Sunday, October 5, 2014

The Glasses of Distrust

Far more than blind trust, we tend to put on glasses of distrust. We view the world through the lens of suspicion - and with what we feel is good reason. We're bombarded daily with headlines that repeat evidence of today's trust crisis from every possible angle. In addition, our own experience validates it.

Stephen: I remember a time years ago when I was traveling with my parents. We visited a less developed country that was known to be corrupt. We hired a driver we thought we could trust to take us several places, and we left a number of watches and other gifts we had purchased in our bags locked in the trunk of his car while we ded some sightseeing. When we returned, we checked inside our bags to make sure the boxes were all there. They were. But when we got back to the U.S. and opened the boxes, we discovered they were all empty!

Greg: Several years ago my wife, and I invested a significant amount of money in salvage wood from old buildings. We never drilled down on the particulars of the investment because the man handling it was our neighbor, who assured us of the wisdome of the venture and repeatedly told us to trust him. Imagine our shock one evening when we saw the arrest of this neighbor on the local television news. We came to find out that he had sold the same inventory to several other investors as well as to us!

Experiences such as these affect us on a personal level. Even more, deeply wounding experiences - such as discovering someone has lied to you, finding out your spouse has cheated on you, going through a difficult divorce (either as a spouse or a child), having a "friend" talk about you behind your back, discovering drugs in your childs's room, having your wallet stolen, finding our that your child has been mistreated at day care, or having business partner continually break promises to you - can easily shift an innate propensity to trust into an acquired propensity to distrust.

Just as with blind trust, it's sometimes easy to put on the glasses of distrust. In fact, if we start out wearing blind-trust glasses but then get seriously burned, we often swing the pendulum to the other extreme and trade them in for thick glasses of distrust and suspicion. It seems like a natural response in a low-trust world. It's an approach that's easy to hide behind. It feels safer and less risky and that we're more in control. It can make us appear more careful, more intelligent. It seems more expedient in an urgency-addicted world where the focus is on short-term gains rather than long-term sustainability. Moving quickly to distrust and suspicion is the common response of society to almost any violation of trust because it is the easiest lever to pull and seems to provide the best legal and defensive cover. Two examples are the dramatically increased airport security after 9/11 and the Sarbanes-Oxley legislation following the Enron and WorldCom scandals in the early 2000s. Both have clearly served their purpose, but both have also come at a very high price.

Wearing distrust glasses is easy also because many of us are "scripted" to distrust. Even something as well-meaning as Stranger-Danger - an important program designed to help young schoolchildren protect themselves against predators - can condition us at a very early age to become suspicious, wary adults, especially if we don't ever stop to reexamine ur old scripts from a mature perspective.

A Few Examples of Stranger Danger Rules

  • Never talk to strangers.
  • Never accept candy or gifts from a stranger.
  • Never go anywere with a stranger.
  • Never let a caller at the door or on the telephone know that you are alone.
  • Always try to walk with a friend or a grown-up.
  • If a stranger grabs you, yell for help as loud as you can.
Though we've become very good at recognizing the cost of trusting too much, we're not nearly as good at recognizing the cost of not trusting enough. In fact, we seldom, if ever, even consider it, and most of us wouldn't know how to measure the cost if we did. Though we think we're being smart in taking precautions to protect ourselves against all the things that can happen in this low-trust world, the cost of this approach, can be incredibly high, particularly in terms of prosperity, energy and joy. Whenever there is distrust in a relationship, on a team, in an organization, or in a community, a wasted tax - sometimes a huge wasted tax - is being paid. You can see at least some of the seven common low-trust taxes in many organizations: redundancy, bureaucracy, politics, disengagement, turnover, churn, and fraud.

The cost of trust may on occasion be devastating, but the high cost of distrust is virtually guaranteed. (FERNANDO FLORES - Former Finance Minister of Chile)
Low-trust taxes result not only from the way we see but also from the way we are seen - in other words, not only in our not trusting but also in our being perceived as untrustworthy. Consider the economic cost to countries perceived as untrustworthy. There is a direct correlation between the prosperity of various countries and their trustworthiness. As the Zack and Knack study cited clearly, "investment and growth improve with trust."

Moreover, some companies from nations that are not perceived as trustworthy by citizens of other nations inherit a "country tax" as they attempt to do business on a global basis. A company or brand based in Russia, for example, is likely to inherit such a tax, resulting in increased cost and decreased speed in doing business. Conversely, companies based in nations perceived as trustworthy - such as Sweden - receive a "country dividend" that decreases cost and increases speed.

More specifically, think about the impact to the country of Haiti on the world stage when, in the aftermath of the disastrous earthquake in 2010, a former Haitian leader was interviewed and asked whether there were any institutions in Haiti that could be trusted with donations to help with the relief effort. He replied, in effect, that unfortunately there were no Haitian institutions that could be trusted and encouraged donations to go through international organizations rather than Haitian entities.

Much like countries that pay a metaphorical "country tax," industries that are not perceived as being trustworthy pay an "industry tax." For example, since the global financial crisis of 2008, the financial services industry has seen a preciptous drop in its perceived trustworthiness as measured by people's lack of trust in the industry to "do the right thing." As a result, to some degree almost all firms in that industry are struggling with increased cost and decreased speed of doing business. Thought it is possible to break out of and transcend country and industry taxes, the effort is clearly an upstream swim. 

Apart from inherited country or industry taxes, many companies incur huge taxes based on their own distrustful behavior. One example was shared by one of our workshop participants, who told us about a business that sold sunglasses. When the company changed hands, the new owner discovered that the biggest problem was a shrinkage of inventory, whch was costing him about 2 percent of revenues and directly hitting the bottom line. Clearly, the shrinkage was coming from theft, so the new owner thought, "If we could just eliminate that shrinkage, we could dramatically increase profit." He viewed the situation through the lens of distrust. "Somebody is cheating us. It's either the customers or our employees - maybe both. So we can't trust either of them." He put in place a control mechanism to address the problem. On the racks where the frames were displayed, he placed a tie-down on every frame so that the glasses could not be pulled off. That way, no one could walk out of the store with a frame that had not been paid for. The problem was that now customers could not even take the frames off the rack to try them on. So although the shrinage was reduced from 2 percent to 0.2 percent, sales decreased by 50 percent! Without being able to try on the sunglasses and see how they looked in the mirror, people didn't buy them.

An insurance company we were invited to work with in Europe had been burned in the past by a few customers who had filed fraudulent claims. In response, the company put into place a rigorous, even onerous, process of verification and validation so that whenever anyone filed a claim, the starting point with the customer was "We assume you are a crook and you are trying to cheat us unless you can prove otherwise." Since adopting this approach, it had not been defrauded, but its customers had been leaving en masse. They didn't like being treated with suspicion and distrust and were going to companies they felt trusted them. 

The cost of distrust to companies not only affects relationshps with customers, it also affects prosperity, energy, and joy within and between companies. There's a cost to excessive rules and regulations in terms of both administration and also creative energy. For example, althoug Sarbanes-Oxley has served its purpose to help improve accountability in U.S. companies and restore its confidence to the markets, almost anyone involved in carrying out will tell you the requirements is enormous. For the average company, the compliance cost is more than $2.3 million each year. The cost of Sarbanes-Oxleyis hurting especially smaller firms, for which the burden is more than seven times that of large companies relative to their assets. Compliance regulations have become a prosthesis for trust - and a very slow-moving, energy-draining, and costly prosthesis at that!

Our distrust is very expensive. (RALPH WALDO EMERSON)

There's also a cost to organizations in terms of attracting and retaining talent. The vast majority of people, both managers and workers, want to be trusted, and they want to work in high-trust environments. When they're not trusted, they become disengaged (i.e. they "quit but stay"), or they leave - particularly the best performers. Employee turnover in a low-trust environment is substantially higher than in a high-trust culture. For example, compare the average turnover rate in the supermarket industry - 47 percent - to the mere 3 percent in high-trust Wegmans. Or consider the fact that 25 percent of Fortune's 2011 100 Best Companies to Work For - for which trust is two-thirds of the criteria - had a turnover of 3 percent or less! The cost of turnover to a company can be enormous, ranging from 25 percent to 250 percent of pay. 

There's also a cost in partnering and collaboration, both internally within a company and externally with other companies. According to Gallup survey, the best partnerships are almost all characterized by mutual trust, while in poor partnershps, less than 3 percent strongly agree that they trust each other. In most situations mutual interest is not enough to override mutual distrust.

Without trust, we don't trully collaborate; we merely coordinate or, at best, cooperate. It's trust that turns mere coordination into true collaboration. It's trust that turns a group of people into a team.

Trust is the linchpin of a partnership. With trust, both people can concentrate on their separate responsibilities, confident the other person will come through. . . . Without trust, it's better to work alone. . . . No trust, no partnershp. (RODD WAGNER AND GALE MULLER - Gallup Executives and Authors)
Just think of a typical team meeting in a low-trust culture. You go into a conference room, and you may see meeting rules posted on the wall. They sound like kindergarten rules: "Be nice." "Speak one at a time." "Take turns." A more realistic representation of the rules might be the Miranda rights: "You have the right to remain silent" (because you probably will). "Anything you say can and will be used against you" (because it probably will). It's interesting that even though the United States has a system in which a person is assumed "innocent until proven guilty," people who are picked up by the police are still called "suspects."

Most painfully, there's a cost to distrust in our personal lives. One of the richest experiences of being human is to enjoy open caring relationshps with others. When we view the world through the lenses of distrust, we alienate ourselves. We cut ourselves off from the fullness of the rich relationships we could be having with a spouse, partner, children associates, and friends - even with ourselves.

It is. . . happier to be sometimes cheated than not to trust. (SAMUEL SMILES - Scottish Author and Reformer)
Clearly, although there is risk in trusting too much, there is also a huge risk in not trusting enough. It puts a tax - often a huge one - on every interaction that could be generating prosperity, energy and joy.

(From Stephen M.R. Covey's "Smart Trust")



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