March 6, 2018

Who Can You Trust?

By Gerhard Gschwandtner and Dr. David A. Shore

Note: Although this article dates back a few years, it seems just as relevant – perhaps even more so – today. Trust, once relinquished, is difficult to restore. The old adage, “My word is my bond,” is still a good rule to follow.

Some 40 years ago Kenneth Arrow, the Nobel laureate, wrote, “Trust is an important lubricant of a social system. It’s extremely efficient; it saves a lot of trouble to have a fair degree of reliance on other people’s word.”

The big question is, who can we really trust?

Research from the University of Chicago documented the fact that we don’t trust anybody 100 percent. We, as a nation, believe that only 39.2 percent of Americans are trustworthy. When the same question was asked of New Yorkers, the score went down to 32.1 percent. We place an extraordinary amount of trust in the military. In fact, that study showed that 80.7 percent of Americans believed the military could be trusted. Banks and financial institutions earned only a 36 percent trust rating. Congress stood at 31 percent – with a fast-moving spiral downward. And what about major corporations? They earned our trust at the rate of a mere 20 percent.

The lack of trustworthiness in corporations increases the cost of sales, reduces the chances of repeat sales, causes increased employee turnover, drives up the price of the product, and hinders global competitiveness. Every salesperson knows that customers buy from people or companies they can trust. Managing and maintaining trusting relationships is not a matter of corporate ethics or personal philosophy; it’s a matter of sound business management and an important part of the corporate strategy for creating value.

Trust is a basic human need – and it begins the day we are born. Eric Erikson, a noted scientist who deeply influenced the field of contemporary psychology, wrote that, in the first stage of life (from birth to the end of the first year), a child learns the difference between trust and mistrust. According to Erikson, the quality of the relationship with the parent becomes the precursor of a person’s ability to interact constructively with other people.

Research shows that babies who fail to form a trusting relationship with a caregiver often fail to thrive. The same developmental requirement applies to creating new business. If I don’t trust you, I may not do business with you. If employees don’t trust management, the business fails to thrive. If a head of state fails to trust the words of another head of state, the relationship between nations will be in jeopardy. Growing distrust between nations can often lead to war.

Trust – A Tribal Need

Trust is omnipresent. Trust is a universal and tribal need. It concerns everyone. It transcends language, gender, age, religion, and local customs.

In 1890, William Sheppard, a native of Waynesboro, VA, set out to become a missionary in the Belgian Congo. He was impressed with the natives and quickly learned their language. After finding his way to the secret kingdom of the Kuba tribe, he was captured and faced execution. When Sheppard was brought before the king’s son, he spoke with such sincerity and conviction that he immediately earned the trust of the royal court. Instead of killing the intruder, the King declared Sheppard a royal ancestor who had risen from the dead and was returning as a spirit. Sheppard, the eloquent missionary who earned the nickname “Black Livingstone,” wrote about his experiences in a book published in 1917 titled Presbyterian Adventures in Congo.

In the world of marketing and selling, the brand that earns the most trust owns the marketplace. When people believe they can trust your brand, they assume your company is stable, your service is reliable, your product offers the highest quality, and your price is fair.

Trust also increases the resilience of a business against adversity. For example, when a news report about Johnson & Johnson claimed production problems in a plant in Puerto Rico, the company’s stock took a dip – but the downturn lasted only a few days and the stock recovered quickly because of the company’s strong reputation.

Trust Is a High Priority

What made the CEOs of companies like Enron or Tyco betray the trust of their customers, employees, and stockholders? The answer to that question lies in the psyche of these individuals. What made the CEOs of those companies go over the line is not their inability to see the difference between right and wrong. What made them go over the line was their egos’ demands that their numbers look good. Their egos were hooked on the adrenaline rush that comes from winning. Since they could not tolerate the appearance of failure, they saw no other choice but to match the numbers to the size of their egos.

One year, the chief executive officers of The Business Roundtable (BRT), representing many of the largest companies in the United States, were appalled and alarmed by the stream of revelations that emerged about fraudulent CEOs – even issuing a statement with the objective of restoring trust and accountability, saying, “Corporate leaders must be held accountable for any abuse of public trust. We believe that executives should be required to return monies they received as a result of fraudulent accounting practices.” To add weight to their statement, the organization ran full-page ads, including their trust-building statement, in the New York Times, The Washington Post, and USA Today.

While fraud is an obvious trust buster, inconsistent performance is another. People trust that which is familiar, consistent, predictable, and fair. Inconsistency erodes trust. That’s why franchise businesses continuously promote consistency and predictability. To the consumer, trust comes from the taste experience that shows little difference between french fries served in a fast-food chain restaurant in Maryland and those served in Montana. Trust means that the pleasures to the palate from drinking Coca-Cola do not change. While consistency in the art of parenting ensures a healthy child, consistency in marketing helps ensure a healthy profit.

Mistakes May Not Create Mistrust

There is an old saying in Washington: “You don’t get into trouble for the deed; you get in trouble for the cover-up.” When President Ronald Reagan made a mistake, he quickly acknowledged it with a disarming, boyish smile. Being open and honest quickly earned Reagan the nickname “Teflon President.”

Open and transparent dealings are critical if a company wants to preserve its reputation for integrity. When Jim Burke, the CEO of Johnson & Johnson (the maker of Tylenol), learned that cyanide-laced Tylenol had been found in a Walgreen’s, he set in motion a crisis management plan that began with a public acknowledgement and an immediate removal of all Tylenol capsules from every store in America. This bold move and others like it earned Johnson & Johnson the top reputation rating in the industry. While Tylenol’s brand emerged stronger after the crisis, companies like Enron, Anderson, and Firestone – by resorting to denial – tarnished their brands and caused gargantuan losses.

Trust is at the core of all business activity and at the core of business productivity. In an open and trusting environment, groups of people can depend on one another and rely on each other’s word. If the economic environment lacks trust, transaction time is slowed and transaction costs rise.

A Leap of Faith

Imagine this scenario. You bring your car to your dealership because your dashboard displayed a message that means, “service needed.” After a quick electronic diagnostic, the technician tells you that you need to replace a part that is not covered by your warranty. Do you say, “Ok, go ahead!” or do you ask, “Can I see the warranty?”

Imagine your doctor tells you, after running a blood test, “You’ve got clogged arteries and you need a bypass operation.” Do you say, “When should we schedule the operation?” Or do you say, “I’d like to explore alternatives and get a second opinion.”

We live in an increasingly complex world where it is difficult for customers to gain a clear understanding of their problems and have complete confidence in the solution. The more complex the product or service, the greater the leap of faith customers are asked to take before making a decision. Trust is the safety net that makes it easier for the buyer to say to the mechanic, “Yes, let’s order the new part.” If there is trust, there is commitment. If there is no trust, the relationship cannot evolve.

As trust builds, the relationship evolves. While establishing trust is a slow process that involves incremental steps over time, the betrayal of trust is often sudden and always threatens the relationship. Many times, betrayal of trust marks the end of a relationship.

Trust Busters

Research shows that it costs up to five times more to gain a new customer than to sell an existing customer. Yet, many businesses make decisions that lead their customers to believe their trust has been betrayed.

For example, when a bank customer signs up for a new “free” checking account and receives a statement that contains a $25 charge for 500 checks or a $10 charge for interest because the account has gone below the minimum balance of $500, then the customer may think the bank has overpromised and underdelivered.

Or take the example of a wireless service provider that promises a rate plan that gives you 1,000 minutes of free calls for only $39. When you get your first bill, you discover your bill is $125 and the number of minutes used is only 853. When you call the telephone company, you discover that some of the calls you made were out of the service area of the plan you signed up for, and you were billed for roaming charges. Since the rate plans are complicated, you may not have paid attention to that fact; but now you know – and you feel betrayed. Chances are that you will regret your decision to trust the wireless provider and will begin shopping for a company you can trust.

Every time a company changes the terms of an agreement without a reasonable justification, it runs the risk of alienating its customer base. For example, you may sign up for a free e-newsletter with a software company. After a month you discover that the company has rented your name to a number of companies that fill your email box with dozens of software and hardware offers. When you go back to the company’s Website, you notice their privacy statement has changed since you signed up. You cancel your subscription, but you can’t stop the flow of spam. Violation of privacy is high on the list of trust busters. Smart companies take precautions by appointing a chief privacy officer to ensure their employees protect their customers from predatory Internet marketers.

The Trust Audit

For many CEOs and other company leaders, the creation of trust has become a high priority. What can companies do to earn higher levels of trust from their customers, their suppliers, and their employees?

One way to begin is to conduct a trust audit. Take a close look at what you promise to your customers and then at what you deliver. Many companies use the word “trust” in a slogan. For example, Deutsche Bank had a trademarked slogan “Trust is leading to results.” McCormick spice company promised, “The taste you can trust.” Sarasota Systems boasted, “The most trusted name in CRM.” Walgreen’s used the slogan, “The pharmacy you can trust.”

Review your brand promise, your advertising messages, your marketing materials, your sales agreements, and your service contracts, and then ask your customers how they rate your performance – how they rate the level of trust you have attempted to earn. Identify what you do to deliver on your brand promise. Ask your employees to create a list of all the trust builders they perceive and all the trust busters they believe need changing. Next, prioritize the trust busters and see how they can be changed or eliminated one by one.

Many times, eliminating trust busters takes no more than eliminating careless mistakes or building a safety net that prevents sloppy work habits. For example, a patient at a hospital once commented, “If they can’t get my name right on the bill, then I wonder if I can trust the quality of their medical care.” An airline CEO said, “If a customer sees a dirty airplane, they may conclude that our engine maintenance is faulty.”

Optimal Trust

While many companies suffer from a trust deficiency, a few executives may drive their employees too hard in the other direction. Is it possible to overinvest in trust? A customer who trusts too much may be perceived as reckless; a seller who invests too much time in promoting and policing trust at the expense of moving business forward may be perceived as foolish. Optimal trust is the “golden mean” between these two extremes.

Executives who build optimal trust follow a dynamic model that relies on four interdependent parts. The model for building deep personal trust has, as its first step, the developing of such positive qualities as warmth, empathy, and genuineness. A salesperson who appears trustworthy will gain favorable attention in the eyes of the customer.

The second part is integrity in all business dealings. Warren Buffett once offered his definition of DNA. He said it stands for “do numbers accurately.” Remember that customers don’t judge you by what you say when you are visiting face-to-face; they judge you by what you do when nobody is watching.

The third part is your performance. Customers will judge your performance after every transaction. They will know if you delivered on your promise. Companies that overpromise and underdeliver are often engaged in a costly struggle to increase customer loyalty. A salesperson’s competence leads to buyer confidence.

The fourth part is to provide objective advice and impartial counsel. Integrity often comes into clear focus when salespeople offer sound advice without a hidden agenda. Good salespeople know that their customers favor impartial information that allows them to make the right decision without fear or pressure. These sales professionals elevate their role to that of a trusted advisor. To remove the possibility of ethical conflict, some securities firms are beginning to build a firewall between research and sales. Prudential once claimed, “Objective advice begins with objective research.”

In essence, optimal trust is all about comfort. Do your advertising messages resonate with your customers? Do your prospects feel comfortable enough with you to trust you with their business problems? Do your customers feel comfortable with your role as their trusted advisor? Do your customers feel comfortable with what you deliver?

The absence of guidelines for building optimal trust may create the illusion of safety, yet these illusions are often short lived. More than 200 years ago, Thomas Paine wrote of the distrustful actions of Great Britain, “A long habit of not thinking a thing wrong gives it the superficial appearance of being right.” History proves that appearances often lead to deception. It also proves that, without guidelines for optimal trust, doing business is unsafe.