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Why Influence Is Only Halfway to Trust

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I was interested to read, in the Wall Street Journal  that persuasion is taking the place of old-style command and control management 

True—and yet only half the truth.

The author, Erin white writes:

Managers say they increasingly must influence — rather than command — others in order to get their own jobs done. The trend is the result of leaner corporate hierarchies and the erosion of division walls. Managers now work more often with peers where lines of authority aren’t clear or don’t exist.

Historically, each business-development staffer worked with a specific engineer in Mr. Martino’s group [at IBM]. He wanted to create teams of engineers to work with business-development staffers. Business-development managers feared the move might lead to confusion and missed connections. So Mr. Martino agreed to appoint team leaders to help coordinate. He says the system is working well.

"The more we operate as a global company, you’re going to be faced with dealing more" across group boundaries, he says. "It’s just the reality."

That’s the truth part: that as organizations become more global, they must get more horizontal, matrixed, and team-based.

Now here’s the half-truth part: that isn’t the half of it.

Marry globalization to business process outsourcing, and you have a massive replacement of clear vertical management not by indirect management—but by commercial contracts with third parties.

Think it’s hard coordinating business development managers in Armonk with engineers in Tennessee? Try coordinating them with an engineering subcontractor in Bangalore.

The difficulty is not just about lines of authority—it’s about horizontal, commercial, supplier/customer relationships with the companies that now handle the work you used to handle internally across those corporate boundaries—which you used to think were complex!

Handling vague lines of authority is merely a way-station on the road to globally outsourced supply chains.

Jack Welch had it half right when he talked about the need for boundaryless companies. The half he missed was to get rid of the word “companies.”

Courses on influence are indeed taking over the corporate agenda from courses on management. But it’s a half-step and change is hampered because “influence” is still chained to an us vs. them paradigm.

The value of “influencing” skills is harshly limited if they are applied only to the achievement of sustainable corporate competitive advantage. If I’m on the same team as you, I might not mind being influenced. But if I’m the outsourcing partner you’re trying to influence, in order to increase your bottom line at the expense of mine, then every attempt at influencing me just makes me more cynical about your motives.

When applied to outsiders, when we say "influence," we mean “getting you to do what I want." Until we see customers and suppliers as on the same side of the table as we are, we cannot move to trust—helping us both get what we both want.

Trust in Singapore

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Greetings from Singapore.

The photo at left is of the Merlion, one of the city-state’s iconic statues—part lion, part mermaid. It’s a symbol of eclecticism—not “town of beans,” or “town by the bay,” or “city of light.” No, this is where water-spitting lion meets mermaid. Part land, part water; part fact, part fiction.

Singapore is part Malay, part Chinese, part Indian. Part open democracy, part tight governmental control. Part Western, part Eastern.

But all significant. Singapore’s population is only 4 and a half million. But it ranks number 9 in the world in foreign currency holdings. On a per capita basis, that dwarfs the other eight.

The Eurozone’s foreign currency holdings are about $3,000 per person. Japan is $15,000. But Singapore is $44,000 per capita. And you can double that if you include Temasek, Singapore’s quasi-Sovereign Wealth fund—a triple-A rated fund, one of whose smaller holdings is over 5% of Merrill Lynch with an option to go to just under 10%

In other words, a country on the move. And a fascinating example of diversity.

In my seminars on trust in business, there is always a discussion about whether trust varies culturally. Invariably, we rediscover that the core elements of trust are universal—but that their expression varies considerably.

The higher the diversity in the room, the higher the quality of discussion about this issue. Which is why discussions about trust in Singapore are among the best I encounter, and inevitably teach me a lot.

To live in Singapore, and to live in a large company with Asian presence, is to recognize the fact of interdependence in the emerging world economy. Your co-workers are Malays, Chinese, Indian; Muslim, Hindu, Christian; Indonesian, Pakistani, Thai, Australian. Where you go to lunch can be a cultural and religious decision. So a discussion of trust is a broad conversation indeed.

Is trust important to the Chinese? Sure, if you mean the cultural ritual of getting to know you before making business decisions. No, if you mean the suspicion that is the legacy of corrupt communist government in modern mainland China.

Is credibility an important part of trust in Asia? Sure, if you mean who you know. Not so much, if you mean technical expertise. Unless you got that expertise at a highly credible institution. Though of course on the other hand…

And so on. These discussions force us to higher levels of abstraction, in order to make sense of our daily interactions.

Here’s what I come away with. There is a universal human and social drive for connection—it manifests personally, politically, commercially, religiously, romantically, and tribally. It is reflected in political alliances, commercial ventures, etiquette, and modes of dispute resolution. All cultures and people need to express disagreement, for example. Just be careful when using Dutch approaches to disagreement in Tokyo, for example.

Arrayed against this drive are the forces and circumstances of fear, poverty, ignorance, custom, history, and xenophobia.

The conflict between the two manifests in aggression, suspicion, and—in business—an ideology based on the concept of competition.

The fundamental shift in the business world today is a move from competition toward commerce. From competing against your customers to collaborating with them. From getting over on others to getting along with them. From the replacement of contracts by trust as a means of mitigating business risk.

Asia has a lot to teach the West about the power of getting along. From reliance on contracts to the use of trust to mitigate business risk. Asia has a lot to teach the West about the power of getting along.  Economically it beats the hell out of competing with each other.

Singapore is visceral evidence of that.

Why We Don’t Trust Corporations

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Josh Bernoff asks the “who do you trust” question at the Groundswell blog, based on data from Groundswell.

 

Here’s the chart he’s talking about.

 

Bernoff’s discussion suggests:

  1. The best trust is personal
  2. 60% trust reviews by strangers in aggregate, e.g. “If 100 people on eBags say a laptop bag is great, then it is great. If they say it’s inferior, then it is inferior. Regardless of what a so-called "expert" might say.”

Bernoff then goes on to draw some conclusions for brand marketers: basically, if they like you, let them talk. If they don’t like you, you can’t shut them up; but you can listen to complaints and improve your product or service.

Phrased this baldly, it sounds like a massive dose of the obvious. But if it were so obvious, more companies would be doing it. Let’s break this down.

Trust is Personal

First, the idea that trust is personal. In my own work, trust is massively personal at root. Two of the four components of the Trust Equation developed by myself and co-authors Maister and Galford in The Trusted Advisor are overtly personal—intimacy and self-orientation.

Brands, Corporations and Trust

Corporations, brands and advertising are inherently impersonal and by their nature self-oriented; which is why ad campaigns and PR agencies have an awfully tough time when it comes to getting anyone to trust their messages.

Think about it. What are the two most trust-destroying words you can say? I nominate Trust Me.

And if that sounds blindingly obvious, then who developed these ad campaigns?

  • RCA “the most trusted names in electronics”,
  • Value Line “the most trusted name in investment research”, and
  • CNN “the most trusted name in news”.

(Do you think that’s why CNN has just been supplanted as “most trusted” by—of all sources—Fox News?)

How about Bernoff’s other conclusion: when they don’t like you, don’t shut them up, but address the complaint and improve the product?

It is astonishing how infrequently this obvious piece of advice is ignored. Let’s call it the Watergate catch-phrase: the cover-up is always worse than the crime.

Think of the iconic Johnson and Johnson response to tampering with Tylenol—ages ago. Why does such an old example of corporate ethical behavior still come to mind? Because it’s so rare. How many pharmaceutical industry kerfuffles since have been dealt with so openly?

Remember Monsanto and Dioxin?

How about the tobacco industry’s continued, chronic response to health concerns?

Remember mad cow disease and the US beef industry’s response?

Rarely is it the first instinct of business to follow Bernoff’s “obvious” advice—to hear consumer criticism as inherently constructive, and to do something about it.

Given that response, is it really so surprising that people trust personal acquaintances more than anyone else? Trust abused is trust destroyed. The biggest reason we trust people we know is that people we know are the ones we can trust.

That’s not circular. It means people we know are more trustworthy than companies who pretend to be. Whose fault is that?

 

What’s Your Trust Quotient? Announcing a New Self-Assessment Online Tool

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TQ=C+R+I/SYou may know your IQ (Intelligence Quotient). You have some sense of your EQ (Emotional Intelligence).

But what about your TQ — your Trust Quotient?

I’m excited to announce here the launch of an of a new online self-assessment tool: The Trust Quotient Self-Diagnostic to answer that question. It’s been in development for several weeks now, and I’m sharing it first only with readers of Trust Matters.

The Trust Quotient Self-Diagnostic consists of 20 questions, based on the the Trust Equation1:

(Credibility + Reliability + Intimacy)

_____________________________

Self-Orientation

The Trust Quotient Self-Diagnostic measures your Trust Quotient Score—your TQ—and compares it with all other test-takers to date. The database will get better as it gets larger, but early returns suggest it fits very well with commonsense assessments.

The Trust Quotient Self-Diagnostic also then gives you practical advice and suggestions on how to leverage your strengths, and how to address on your weaknesses.

Please go to TrustedAdvisor.com/TrustQuotient to take The Trust Quotient Self-Diagnostic . Tell your friends.

And if you don’t mind, drop us a note to say what you think of The Trust Quotient Self-Diagnostic, including how to make it better and more useful.

1see The Trusted Advisor, by David Maister, Charles Green, Robert Galford; Free Press, 2000

Warren Buffett, Confidence and Leadership

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Reading a Fortune interview with Warren Buffett the other day, I was struck—as I always am, come to think of it, when I read about him—by the simplicity and clarity of his thinking. Mostly the simplicity. Because that’s where the clarity comes from.

This ability to see simple patterns in the midst of chaos is what distinguishes a lot of fine leaders from those who are masters of complexity. Here are some samples from Fortune’s interview:
 

There are costs to Sarbanes-Oxley, some of which are wasted. But they’re not huge relative to the $20 trillion in total market value. I think we’ve got fabulous capital markets in this country, and they get screwed up often enough to make them even more fabulous. I mean, you don’t want a capital market that functions perfectly if you’re in my business.

Q. Do you think the $150 billion government stimulus plan will make an impact?
Well, it’s $150 billion more than we’d have otherwise. But it’s not like we haven’t had stimulus. And then the simultaneous, more or less, LBO boom, which was called private equity this time. The abuses keep coming back – and the terms got terrible and all that. You’ve got a banking system that’s hung up with lots of that. You’ve got a mortgage industry that’s deleveraging, and it’s going to be painful…

…Finance has gotten so complex, with so much interdependency. I argued with Alan Greenspan some about this at [Washington Post chairman] Don Graham’s dinner. He would say that you’ve spread risk throughout the world by all these instruments, and now you didn’t have it all concentrated in your banks. But what you’ve done is you’ve interconnected the solvency of institutions to a degree that probably nobody anticipated. And it’s very hard to evaluate…

..The worst thing you can have is models and spreadsheets. I mean, at Salomon, they had all these models, and you know, they fell apart….

…The American economy is going to do fine. But it won’t do fine every year and every week and every month. I mean, if you don’t believe that, forget about buying stocks anyway. But it stands to reason. I mean, we get more productive every year, you know. It’s a positive-sum game, long term. And the only way an investor can get killed is by high fees or by trying to outsmart the market….

The world is increasing in complexity; but Buffett seems one of those content to look past the complexity and see eternal patterns replaying themselves. He’s a big fish who treats big ponds just like the little ones he came from.

It seems to me this is very much tied up with a sense of assured self-confidence. The several really good leaders I have known have this. They are not egotistical, nor unrealistic, nor full of themselves. They simply have the confidence that they know how to get along in the world, understand the underlying rules, and don’t get lost in the details.

From one perspective, it’s the Great American Hustle—just believe in yourself and you too can emulate Warren Buffett. Yet pure confidence absent some grounded view of the world is just a self-con job.

The Rules of the World are simple: but that doesn’t mean they’re easy.

Do Non-Solicitation Clauses Pose Conflicts of Interest?

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I would sincerely like to ask my professional services readers, and particularly those in the legal profession, for some help. I’m not being snarky or sardonic this time, this is a genuine request for perspective.

Professional services firms commonly have several clauses affecting relationships with their employees and subcontractors. The list includes non-competes, intellectual property restrictions—and non-solicitation clauses. It’s this last one I want to focus on.

Most such clauses boil down to something like “as long as you work here and for X time after you leave (typically up to two years) thou shalt not approach a client (or future client, or anything vaguely resembling one who ever breathed the same air as you) with the intent of selling work ‘similar’ to what you did for us.”

Or, in simpler terms: hands off–that client belongs to the company, not you, and we’ll sue if you try to steal ‘our’ client from us by doing what we hired you to do.

As you can tell, there is something that rubs me the wrong way about this. Yet I also have a feeling I’m missing something. Most things in life exist for a reason. I may be missing a big fat reason on this one.

Here are the arguments against such clauses, as I see them.

• Firms requiring this clause position their clients as property to be bartered over. The phrase “who owns the client” has to be somewhat offensive to the putatively owned client.

• There is an inherent conflict of interest with the principle of client service. Say an ex-employee or subcontractor develops a better product, at a lower price, offering greater value, and meeting a need clearly expressed by a client of the existing firm. Non-solicitation clauses mean the employing firm is preventing their client—to whom they are presumably devoted to giving great service—from even hearing of the potential better deal. This is a “dog in the manger” strategy. It may not be legal restraint of trade, but isn’t it a violation of basic client service principles?

But, what’s the other side? What’s the social rationale for non-solicitation clauses? Can someone offer an explanation of how they are, on balance, in the best interests of client, employer and employee together in the long run?

Thanks in advance for any enlightenment; I look forward to the dialogue.

Great Selling by Truth Telling: A Best Buy Tale

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I was in Best Buy the other day.

The sales guy was excellent. He was open about what he knew and what he didn’t. He advised us to spend more, or to spend less, depending on what we wanted and needed in the several product lines we were exploring. He was candid. He spoke quickly and directly, in short, to-the-point sentences.

When we finished, I asked him, “You’re not on commission here, right?”

“No, not here. I’ve sold on commission before, though.”

“Which do you like better?” I asked.

“Oh, I prefer this. You can tell the truth.”

“You can tell the truth?”

“Yup. The other way, sometimes you’ve got to make the month, or bend it around for some other reason. It’s hard. Here you just tell the truth. It’s a lot easier.”

Just tell the truth–it’s a lot easier.

Let’s parse that: then evaluate it.

Why is it a lot easier?

1. There’s only one version of the truth—an infinity less to remember.
2. It’s easier to answer questions—it requires only short-term memory, not creative license.
3. It’s easier for people to tell you’re not lying.
4. People buy more from you if they feel you’re telling the truth.
5. People tell their friends; truth-telling is good marketing.

Of course, some people feel this is a sucker’s game. It’s sales right? The point isn’t to tell the truth, it’s to not get caught not telling the truth? To look like you’re telling the truth, not to actually tell it.

After all, we’re in business—right?

So let’s have a look at the numbers.

BBY Stock Chart

Here is a 5-year stock chart for Best Buy, tracked against the S&P500, and against Best Buy’s most obvious US competitor, Circuit City. (BBY is the one that ends at the top, by the way).

And sure, you can make charts look any way you want. I’m not trying to be an analyst here. I’m just saying the case is not only intuitive, but very plausibly empirical as well.

(By the way, Bear Stearns rated it underperform back in January. Goldman Sachs rates it a Buy.  Cheap shot? Maybe, but I’m just sayin’…)

Telling the truth is not stupid, wussy, or bad business. Far from it. It’s very good business. And for pretty obvious reasons.

And that’s the truth.

30 Minutes, 30 Cents, 30 Billion: Fragmenting Business

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A few weeks ago I sat next to an investment banker on a long flight. He works hand in hand with some of the super-quants on Wall Street who perform high-wire arbitrage through mathematical techniques so arcane that “I’d have to get two more math degrees just to understand them,” as my seatmate put it.
“Basically what they’re focused on is predicting the next 30 minutes,” he said. (Actually it may have been “the next 30 seconds,” I forget.  Anyway, day-trading for the Big Bucks, with lots of Other People’s Money).

At my destination, I heard a senior exec of one of the world’s high-tech success stories talk about their business model—“30 cents a transaction times billions of transactions, pretty soon you’re talking real money.” (How many of you remember Everett Duerksen, the originator of that line? Hey I’m not old, just well-read!).

30 minutes, 30 cents, 30 billions. Not your father’s bizmodel.

There is no shortage of economists who will gladly tell you the wonderful role these business models play. They mitigate risk; they lower costs; they create greater liquidity; they globalize geographically fragmented businesses.

Gosh, is there no downside? Of course there is. And it’s one of those two-sides-of-the-same-coin things.

The business world of today is heavily driven by two trends—fragmentation of processes, and globalization of scale. Break everything into tinier and tinier processes, and scale them globally. You get all the benefits listed above, but—what happens if no one has the big picture anymore?

You occasionally get myopic consultants and bankers—for a great example see this blog post from last year. 

But more importantly, you get situations where everyone is transaction-oriented, and no one has a stake in the integrity of the entire process.

The airline industry, many decades ago, was largely financed by insurance companies. The insurance companies tended to have ties to multiple airlines, partly to hedge their own risk.  Then the banks got into the business. Each bank picked a favorite—and given the peculiar economics of the airline industry, all the airline-bank pairs began to beat each other into the ground with excess capacity. The industry hasn’t made money for decades.

For a more current example, of course—subprime mortgages. When an industry gets dissected, disaggregated, and disintermediated, there may or may not be a problem. If a regulatory agency is there to see the big picture, that may be OK. If a risk-assessing industry is in place (bond ratings, accounting firms), that may serve to keep things in check.

But if none of those things are true—if Glass Steagall has been eviscerated, financing products escape regulatory purview, if financial institutions are selling off and collateralizing loans and if credit card companies are chasing fees (read transaction) instead of loans (read relationship)—then watch out. No one’s minding the business store.

In such cases, business becomes a combination of Russian roulette and musical chairs. He who gets in and gets out fast wins. He who stays is a sucker.

How fast is 30 minutes? How small is 30 cents? Small, and getting smaller.

Ode to Distrust

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Charlie:

You trust guys are taking over the Ethernet. You always write as if someone were arguing with you from the other side, but the distrust people are never heard from. It’s about time someone spoke up for distrust for a change.

I mean, if we didn’t distrust other people, we would all still believe in Santa Claus, the Easter Bunny, the Tooth Fairy, Hillary and the Republican Party! If we spent all our time trusting each other, a teenage child saying, “Trust me, dad” would put us at ease, instead of jolting us like an electric shock, putting us instantly on our guard to deal with a life threatening event, as it should.

If we didn’t distrust, the boss saying, “First, let me say that you did a wonderful job collecting for the United Way this year . . .” wouldn’t throw us into evasive maneuvers. And your spouse asking, “What are your plans for the weekend, honey?” might lead you to say, “Nothing, dear” instead of the more cautious, “I’m not sure. Jim hinted that he might dump a big project on my desk.  What’s up?”

We musn’t get so jaded that we give up entirely on distrust. Think of what it would do to the economy!

Think of all the unemployed diplomats, auditors and lawyers! It would hit the lower income worker just as hard with security guards, credit clerks, repro men and many others put out of work and left with inappropriate skills.

Why peace might even break out, threatening the entire military-industrial complex. That would bring our economy to its knees! And as the US economy goes, so goes the world’s. One might safely say then that distrust makes the world go round.

No, Charlie, don’t let the siren song of trust turn your head. If you got too much of it, trust me, you wouldn’t like it.

Ford Harding

Web Trust 2.0 vs Web Trust 3.0

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Thought leaders John Sviokla and David Pogue both posted thoughtful pieces about the role of trust in a wired, Web 2.0 world.

Pogue—technology columnist for the NYTimes—writes about the positive impact of (intelligently-moderated) blogging on the reputation of the blogging host.   Sviolka, Vice Chairman of Diamond Management & Technology Consultants, writes about The Madness of Crowds, focusing on the dynamics of reputation systems, and how the web enhances them.

They’re both talking about the web as a means of enhancing one’s reputation—but they emphasize very different parts of trust. Who’s right?

They both are, of course, but I’d say Sviokla focuses on what I’ll call Web 2.0 trust; Pogue is talking about Web 3.0 trust.

Sviokla’s subject matter is eBay, Amazon, and Motley Fool’s Caps. He sees these as more powerful in trust-creation than blogs, because, as he puts it:

The problem with Wikipedia, and blogs, and user generated content is that many of them don’t have a strong reputation management process. Put another way, any idiot can have an opinion. The most important thing is does the person who is giving an opinion have a good reputation? Is that reputation attached to his or her opinion? Does the person own the downside risk of the adverse effects of their opinion?

Sounds good, right? Though, as whimsically pointed out in Trust Isn’t Transitive by Peter N Biddle, just because someone can fly a 747 doesn’t mean they can be trusted to carry a handgun. And though I might buy a book from someone with a good reputation rating on Amazon, that doesn’t mean I’d introduce them to my daughter.

That’s where Pogue and Web 3.0 trust come on. Notwithstanding Sviokla’s critique that blogs are unmeasurable and don’t hold people accountable, they perversely have the wonderful ability to humanize. That’s exactly what people are—unmeasurable and hard to hold accountable. And a significant part of how we come to trust them is related to how much we come to know about them—in precisely those hard to measure and slippery ways.

As Pogue points out, when Microsoft lets employees blog, you suddenly see the human side of the firm, and the “Dark Side” gets a little lighter.

In my terminology (the Trust Equation—Credibility plus Reliability plus Intimacy, all divided by Self-Orientation), Sviokla is heavily defining “trust” in terms of reliability. Pogue is emphasizing the intimacy component—not on blogs alone, but in moderated commented blogs—Diablogs.

The intimacy factor is inherently richer, because intimacy is where risk enters the trust equation. People and firms take calculated risks in blogging: how much to moderate, how much to reveal, how close to the edge to get, how one makes those judgments; all these things tell us a lot about the writer, the blog editor, and the firm. Reliabilty says something very deep—but not nearly as broad.

Intimacy also gives us the bandwidth of exposure to assess other’s self-orientation. Are they in it for themselves? Or do they seem to care about me? And self-orientation, I argue, is the single biggest factor affecting how we assess the trustworthiness of another.

Does Google really mean it when they say they “Do no Evil?” The answer won’t be found in Sviokla’s reputation management systems. It will be found in Google’s willingness to let its people speak, from the heart, about what they think. And, seeing their hearts, we will know the judgment to make about whether to trust them.

Not just for book buying, but for introductions to daughters and the like.