struggle mightily to keep under-employed. On the client side, we know personally of three people with whom we interacted, and I am guessing there were more. Total elapsed time was 2-3 months.

The contract included fairly typical clauses to the effect that we would not steal their intellectual property, lists, or secrets; generously they agreed to return the favor.

It also included clauses saying that we would generally indemnify them against everything from lawsuits about IP to people falling on their sidewalks to taking bad advice from us. (And here I worry about trying to get clients to take my advice!)

Most interesting to me was the clause that – at their request – we would submit our trainers to drug testing and to criminal record searches, through whatever such means as the client would dictate, of course at our expense. Moi? Nous? I mean, we’ve got our faults, but…

All this in order to gain the privilege of giving a workshop on – wait for it – how to establish trust-based business relationships. (And yes, I am painfully aware of the irony, even if the client is not. But you go where you are most needed, and agreeing to a training session on trust is actually a pretty good first step.)

Sadly, this is not a unique story. In fact, about 80% of it is standard operating procedure these days. In this case, I sent an email protesting that we felt mildly insulted about the drug test thing. I received back a most polite and apologetic note assuring me that that was surely not the intent, and that they felt badly about it – it’s just that, this is just how business is done – you know, it’s not personal, it’s business.

And voila, we’re back at the movies. See what I mean?

What’s Going On Here 

I want to emphasize, there are no bad intentions here; there are no laws being broken. To use the business vernacular, this is risk mitigation. But it’s risk mitigation gone rogue.

It starts with companies themselves as victims of a shakedown. A lawyer – perhaps their own internal counsel – tells them that they are subject to grave exposure from a lawsuit by some wild-eyed plaintiff’s attorney. Since lawyers vastly prefer to err on the side of caution, they like to be armed with shotguns when they go to hunt fleas.

One form of protection, conveniently served up by insurance companies (who love their lawyer friends) is straight-up insurance. But, apparently cheaper than buying your own protection is to lay off that protection cost onto those who are employed by the company: their suppliers, their employees, and their customers.

And so we get oppressive do-not-compete clauses for employees; mandatory arbitration in the fine print for customers; and send-that-indemnification-downstream to contractors for any risk you can think of.

The Extortionate Impact on the Economy

I welcome the comments of those better versed in economics than I to more accurately describe this, but I can suggest the outlines of four broad effects.

One is simply over-insurance. If I have market power over you (as big companies generally do over little companies, and buyers generally do over suppliers), then I can force you to pay for my insurance. And, I’d prefer to be over-insured rather than under-insured thank you very much, and frankly I don’t care if you have to over-pay for it. In fact, I’ll get it back in nice lunches from my professional partners-in-crime.

I have no idea how to quantify this effect, but since the phenomenon covers every industry, my tummy says it’s Big.

Second, this kind of burden massively adds to the level of transaction costs in our economy.  Initially described by Ronald Coase in the 1930s, transaction costs are non-value-adding costs which enable value-adding through other means, e.g. economies of scale.

But there comes a point when transaction costs begin to overwhelm the possible value they can enable, and cutting transaction costs themselves becomes a more sensible way to achieve economic success.

Are we at such a point?  Consider that the US has the highest ratio of lawyers per capita of any country in the world.  And that the lawyer-per-capita ratio in the US has gone up by 250% since 1950. (Personally, I can assure the reader that the contracting process for training sessions like the one I describe above was vastly simpler 20 years ago. And I sincerely doubt clients got burned, whether by drug-addled trainers or via other means.)

Third, this shakedown amounts to a massive, systemic substitution of check-boxes in place of management to govern the natural friction that exists between contracting people. For example, it substitutes a gigantic system of criminal record checks in place of a few personal phone calls for references. Among the costs of such substitutions is a decline in trust. A big one.

Finally, when you pile on so many transactional, impersonal “risk-mitigation” steps, you open up wide opportunities for corruption of various types. Corruption isn’t just handing over bags with cash. How many times have you heard, “Oh don’t worry about that phrase, we never pay attention to that anyway, it’s just part of the standard form.” How many times have you read the fine print at the bottom of every online purchase you make?

Where there is such casual, wholesale and willful ignoring of agreements, there is a ton of room to become cynical and unobservant about said agreements.

The next level up is easy – think of robo-signing mortgage agreements. And note all the irate protestations by bankers about how this was really no big deal. It’s not such a long step from there to the bags with cash. (Some readers might enjoy Mark Twain’s tale The Man That Corrupted Hadleyburg).

The parallel with moving from locally-made mortgage loans to globally aggregated, tranched and securitized packages is evident. When you depersonalize, you desensitize, and you de-ethicize.

Shades of Shakedowns

Of the two, the gangsters’ shakedown is more honest. It is authentic; you know what you’re being told, by whom, and for what purpose. You know that the threat is real, the intent unmistakable. By contrast, in the modern corporate shakedown, there are no villains, everyone has plausible deniability; they all have clean consciences and clean hands.

The mob had corrupt lawyers who could game the system. In the modern corporate shakedown, it is the system that is doing the shakedown.  We have MBAs, lawyers, and actuaries all soberly attesting that they have lowered the risk of our business contracting system at every stage.

Does anyone else smell a Black Swan here?

The Alternative

A major issue with trust is how to scale it. But maybe an even bigger issue is forgetting what it’s all about in the first place – what we have lost. Here’s a reminder.

I had a conversation with a solo consultant the other day, a disgusted emigrant from corporate America. He now does consulting and coaching for small business clients. His entire contracting process is as follows:

At the beginning of every month, you will send me a check for $5000. For the rest of that month, I will answer the phone all the time whenever you call. Should I ever not receive my check by the fifth day of the month, I will know that you’ve become unsatisfied with my services,  and we shall both expect further conversations to cease.

He has never had a dissatisfied client. His cost of sales is minimal. His legal fees are zero. His risk is pretty much nothing – because he has created a trust-based relationship.

I find that completely unsurprising. That’s just how it works – if we remember to let it.

DON’T Always Exceed Expectations

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Many of us go around repeating a mantra that we think is self-evidently correct: Under-promise and over-deliver, we say. Always exceed expectations.

There is a website ExceedAllExpectations.  Another website, HowTo.gov, tells governmental agencies to use metrics to exceed expectations. And as you well know, it’s a common mantra in business.

Not so fast.

Why Always Exceeding Expectations is a Bad Idea

Think this through. If you intentionally exceed a customer’s expectations, then you intentionally misled your customer about what to expect. If you make that a habit, then frankly, you’re a habitual liar.

Think that’s too strong? Think it through the next step. When a customer habitually gets more than they were promised, what’s such a customer to think?  That’s easy – that you’re constantly sandbagging the quote to make yourself look good. And they will naturally start to bargain with you about the expected results and/or the price.

When you make a habit of exceeding expectations, you are training your customers. You are training them to expect you to under-promise and over-deliver. And they are not dumb, they learn quickly.

You have trained them to doubt you, to suspect your motives, and to disbelieve what you tell them in the future.

Proof from the Market

In yesterday’s bi-weekly newsletter TrustedAdvice, I included a link to a video clip about this idea. (By the way, if you’d like to get TrustedAdvice via email, click here to subscribe).

Within minutes, I heard from two readers, with very interesting comments.

From Reader 1
I have learned this time and time again, but I want to please my clients, so I repeatedly try to exceed client expectations – only to find the clients coming back and demanding more and more.  The fact is, I set myself up for failure, as you cannot give more than 100%. I end up getting frustrated because then clients generally speaking don’t appreciate it when you do give them 100%, they just expect more and more of you and your time.

and Reader 2 adds another wrinkle
My company has exceeding expectations built into its DNA, a by-product of yours truly (though I am so much better now than I used to be). It has created more damage than you’d ever think. Not just in terms of clients expecting more for less, but in a shop that can never truly feel good about itself just for doing a good job, always feeling we could/should have done more.

“Always exceed expectations,” despite frequently coming from good motives, actually succeeds in destroying trust, with customers and employees alike.

So – don’t do that.

Instead, do what builds trust. Tell people exactly what to expect, and then deliver that. Period. After all, that’s how you develop a track record or being credible and reliable. That way your motives are never in doubt. That way you get known for being not only a straight shooter, but a particularly good estimator.

Basically, tell the truth. It’s always a better policy.

The Number One Mental Illness in Business

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Watch Your Blind Spot.Sometimes we don’t think right. Often we don’t think right, and we don’t even notice it. (This is well-described in a book called Blind Spot, by Banaji and Greenwald).

People in business have big blind spots, just as we do in other social milieu. Recently I’ve run across two items that, together, highlight one of the biggest blind spots of them all.  I don’t know what to call it, and I’d like your help in deciding that.

The two items popped up in neuroscience, and in business strategy.

Neuroscience

I’ve written before about How Neuroscience Over-reaches in Business. In response to that particular article, reader Naomi Stanford sent me a stunningly good academic critique of the “neuro-leadership” research. Sober, laser-like, and devastating, it lists a number of reasons why the neuro-leadership crowd is up to non-sense.

It’s called Not Quite a Revolution: Scrutinizing Organizational Neuroscience in Leadership Studies, by Dirk Lindebaum and Mike Zundel. It’s tough going unless you love philosophy of science, but worth it if you’re into this issue.

I want to highlight just one of the many points they make, because it jumped out at me so strongly. In their words:

… we argue that a predominant focus upon neuro-science to the study of leadership as an individual difference excludes further important units of analysis…a more appropriate ontological locus of leadership resides in the dyadic relationship between a leader and follower – as opposed to a leader-centric or follower-centric locus…Our appreciation of the dyadic nature of leadership, coupled with the need to be contextually sensitive, is incongruent with the predominant view of organizational neuroscientists who view leadership largely as residing in the leader.

In other words: leadership is a relationship. It’s not [just] a character trait, a skill, or a neuron path residing in an individual, any more than is love, or trust. It’s a 1+1 = 3 situation. You can’t get to the whole by just analyzing the parts.

In leadership, this suggests the key doesn’t lie in examining (or training, or selecting) one party, but in understanding multiple parties in relationship.

What’s the name of this blind spot in neuroscience? The authors suggest it’s reductionism – a desire to break things down to simpler parts.

I think it also smacks of the cult of the individual.

Strategy

Until the 1970s, business strategy was thought of in metaphors of war, and distinguished largely from tactics. But in the late 1960s, Bruce Henderson took a backwater part of strategy – competitive strategy – and turned it into a quantitative, matrix-hugging bounded idea set. Michael Porter put the finishing touches on it in Competitive Strategy in 1979.  The triumph of this view was so complete that the adjective has been redundant ever since. We now think all strategy is competitive strategy.

The essence of BCG and Porter’s worldview eerily presages the neuroscientists decades later. They saw the essence of strategy as lying within the single, solitary organism of the corporation (or the business unit, if you will).

Strategy, by this view, is all about the solitary struggle of each company to gain and sustain competitive advantage over the Hobbesian hordes who would do it in.  Nearly all business strategy today assumes the solitary nature of the business – the corporation is the atomic unit of business.

But strategy makes the same mistake the neuroscientists would make later. We are increasingly seeing that the successful businesses are not those who see themselves as valiantly struggling alone against the odds – they are instead those who collaborate, form trust-based relationships, and basically get along with the rest of business and society – rather than constantly struggling to ‘win’ against everyone else.

Again, 1+1 = 3. Unless you insist on looking only at 1, and then at 1 – in which case you’ll always end up with 2.

Here’s a small example: the Top Ten most trustworthy companies, over a three year period, outperformed the S&P by 24%.

What’s the name of this blind spot? Perhaps it’s reductionism again. Perhaps it’s the delight that economists like Milton Friedman take in pushing abstract models to the hilt. Perhaps it’s the alienated angst of Ayn Rand lovers. Perhaps it’s the thrill of the old Wild West rugged individualism, or maybe it’s just protectionism.

But whatever – I think the blind spot is the same in both cases.  It is a case of looking to individuals, instead of to relationships, for answers to what are most completely seen and understood as relationship problems.

The blind spot we’re stuck in – focusing on individuals, not relationships – carries multiple penalties. We should interview people for how they get along in groups – but instead we scrutinize their individual performances. College admissions look mainly at SAT scores and grades, not at social abilities. And I’m not even going to mention Congress.

In strategy, Michael Porter is an interesting case. A brilliant mind, he knows full well that the imperative of businesses these days is to get along. But in his recent writings, he is struggling to square the circle – to explain why a company must get along with others in order to gain maximum competitive success. The goal is inconsistent with the tactics for getting there. Companies who “do good” in order to “do well” end up doing neither.

We really need to stop seeing things this way in business, as elsewhere. We live in a relationship world. Thinking we are solitary Robinson Crusoes floating around on our solitary islands is sub-optimizing at best, and destructive at worst.

Expense Sheets and Cultures of Trust

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Business travelers know the taxi expense fiddle. You ask the taxi driver for a receipt. He winks at you and gives you a blank form, implying you can fill it in later, and who’s to say how much that ride cost, wink-wink, nudge-nudge.

How honest are you about the number you write down? How honest do you think others are? Do you think it varies by occupation? By income level? By geography? Would a college professor from Ohio State be less, or more, honest than an associate at a New York private equity firm?

Does the typical response look different in Beijing than in New York? What about Paris? Or Buenos Aires?

What are the cultures of trust? And what drives them?

Chinese Receipts and American Rentals

In China, street vendors hawk fake receipts for sale, as if they were DVDs or watches or fast food.   An American instinctively thinks, “How corrupt!” And yes, it is.

The news is also rife with stories of massive graft in Chinese government, with mid-level officials buying Mercedes and expensive wines. We also hear horror stories emanating from China about food safety.

Clearly China has a problem with trust in government and business. We in the West can comfortably turn up our noses and tell ourselves that at least our trust issues are far more evolved.

Or are they? Consider the NY private equity partner and lawyer who engaged a broker to find a scarce rental in the Hamptons.  When the broker found them one, they brazenly approached the owner to cut out the middleman broker.

Consider the Big Company which, when charged with violating their self-advertised objectivity, independence and integrity came up with the novel defense that hey, nobody believes that crap anyway, so don’t hold us to it.

Leaving aside whether those kinds of violations are more “evolved,” they surely are different in kind. What are those differences?  What are the kinds?

Cultures of Trust

We often talk about trust in business as if it were a single, universal trait. It is not. Francis Fukuyama, in his seminal book Trust, wrote well about this. In China, the level of trust is very high within extended family relationships – but quite low outside it. The reasons are linked to China’s historical development.

By contrast, French society has a great deal of confidence in centralized, bureaucratic institutions, e.g. the Ecole Polytechnique, or wine labeling.  Trust in Japan is high within the island-bound nation/culture of Japan itself, but much lower when it comes to gaijin. In southern Italy and Eastern Europe, trust is often more tribal.  And so forth.

What is the culture of trust in the US, particularly in business? Given the nation’s short and melting-pot  based history, it’s not driven by a common culture or religion. Instead, there are two ideologies that play a particular role in determining the nature of trust in the US: freedom and capitalism.

The “brand” of the US has always pitched freedom as front and center, and not just religious freedom. For countless millions, it has meant freedom to make it economically, through the fruits of your own labor, if not for you then for your kids.

Closely linked to that is our view of capitalism. While of course there are nuances, the main view of business throughout our history has been a belief that the pursuit of individual good ends up benefiting society as a whole. Adam Smith’s Invisible Hand has been a welcome metaphor for US business over the years.

There are a whole lot of things to admire about that ideology; the US can point to its own economy as Exhibit A. But it does mean we look at trust in a  slightly different way than do Chinese, or Russians, or Chileans.

In particular, we look at it like rules in a game.

The rules of the game are clear, but they can change. We generally don’t like rules, but admit that some are necessary. We have referees to help interpret and enforce those rules. Occasionally, the refs get over-matched, and social change results (though usually not before some disaster makes it politically unavoidable).

The main rule is, stay within the rules. All else is fair game, until and unless the rules change.

That kind of ideology makes trust a little more conditional in the US than elsewhere. And there is good and bad in that as well. The good part is that Americans can move with the times, adjust, be flexible about issues of trust when the need arises. The rules of trust may change, but the game itself keeps its integrity.

The American trust problem arises, I think, when we stop treating business as a game. And we have. Etiquette is out. Simple agreements are so last-century – now they need hedging with counter-parties. And handshake deals? Last millennium.

The rules become exogenous to the game, seen as a hindrance, and only one rule survives– survival of the fittest. That’s where we’ve gotten to, and the results are ugly. The doctrine of competitive strategy says, at its heart, that relationships are a cruel myth – the only thing that matters is sustainable competitive advantage, over your customers, your employees, and everyone else.

We’ve marinated in that solitary stew long enough. In an increasingly inter-dependent world, the view of every-man-for-himself is a recipe for a circular firing squad.

A New Business Ideology?

Are things changing? Does Capitalism 2.0 require Adam Smith 2.0, or something even more radical? I’ll talk about that in an upcoming post.

Unconscious (Ethical) Incompetence: The Curious Case of SAC Capital Advisors

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Should Have Seen That ComingNoel Burch is credited with formulating the Four Stages of Competence model. It describes the psychological states involved in a progression of competence, as in:

1. Unconscious Incompetence
2. Conscious Incompetence
3. Conscious Competence
4. Unconscious Competence

The model has always struck me as one of those so-obvious ideas (like spreadsheets) that the miracle is no one ever thought of it before. It just makes sense.

It is usually applied to the mastery of skills, expertise, or knowledge. It is equally interesting, however, to apply it to the concept of moral development in people and in organizations. Which brings us to the curious case of SAC Capital Advisors.

SAC Capital: The Contradiction

Last week, SAC Capital Advisors was indicted by a Federal Grand Jury in New York for insider trading. The firm pleaded not guilty, and of course nothing I say here should be construed as an opinion on the merits (and my legal credentials are zip-squat anyway).

In reporting on the story, New York Times financial reporter James B. Stewart highlights an interesting question:

According to SAC Capital Advisors, the wildly successful hedge fund now accused of systematic crime, the firm not only has “a strong culture of compliance” intended to “deter insider trading,” as the firm put it recently, but may also have one of the most rigorous and “cutting edge” hedge fund compliance programs in the country.
The firm said it spends “tens of millions of dollars,” on compliance, “deploys some of the most aggressive communications and trading surveillance in the hedge fund industry,” has hired big-name lawyers like Peter Nussbaum and Steven Kessler to oversee compliance, and has a staff of “no fewer than 38 full-time compliance personnel.
Which sets up the question: What were they doing?

What indeed.

Two Scenarios for Going Bad

Let me suggest a continuum of answers to that question, with the two extremes reflected in the following two purely hypothetical internal conversations at SAC following the indictment:

Version A: “Can you believe our bad luck? Just when everything was going so great, some flunky up and blows the whistle on the greatest inside deal since Teapot Dome. It was perfect! I guess it was too good to be true, something had to go wrong some day and we’d get found out.  Well, let’s fight the hell out of it and see what we can still walk away with.”

 

Version B: “Can you believe our bad luck? We take compliance seriously around here, nobody spends on compliance like we do, we’ve got the best systems in the business, the best programs, the best communications and the best lawyers to make sure we’re squeaky clean, and – a couple of lousy bad apples come in and ruin it. Not only for us, but for our clients as well. If they only knew the opportunities we pass up… For crying out loud, when is enough; blood from a stone. We are over-regulated to a T already, how much more compliant can you get?”

I don’t know about you, but I’d put money on the B end of the continuum. What looks like clear malfeasance from the outside all too often looks like business as nearly usual on the inside, with shrill grenades of  misunderstanding being lobbed in from the outside. Whether it’s SAC, Enron, WorldComm, or the generals in charge of preventing rape in the military, most frogs sitting in the water don’t notice the temperature rising to a boil.

Which raises the ethics conundrum – Scenario B is a form of Unconscious Ethical Incompetence. The doers of badness do not recognize that it is badness they are doing. Indeed, they often see it as goodness.

In the Four Stages model, unconscious incompetence is the first step in the process. That heightens the contradiction, because the evil-doers in such cases think they are actually at the opposite end of the scale – having already internalized the right behaviors so that they are unconsciously competent. Nothing could be more wrongheaded and insulting, they think, than to suggest they are actually at the bottom of the scale!

Hence the reaction – not guilt, or even remorse, but pained indignation. Moi?  Nous?  Surely you jest.

You Can’t Depersonalize Trust and Ethics

Cases of this sort highlight a vicious circle in managing for trust. Violations of trust are met with new processes or procedures for preventing it in future. Since so much of business is about processes and metrics, this is seen as a perfectly normal response.

However, by turning trust and ethical issues into issues of process, they are robbed of their context in a relationship, and therefore stripped of their human quality. The predictable result of this is to lower the internal standards of conscience and social behavior, which then leads to more violations. And on, and on.

This is the substitution of quantitative, transactional, impersonal focus for qualitative, relationship-based, human phenomena. Unless checked, it only gets worse. Financial services is only one of the most obvious industries in which this happens. You can see it in pharma, in many sales organizations, even in academia.

Unfortunately, most outside consultative solutions to institutional trust issues tend to focus primarily on traditional change management factors – incentives, structures, communications (or culture, which I tend to see as the result of all the other things). But those traditional change management factors, which work so well when introducing quality or customer focus initiatives, have limited range when it comes to issues of trust and ethics. In fact – they make it worse, by implicitly suggesting the issues are ones of incentives, structure and communication.

What is sorely needed is something that sounds too old-fashioned – personal role-modeling of character-based behavior by leaders. Personal actions at the most minute level – comments, reactions, shading of language, confidence of decisions, personal displays of integrity in the moment. These are the things that employees notice, absorb, and emulate.

Former SEC Chairman Harvey Pitt had done some consulting for SAC. He told reporter Stewart that he “Came away from his visit to the firm unimpressed. ‘My sense was that it was a check-the-box mentality, not a serious commitment,'” he said.

Whether he was right or wrong about SAC, the distinction is powerful. As Mr. Pitt also said, “When it comes to compliance, you have to live, eat, breathe and drink it. It has to be embedded in a firm’s DNA.”

And the route to the firm’s DNA (metaphorically) goes straight through that of the leaders (literally).

8 Ways to Make People Believe What You Tell Them

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Get Straight to the TruthCredibility is one piece of the bedrock of trust. If people doubt what you say, all else is called into doubt, including competence and good intentions. If others don’t believe what you tell them, they won’t take your advice, they won’t buy from you, they won’t speak well of you, they won’t refer you on to others, and they will generally make it harder for you to deal with them.

Being believed is pretty important stuff. The most obvious way to be believed, most people would say, is to be right about what you’re saying. Unfortunately, being right and a dollar will get you a  cup of coffee.  First, people have to be willing to hear you. And no one likes a wise guy show-off – if all you’ve got is a right answer, you’ve not got much.

While each of these may sound simple, there are eight distinct things you can do to improve the odds that people believe what you say.  Are you firing on all eight cylinders?

1. Tell the truth. This is the obvious first point, of course – but it’s amazing how the concept gets watered down. For starters, telling the truth is not the same as just not lying. It requires saying something; you can’t tell the truth if you don’t speak it.

2. Tell the whole truth. Don’t be cutesie and technical. Don’t allow people to draw erroneous conclusions based on what you left out. By telling the whole truth, you show people that you have nothing to hide. (Most politicians continually flunk this point).

3. Don’t over-context the truth. The most believable way to say something is to be direct about it. Don’t muddy the issue with adjectives, excuses, mitigating circumstances, your preferred spin, and the like. We believe people who state the facts, and let us uncover the context for ourselves.

4. Freely confess ignorance. If someone asks you a question you don’t know the answer to, say, “I don’t know.” It’s one of the most credible things you can say. After all, technical knowledge can always be looked up; personal courage and integrity are in far shorter supply.

5. First, listen. Nothing makes people pay attention to you more than your having paid attention to them first. They will also be more generous in their interpretation of what you say, because you have shown them the grace and respect of carefully listening to them first. Reciprocity is big with human beings.

6. It’s not the words, it’s the intent. You could say, in a monotone voice, “I really care about the work you folks are doing here.” And you would be doubted. Or, you could listen, animatedly, leaning in, raising your eyebrows and bestowing the gift of your attention, saying nothing more than, “wow.” And people would believe that you care.

7. Use commonsense anchors. Most of us in business rely on cognitive tools: data, deductive logic, and references. They are not nearly as persuasive as we think. Focus instead more on metaphors, analogies, shared experiences, stories, song lyrics, movies, famous quotations. People are more inclined to believe something if it’s familiar, if it fits, or makes sense, within their world view.

8. Use the language of the other person. If they say “customer,” don’t you say “client.” And vice versa. If they don’t swear, don’t you dare. If they speak quietly one on one, adopt their style. That way, when you say something, they will not be distracted by your out-of-ordinary approach, and they will intuitively respect that you hear and understand them.

What’s not on this list?  Several things, actually. Deductive logic. Powerpoint. Cool graphics. Spreadsheet backup. Testimonials and references. Qualifications and credentials.

It’s not that these factors aren’t important; they are. But they are frequently used as blunt instruments to qualify or reject. We’d all prefer to be rejected or disbelieved “for cause,” rather than for some feeling. And so we come up with rational reasons for saying no, and justifying yes.  But the decision itself to believe you is far more likely driven by the more emotive factors listed above.

 

 

How to Increase Trust in Organizations

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Increasing Trust Within Your OrganizationI was grocery shopping Saturday. It was 2PM, 96 degrees out – pretty hot for New Jersey – and I was in the checkout line. The cashier had started sliding my purchases through the register, when suddenly I noticed a bag left over from the customer before me. She had left and gone to her car.

The woman doing the bagging noticed it at the same time. She grabbed the lady’s bag and dashed out into the heat. She was making pretty good time for a woman in her 60s, and we all could see her out the window as she finally caught up, handed over the bag, and started back.

Then the cashier suddenly exclaimed, “Omigosh, she left two other bags as well!” Looking quickly at me and the woman behind me in line, she said, “Will you two please excuse me for just a minute? I’ll be right back.” And she too took off after the forgetful lady, with two bags in tow. She was in her 20s, and made very good time.

It occurred to me I could slide a few groceries over the line and into my bag and escape without paying. (I don’t do such things, but the idea did show up in my mind). Then the elderly woman behind me in line said, “You know, I don’t mind one little bit waiting for someone who’s doing a good deed like that.”  Neither did I, I said, neither did I.

When the cashier and the bagging lady came back, we both complimented them, and they blushed a bit and said thank you. (I sent a complimentary email to ShopRite’s HQ later that night with the store number, employee name and cash register number, all of which were on the receipt).

So my question is: how do you get employees to behave like that? I mean generously, based on principle, willing to take certain risks, confident to act in the moment. How do you keep from getting sullen employees who talk about “career-limiting moves,” who won’t lift a hand or take a risk to help another?

How Do You Induce Values-based Behavior in an Organization?

Earlier that same day, I had the opportunity to briefly visit a Sears store, a Macy’s store, and a Bed Bath and Beyond unit. Sears was awful – employees keeping their distance from customers, 100 feet away, pretending not to notice. Macy’s was a little better, but still sullen, under-staffed, and radiating not-helpfulness.

BB&B was a huge contrast. Several employees, busy doing other things, asked me if they could help. I asked two for help, and they both went out of their way to do so.

How does this happen?

The standard answer in most businesses, I’m afraid, is to focus on the wrong things: typically  incentives, communications, and procedures.

The more I see of business, the more convinced I become that the single most powerful way to create values-based behavior is none of the above – it is to do it yourself, and to talk about it with others.

The Usual Suspects

Incentives appeal to the individual’s rational economic or ego-satisfying needs. Fine and dandy, but if you’re trying to incent selfless behavior, the concept of rewards is just a tad self-contradictory.

There is probably (I’m guessing) more money spent on communications than on any other “solution” to issues of trust, ethical behavior, and customer-focus. Companies love to pronounce their values to their customers, and reinforce them internally in posters, newsletters, and blogs. The problem is, impersonal companies communicating about personal relationships is some kind of category mistake.

And procedures? The whole point of values-based behavior is that the employee extrapolates from principles in the moment. Rehearsing and drilling doesn’t help extrapolate values, it replaces that process with rote memory.

Role Modeling

Think of how we learn from our parents. Think of the sports or public figures we admire (there are still a few). In all cases, we are influenced by what they do – not by what they say they will do, or did do, or wish they’d done.

When it comes to values, I suspect BB&B has leaders in their operations organization who both walk the talk, and talk it too. People who lead by example, and who are convinced that values like customer assistance are valid only if kept sharpened by use.

I suspect Angie the cashier at ShopRite was hired partly because she exhibited values. I suspect that the folks managing her store make a point of being helpful and customer-focused, and engage customers about values like that. I suspect it didn’t occur to her that she shouldn’t take the risk of leaving her cash drawer and my groceries unattended – because her leadership would have trusted their customers and done the same thing – and she knew it.

We have overdone the behavioral, incentives-based, needs-maximizing best practices model of human resources. We have under-estimated the human power of changing humans. After all, the business of relating to other people is personal.