Trust and Speed

In Associations Now, Newton Holt interviews Stephen M.R. Covey (son of the other Stephen Covey), who has a book out about trust in the business world. I particularly liked his response to Newton’s question about how to talk about trust to utilitarian people who see trust as “soft.”

More than anything, the trust message needs to be framed to the ultra-utilitarian, and to all of us, in economic terms rather than in moral terms. The economics of trust are as follows: Trust always affects two measurable outcomes—speed and cost. When trust goes down in a relationship or in a company, speed goes down and cost goes up. This is a tax, whereas the opposite is true as well: When trust goes up in a relationship or in a company, speed also goes up, and cost comes down. This is a dividend. It’s that simple, that real, that predictable.

I’ve written about trust in a few different places—most recently in an article with Madelyn Blair for the Journal of Association Leadership. But I also did an academic paper on it during my graduate studies in conflict resolution, and one point from that paper has always stood out for me.

We use trust (and distrust) to deal with complexity. As we move through the world, we know that anything might happen. The “other” (person, company, coworker, etc.) might act against your interests or they might not. They might do as they say they will, or they might not. We can’t account for all possibilities (it’s too complex), so trust simply eliminates some of the possibilities. But so does distrust. Distrust isn’t just the absence of trust, it is the functional equivalent of trust. It reduces the complexity, but by choosing the “negative” path for the other.

That’s where the speed issue arises. By choosing the negative path, you then have to do all kinds of extra work to protect yourself. That takes time and money in organizations. Trust (assuming the “positive” path for the other) then frees up time and money because you don’t have to protect yourself as much. This is why trust is such a valuable thing. Everyone has less time these days, so maintaining high trust can be a huge competitive advantage.

Comments

[Chris Bailey]

Good stuff and I'm a believer. And it looks like the beginnings of a dialogue we can begin with our utilitarian peers. The 'economics' of trust might have an equation associated with it. I don't suppose there is more to the article that offers proof of concept? The utilitarians among us are also the ones who desire proof over faith.

[Jamie Notter]

Yep! The author says:

The data is overwhelming. A Watson Wyatt study showed that high-trust organizations outperformed low-trust organizations in total return to shareholders by 286 percent. The "100 Best Companies to work For [as ranked by Fortune Magazine, of which mutual trust is the primary defining characteristic, outperformed the S&P 500 by over 400 percent over a seven year period. (and there's more).

[Chris Bailey]

Oh for goodness sake...Jamie, you should have just said, "Look at the link that I lovingly placed in the post so stooges like you can read the full article for yourself." :) It's truly is a great interview from Newton. Yet another book to add to my wish list.

[Jamie Notter]

Hey--we aim to please! :-)

[Newton Holt]

Hi, Jamie--very glad you enjoyed the article! I'd highly recommend the book to anyone who is skeptical about the role such so-called "soft" elements play in business relationships. Covey's argument isn't just compelling; he also has an empirical as well as rhetorical basis to stand on, as the Watson Wyatt numbers show. Check out his website, www.speedoftrust.com. Lots of complementary material there to go along with the book.

[Suzanne]

Newton and Jamie, I extend the deepest thank you for your support of The SPEED of Trust. We are on a mission and you are certainly creating waves. Stay in touch as the best is yet to come!

[Suzanne]

Newton and Jamie, I extend the deepest thank you for your support of The SPEED of Trust. We are on a mission and you are certainly creating waves. Stay in touch as the best is yet to come!