Monday, March 9, 2009

Leading at The Speed of Trust

by Rodger Dean Duncan

At this time of economic upheaval and political transition, trust is an issue that’s front and center.

Everybody’s in favor of trust. We all know it’s important. But a lot of people seem to regard trust as soft and intangible, a social virtue that’s nice to have but impossible to quantify.

Yet trust is much more than that. Trust is a hard-edged economic driver. Yes – trust is indeed a character trait. Trust is also a competency that can be taught, and learned, and improved.

My associate Stephen M.R. Covey has written a best-selling book on the subject. It’s called The Speed of Trust.

So what’s the big idea?

The big idea is simply this: Low trust is a tax. High trust is a dividend. It’s true in a relationship. It’s true on a team. It’s true with a client or customer. It’s true with every kind of stakeholder.

When trust is low, you pay a “tax” – because everything requires more time to accomplish and everything costs you more. When trust is high, you receive a “dividend” – because you’re able to get things done faster and at a lower cost.

This dividend is real. It’s not just a feel-good factor. It’s an actual economic dividend. And the data on it are overwhelming.

For example, a Watson Wyatt study showed that high-trust organizations outperformed low-trust organizations by 286% – that’s nearly three times – in total return to shareholders.

Every year Fortune magazine – in conjunction with the Great Place to Work Institute – publishes a list of “The 100 Best Companies to Work for in America.” Trust is the primary defining characteristic required to get on that list: trust between management and employees, trust between and among work teams.Trust factors comprise more than half of the criteria.

So, how do these high-trust organizations do? They outperform the S&P 500 by 416% in terms of their economic return.

A similar phenomenon occurs in education. We all know there’s a correlation between learning and the relationship between student and teacher. And as you’d expect, trust is an important component of that relationship. A national study shows that students in high-trust schools are three-and-a-half times more likely to increase their test scores than are students in low-trust schools.

Regardless of the industry, the research data are overwhelming: The low-trust tax is real. The high-trust dividend is real.

I frequently tell my clients that the second most expensive thing that can happen with regard to their employees is when smart and capable people quit and leave. But the number one most expensive thing that can happen is when their smart and capable people quit and stay.

Disengaged employees are enormously expensive. Engagement flows out of trust, and trust flows out of engagement. They are mutually reinforcing.

Studies by the Gallup organization show that 96% of engaged employees trust their leaders, while only 46% of disengaged employees trust their leaders. Gallup puts a conservative price tag of $300 billion per year on disengagement in the U.S. alone

So which comes first – the distrust or the disengagement? Both. And that’s the point. Trust affects everything.

Consider something like innovation. The Financial Times studied the 100 top companies on their list. They compared the top 20 innovators to the bottom 20 innovators. High trust was the number one differentiating factor.

Think about it. Innovation flourishes and thrives in an environment of high trust. Try innovating in a low-trust culture. People clamor for credit. They point fingers of blame. They tell each other a lot of victim, villain, and helpless stories. Because low-trust environments are not safe, it’s hard to make strides with innovation. You want to increase innovation? Increase the trust.

Consider teamwork. Our entire global economy – from the factory floor to relationships between nations – is based on collaboration. Genuine collaboration thrives or dies based upon trust.

Without trust it’s impossible to collaborate. You might be able to coordinate or you may cooperate. But genuine collaboration requires trust.

What about partnering? Partnering is an absolutely critical element in the industries represented here today. Partnering can take many forms, from outsourcing help with outages to installation of major hardware needed to operate a nuclear plant.

What about outsourcing? A study by the Warwick Business School in the UK focused on outsourcing contracts over a ten-year period. They found that companies that managed their outsourcing relationships based on trust – as opposed to relying on the fine print of service contracts – outperformed low-trust organizations by 40%. They call it the 40% dividend.

Studies in every industry validate the notion that trust is king. Whether you’re talking about execution, loyalty, sales, accelerating growth, or any other metric – high trust is a dividend. Everything – all the execution strategy, all the innovation, all the partnering, all the collaboration, all the growth and performance improvement – all of these things are tied to trust.

Now, let’s dig deeper into this idea of trust being a competency.

When we see the importance of trust we experience a paradigm shift. When we begin to speak the language of trust, it signals to others that we are committed to earning the dividends of trust.

When we behave in ways that build trust we actually earn those dividends and minimize the trust taxes we may have been paying.
It is then that we’re best able to achieve the sustainable high results we want.

Now, all of this may seem like a blinding flash of the obvious. Unfortunately, as we all know, common sense is often not common practice. And in the case of trust, the common practice seems to be to distrust.

Distrust is reflected in the silo mentality we often see in organizations. The surface relationships may be cordial, but right underneath the top veneer there’s often doubt or outright suspicion.

Fragile trust is often reflected in relationships between management and union members, between companies and suppliers.

Even when many of the other performance metrics seem to be okay, fragile trust can be a hidden variable – lurking beneath the surface as it slows down processes and drives up costs.

Why does this occur? I suppose there are many reasons. And I believe a primary reason is that most people still regard trust as just a nice-to-have social virtue and don’t yet understand trust as an issue they can do something about explicitly, deliberately, and quantitatively.

At one time, most of us didn’t understand the effects of cholesterol. But now there’s plenty of information available and we can make informed choices about our eating and exercise behaviors. There’s also plenty of quantitative information available on the effects of trust.

So let’s consider some of the informed choices we can make to earn trust, to maintain trust, and to extend trust.

Stephen M.R. Covey has identified 13 specific behaviors exhibited by leaders who consistently enjoy the benefits of high trust. Some of these behaviors are Character-based. Some of them are
Competency-based. And some include both Character and Competency components.
One Character-based behavior of people who earn high levels of trust is Straight Talk. They not only communicate clearly enough to be understood, they communicate so clearly that it’s difficult to misunderstand them. They use simple language.

There’s an old Chinese proverb that says “the beginning of wisdom is to call things by their right names.” Trustworthy people call things what they are. They do not “spin” the truth. They’re careful not to leave false impressions.

Of course the opposite behavior would be to lie or to deceive. Honest people don’t lie or deceive. However, honest people do sometimes engage in what can be called “counterfeit” behaviors. With regard to Straight Talk, counterfeit behaviors include “beating around the bush,” withholding information, selectively divulging only the information that supports our position.

And the granddaddy of them all: “corporatespeak” – that convoluted mass of euphemisms that puts a rosy spin on even the most negative of events. Nobody appreciates “corporatespeak” and spin. They’re not only not credible, they’re insulting. Yet they are very common.

Trustworthy people talk straight.

A Competency-based behavior that builds trust is to Confront Reality.

Trustworthy people step up to the tough issues and deal with them head-on. They engage others openly so they can tap into the creativity, ingenuity, and synergy that make for better decisions and better outcomes.

This has a powerful effect on both speed and cost.

Of course the opposite is to simply ignore reality or to act as though it doesn’t exist. We have a multitude of case studies on ignoring reality in the in the political arena, in the aerospace industry, in the healthcare industry, and certainly in the financial industry.

A counterfeit behavior is to pay lip service to dealing with the tough stuff, while really just tinkering with superficial symptoms rather than focusing on root causes.

Confronting reality requires courage and can be very uncomfortable. But it’s not nearly as uncomfortable as suffering the consequences of Pollyanna nonchalance.

An important trust-building behavior that has both Character and Competency components is to

Listen First. Trustworthy people listen first to understand, not to judge.
Genuinely listening first is harder than it may sound. Trustworthy people listen not just with their ears, but also with their eyes and their hearts. They’re very cautious about making assumptions. They don’t presume to have all the answers – or even all the questions.

A counterfeit behavior is to merely pretend to listen … just waiting for your turn to speak, or looking for holes in the other person’s position so you can attack theirs and bolster yours. That’s not dialogue. That’s debate.

Trustworthy people are not afraid of having their own positions challenged. Trustworthy people are eager to learn, even when it involves changing their minds. They Listen First.

And finally, an important way to earn and maintain trust is to Extend Trust.

Trustworthy people have a propensity to trust others. We’re not talking about blind trust or gullibility. We’re talking here about “smart trust” that’s based on a reasonable assessment of risk. Trustworthy people tend to extend trust abundantly to those who have earned it. They extend trust conditionally to those who are still earning it. But their first inclination is to trust.

A counterfeit behavior is to extend “fake trust.” This often comes in the form of giving people responsibility for results but withholding the authority or resources needed to achieve the results. In other words, giving someone a job but then “snoopervising” or hovering over them.

Micromanaging is perhaps the most common form of “fake trust.”

People tend to behave the way they’re treated. If you want people to trust you, extend trust to them. Otherwise, you simply contribute to the downward spiral of distrust and suspicion that imposes low-trust taxes and pushes aside the opportunity for high-trust dividends.

One of the many myths about trust is that it’s only about integrity. Trust is actually equal parts Character and Competence. Both components are required. The big idea here is that even if the superficial relationships in an organization are cordial and friendly, fragile trust under the surface can impose a number of expensive, low-trust taxes on overall performance.

Conversely, organizations that appreciate the real, economic effects of trust – and that explicitly and deliberately teach trust behaviors and build cultures of trust – enjoy the benefits of high-trust dividends. Believe it. You, too, can enjoy the speed of trust.

Article from The Duncan Report. For more information please click on their link.

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