Trust: the competitive edge

By Stuart Maister and Kevin Vaughan-Smith, Joint MDs, Mutual Value

This is the draft opening to a book we have been asked to develop, currently called: Trust: The  Competitive Edge

When a small child looks into their mother’s eyes, their love is based on total trust. It’s an instinct we never lose. If you consider your own most important relationships – partner, friend, relative – which are the best ones? And what is it that makes them so?

You want the best for each other.

This is an inate need we have from the time we are born. We want to bond with others with whom we can relate and on whom we can rely. We know that in order for that to be true they need to be able to trust us too.

What we sometimes forget is that business is made up of human beings in some kind of relationship, and these truths apply just as much in the commercial world.

You may choose a supplier, colleague, partner or even your employer through some range of factors; the ones you stick with tend to be the ones you trust. Yet often when people ‘put their business heads on’ they often forget this, and believe they need to behave in ways that damage trust – maybe even destroy it – because of other imperatives and the need to ‘be commercial’.

The central proposition of this book is that the most commercial and effective way to behave is to trust and be trustworthy, and to build relationships on that basis. The difference in business is that you need to consciously, actively develop this habit, and do so not only as an individual but also as an organisation. This requires a structured approach based on fundamental beliefs. That is what this book will address, and show you how you can apply these principles when leading, selling, collaborating and partnering.

‘Trust me.’ The minute you say it, it becomes harder to believe. That’s why it has to be earned, deserved and embedded in the way you and your colleagues turn up every single time. That’s what this book is about. There are many examples where this proposition has been shown to be true.

The digital giants rely on trust

When the Chinese digital company Alibaba Group launched its initial public offering to US investors in 2014, it was valued at $225bn. At one point in 2021 its market capitalisation topped $800bn. A large part of its phenomenal achievement is that the company actively builds trust with its business partners and leverages this to create mutual value.

One of the major mindset breakthroughs came when they realised that they led an ecosystem, not just a platform. They developed the Taobao marketplace, and it quickly became clear they needed to limit their own activities within it in order to create space for new ideas, applications and services to thrive, provided by its ecosystem businesses. They had to trust the businesses to innovate and drive greater value; the businesses had to trust that Alibaba would not simply steal the best ideas and develop its own versions. 

Brian Li, then vice president of strategy, explained:

“Someone in Alibaba will, perfectly reasonably, say: ‘we see a new application is becoming popular, why don’t we build one to do this?’ But a good ecosystem leader will say ‘no’…By taking this approach, users now have a choice of multiple apps in our ecosystem.”

As we write this Alibaba is going through new challenges, none of which impact the incredible success the firm has had and reflect the current circumstances of the Chinese business environment. In that market, it needs the trust of the government as well as its customers and shareholders in order to thrive, and that creates new complexities.

In fact, without widespread trust, the huge digital companies like Alibaba which dominate the biggest valuations in the world would collapse. If for a moment you didn’t believe Amazon would deliver or Whassap would keep your message secure this would be a major threat to the success of these companies.

Alibaba shows that there may be other trust issues they need to address in order to continue to succeed – for example, if we don’t trust they pay fair taxes, will this become an existential issue?

eBay’s founder, Pierre Omidyar, said this about its success:

“eBay’s business is based on enabling someone to do business with another person, and to do that, they first have to develop some measure of trust, either in the other person or the system.”

What Pierre Omidyar described is a principle which can be applied to all sizes of organisation in the way they show up. The difference between the most successful and the rest is that they consciously focus on building and preserving trust as a central part of their strategy.

When trust disappears

Think about what happens when trust is destroyed. After 89 years in business, in 2002 Arthur Andersen ended its role as an auditor. Before it became embroiled in the Enron scandal, it had 28,000 employees in the US. By the time it was forced to relinquish or revoke its licences to operate, that number was down to 3,000. 

A firm which was one of the Big Five global accountancy firms collapsed in a matter of months, leaving what was now the Big Four to mop up the people and accounts which made the Arthur Andersen business so successful. The reasons for the collapse were accusations of complicity with the Enron leadership’s accounting fraud and obstruction of justice by shredding documents. A conviction for the latter was reversed, and in fact a tiny proportion of the Arthur Andersen firm was involved in the scandal, but none of this mattered. The reputation of the firm was in tatters. Despite all of its huge global presence, a giant of the financial system collapsed quickly once it lost its most important asset: trust.

In a corner of the lush 150-acre campus where the firm had trained tens of thousands of bright young new recruits, there was a shrine to ethical accounting. It highlighted a campaign of one of the firm’s major leaders in the 1960s against companies that cooked the books and the regulators that let them. From its inception the firm had stood for ethics and honesty, and it is said its founder, Arthur Andersen, originally built his business by putting reputation over profit.

So, what had changed? The Wall Street Journal in 2002 summed it up like this:

“Andersen leaders responded (to pressure to perform) by pushing partners to become salesmen — upsetting the delicate balancing act any auditor must perform between pleasing a client and looking out for the public investor.”

What’s more, the shrine to ethics is a stunning symbol of what happens in so many large companies when it comes to values and culture. Warms words exist in abundance, headquarters have terrific showcases to virtue, but turning these into actual behaviours requires conscious and continual proactive effort with real clarity about what this means in practice. We call this turning values into value, and it requires structure and focus.

Defining trust

So what is trust? Many people deal with it as an instinctive thing – ‘I know when I can trust someone’. It’s seen as something indefinable, felt not seen.

The problem with this, if you’re trying to develop trust as an organisation, is that it is then impossible to bake into your strategy and culture or measure its impact. It cannot just be something individuals generate if it’s to be a consistent deliverer of value. Otherwise, we shrug our shoulders and say that some have it and some don’t.

We’ve defined trust based on three dimensions, and each of these is interdependent if trust is to be earned and given in a relationship. This applies to all business relationships, whether those of colleagues, buyers and sellers or of partners in an ecosystem. We call this our Trust Model and it will provide the structure for this book.

There have been a number of models about trust in business to which we owe a debt of gratitude as we developed our own. The two most notable ones are the Trust Equation, sometimes known as the Maister Trust Equation, developed in large part by David Maister (the cousin of Stuart, one of the authors of this book) and the Speed of Trust, developed by Stephen M.R. Covey, which was taught and introduced to the UK by Kevin, the other author. Both are brilliant summaries of what it takes to build trust, and we will look at them in this book. However, we believe that neither fully addressed the first of our three dimensions, and the one that may be viewed as the most critical: Clarity.

Clarity

Have you ever completed a project, knowing that you have done a great job, but to your horror discover that your customer or colleague is unhappy because it wasn’t what they were expecting? Have you ever commissioned work only to find out that the person responsible is not carrying it out as you wanted them to – or would have done yourself? Or perhaps that a supplier has done the work but is charging you more than you had anticipated?

It would be amazing if none of these scenarios is familiar to anyone reading this. What happens as a result of this? Trust is damaged. Both parties end up dissatisfied with the experience even though both had the best intentions in doing the work.

The person commissioning the work says: ‘Next time ‘I’ll watch every step to make sure they’re doing what I expected.’

The person doing the work says: ‘Next time, I’ll check in at every stage to make sure they’ll pay me/credit me for the work I’m doing.’

Innovation is no longer possible. Change is painful. The quality of the work will be less than it could have been. On major projects, everything slows down because of the need to constantly check in. Disputes arise, blame begins and everyone becomes defensive in their behaviours.

The issue is Clarity. This is much more than a contract, which still leaves ambiguities and fails to address change. Taking the time to gain agreement over the ambition of the relationship, the outcomes involved and the way the parties will behave in working together pays huge dividends in effectiveness and performance because at every stage trust is built or maintained. We look in detail at what this means in practice

Character

All of the trust models include some aspect of this and we do too. This is the dimension that addresses the behaviours consistently demonstrated by those involved in the relationship. The critical aspect of this is to consciously and collectively decide the behaviours which will be expected of all parties, look at what this means in practice, and hold each other accountable for these to be present.

This is such a powerful aspect of trust-building as it is the manifestation of the relationship – how we each show up. Yet our experience is that most professional relationships do not actively address this and, even if they do, they do not hold each other to account for the way they behave. Problems emerge and are treated as technical, quality or cost issues where often they are behavioural. Looked at another way, those genuine issues need to be solved in a way that builds trust, if that is the intention of the parties involved.

One of the critical areas we will look at is how to develop the appropriate behaviours as a team or firm. We may, for example, say we will work in a partnership with our supplier and maybe even identify all the ways this turns into behaviour. However, what this looks and feels like in practice may be a long way from that – and we show how to structure meetings and conversations so that trust-building is always central to the interaction.

Capability

When you pitch for work do you spend almost all of your effort on setting out how you can provide the service, solve the problem and be competitive? Capability dominates the interaction in professional and commercial relationships, but when it is narrowly focused it is not fully building trust.

Of course, a key component of trust is to do what you say you will do when you say you will do it and at the cost you promised. However, this ignores the fact that, in many cases, your ability to do this is impacted by the capability of the customer/partner/colleague to play their part. We set out how interdependence is most often the key component of capability, and by establishing this from the start we demonstrate that this dimension can either be the foundation or the destroyer of a great, sustainable, trusting relationship.

The other dimension we look at is capability over time. If a supplier wants to be my trusted partner then I have to believe they will stay current, innovate and continue to ensure they’re providing me with the best possible service. My confidence in them is a key component of my trust and commitment. Continually feeding that confidence by bringing new ideas and services to the customer is a trust-building capability.

There’s one more aspect to this. Are the parties capable of behaving in a trustworthy, collaborative manner with each other? We’ve worked with clients where thise directly involved have great intentions, but are stymied by pressures from above. Exploring the motivations and needs of everyone from the start, and communicating changes to these through the life of the relationship,  is critical if trust is to be maintained.

David Maister, the lead author of The Trusted Advisor,  said:

“Building trusting relationships with clients leads to many benefits: less fee resistance, more future work, more referrals to new clients, and more effective and harmonious work relationships with the clients. However, many people have built their past success on having a transactional view of their clients, not a relationship one, and it is not clear that they really want to change.”

Our experience suggests the same is often true of colleagues in a team or teams within the same business, partners who are meant to be collaborating, and leaders who want to get the best from their people.  This is true for organisations of all sizes and types, and our book is intended to provide both the theory and practical ways to help human beings, doing their best in their professional lives, build trusted relationships based on mutual value.

Does this resonate? If so, let’s have an open discussion about what this might mean for your business and what difference it would make. We also welcome feedback on this article as we develop our book treatment more fully.