Crisis of confidence?

Trust for most is an everyday occurrence. You trust your wife/husband/partner implicitly. You trust your friends and family. I trust (most of the time) that I won’t get knocked down cycling to and from work. My editor trusts me to make him a good cup of tea when I eventually get to work (hey, it’s pay-rise time soon!).

This trust extends to nearly every facet of daily life. Even at work I trust the experts I get the chance to speak with – in this particular case, Charles H Green, founder and President of Trusted Advisor Associates. Likewise, he must trust me to write a half decent article otherwise he wouldn’t have given up some of his time to discuss – what I’m hoping you’ve guessed by now – trust in business.

These relationships I’ve mentioned are predominantly developed over a period of time and although a little white lie may lead to the need for a bunch of flowers, groveling apology or another cup of tea, such relationships are untenable without trust. The consequences in business are just as great. If you’ve misguidedly placed your trust in a business relationship the fallout could be huge – financial loss, professional embarrassment, the list could go on. So why do we place less emphasis on trust in business than we do out of work? I’m trusting that this article will provide some insight.

What is trust?

As with the aforementioned examples, trust (in business life as in private life) is borne out of a personal relationship, it has some element of person connectedness to it. The notion of digital trust or impersonal trust is an oxymoron; it just doesn’t make sense in the absence of some notion of personal relationship. A trust-based relationship therefore recognizes the humanness – the relationship component – of business relationships.

This is something Green (along with associates David Maister and Rob Galford) developed in their book The Trusted Advisor, where they formalized a ‘trust equation’ made up of four components. “We put them in the form of an equation where credibility, reliability and intimacy are all factors that increase the trustworthiness of an individual – it’s actually the trustworthiness equation – detailing how one becomes worthy of trust. If the person you’re interacting with perceives you to be credible, reliable and that they can share intimate information with you, then to that extent they perceive you to be trustworthy,” says Green.

In the denominator, however, they have a fourth factor – self-orientation. Green continues: “That one factor has three times the weight of the three in the numerator – and that was conscious and intentional. I really believe self-orientation is the most fundamental part of trust. If you’re in it for yourself, then almost by definition you’re not in it to help the other person – hence they can’t really trust you. The more self-orientated you are, the less likely someone else is to trust you.”

This is a long way of saying that the real guts of the issue is a sense of having the other person’s best interests at heart. We trust people when we feel: “Yeah, he does seem to be genuine with me and seems to be interested in my interests; I feel this person might actually do well by me and not use me as an object to take advantage.”

A long-forgotten art

This seems simple enough, but Green is quick to point out that trust, by objective measures such as surveys, is “at an all time low”. So why is trust seemingly a lost art in business? One is the extreme commercialization of culture – the internet stock boom probably had a lot to do with it, the glorification of get-rich-quick, the infomercial, reality television – there’s an awful lot of exposure to, for a lack of a better term, crass commercialism.

But it doesn’t stop there. Green continues: “I also put some of the blame for lack of trust in business with business schools, educators, consultants, business gurus and so forth – I’m talking Fortune magazine, Harvard Business School and LBS, etc.”

These are big statements, but Green believes they are by no means unjustified. It is common today for such places to preach an extremely self-orientated approach to business practice. “In particular, things like customer-focus, customer-centric and customer-orientation are really not customer-focused or centric for the sake of the customer – the next sentence is always ‘in order to increase the sustainable competitive advantage of the company’.”

So the language of business has come to be extremely selfish and self-orientated – for example, we’ve converted ideas of people from personnel to human resources, to human capital; we’re now using purely financial language. When you talk about the use of people it’s how do we attract and retain them; business schools advocate things like golden handcuffs and programs to keep staff – not for the good of the people, but for the good of the company.

Customer acquisitions and customer loyalty are further points Green touches on. In particular: “I ‘love’ the notion of loyalty. There’s an awful lot about customer loyalty and what a wonderful thing that is, but we’ve reduced the word loyalty. It used to have connotations of ‘til death do us part’, or ‘greater love hath no man than this’. Those were the contexts in which you heard the word loyalty; now you hear it in terms of price shopping and coupon programs, repeat purchase behavior.”

This really trivializes the emotional and it also puts relationship issues very much in the context of how to tweak human behavior and emotions to improve sustainable competitive advantage for the company. To let Green sum up: “It’s cynical. And that’s the gospel according to modern business theory and I think that’s partly to blame.”

A reversible trend

Does this mean that good old trust is something we aren’t likely to see again in what is an increasingly self-absorbed world? Somewhat refreshingly, Green believes it’s always possible. And it’s pretty easy too – you just reach out to another person and basically find out what your common needs and objectives are. “It’s very similar to what they teach in negotiation: don’t haggle over what your differences are, focus on what your common similarities are. In divorce proceedings for example, if you go to a mediator rather than a litigator, mediators will say stop arguing about who gets the dog and start arguing about how you’re going to raise your children.”

Furthermore, Green confirms you need to identify what the advantages are to working together in a long-term trusted way. “They’re huge, enormous,” he says. “There’s the reduced need to negotiate issues all the time, there’s the ability to understand each other, the ability to get rid of all kinds of legal contractual agreements that take up a huge amount of time, and so on”

So the advantages of trust partly relate to time and partly to common interest, but there’s a tendency in business to talk just about transactions. Almost the entire field of selling, for example, is built around the notion of transaction – how to get the deal, how to close the deal. “If all there is the deal, the implicit assumption is that you’ll never see these people again so screw them; get the most you can, don’t waste too much time trying to get the lead, and as soon as you figure out the lead is or isn’t useful get rid of them,” he asserts.

From a trust-relations viewpoint, however, you cannot afford to think that way. “You never know when you might run across that person again; they might know somebody who knows somebody else. This is marketing, this isn’t just lead generation; you’re going to run across these people again and they will help build your reputation.” Green’s advice is therefore to take a little bit of time to help them. “Try and understand what they need, and what you can do – if anything – to help out and give them suggestions before you send them on their way.”

And of course there’s the financial gain, which will probably be the key to swaying people’s opinions about the importance of trust. But where’s the proof there’s profit to be made? Green makes reference to the raft of literature written in the last 15 years based around what he calls ‘loyalty economics’, citing Fred Reichheld’s book The Loyalty Effect. “In this book, he makes a very profound and simple observation: depending on the business it costs between four and 17 times as much to generate a dollar of revenue from a new client as it does to generate a dollar of revenue from an existing client.”

It is therefore more expensive to generate business with people you’ve never met than it is with people you have. “There was some tremendously impressive data-driven research from Harvard Business School to show how profoundly true that was in industry after industry. And that’s all without even touching trust,” confirms Green. “It’s simply saying familiarity and continued relationships are enormously profitable. If you build trust on top of that, you’ll know where the other party’s coming from and they’re likely to give you a break and give you the benefit of the doubt; they’ll work with you when times are rough because they’ll expect you to do the same thing. Reciprocity is a very powerful human component of relationships so it’s hugely profitable.”

As time goes by

Unfortunately, many use the excuse of time to explain the company’s approach, saying ‘we haven’t got the time to build these relationships, we need results now’. But Green believes it’s a myth that it somehow takes a lot more time. “It’s more a change of attitude and perspective. Depending on the business, I tell some people it will take 6-12 months to generate a reputation for behaving differently, others it takes no time at all. You simply stop looking at the person in front of you as a walking wallet with dollar signs on it and begin focusing on serving what they need instead of finding what you need in them.” The payoff in many cases is immediate, because people are far more inclined to buy from someone about whom they can say ‘gee I sort of trust this guy’ than they are from somebody who is clearly reciting the latest sales pitch.

This, of course, raises the question of why don’t more people do this all the time? Green believes the reason is very simple. “I think we’re afraid. It’s the prisoner’s dilemma: ‘I don’t know him, he might screw me over so I’m going to get him first’. We’ve enshrined that in the approaches modern business now takes – how do we gain advantage from this group of customers, how do we stay competitively ahead of our competitors – rather than more enlightened perceptions.”

Interestingly, however, Green believes trust is going to be more important in the future than ever because, paradoxically, the more that things get automated and data driven, mechanized and depersonalized, the more important the few personal interactions that remain will become. “There may be far more interactions in the future and more of them will be mechanized, but the role and importance of the few that are trust-based are going to be increased.”

Furthermore, books discussing the future all make reference to how much more connected we’re becoming. Green confirms: “Everything is interrelated, everybody is on everybody else’s database, we’re all on myspace.com, etc. This means that the consequences of your actions reverberate much more than they used to.” He uses the analogy of a salesman: “In the past they could say ‘I’ll take advantage of this customer’ and then move on their way getting the better of them. If you were self-orientated nobody would call you on it. Now you are likely to run into that person again, or that person is likely to switch company’s and bump into you, or they’ll tell 27 people, or what you did will show up on a database or a website.” The consequences of your actions and your reputation will therefore become far more transparent to everybody.

So be warned of this double-edged sword: technology may be a factor aiding in the diminishing levels of trust in business, but it can certainly come back and kick you in the proverbial. I guess, as the saying goes, ‘honesty is always the best policy’.