Why Trust Matters

Clients sometimes ask me why they should focus on trust as a business imperative.  Trust, after all, just seems, well, “squishy” and vague like ‘satisfaction’.  “Come on now, focusing on trust really doesn’t help us, does it?” they ask, in an incredulous tone.  The truth of the matter, however, is that trust is very concrete and real.  It is a skill that can be learned.  And the impact of high trust or low trust in an organization is quite tangible with real-world consequences.

As a manager, think of someone you trust at work.  Chances are quite good that communication between you is easy, honest and open.  You may engage with them more often, and discuss new ideas and innovations – trusting that you will get an honest assessment in return.  Decision making is quicker and there are less hidden agendas.  Because you trust this person, you are likely to delegate more responsibility to them, and give them the room to take the project and run with it.  The more the relationship develops, the more the trust.  The more trust, the greater the return.

Now, consider someone whom you do not trust.  Communication takes more time, and has to be carefully measured.  The shorthand you use with the people you trust isn’t there.  Decision making can be a pain.  And when you see this person in the hallway, you might think “gosh, I hope I don’t have to engage too much with this person”.  Moreover, if you manage this person, you delegate less.  And you feel you have to follow-up with them constantly.  In fact, you probably have to hire more people because somehow the work you don’t delegate to this person has to be done by someone, so you have a handful of people doing this work.  Clearly a case of diminishing returns.

If both of these people are on the same team and earn roughly the same salary, the different return on your investment is quite evident (even if the trusted person earns slightly more, there is a limit because salaries are usually banded).  So, the lack of trust is costing your organization money.

This is at the micro level – between you and people you work with.  And if you consider the implications of this line of thinking when you expand it to consider your entire organization, it becomes quite clear that trust really does help a business become more successful.  A good business example of this, writ large, is the purchase of McLane Distribution Company by Berkshire Hathaway some years ago.  Following a two hour meeting, the $23 billion dollar acquisition was finalized in under a month.  Both companies were public and therefore their records could be scrutinized by the public.  Warren Buffet said, “I trusted Wal-Mart (who owned McLane), I trusted the people I worked with.  I knew everything would be in exactly the order they said it would be and it was.  We did no due diligence.”  They saved a lot of time and money because of trust.

You can even extend this thinking further, to institutions such as “business”, “government” and so on.  Lack of trust in the financial markets recently resulted in the biggest recession since the Great Depression.  And lack of trust between banks and businesses and consumers is making our recovery slow and painful.  So, in a future blog, I’ll address how trust is actually a concrete leadership skill.  But for now, it’s important to position the role of trust in your organization rightly:  trust matters.