Would you like your clients to trust you? Presumably you would. And in order to trust you, they must feel that trusting you is a low-risk proposition. They must feel you are trustworthy. Most firms get that.
So, most firms go about trying to appear trustworthy. (The better ones, of course, actually try to be trustworthy, since trust is a hard thing to fake.) This often translates into things such as values statements, corporate social responsibility, efforts at transparency, and programs to enhance customer focus.
All of that is well and good, but those efforts are missing a critical element. Because if all you focus on is trustworthiness—cosmetic or real—then you are forcing your client to take all the risks. And if your client is the one always taking the risks, after a while your client will notice and say, “Wait a minute. I appreciate all of the Boy Scout virtues and so forth, but I notice you never take any risks. And that’s not fair. And so I don’t think I trust you.”
You can be trustworthy to the max, but if you never trust your client, then before too long, your client won’t trust you. And as goes their trust, so goes their business with you.
Trust Is Reciprocally Risky
“The fastest way to make a man trustworthy is to trust him.” That statement is credited to President Franklin D. Roosevelt’s Secretary of State, Henry Stimson, and he expressed a powerful concept: trust is a reciprocating exercise in risk-taking. First one party takes a risk, and the other reciprocates. Then the roles reverse, and the exercise is repeated.
Take the simplest of all trust gestures: the handshake. Smiling I extend my hand to you and say hello, signifying good intentions. You almost certainly return my handshake, smile, and greeting. But you don’t have to.
You could, after all, spurn my gesture, refuse to extend your hand, frown, and turn away from me. I would feel embarrassed, upset, and dismissed. And that would be the end of our budding trust relationship. You probably wouldn’t do that, though. Instead, you would meet my risk-taking gesture with trustworthiness, and our relationship would be off to the races.
Corporate Risk Mitigation
This is not an exercise in corporate anthropology. Think about the context in which you hear “risk” in modern-day business. It is almost always in a negative sense.
Risk is seen mainly as something to be mitigated. Post 2008, financial institutions have laid off layers of employees—except in risk management. The contracting process in nearly all companies has added layers of risk indemnification to its documentation. Lawyers are on hand to ensure not just compliance, but even the appearance of anything that could be considered risky. Insurance businesses are inventing new products to mitigate risk in contracts of all sorts. The last few decades have seen the creation of risk management institutes and certificates in risk management programs.
Despite the protestation that some risk is good (think “risk appetite” or “calculated risk” in the financial world), the emphasis is overwhelmingly on the “calculated” part, not the “risk” part. And once one gets outside of the financial world, it’s hard to find examples of thinking that suggest risk is good.
Execution Risk and Dereliction Risk
The management world is obsessed with avoiding execution risk—the risk of doing the wrong thing. Unfortunately, it makes a pact with the trust devil when it embraces dereliction risk—the risk of not doing the right thing.
We want lifeguards to eschew dereliction risk. If they think someone is drowning, we don’t want them second-guessing themselves. We want them in the water immediately. In basketball, Kobe Bryant is the NBA’s leader in most missed shots. He would rather shoot 4 for 20 than 2 for 5. Another athlete, hockey great Wayne Gretzky, says you’ll never miss a shot you never take—but neither will you make any shots. In all of those cases, they understand the importance of taking execution risks and avoiding dereliction risk.
Yet in business, we are afraid of a hundred execution risks. We fear having the wrong answer, giving offense, looking ignorant, looking foolish, or speaking out of turn. So, we do nothing. And because of our penchant for avoiding execution risk, we absorb dereliction risk, which guarantees failure in the long run.
Trustworthy but Untrusting Does Not Compute
You may be proud of your organization’s record on trustworthiness. But ask yourself these questions to see if you may have some work to do on trusting:
- Do you have onerous non-compete clauses for your employees?
- Do your sales pitches hedge their bets or lead with strong hypotheses?
- Do you make your subcontractors insure you against general liability with no limits?
- Do your salespeople refuse to answer direct questions about price?
- Do you ever admit you don’t know something when asked a straight question?
- Do you insist on client non-disclosure agreements (NDAs) beyond your industry’s norm?
- How many ex-employee lawsuits has your firm been involved in in the past five years?
- Are your tardy account collections handled by accounting or by account managers?
- Would you ever recommend a competitor to a client if the competitor were clearly the better candidate for the job?
- Do you use lie detector tests for employees?
- Do you encourage your salespeople to comment on their own and others’ feelings?
- Do you share your cost information with clients?
- Do you share your supply-chain information with suppliers or clients/customers?
- How many paragraphs of fine print are in your client agreements? And how fine is the print?
- Are your standard client agreements longer or shorter than your biggest competitor’s?
- How do you handle overruns by you with your clients? How do you handle overruns by your suppliers with you? Which is more onerous?
You can be as trustworthy as a Boy Scout, but if you force your clients to take all of the risks, then before too long, they won’t trust you.
This article was originally posted to the Trusted Advisor Blog by Charles H. Green on June 6, 2016.
