Please trust me

Saturday December 12, 2009
Please trust me
Science of Building Leaders by ROSHAN THIRAN

Effective leaders build trust across their organisations.
A FEW months ago, Audrey, our youth camp leader, was faced with a dilemma. A campsite vendor had under-charged her for a recent camp. At the same time, she was under tremendous pressure to make ends meet for the camp.
What did she do? She informed the vendor of the mistake. The vendor was pleasantly surprised and soon a strong bond of trust developed. I was extremely proud of Audrey’s action as she’s a great role model for our kids. With this small act, trust was enabled, resulting in lower prices and flexible arrangements at future camps.
Trust relationships are vital to the success of business. Trust is under-rated in most businesses and taken for granted by many. We follow leaders because we trust them and believe they will take us to greater heights. When we interview, we tend to hire people we trust. We use products only if we trust it. And the best companies in the world use trust to grow their businesses. Rock band Radiohead released its last album online, trusting fans to decide the price for the album, and generated more revenue than all its previous releases.
Research by the Institute of Business Ethics found that companies displaying a “clear commitment to ethical conduct” almost invariably outperformed companies that did not display integrity and trust. Its director, Philippa Black, concludes that trust and integrity has been proven to pay off in financial returns for companies.
Trust is essential to building enduring connections with employees, suppliers, customers, and the communities in which we do business.
A recent study showed that trust is significantly related to sales, profits, and turnover and is a source of competitive advantage. The study also concluded that “the ability of a general manager to earn higher trust from his or her employees likely creates a competitive advantage for a firm over its rivals”.
We see numerous examples of how trust drives productivity. Years ago, Ford, who had more than 500 employees working in their accounts payable department decided to benchmark against Mazda, another car manufacturer.
To their surprise, Ford found that Mazda had only five employees in payables. Yes, you read that right – FIVE. Ford had 500 vs Mazda’s five. How did Mazda do it? The answer – you guessed it – is TRUST!
In Ford, the account payables folks had to match the purchase order, receiving reports and supplier invoices. If there was a mismatch, there was significant rework. In Mazda, there was no paperwork at all. Mazda trusted its suppliers and did not bother processing invoices. When goods arrived from suppliers, Mazda built their cars. Once a car was built, they automatically transferred funds to the suppliers. Mazda had no invoicing or processing, but paid with trust, saving significant costs.
Trust is a key element in business, as it is in relationships and politics. In fact, trust actually lowers the risk of malpractice among US doctors. Malcolm Gladwell, in his book Blink, uncovers that “the risk of being sued for malpractice has very little to do with how many mistakes a doctor makes. Analyses of malpractice lawsuits show that there are highly skilled doctors who get sued a lot and doctors who make lots of mistakes and never get sued.”
Apparently, people only sue doctors they don’t like or trust. They don’t sue doctors with errors whom they trust or like. In fact, in some hospitals today, doctors are encouraged to apologise when they make mistakes, trusting patients to forgive them. And statistics have shown that in such hospitals, malpractice suits have dwindled.
On the flip side, lack of trust destroys entire industries as the world’s recent financial markets collapse attest. Credit stopped flowing due to trust issues. Big banks refused to lend to each other because they didn’t trust each other’s ability to repay.
Trust is like a vase; once it is broken, even if you fix it, the vase will never be the same again.
So, even if you have the best products in the world, if you lose trust in your service or product, you will soon not have a business. Numerous companies try to create trust by PR stunts and building corporate social responsibility arms, but fail to understand that trust is not an event-based action. It takes years to build up trust, and seconds to destroy it.
If trust is so important, what precisely is trust? How can it be achieved and sustained?
According to Dr Duane Tway, “We all think we know what trust is from our own experience, but we don’t know much about how to improve it. Why? I believe it is because we have been taught to look at trust as if it were a single entity.”
Dr Tway is right. Trust is not a single act. Aristotle, the great philosopher best described trust in his Rhetoric. He suggested that trust, which he called Ethos (the trust of a speaker to a listener), had three parts. First was the intelligence of the speaker (correctness of opinions, or competence), secondly the character of the speaker (reliability, integrity), and finally, the goodwill of the speaker (favourable intentions towards the listener).
In layman’s term, leaders and managers today need to build trust by the integrity of their competence, the integrity of their character and finally their sincerity towards their employees.
In other words, a leader cannot fake town halls meetings and occasional roundtables with employees and expect them to trust his or her leadership. Trust has to be earned. Having a title doesn’t guarantee you the trust of your subordinates. Trust is built on a daily basis. It is the employees’ perceptions of your ability, honesty, and sincerity.
But how do we begin this process of building trust? I personally believe the best way to build trust is to extend it to others. I know a Ramly burger stall owner who decided to allow his customers take their own change from coins he left out on the counter. He was able to serve them faster, but more importantly, his customers hardly cheated him because they felt honoured to be trusted by him. Trust begets trust.
Netflix, the world’s top DVD rental company, trusts its employees to take whatever vacation they feel they need. Many companies trust their employees to have “flexi” working hours, and research has shown that in most cases these employees work longer hours than those that do not adopt “flexi” hours.
Finally, trust begins when a leader role models the qualities of trust and filters it down throughout the company. This drives others to follow suit and soon a culture of trust emanates across the entire organisation. Trust is a powerful tool as it forms the foundation for effective communication, employee retention, motivation, and contribution of discretionary energy – the extra effort that people voluntarily invest in work.
Yes, you can still get things done without trust when you are the boss by ordering people to do things. But you run the risk of getting the salute and not the heart, gaining compliance and not the commitment. Trust has to be earned. And when you get it, the rewards that come from it, makes you a leader on a different platform. As George McDonald puts it, “to be trusted is a greater compliment than to be loved”.
•Roshan Thiran is CEO of Leaderonomics, a social enterprise passionate about transforming the nation. Join the Leaderonomics journey via Facebook, Twitter or by logging on to www.leaderonomics.com. And if you have just completed your SPM, sign up for the Diode School Leaver’s camp at www.diodecamp.com.