Ethics vs. Jack Welch at the West Point of Capitalism

You may have heard about the recent so-called MBA Oath undertaken by some students at Harvard Business School.  Do click the link, it’s a short read, but to summarize it even more, it’s an oath to behave in ethically, non-selfishly motivated, socially responsible ways.

MBA Students For Ethics and Social Responsibility?

Here’s the May 30 NYTimes story,  as of which date “nearly 20% of the graduating class” had signed the oath.  When I read that, I resolved to blog about it in a week’s time.  It was clear to me on May 30 what I was going to say:

No biggie.  In my own class (1976) it wouldn’t have surprised me if as many as 10% would have signed such an oath.  That would suggest either a doubling or a 10 percentage point increase every 35 years.  

By that arithmetic it would take either until the year 2061 or the year 2114 for 51% of Harvard MBAs to agree with such controversial statements as “I will act with utmost integrity and pursue my work in an ethical manner."  Oath?  Much ado about nothing.

Well, shame on me, o me of little faith in my descendant classmates, because as of June 3 (according to the Economist’s story), that number was up to 400—roughly half, by my close-enough calculations. 

Now, half is considerably larger than 20%.  In fact, I think it’s more like 50%, though HBS MBAs in my day weren’t all that great at math (‘go hire one from MIT if you need it’ was the not-so-tongue-in-cheek phrase we heard).  And I am quite sure, as I mentally run down my list of classmates, that nowhere near 50% would have signed the oath back in the day.

Ethical Progress at Harvard Business School?

I’ve previously critiqued the ethics course at HBS  and b-schools in general for not getting it right, but this is different—as a whole, this manifesto gets it very right.

I don’t like using superlative buzz words, but the “sea change” metaphor comes to mind.  Or, to mimic Verizon’s FIOS ad, “This is big.”

How big?  Let’s contrast it with Jack Welch. 

Welch was recently trotted out from the dead to reprise his greatest hits at a Bloomberg/Vanity Fair economic forum.  It had a shot at being an intelligent economic dialogue until Jack popped open the coffin lid and shouted “buy or bury the competition!”  thus drawing loud applause from the over-60 crowd in attendance. 

Now, GE’s stock price when Welch left in 2001 was 50; it since dropped as low as 8.  Today it’s 14.  But don’t tell me that’s the fault of his (handpicked) successors; it’s what happens when a formerly great strategy meets seriously new times (and Imelt can’t work Welch’s old opaque GE Capital magic anymore).  That applause at Bloomberg  was the sound of the old guard waxing nostalgic, still hoping to believe in the old verities.  But they’re gone, gone. 

Jack Welch, Old School: Interconnected World, New School

Jack WelchThe old strategy?  Competition, competition.  Your customers and your suppliers are your competitors.  Be boundaryless–right up to  the boundary of your own company, where it becomes bury the enemy. 

The new strategy?  Collaboration, collaboration.  It’s a flat world; joint venture, alliance, outsource, teamwork, network, share.  Your customer is your purpose for being, and your supplier is your life partner.  We’ve finally gotten past Thomas Hobbes–and just in time to deal with global warming and global supply chains.

Which strategy is right for the times?  Look at Detroit; a fervent worshiper of the Competitive Gospel.  According to Welch, Detroit’s downfall was unions, pension laws and health care.

Booshwah; Detroit’s Achilles’ heel was an ideology that, unlike Toyota, pitted them against their own suppliers in an era where supply chain relationships proved the key to lower systemic costs; where one team measured "long term" in 3-year cycles, and the other measured it in generations.

Dealing with GE today is still like dealing with Welch.  They’d rather do reverse online auctions than engage in relationships.  They are shooting their own economics in the foot by declaring,  like old Bolsheviks, "we will bury you" at their fellow commercial travellers.

Me, I’ll bet on the new kids in town, who understand 1+1 >3,  and 1 vs. 1 <2; who say things like

>I will safeguard the interests of my shareholders, co-workers, customers and the society in which we operate.
>I will manage my enterprise in good faith, guarding against decisions and behavior that advance my own narrow ambitions but harm the enterprise and the societies it serves.

Good for you, HBS class of 2009.  I say you done us proud. 

Can Trust Be Taught?

Let’s not mince words. The answer, pretty much, is yes.

The exception is what the academics call social trust—a generalized inclination to think well or ill of the intentions of strangers in the aggregate. That kind of trust ends up being inherited from your Scandinavian grandparents (or not, from your Italian grandparents).

The rest, let’s break it down. First, enough talk about “trust.” Trust takes two to tango. One to trust, another to be trusted. They are not the same thing.

So let’s start by asking which we want to teach: to trust, or to be trustworthy?

Trusting someone is, paradoxically, often the fastest way to make that other person trustworthy—thereby creating a relationship of trust.  People tend to live up, or down, to others’ expectations. So if you can muster the ability to trust another, you’re both likely to reap big returns quickly from the resultant trust.

However: trusting can also be a high risk proposition. The vast majority of business people, on hearing “trust,” will say “that’s too risky.” In other words, they hear “trust” as meaning “trusting,” and they turn off.

On the other hand, there is being trustworthy. If you consistently behave in a trustworthy manner, others will come to trust you, and voila, you have that trusting relationship. Being trustworthy tends to take longer than trusting, but the results are just as good. And, it’s very low risk.

Let me say that again: becoming trustworthy is a low risk, high payoff proposition. This is not a hard concept for people to get, if explained right.

What does it mean to be trustworthy? The trust equation explains it: it’s a combination of credibility, reliability, intimacy, and a low level of self-orientation. You can take a self-assessment test of your own TQ, or Trust Quotient, based on the trust equation.

So the question is: can people be taught to become more credible? More reliable? More capable of emotional connectedness? More other-oriented and less self-oriented?

The answer is yes. Big picture, there are two ways to teach these things. One is to recall Aristotle’s maxim: "We are what we repeatedly do. Excellence, therefore, is not an act, but a habit."

People can be taught truth-telling, reliability, even other-orientation to some extent by showing them the behaviors—particularly the language–of trustworthy people.

But the deeper, more powerful approach to building trustworthy people starts the other way around: by working on thoughts to drive action. As the Burnham Rosen group articulates this point  "thought drives actions which result in outcomes."

Many disciplines outside of business know the truth and power of this approach: psychology, acting, public speaking, to name a few. Business doesn’t appreciate it enough. But commonsense does.

Trust can be taught: either by teaching trusting, or trustworthiness. The latter is lower risk, hence the most attractive approach for many in business.  And trustworthiness can be taught via a mix of skillsets and mindsets

It makes sense.




Ethics and Compliance: What’s Trust Got to Do With It?

I believe words matter.  They affect the way we think, therefore the way we perceive, therefore the way we act.  Words are not passive things, acted upon by our blind behaviors; they are cultural repositories of memory.  Ontogeny recapitulates phylogeny in language as well as in biology.

So it has always bothered me to hear “ethics” and “compliance” in the same phrase.

I’m aware I’m in the minority; it is casual usage to combine the two. 

  • There is the Society of Corporate Compliance and Ethics and their Institute
  • Back in 2005, a speech by the SEC talked about the decline in ethics and compliance.
  • Corpedia Corporation “offers a wide variety of innovative and user-friendly compliance and ethics solutions.” 

So, it’s commonly used.  Then again, we also live in a world that obsesses over Britney Spears.

Defining "Ethics" and "Compliance"

Let’s try the dictionary.  First, ethics:

1. (used with a singular or plural verb) a system of moral principles: the ethics of a culture.
2. the rules of conduct recognized in respect to a particular class of human actions or a particular group, culture, etc.: medical ethics; Christian ethics.

Now, compliance:

1. the act of conforming, acquiescing, or yielding.
2. a tendency to yield readily to others, esp. in a weak and subservient way.

These two words don’t live together easily.  In fact, if we try to substitute “Wall Street” for “medical” or “Christian” in the ethics definition, we get what most people would call an oxymoron: Wall Street ethics. 

I would argue this is a serious issue.  Entire industries—financial and pharmaceutical come to mind—have come to conflate the two words, and we are all the worse for it. 

When “ethics” becomes a soul-less matter of ticking the boxes, when we substitute acquiescence for a conscience and subservience for principles, we have lost a great deal.  In particular, any meaningful sense of the word “trust.”

How can a financial planner aspire to being a fiduciary through procedures alone?  How can a company achieve client focus through quarterly behavioral competencies alone?  How can we create trusted regulatory agencies if all they do is enforce processes and paperwork?  How can you give multiple choice ‘tests’ that ‘certify’ people as being ‘ethical?’  But that is generally how "compliance" programs are executed. 

That way lies Bernie Madoff, and a thousand other example of people who have lost track of simple guidelines like be transparent, tell the truth, serve your clients, and work for the long run. 

You Can’t Comply Your Way into Ethical, or Trustworthy, Behavior

A focus on compliance alone can never create ethical behavior.  Perversely, all it does is incent slightly bent people to become more bent by focusing on exploiting the inevitable gray areas that crop up in any set of behavioral rules.   There are plenty of professionals who are 100% compliant with their industries’ lax standards, and are, by many customers’ judgment, highly untrustworthy, selfish sleazeballs.

Law schools can take some blame here; law is the only profession in which the notion of ‘truth’ is non-existent, replaced by ‘evidence.’ 

MBAs are hardly blameless; their mindless pursuit of markets, transactions, and micro-measurements have fueled the replacement of “character” with “observable behaviors that achieve sustainable competitive advantage.”

But that’s too easy.  We’ve all gone along with it.  We’re all infatuated with “science,” neuro-proof, lawsuits and fix-it drugs. Ethics?  Get with it, dude.  

I know this sounds like an old-fart rant, and in part it is.  But there are plenty of businesspeople who behave well, and even prosper because of it.  And they’re also to blame for tolerating the shades of gray. 

We don’t have a crisis of trust and ethics so much as we have moral sloppiness–a willingness to tolerate mediocrity.  Most of us have remarkably similar instincts about what’s right and what isn’t.

What we’ve all got to do is get mad about how far we’ve strayed.

And compliance is not an excuse.

The Trust Roadmap

While trust is an issue that never goes away, the last couple years have been seen a collapse in the trust that the public, employees and even companies have for corporations and many other organizations. Many organizations recognize that without trust from their key stakeholders, they can’t operate properly.

However, once the leadership recognizes a problem, the next step is often to measure it. And trust is notoriously difficult to measure.

So, here at Trusted Advisor Associates, we’ve been analyzing, well, how to analyze trust. Today we’d like to talk about what we’ve come up with and are planning to introduce in the next few weeks: The Trust Roadmap.

Trustworthiness at the Organizational Level

I’ve been writing recently about a comprehensive approach to thinking about trust. Think of it as a two by three matrix.

On one axis, we have those who trust and those who are trusted; trusting, and being trustworthy. See for example Trust, Trusting and Trustworthiness.

On the other axis is “where” we find trust: interpersonal, organizational/institutional, and social.

We’ve talked a lot about being trustworthiness interpersonally. For example, if you haven’t done so already, click to find your Trust Quotient™, your TQ™.

But how can we trust a business? What can an organization do to be trusted? To regain trust? And so forth. What’s needed is the organizational equivalent of the TQ quiz: what’s needed is a Trust Roadmap. And it’s finally just about here.

For some time, Trusted Advisor Associates have been developing a tool aimed at assessing trustworthiness at the organizational level. We’re announcing it now, even though it’ll be a few weeks before it’s website-deployed and open for business.

Introducing the Trust Roadmap

The purpose of the Trust Audit is to allow a company to take a systematic, high level look at its trustworthiness. More organizationally savvy than a financial audit; more market-focused than an employee engagement survey; and more culture-focused than a reputation survey.

The Trust Roadmap is not:
a. a longitudinal survey purporting to track trust over time
b. a public database
c. a best practices database

It is none of those things because we believe trust is situational, for organizations as well as for individuals. We are interested not in academic research per se, but in teeing up meaningful issues in a meaningful way for our clients.

What is the Trust Roadmap? The Trust Roadmap is private; results are known only to the company contracting for it. The Trust Roadmap is aimed at leadership teams, top management teams and Boards who are interested in taking a serious, objective look at how trustworthy they are seen to be, and at what they can do to improve.

The end result “deliverable” of the Trust Roadmap is a survey-based discussion around a Heat Map—a map of where the organization’s biggest trust threats and trust opportunities lie.

Conceptually, The Trust Roadmap is built from the four Trust Principles (client focus, transparency, medium-to-long term focus, and collaboration), and from a modification of Weisbord’s model of organizations – external relationships, leadership, structure, rewards, processes. Think a 4×5 matrix (come on you, you knew we’re ex-consultants, you knew what to expect).

Mechanically, the Trust Roadmap starts with an online survey—20 questions, just like the TQ, one for each cell in the matrix. Respondents will come from external (customers, suppliers) and from internal (employees, leaders). There is no set number of respondents.

From the survey, the Heat Map is generated, and richer discussions (we have up to five areas to explore in each of the 20 cells) are held around the opportunities indicated.

If you’re interested in learning more, stay tuned to this station, and/or contact Sandy Styer at

Realms of Trust and Manifestations of Trust

Most would agree that trust is a hot topic just now.  That’s about the only thing agreed upon about trust, however.  We can’t even decide what it means.

I wrote a post last week called Trust, Trusting and Trustworthiness.  I suggested that much writing about trust confuses these three manifestations.

Think of that post as Managing Trust Part I — Trust Manifestations. Think of this as Managing Trust Part II — Trust Realms.

There are three trust realms in all: interpersonal trust, organizational/institutional trust, and social trust.

The realms of trust are well known to academic trust researchers, not so much to business people. They do make simple common sense, however.

1. Interpersonal trust

Interpersonal trust deals with one-on-one dynamics. Most of my work has focused in this area. It’s the stuff of relationships, selling, advisory businesses, and personal risk-taking.

2. Organizational and institutional trust

This form of trust covers a wide range of issues: the organizational environment conditioning interpersonal trust relationships, the trust of individuals in their organizations and institutions, and the nature of trust relationships between organizations themselves.

Surveys that measure “trust in government” can shift dramatically and quickly, with the election of an Obama, or the humbling of an SEC, for example. In these respects—speed and personalization—organizational trust resembles personal trust. But it also deals with organizational cultures and values—undeniably group phenomena.

3. Social trust

Social trust deals with the generalized beliefs individuals hold about “other people."  Think under what conditions you’re likely to lock your car doors. Unlike the other two realms, this trust doesn’t deal with people as individuals; also, it tends to change only glacially, perhaps across generations.

If we array the realms of trust against the manifestations of trust, as shown below, we can begin to have a structured conversation about trust.

Trust Realms and Trust Manifestations



Being trusted

State of Trust

 Until then, we are going to have vague, or circular, or meaningless discussions about trust.

When Steven H.R. Covey talks about how trust affects speed and cost, he is largely talking about the manifestion dimension—the presence or absence of a state of trust. But is he talking about the state of personal trust? Or organizational? Or cultural/social?

Gatehouse, a UK communications consultancy, says “business is facing a massive and global crisis of trust right now.”  But what are they talking about?  Which manifestation?  Which realm?  Or are we descending into an inevitable and inescapable downward spiral of rampant anarchy? 

Do they mean that individuals are less trusting of business? Or that more businesses are untrustworthy? Or that the state of economic uncertainty has rendered the state of trust lower?

Paul Seaman’s review of the Edelman Trust Surveys (Would you trust a trust survey?) does a nice job of taking apart the apparent meaning of trust survey data.  A small example: trust in banks is down, trust in government is up: does that mean we want the government to take over banks?

These are not word games.  Intelligent policy formulation depends on being able to clearly define problems. For example:

• When is structural regulation preferable to greater enforcement?
• For what trust issues is transparency an appropriate remedy?
• Do we have any institutions that teach the personal manifestation of trusting?
• If you change personal and organizational trustworthiness, do you have to worry about social trust?

We’re entering a period where trust has gone viral; it’s got buzz. We’re about to see more survey data, telling us with greater and greater precision whether doctors are gaining on nurses in trust ratings, who has the most trusted brand name, and whether trust in Romanian economists went up or down in October. 

Watch out for conflicts of interest: who’s paying for a ranking of trustworthy companies?   What problem is being solved?  What issues are being addressed?

Get ready for many tales, full of sound and fury, signifying—well, just what? That is the question.


Oprah and Two Trust Tests

Trust is bustin’ out all over. Or, to be more accurate, its perceived absence is creating a lot of press.

It’s one thing to become a focus for Steven H.R. Covey Jr.—but it’s yet another level of phenomenon when Oprah puts trust on the front page of O Magazine.

Of particular note is a self-scoring “trustometer” self-assessment trust test by Martha Beck.

It’s a good quiz; go take it, you’ll learn something.

There are three kinds of trust surveys: those that measure trusting, those that measure trustworthiness, and those that measure the combination, i.e. trust. Ms. Beck’s trust test measures the first—trusting.

The thrust is: how clearly can you see things for what they are, rather than as they appear through your own obscured ego-driven lenses? Your gut feelings are probably very good—unless you get in their way.

This is a good message—the ability to intelligently take risks, to trust, is a powerful thing. In the Age of Madoff, where trusting is an unpopular concept, this is a welcome reminder of the importance of trust.

So much for trusting: how about, can we measure how much people trust us?

Yes we can. If you’ll forgive the shameless self-promotion, that’s what the Trust Quotient™, or TQ™, measures—our level of trustworthiness. (To be precise, since it’s also a self-assessment, it’s our best guess about how much others trust us).

Unlike the Beck trust test, which gives you a one-paragraph “if your score was between __ and __, you are ….”, the Trust Quotient trust test gives you several pages of analysis and recommendations about the various components of trustworthiness.

Take them both: the Beck Trust test on your ability to trust: and the TQ Trust Quotient test to assess your trustworthiness.



The Guts of Trust

I’ve written before about trust in business relationships and selling, and I’ve written about models of trust (see Trust: the Core Concepts.

But what about the guts of trust—of trusting, and of being trusted?

I mean what does it feel like in your gut? What is the gut-level stuff that makes it work—or not work? How do you know it in your gut when you’re being trusted—or trusting?

I don’t mean models, and abstractions, and data. I mean being real.

Here’s the guts of what I’ve learned about trust—from the gut.

1. I can’t tell you what works for you; I can only tell you what works for me.

2. You can tell me what you think I should do; but I won’t do it. Unless I feel like it anyway, or unless I really trust you.

3. I can learn this stuff. It helps to be born with it, but I can learn.

4. Rarely, I learn trust by observing someone who does it well. I once saw a newspaper publisher run a 15-person all-day meeting just by listening, by nodding at someone and saying, “I can tell you’ve got something to add to that, Joe, right?” That time, I got it.

5. Generally, though, I learn trust lessons better through failure than through success. Those are “learning opportunities”—though I rarely see them as such at the moment.

6. Whenever I fail to trust, or to be trusted, it is nearly always my fault, and nearly always due to fear. Fear is the mother lode. I am learning to remember to ask myself, “what am I afraid of?” I hate the answers—they are always the same—shame and guilt. What a waste of time!

7. I don’t trust you until I think you understand me. Why should I expect the reverse to be different?

8. I’d rather you go first. But then things rarely happen. So I guess I have to.

9. You can’t hurt me without my permission. Which I don’t have to give. You’re not annoying—I’m annoyed. And I can stop being annoyed anytime I choose to.

10. You’ll trust me most if I don’t ask, beg, or try to force you to trust me. You’ll trust me the most if I’m of service to you—no strings attached.

11. I’m OK, You’re OK. True enough, but a hard place to get trust started. I’m an Idiot, You’re an Idiot—now there’s a place that offers traction.

12. Trust never comes without risk. Having the courage to be vulnerable, and to take small emotional risks now is what creates trust—and mitigates larger business risk later.

13. If I’m transacting, I’m alone. If I’m relating, transactions come along like ripe fruit.

14. After some point, I realized I could trust my gut more than my brain. Later, I realized that had always been true.

15. I get what I want when I stop wanting it. People trust me when I stop demanding trust.

16. Alone on a desert island, I don’t have to trust or be trusted. And I can always create my own trust-free island. It’s safe, but it’s awfully solitary.

Trust Me

Courtesy of The Financial Brand comes the story "A Failure of Trust:"

"On Thursday, September 4, an ad from Silver State Bank asked, “Why do so many of Nevada’s strongest businesses trust Silver State Bank?” The answer? “Security” and “protection.”

The next day, the bank was seized by federal and state regulators.…In the two months prior to the bank’s seizure, customers pulled $264 million of the $1.7 billion on deposit at Silver State."

There are no more trust-destroying words one can say than “trust me.” Googling “trust us” gets more than 5 million hits. Interestingly, well over half appear to be of the cynical phrasing, e.g. “Trust us, we’re experts: How Industry Manipulates Science."

In other words, most of us are “on” to the con.

Yet the self-delusion (and occasionally cynicism) continues. I periodically Google “your trusted advisor” to see who still thinks advertising “trust me” is a good strategy. I won’t name names—you can do it yourself: just search on “your trusted advisor” (don’t forget the quote marks), and decide for yourself whether the advertisers really are your trusted real estate agent, your trusted financial planner, your trusted land developer—or not.

Most people who use the term “trust” or “trust me” or “trusted advisor” in advertising mean well. In a few cases, they’re even right. But they miss the point.

The point is, it’s inherently contradictory to advertise your trustworthiness. It’s like bragging about your humility. Trust is supposed to be largely personal, and about serving the customer. Trust ads are intrinsically non-personal, and inherently self-serving.

George Burns once said, “Sincerity is the most important success factor; if you can fake that, you’ve got it made.” The joke lies in the implausibility of faking sincerity. Ditto for trust.

Unsolicited testimonials are fabulous. Solicited testimonials, quoted in mass media, are quite another thing. The difference lies in the motives.

Talking internally about how to be trusted is great; talking to clients about it is good to the extent you do it one on one, in small groups, with blank notepads and a willingness to learn. Talking to clients about trust via statistically valid online surveys that don’t let you expand on the “other” checkbox and that are designed solely to be converted into incentivized behaviors—not so much.

Trust advertising is a personally critical issue to me, given the name “Trusted Advisor Associates.” I need “trust” in the name to describe my content and subject matter, but I have on occasion cringed when a client went off-script and introduced me at a speech as “the trusted advisor.”

Our website always says “we help build trusted advisors…” and never “we are trusted advisors.” Even with that, we get occasional snide comments about the insincerity of calling ourselves “trusted advisors.”

I don’t blame them a bit. The currency of language is frequently debased in business (think ‘loyalty,’ ‘customer focus’).

Given the current state of cynicism about trust, the best any of us can do is to be careful about our own language, and to let our integrity and trustworthiness be their own advertisement.

After all—that’s how trust really gets built.

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

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)



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 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