Forbes Magazine declares: “Trust is the New Core of Leadership”. The Edelman Trust Barometer touts trust as “an essential line of business.” While we affirm the importance of trust, trust in governments, businesses, the media and even NGOs is declining globally. While there is an abundance of information about building inter-personal trust, information for building maco- or institutional-level trust is fairly scarce. That’s why for the next 12 weeks, I’ll blog about inter-organizational trust, its benefits and how formal and informal governance mechanisms can help your organization build trust with suppliers, distributors, community partners, etc. Why? Distrust is expensive. It limits our opportunities, it increases legal and monitoring costs. Distrustful environments are more unpleasant to be in since humans are pre-disposed to trust. And, a negative spiral of distrust is extremely difficult to reverse so, leaders need to understand and implement trust-building mechanisms.
The issue is urgent. Recently, the 2012 Edelman Trust Barometer found that the number of “distrusting” countries is growing and, if one casts a critical eye to the list of trusting countries (China, UAE, Singapore, Mexico), you might ask whether those are countries where it is unsafe to openly express distrust. Even in ‘neutral’ Canada, “informed publics” give government, business and the media a tepid trust score. In the US – now officially “distrusters” – fewer than 50% of respondents trust any of these institutions.
With accusations of election tampering in Canada, negative political advertising, epic tales of corporate greed and excess in the US, it’s little wonder that individuals’ trust in organizations is in decline. Even in traditionally high trust societies like Japan and Germany (Sako,1997), the meltdown and subsequent handling of the Fukushima reactor and the financial crisis in Europe have led to a sharp drops in individuals trust in organizations.
These trends towards a low-trust societies are a critical social and business issue. From a bottom-line perspective, distrust is extremely costly in terms of requiring additional contracts, regulation and oversight.
In the absence of trust, more time is required to bring projects to completion and opportunities are missed simply because parties could not trust one another enough to risk a new or expanded partnership. The costs of distrust are significant personally, organizationally and socially. For example, if people do not trust the electoral system, they may demand increased oversight or public inquiries. The governing party may have a more difficult time implementing policy because media and the public are looking for their ‘hidden agenda’ simply because the electorate does not trust their intentions. Considerable time and resources have to be spent on over-communicating, meeting, assuaging, etc. before policies can be implemented.
But what do we even mean by “trust”? Academics have been trying to define trust for 20 years and have yet to arrive at a common construct. What is the essence of trust between people? Trust in a brand? Trust in leadership? Trust in the boundary spanner? Trust in regulations and processes?
The fact is trust is like quicksilver – a complex and dynamic construct that evolves depending on the type of relationship, the actors, the context, the history, etc.
Neither academics nor practitioners have their arms around the concept of trust, how to build, maintain or rebuild it. What we do know is that there are different types of trust and different contexts in which it manifests itself. We know empirically and practically that trust has many human, social and business benefits. It is grounded in ethics and benevolence and it can be enhanced by formal and informal governance mechanisms.
Over the next 12-weeks we’ll examine these and other issues to provide practical and research-based insights. The work draws on my recent MA research into marketing, ethics, business strategy and economics literature and will cover:
- Intro: The Declining State of Trust
- Trust: Definitions, perspectives and types
- Interpersonal, organizational & inter-organizational trust
- 22 Benefits of inter-organizational trust
- Ethics: goodwill at the heart of trust
- Using formal governance mechanisms to build and maintain trust – Part A: Hierarchy, Monitoring & Contracts and Part B: Transaction Specific Investments
- Using informal mechanisms and relational norms to build and maintain trust – Part A: Common norms, values & goals; Part B: Joint planning & problem solving; Part C: Bi-lateral communication
- The role of reputation
- Do you trust boundary-spanners or the organization itself?
- 12 Downsides of Trust & Mitigating the Downsides of Over-trust
- Can an organization have solid inter-organizational trust without organizational trust?
- Practical applications for leaders
I hope you’ll share your thoughts on these posts and perhaps propose some catchier titles!
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