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Bad for the Customer, Good for the Stock Price: Wait, What?

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Bill Bachrach has a business somewhat like mine, though with a specific vertical industry focus: he teaches people to become trusted professionals in the field of financial planning. I’ve read much of his material over the years and have the highest regard for what he has written (not to mention what he’s done—like the Hawaii Ironman Triathlon).

The other day, Bill found just the right words to express a paradox. Just how is it that an industry, by burning its own customers, can raise its stock price? We’ll come back to that: first, here’s Bill, from his newsletter The Trusted Financial Advisor:

The headline reads: "Wall Street wins big as Dodd drops fiduciary provision." And the first line of that article is "Chalk it up as a win for the securities and insurance industries." How do the securities and insurance industries win when the client loses? It’s a fascinating way to view the world, but not surprising.

Here’s my translation: "the lower the standards the easier it is for us to manage our advisors, salespeople, and agents." It’s the usual product-oriented, fear-based thinking from our industry at-large and it proves, once again, that you have a competitive advantage as an individual Trusted Advisor who chooses to put the client first.

Can you believe what you just read; you have a competitive advantage by putting the client first? Yes, you do. Doesn’t everyone put the client first? Apparently not. Amazingly enough, our industry considers it a win when they don’t have to adopt the highest standard of care for their clients. Wow.

Point One: There Are a Few Bad People Out There

Now, you can argue that the industry is right in its argument that the absence of a fiduciary standard is actually in the best interest of the client, but I’m with Bachrach on this one. If you disagree, I’ve got a bridge for you.

Some people think trust is naïve, that the world is a nasty place, that no one is trustworthy, and that trusting is a foolishly suicidal act.

Trust is not naïve—there is no trust without risk, for example—but it needs to be said that those people are not all wrong, not by a long shot. There are industries more rife than others with untrustworthy behavior, and the business of money, at least in recent years, is one of them.

But there’s a bigger issue that Bachrach’s indignation suggests:

Point Two: Watch Out for Profit-Justified Ethics

There are a number of researchers out there—I won’t name names, but you could research them easily—who invest quite a bit of time and energy in proving that "good" business is also good business; that you can do well by doing good. Profitability is shown to be correlated with values like transparency, social responsibility, candor, and customer focus.

I’ve studied a lot of that work, and think it is generally and fundamentally true. Doing good really does result in doing well. But—not in all cases, and not necessarily in the short run.

As Bachrach points out, you’ve got an entire industry that apparently believes they can make more money by gouging their customers than by being straight with them. Are they wrong? Put it this way: I wouldn’t even bet your money against Wall Street on this one. They are most decidedly not stupid.

Why’s this an issue? Because many of these socially-minded thinkers—whom I happen to think are basically right, and whom I support—are playing with fire when they use profitability as a justification for “good” behavior. The more you say, “the good-doing companies are actually more profitable than the evil companies,” the more you conflate the two. And the more you open it up for some companies to infer the converse and the inverse:

“It’s making the most money, so it must be the good thing,” and

“It’s not making money, so it must not be the good thing.”

And what you’ve then done is to re-define ethics in terms of profitability.

Now, there is no harm in pointing out that good deeds are usually more profitable. And none of these analysts intend to argue in favor of the perverse results. But intentions have a way of getting misinterpreted by those who have ulterior motives; those who are, oh let’s just say, bad.

It’s similar to what L.J. Rittenhouse said in a recent Trust Quotes interview, the "result of trying to replace moral standards with legal standards" is a lowering of integrity. So it is here, when we don’t guard against the turning of the ethical tables.

Just to be clear: if something is ethical, it’s usually profitable. But if it isn’t profitable, that doesn’t mean it isn’t ethical. And just because it is profitable doesn’t mean it is ethical.

There will be the more-than-occasional situation where the right thing to do is simply not the profitable thing to do. That’s when you find out who’s ethical, and who’s simply hustling their own customers.

The SEC Chose Wisely in Goldman Case

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The SEC earlier today announced a civil suit against Goldman Sachs.  This act was the talk of Wall Street—the DJIA dropped 125 points, Goldman’s stock lost 12.6%, and CNBC broadcast a special evening show called “Fraud on the Street.”

The suit charges Goldman with not disclosing information. I won’t bother with the detail, you can read that in the above links—the point is, the charge is non-disclosure.

Now, that’s an interesting charge. It amounts to some form of misrepresentation. In the non-legal world, that’s generally known as lying. In that same world, the teenager defense of “I didn’t actually tell a lie, I just let you think what you thought” is considered a distinction without a difference.

The point is, the SEC chose to charge Goldman with something that’s not only illegal, but resonates easily with Main Street as also being unethical. Since the gap between the illegal and the unethical is one of the main casualties of the recent financial debacle, this is a welcome sign—a charge that re-unites the legal and the ethical.

The Spin–Red Herring Issues

Goldman itself responded that the charges are “completely unfounded in law and fact.” Look for a splitting hairs defense a la “it depends on what the meaning of the word ‘is’ is.”

Goldman and others make several arguments that are pointedly red herrings. One is that they didn’t do this transaction to short the market (non-responsive). Another is that the buyers of the CDOs were big boys, and should know what they were getting into (ditto). Another (by Goldman) is that they themselves lost money on the deal (again…).

The pro-Wall Streeters are not alone. NBC News led with “if the government is right, people all across the country are still paying the price for schemes like this that we’re only learning about this now.” Their commentator presented the charge as betting against a carefully constructed product; not the SEC charge. Lisa Myers said, “essentially Goldman Sachs is accused of helping rig the game against investors.” And Robert Reich said the real crime is not what was done illegally, but what was done legally. Fair point, but not a commentary on the crime. CNBC’s Erin Burnett tried to get commentators to say it was suspicious timing, to buttress financial legislation in Congress or to deflect press attention from the SEC’s shortcomings in the Stanford case. Again—not on point.

What the SEC Did Right

I’m no lawyer, but I’m guessing the SEC could have pursued many other charges. It chose to pursue this one—the legal equivalent of what laymen call ‘lying.’ Lying is the most trust-corroding thing that can be done. It not only ruins credibility, it casts motives into doubt. Lying kills trust.

A charge of failure to disclose is exactly the kind of charge a responsible regulator should be pursuing. It reunites the legal and the ethical—a casualty of Wall Street’s actions—and aims at restoring trust.

Greed is not illegal, though it may be unethical; ditto for fleecing one’s customers. But misrepresentation—or the near-equivalent of selective disclosure—is both.

Good for the SEC for taking this route.
 

Empathy is the Antidote to Resentment

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If you’re groaning at the prospect of another ‘soft skills’ blogpost, hang on. The soft stuff is what enables ‘hard’ stuff like profits, speed and success. Here’s what I mean.

You Might Be Copping a Resentment If…

You may not think you’re a resentful person. And maybe, graded on a curve, you’re not.

But how often do you find yourself muttering at the driver who cut you off; re-arguing arguments in your head, where you win this time; waking up in the middle of the night pre-occupied with your checking account; and gossiping with someone about how so-and-so really isn’t all that?

All those are versions of wishing you could change reality—when you can’t. And that’s a pretty good definition of resentment.

It’s the difference between hoping and wishing. Hoping things will change is fine, particularly if you’re doing something to help the change. But wishing that things were other than they are—that is living in an alternative universe. And that’s resentment. It’s fine to hope you win the lottery—as long as you bought a ticket. But wishing you’d won last week’s lottery—that’s resentment territory.

By living in an alternative universe, you’re playing at being God. Unless, worse yet, you think it’s not play, and you actually believe that all your wishing makes a dime’s worth of difference to Reality. There is a God–and you’re not it.

Resentment generally, eventually, manifests as resentment against other people. But personal resentment is like taking poison and waiting for the other person to die. All it does is eat you up from inside, while the Resented One is either blissfully unaware, or at least generally doesn’t give much of a damn. 

Why Resentment Kills Sales and Influence

This is not afternoon TV psycho-babble. It makes a daily difference in business—a huge difference. Let’s just take business development and advice-giving.

If you are prone to the Black Art of Resentment, then you are likely to believe in short cuts, quick fixes, fad diets, new interpersonal techniques, flashy methodologies, and come-on lines for dating bars. Because all those gimmicks appeal to your desire to live in a world other than this one: one in which you can dominate, control, bend the other’s will to your desire. And when they let you down—and they do, and they will—you will once again feel Old Friend Resentment (or its kissing cousin, self-pity).

People don’t buy from those who are trying to change them. People don’t pay attention to people who are trying to persuade them to their own viewpoint. People don’t take advice from those whose egos are tied up in having their advice taken. They interpret all those things as attempts to manipulate, and they shun the manipulator. This is not a good thing.

The Best Way to Sell and Influence

The best way to sell and influence is to get rid of resentment; get rid of living in alternative universes; accept everything, starting with the customer in front of you.

Acceptance in this case means taking them at face value, getting to know them on their terms, giving up all attachment to outcome (because that’s about you, not them), and applying your focus, energy and attention to them. Let’s call that empathy.

If you do that, and spend your time and energy seeking to understand them, you’ll do a far better job of understanding them and their needs than all the other resentment-fueled alternate-universe salespeople and advisors. One result of which is, you’ll end up selling more and having your advice taken more often.

Goals are Great, but An Expectation is a Pre-meditated Resentment

Goals are great. So are objectives and milestones and targets. They give you a sense of what you’re aiming for, and help you envision the to-be state. 

But don’t confuse goals with their purpose. The purpose of a goal is not to achieve the goal—the purpose of a goal is to help you achieve your True Purpose. You should never confuse a quarterly sales quota with a Purpose.

It’s when goals get transmuted into expectations that we confuse goals with purpose. When we start living in that alternative universe defined by the goals, when we start obsessing over the new car, winning the contest, getting the boss’s approval, ranking in the top 20% on the bonus plan—that’s when we begin to have expectations. And an expectation is a pre-meditated resentment. When we expect, we are setting ourselves up for resentment.

Plan, set goals, and strive. Then celebrate what you get; because to bemoan what you haven’t got is to live in resentment. A life spent wishing you were other than you are is a failed attempt at playing god, and a recipe for unhappiness—not to mention poor sales.

 

 

 

 

 

 

 

The Trust Primer Volume 6

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Every 2 out of 3 months we publish an issue of the Trust Primer, an ebook series highlighting three recent provocative and insightful topics and conversations from the TrustMatters blog. 

Catch up on posts you missed.  See what we think is worth highlighting, and agree or disagree with us.  Pass it along to friends you think might enjoy it.  It is free, after all, and it looks pretty cool, if I do say so myself.

In this issue we touch on three different aspects of relationships: the relationship of a company to society, the relationship of a company to its several stakeholders, and the relationships between ourselves as individuals.  The individual posts are:

But you can get them all at once in .pdf ebook format by clicking below:

Get the Trust Primer volume 6 here

We hope you enjoy it.

April Carnival of Trust is Up

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The Carnival of Trust this month is hosted by Skip Anderson, who hosts the Selling to Consumers blog.  Those of you familiar with the Carnival can click right here to go straight to it. 

If the term "carnival" in this context is new to you, it’s a monthly compilation of the ‘best of the web’ regarding trust blogs, as adjudged by a floating host, unaffected by yours truly.  This month’s selection of 11 articles, being made by Skip, partly reflect his interests and partly reflect a more eclectic taste as well.  They cover the gamut of sales and trust, from strategy to technique, from social meaning to inner meaning.

He’s selected an interesting smorgasbord of material, including the relationship of trust and ROI; trust, profit and ethics; stale popcorn and how it affects buying behavior; a comparative ranking between ‘interesting’ and ‘truthful’; and a rollicking good dialogue about a controversial YouTube post put up by adfolk OgilvyOne, hosted by @davidabrock.  Among others, that is.  Eleven in all.

See what a great Carnival is all about: read someone else’s take on trust for a day.  Go visit April’s Carnival of Trust, hosted by Skip Anderson–many thanks Skip!

At the Corner of Assertiveness & Cooperation: Collaboration

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© Copyright 2003-2010, Pfaff & Associates. All Rights Reserved.What do we meet at the corner of Assertiveness and Cooperation? The Thomas-Kilmann assessment suggests that it’s Collaboration.

Their assessment,  which is the basis for many others, explores different styles people use when handling conflict. For some of you this work may be familiar, but I only learned of it a few days ago from my sister, a professional mediator. Here is a free version which gives you a quick view of the five areas measured by the Thomas-Kilmann assessment.

It identifies five styles of handling conflict between two people: the Avoider, the Accommodater, the Compromiser, the Competitor and the Collaborator.

These types are arrayed in a graph with Assertiveness (defined as concern for the task, or as "thinks of self") on one axis, and Cooperation (defined as concern for people, or "thinks of others") on the other. In the lowest left hand corner is the Avoider, someone who’d rather not deal with conflict at all, and in the upper right hand corner, the corner where the highest level of Cooperation meets the highest level of Assertiveness, is the Collaborator. (Smack dab in the middle, as you’d expect, is the Compromiser, but we’ll save that for another day.)

What fascinated me about this model is the light it sheds on Collaboration: where its power comes from, and what distinguishes it from Compromise. Certainly, there are situations in which compromise is adequate and even worthwhile. I’d like to go out for dinner, you’d like to stay home. Taken a step further, I’d like not to cook tonight, and you’d like not to get dressed up or spend a lot of money. A compromise on a nearby casual restaurant fits the bill perfectly, and you and I probably don’t need to spend a minute more on a "conflict" like this. But a compromise is always a meeting in the middle, so each gets a little of what they want, and compromise often gets to a gray solution, not really satisfying to anyone but sort of appeasing everyone. In art, it’s mixing a lot of colors to get mud.

Collaboration gets its power because it uses the energy of Assertiveness–ideas and real points of view, championed by people who care–and the energy of Cooperation–a willingness to make things work for all involved. From collaboration comes the best result, the idea or solution which is fashioned from everyone’s input and is better than what any one person could have come up with on her or his own.

And a key point in all of this, a key ingredient in collaboration, is that it starts with conflict, but it doesn’t end there. It takes the energy of the conflict–opposing or differing views, needs and goals–and the attitude of collaboration–the willingness to reach the best solution for all concerned–to get somewhere we’ve never been before, and somewhere we couldn’t go alone.

I’ll close with a quote from Dr. Martin Luther King, Jr.

"A leader isn’t a seeker of consensus, but a molder of consensus."

PS: If you love this kind of self-knowledge quiz, try our Trust Temperament assessment. Far cheaper and more revealing than a therapy session.

David Maister on Trust and Professional Services (Trust Quotes #7)

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David Maister  is well-known to readers of this blog. David was lead author on The Trusted Advisor along with myself and Rob Galford. A former Harvard Business School professor, he originally specialized in logistics and transportation (writing 8 books on those topics.) He became the guru of Professional Services with his 1993 book Managing the Professional Services Firm after which he wrote 6 additional books on professional service firm topics.

CHG: Welcome to the Trust Quotes series, David, I’m glad to get you on the record on the subject of trust some ten years after we co-authored The Trusted Advisor. How has your view of trust changed, if at all, since then?

DM: I’m probably a little more skeptical and less hopeful now than I was ten years ago as to the degree to which earning trust is learnable (or teachable.)

When you and I (and Rob) wrote about trust in 2000, we stressed that earning trust was not just about the knowledge of tactics or the possession of skills, but required some underlying attitudes or character attributes – for example, a real interest in those you were dealing with, and a sincere desire to help (what we called “low self-orientation.”)

As authors, consultants and teachers, we (and others) can help a lot with the knowledge and skill parts of understanding trust, and perhaps even (through role playing and practice) help people improve on the behavioral aspects – getting more skilled in conversations for example.

But what remains as a dilemma is what happens if people are actually not that interested (on a personal level) with those whose trust they are trying to earn, or are not really trying to “focus on helping first, and keep the faith that, by earning the relationship, you’ll get what you want down the road.” 

I am suspicious about whether the underlying attitudes or character traits necessary for trust are as common now as they have been in the past.

This is not a comment on the inherent flaws of individuals. Rather, I think we have seen a generational change (or two) in the institutional context within which people have been raised. Customers and clients, through their increased reliance on purchasing departments, are signaling a lesser interest in buying through relationships. At all levels (so-called “partner” or “non-partner”) professional firms are routinely achieving improved economic results by treating their people as “employees at will” rather than assets or members of an organization which gives and expects loyalty. The data is very clear – in the law for example, the single biggest means by which firms improved their profitability (across the profession) was de-equitizing existing partners and drastically reducing the numbers of people promoted to partner. That’s not just a response to the recession – it’s been going on for decades.

Accordingly, I think we are living in organizations which have low (and declining) trust and individuals are responding in kind. I think our economy and society has been training people to not trust.

 

CHG: For the record, what do you think is the role that trust plays in professional services–or for that matter in business as a whole?

DM: I remain as convinced as ever that a high-trust method of operation is the best high-profit, high growth strategy. In my 2001 book Practice What You Preach, I studied 139 professional operations and was able to show statistically that the key determinants of financial success were when the people throughout the organization (not just those at the top) agreed with the statements “we always put the interests of clients first,” “we have no room for individualists who put their own interests ahead of the clients or the firm,” and “Our managers are men and women of integrity who always act in accordance with what they preach.”

However, it is sad to report that while these attributes (where they existed) could be shown to produce high profits and high growth, they were not common. Alas, in most businesses, neither the employees nor the clients can trust that managers will act in accordance with the principles they advocate. So, cynicism and self-protection results.

CHG: In your career, David, you consulted to or worked with a panorama of industries—law firms, accounting firms, advertising, actuaries, public relations, architects, consulting firms. What did you find to be the most common trust issue across all of them?

DM: Over the past decade or two, there has been a collapse of the “professional service firm model” as a special form of organization. In the past, what made a professional service firm different from a general corporation was that it was built on some generally agreed (if sometimes implicit) assumptions. Assumptions that you could depend upon and trust that they would be observed.

Under the old model, professional firms offered careers, not just jobs. If you were hired at the entry level, it was “assumed” that, in exchange for your hard work, you would be given an apprenticeship, be well-trained and, if you didn’t make it to the higher levels of the firm, you would be helped to find an alternative career. If you did “make partner” there were assumptions that (even if there was no such thing as life tenure) you were treated (and expected to behave as) a long-term member of a cohesive team, and that the firm would be loyal to you if you were loyal to the firm.

None of these “rules’ or assumptions apply today. No-one today knows what it means to “be a partner.” It’s hard to be trusting or trustworthy (between and among partners) if no-one knows whether or not there are sustained “rules of engagement.” Accordingly, even in some incredibly admirable firms, I hear sentences like “I feel like I’m only one bad year away from being terminated.”

Few entry-level hires (according to the survey data I have seen) expect to be with their firms 5 years hence. They don’t believe that their firm has any form of commitment to them. The recent actions during the 2008-2010 recession, wherein junior and admin staff were the first to be tossed overboard in the (successful) attempt to preserve partner incomes proved to everyone where the true priorities of most organizations lie. Together with the fact that, in many professions, professional firms are increasingly publicly held, professional firms are (in my view) much more short-term focused than a decade or two ago. This breeds distrust inside the organization. No-one knows what rules or organizing principles (if any) can be depended upon.

I’m sorry to sound so cynical, but my experience is that juniors don’t trust partners, partners don’t trust each other (especially if the other partner is in a different office, practice specialty, or industry group), no-one trust that management will do what they say they will, and everyone views clients as people to be feared (or seduced) rather than people to trust. Shining counter-examples do exist (the usual names) but they are not the norm.

Yes, researchers, authors and consultants can prove that these are counterproductive and self-defeating attitudes, but that doesn’t make them any the less prevalent.

CHG: As long as we have that list in mind—is there one industry in particular that you found particularly better at—or more challenged, for that matter—at issues of trust?

DM: In general, I find excellence at trust to exist at an individual level (there are many incredibly admirable practitioners in every profession) a very few firms that have firm-wide reputations for it, and no one profession or industry that has a consistently high reputation for being more trusted than other industries. There’s a reason there are consultant jokes, doctor jokes, lawyer jokes, plumber jokes, dentist jokes, accountant jokes, etc. As generalizations across entire professions, we’re all bad at working well with clients.

One profession – the law – does have a particular challenge with trust inside their own organizations. As I pointed out in a recent article, lawyers are professional skeptics: They are selected, trained, and hired to be pessimistic and to spot flaws. To protect their clients, they place the worst possible construction on the outcome of any idea or proposal, and on the motives, intentions, and likely behaviors of those they are dealing with. As Tony Sacker, my kind and gentle brother-in-law and a solicitor in the United Kingdom, says: “I am paid to have a nasty, suspicious mind.”

Recently, I was advising a firm on its compensation system. They didn’t like my recommendations. Finally, one of the partners said, “David, all your recommendations are based on the assumption that we trust each other and trust our executive or compensation committees. We don’t. Give us a system that doesn’t require us to trust each other!”

Much current practice in firm governance, organization, and (not least) compensation comes from the fact that partners vigorously defend their rights to autonomy and individualism, well beyond what is common in other professions. There is nothing inherently wrong with that. However, as major corporations consolidate their work among a smaller number of firms, domestically and internationally, they expect that firms will serve them with effective cross-office and cross-disciplinary teams. Firms are vigorously responding to this with a stampede of lateral hires, mergers, and acquisitions. Their goal is to create big organizations offering many disciplines, locations, and cultures. The unanswered—actually, barely asked—question is whether these firms can shift from a managerial approach, based on partner autonomy, to new approaches that can create a well-coordinated set of team players.

It is hard to unbundle which is the cause and which is the effect, but the combination of a desire for autonomy and high levels of skepticism make most law firms low-trust environments.

CHG: What’s happening with trust in business these days? Your take on it?

DM: I’m not sure I have the “view from the mountaintop” perspective about business as a whole, so perhaps the best way for me to try and answer is as a consumer. Continuing my less-than-hopeful theme, I have to report that as a recipient I do not experience much change or improvement, at least systematically, from those who try to serve me. I’m not saying that I don’t like my doctor, lawyer, plumber, dentist, broker, (and so on.) It’s just that I do not perceive that they are doing anything new that they did not do ten years ago. (Do your readers?)

Nor do I see many game-changing approaches from new entrants in many professions that systematically increase trust between provider and client. Many professions are moving to fixed-fee pricing in part due to the historical lack of trust in the motives of providers who billed by the hour.

One approach that recently caught my attention was the offering of a premium-fee “concierge” primary care physician services where the doctor limits the number of patients to 400 instead of the normal primary care doctor who has a “list” of 2,500 patients or more. This COULD be a systematic way to increase intimacy and accessibility, but (at least in Massachusetts) it has not taken off in a big way.

CHG: Your old industry of professional services; what did you find to be the most common failing—and did it by any chance have any connection with trust?

DM: Most of the weaknesses or failings of professional firms, in my view, derive from the fact that professionals (and their institutions) are made up of highly intelligent people who value and celebrate that which is rational, logical, analytical and based on high intelligence. After all, it is superiority in those things that are screened for in doing well in college and, especially, in obtaining advanced degrees. However, few of us who went that route (unless we had it from childhood) were ever helped in developing our interactive, emotional people skills.

No one ever got their MBA because of superior empathetic skills. Few people, if any, had a successful law school career because of their predilection for being a team-player rather than focusing on their own accomplishments. No-one teaches you (formally) the abilities of being a good conversationalist – having a fresh point of view, but not trying to thrust it upon everyone else, speaking politely and respectfully; telling good stories to illustrate key points; being good at drawing other people’s views out and drawing them into the conversation; not being afraid to admit areas of ignorance; listening with genuine interest. In our educational system (and in our firms’ training and development approaches) these basic human skills are either absent, or treated as secondary.

It sounds trivial and trite to say “It’s all about learning to deal with people,” but what’s often overlooked is that it’s very HARD to develop such people skills if you don’t start until later in life. People and firms underestimate how much effort and time it takes to develop such skills.

CHG: Tactically speaking you’ve heard me talk about trustworthiness vs. trusting, with the combination adding up to trust. On which side do you think business needs more work?

DM: I think you have made an incredibly important distinction, Charlie, and it’s a major contribution to get people thinking about it. I think you and I have always believed that you can’t be seen as being trustworthy unless you are prepared to trust, and being prepared to trust is an incredible leap of faith for many people. So, that’s the hardest part for many people.

When people ask, “How can I be seen as more trustworthy?” there’s more than a little hint of “Let’s get to the stage where I begin to benefit as quickly as possible.” Asking “How can I learn to trust more those with whom I want to have a relationship?” demands that people really are taking a relationship (rather than transaction) approach. Unfortunately, there are people looking at “trust’ as an approach or tactic to “do the deal more quickly.’ They underestimate the mindset change that’s really required to make it work.

CHG: How do people come to learn about trust? How did you learn about it?

DM: Today, “trust” is a hot topic. As you have pointed out, Charlie, claims to being “your trusted advisor” are everywhere. Everyone wants to train their people to earn clients’ trust in order to lower selling costs and avoid fee pressure. What is often misunderstood is that enhanced trust CAN do these things, but it’s not a gradually rising response curve. A little more trust does not get you a little less fee sensitivity or a little more repeat business.

In my experience, it’s a big “step function” – only when you have clearly put a big difference in trustworthiness (and trusting behavior) between you and others in the market can you then reap the rewards of being truly different. I’m not saying it’s “all or nothing” but it’s close to that. “I trust them a little bit more than others” is not much of a commendation, and is not likely to lead to a big change in buying behavior.

My own introduction to trust was by experiencing it – examples that we included in The Trusted Advisor book, and some that have happened since. Every so often, you come across someone – a dentist, an interior decorator, a financial advisor – who earns all your business and long-term loyalty by putting your interests first. And when it happens, as it happened to me, you become an instant convert.

I truly believe there are no secrets here – it’s just the Golden Rule, “Deal with others as you would wish to be dealt with.” The trouble is, too many of us think that our business is different or that our clients are different. We don’t trust them to reciprocate if we do the right thing, so we drop the golden rule and relapse into transactional behavior.

CHG: You didn’t just write about trust only in The Trusted Advisor; in what ways did trust show up in your other books?

DM: All of the lessons of trust in dealing with clients also apply, virtually un-translated, into building trust inside the organization. I wish I had done what our co-author Rob Galford did and written The Trusted Leader, which was a logical follow-up.

Actually, I did try write about effective management and how trust applies. It’s a constant theme thorough all my books. However, it’s still hard to be completely convincing. It’s very sad, but there’s a school of though out there among many managers that accepts Machiavelli’s line about it being better to be feared than to be admired. In the balance between “pragmatists” and “ideologues/idealists”, I still find more people who are self-described pragmatists, rather than managing their businesses according to strictly-adhered to values, standards and principles.

CHG: Unlike Willie Mays, you retired while still on top. Do you miss it?

DM: So far, not at all. I’m not saying I won’t wake up one day with a passionate desire to write another book, it could happen.

But it feels really great not to get on airplanes, and my wife and I, after treating Boston (our home town) as the place where for 25 years we did our laundry, are finding that (surprise, surprise!) it has many wonderful things to offer that keep us busy and engaged.

CHG: David, it’s been a delight talking with you again, thanks so much for taking the time.

This is number 7 in the Trust Quotes series.

The entire series can be found at: http://trustedadvisor.com/trustmatters.trustQuotes

Recent posts in this series include:
Trust Quotes #6: Anna Bernasek
Trust Quotes #5: Neil Rackham
Trust Quotes #4: Peter Firestein on Trust, Character and Reputation

Inflation Economics: the Tooth Fairy vs. Lemonade Stands

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Over the weekend, walking with a few other adults in 75-degree Holliston, Massachusetts, I observed a clear harbinger of spring: a kid’s lemondade stand in a cul de sac. The price: 10 cents per small cup. It wasn’t bad lemonade, either.

This led us (naturally) to discuss the resurgance of YouTube videos featuring beat-downs of Easter Bunny characters, and thence–again, naturally–to the going rates being paid by the Tooth Fairy. We reckon it’s a dollar.

The consensus–among 5 out of 6 adults–was that back in the day (20-40 years ago, depending on our ages), lemonade went for 5-10 cents, and the Tooth Fairy used to pay out somewhere between a dime and a quarter (that’s 10-25 cents, for our  New Zealand readers).

The astute among you will quickly calculate the implications: inflation has hit The Tooth Business far more heavily than that sugary-sour cause of tooth-decay itself, Lemonade. The  Tooth Fairy’s economic model, therefore, has been more inflation-challenged than that of the youthful entrepreneur.

Neo-classical Economics vs. Family Economics

Somebody out there will correct me, no doubt, but basically neo-classical economists suggest that people are largely rational utility-maximizers and that, markets being generally free, prices will seek levels informed by both those drivers.

The rest of us, of course, know that people are highly irrational and there is no such thing as a free market. So we are free to concoct our own theory of inflation in the realm of Family Economics.

Let’s start with the obvious fact: no rational adult would have kids in the first place. It makes no sense economically, and increasingly it’s becoming clear that it makes little sense in terms of happiness or sanity either (insanity being hereditary, since you get it from your kids.)

Let’s focus on who sets prices. Nominally, it’s the kids who set the lemonade prices, while the Tooth Fairy (aka Mom and Pop) sets rates for the tooth repo business. In fact, M&P play a big role in each.

Mom and Pop, being in the game for irrational reasons anyway, wish the best for their kids. The best, in the case of lemonade stands, means that the kids get lots of business, much gratitude and praise, and little grief from the (neighborhood) market.

The best way to achieve that goal? Subsidized low prices. The kids get high volume, praise, even tips. Parents rationalize they’re teaching the kids a valuable lesson in economics. (Of course, they’re really just teaching them the case for massive government subsidy and transfer payments, but no matter).

Then why the high prices in dental recycling? Parents, operating against their own enlightened self-interest once again, foolishly seek love and affection from their kids. They figure if they over-pay for teeth, they’ll get that much more gratitude. The fact that kids don’t effectively calibrate the difference between ten cents and a dollar somehow doesn’t register to them.

And as if that weren’t enough, the fight for kids’ love extends to the competition from the perceived love the neighbors’ kids get from their parents. "But Johnny got five dollars from his tooth fairy" is the surest way to generate a round of neighborhood inflation.

Behavioral Economics

There are several new approaches to economics out there, loosely aggregated under the term "behavioral economics." All aim to make sense out of otherwise nonsensical behaviors–seeing utilitarian maximization in people sacrificing their lives for the species’ sake (a la lemmings), that kind of thing. 

But sometimes, I think, the  search for meaning is simply doomed. Furthermore, if all behavior  makes sense on some scale, then there’s  no such thing as stupid. This is a dangerous belief, since if there’s no stupid, then there’s not much against which to contrast the opposing virtue.

A case in point may be parental love for children.  Kids–they break your bank, break your heart, yet still the human race engages in the eternal race to propagate. Go figure.

What sense does it make? Not much.  But  why should it have to make sense? It’s an "is" thing.

Let’s just call it human economics and move along, move along, nothing to see here, just move along…

 

 

Closing the Book on Closing

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Let’s pull out all the stops on this.

Aggressive, constant closing is just about the worst thing most salespeople can do. Closing kills more sales than it gets, and ruins future sales by squelching relationships. If you still have those old “50 Closing Strategies” books gathering dust, get rid of them. If you still believe in ABC—Always Be Closing—I want to convince you once and for all to stop it.

And sales managers, please read on: because at every quarter’s end, when you exhort the troops to bring the numbers in, all you’re doing is telling them to close. And you are constructing a circular firing squad when you do it.

I’ve had a few things to say about this in the past, not just about closing  but about the paradox of selling,  and about why so much in sales these days works to defeat trust, hence defeat sales.  As Yogi Berra said, you could look it up.

Don’t Take My Word that Closing is Bad: Take Konrath and Rackham’s

Jill Konrath  is a highly-respected author,  sales consultant, and blogger.  She’s even less ambiguous than I am: “I will never, ever train people on closing techniques if they sell to the corporate marketplace.”

In Neil Rackham’s perennial best-seller SPIN Selling  , he describes results of research on closing for both low-priced and high-priced goods.

• For low-priced goods, training sellers in closing techniques resulted in slightly shorter sale times, and a slightly increased rate of sale (76% vs. 72%). Meaning—a slight improvement by increasing closing techniques.

• For higher-priced goods, training sellers in closing techniques also resulted in shorter sales transaction times—but it also resulted in less sales—33% vs. 42% before being trained in closing.  

In other words: closing may increase efficiency and slightly improve your results if you’re selling copy paper, and low cost add-on products (“you want fries with that” is actually a good use of closing: take note, McD’s countermen).

But if you’re selling any kind of professional services, or most anything over a few hundred dollars–the better you get at closing, the less you sell!  Oh well, at least you get shot down faster!

Rackham’s data was from a few decades ago.  Do you think closing techniques have gotten more effective, or less effective, in today’s times?  Yup, that’s right.

The Real Culprits: Sales Management and the Training Industry

Salespersons have their own battles to fight. But their job is made immeasurably harder by those who design the sales environments.

Ask yourself, which business strategy works better: one that is executed consistently over a long time period, or one that is given a new endpoint every few months? It’s the same with relationships—business or personal.

In personal relationships, we talk about people who are commitment-phobic, or about players—those looking only for one-night stands. In effect, those are what the quarterly insistence on cleaning up the numbers makes your salespeople.

Following is a quote from a sales training newsletter I received a week ago:

Charles, with only three days to go until the end of the month (and end of the first quarter), it is time to push hard to exceed budgets.

This month we focused on planning and preparation, but it is now tome [sic] for all your hard work to pay off. As it is time to close, we have put up a small selection of articles on our homepage to help you.

Members can log in and search for thousands more articles and resources, including over 40 more articles all on sales closing.

Presumably somebody buys this stuff. But let’s be clear about what it is: the intellectual version of crack. It urges you to give up on long-term plans and relationships, and subordinate them to the siren call of the “here-now.” Worse, it is entirely self-centered—urging the seller to bend the client, and particularly the client’s wallet, to the will of the seller.

Here’s how Neil Rackham puts it: “When salespeople are under pressure to produce short-term results and are being told to get the business this month by whatever means necessary, they pressure customers and this creates suspicion and mistrust.” 

Exactly. So if you’re a sales manager in a business that isn’t small-dollar and ancillary, and if you’re pushing your people to step up the closing at quarter’s end, then you are creating suspicion and mistrust. Which ruins sales in the medium and long term.

Who cuts off their nose to spite their face that way? Besides crack addicts, I mean?

Never mind. Just stop closing. In its place, substitute constant striving to improve results and relationships for your clients. If that feels too vague, then use Jill Konrath’s suggestion: focus on the Next Logical Step.

You’ll sell more. And sleep better too.
 

Apollo 13: A Love Song to Collaboration

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“Houston, we have a problem.” Famous words uttered by Jim Lovell in the real Apollo 13 mission, and by Tom Hanks as Lovell in the great movie Apollo 13. The mission, we know, was a ‘successful failure’ in that they didn’t reach the moon, but the three astronauts, Lovell, Swigert and Haise, got home safely.

And they got home, I believe, because of collaboration in its purest sense.

Just after getting the ‘problem’ news, and checking and hoping there were simply reporting malfunctions, Flight Director Gene Kranz (as played beautifully by Ed Harris in the movie) assigns teams to work on solutions with only the gear the astronauts have on board. In the movie we see only a short scene:

Several technicians dump boxes containing the same equipment and tools that the astronauts have with them onto a table
Technician 1: We’ve got to find a way to make this
[square CSM LiOH canister]
Technician 2: fit into the hole for this
[round LEM canister]
Technician 3: … using nothing but that.

The rest of the engineering takes place off camera, but we can imagine what it was like:

Technician 1: Well, we’ve got three meters of g17 tubing to start…

Technician 2: and if that’s too small we can hook it up with the FCG-420 …. and so on until they made it work.

I can also imagine what it wasn’t like:

Technician 1: Well, we’ve got three meters of g17 tubing to start.

Technician 2: No, that won’t work. Too small. (Thinking, I don’t want his idea to win. I wanna be the one who comes up with the solution.)

Technician 3: You’re both wrong. You’re looking at it from the wrong direction. (Thinking: these guys are total dopes and they’re going to make me look bad to the boss.) …and so on until Lovell, Swigert and Haise ran out of air, or fell into the ocean, or hit the entry trajectory wrong and were hurtled right back out into space.

My guess is that the guys on the ground weren’t worried about career limiting moves, one-upsmanship, or even being on the “winning team” which engineered the solution. My guess is that they were worried about one thing and one thing only: how do we bring these guys home?

True collaboration means taking the best of all the individual ideas, and from that building the very best solution. It’s not compromise, a watering down, but playing off one another’s ideas and work to build something better than any one person could have done alone. It’s the highest intersection of cooperation and assertiveness.

What made collaboration work?

First, it’s no coincidence that the space missions were called missions. They weren’t projects or details or jobs, but missions. It took over 400,000 people to get a spacecraft launched, and all of them had a clear and common goal.

Second, there was a terrible sense of urgency that become even more intense in the Apollo 13 crisis: the clock was ticking , and crafting a solution was truly life-and-death.

Third, they had in Kranz a Flight Director who was both a manager and a leader. Once the doors were shut in ground control at the beginning of a launch, he reportedly told the ground crew: “Gentlemen, I will support every decision you make.” And in the movie:

NASA Director: This could be the worst disaster NASA’s ever faced.

Gene Kranz: With all due respect, sir, I believe this is gonna be our finest hour.