Book excerpt: how lack of trust destroys value - but why it is so common

This is the first chapter of our book ‘Choose Trust’, to be published by Economist Books. It sets out how distrust reduces your effectiveness as a leader, salesperson, teammate or buyer - but why this is so common in the workplace.

" A man who trusts nobody is apt to be the kind of man nobody trusts.” Harold MacMillan, British Prime Minister

In 2002, after 89 years in business, Arthur Andersen ceased to be an auditor. Before it became embroiled in a major scandal involving an energy firm, Enron, it had 28,000 US employees. By the time it was forced to relinquish or revoke its licences to operate, that number was down to 3,000.

The company, one of the Big Five global accountancy firms, collapsed in a matter of months. Accusations that they had turned a blind eye to the Enron leadership’s accounting fraud, and then obstructed justice by shredding documents, created too big a scandal to survive.

Despite the fact that this conviction was reversed, and only a tiny proportion of the Arthur Andersen firm were involved, the damage had been done. The reputation of the whole organisation was in tatters. Despite its huge global presence, a giant of the financial system collapsed all too quickly once it lost its most important asset: trust.

The company had always stood for ethics and honesty. Its founder, Arthur Andersen, originally built the business “by putting reputation over profit”. So, what had changed?

A 2002 article in The Wall Street Journal summed it up like this:

“Andersen leaders responded (to pressure to perform) by pushing partners to become salesmen -- upsetting the delicate balancing act any auditor must perform between pleasing a customer and looking out for the public investor.”[1]

It’s an extreme reminder that trust is the basis of all relationships, at work as well as in life. In the pursuit of immediate profit, the individuals at Arthur Andersen had been encouraged to act in ways that compromised relationships based on trust. The cumulative effect was enough to bring down an entire organisation.

Once you no longer trust someone or something, you lack confidence that any promise they make will be kept. If they appear untrustworthy, you avoid them. When you have a choice, you look elsewhere for the service they provide. Or, if you have to deal with them, you do so in a very transactional way, checking everything and only giving what you have to so that you get what you need or want.

The Collins Dictionary defines trust in a useful way, through a series of sentences:

“If you trust someone to do something, you believe that they will do it.

Your trust in someone is your belief that they are honest and sincere and will not do anything to harm you.

If you trust someone’s judgement or advice, you believe that it is good or right.

If you say you trust that something is true, you mean you hope and expect that it is true.”

For most people, this is a simple statement of how you want to be seen by others. In your working life, it is important that, to a greater or lesser degree, these statements are true about you. And, it’s important that you see others with whom you work in the same way.

Consider the opposite of all of these sentences. Instead of ‘trust’ put in ‘do not trust’ and consider the opposite of what you expect or believe as a result. Where this is true, it is deadly to commercial and professional relationships. Here’s what it looks like.

“If you do not trust someone to do something, you believe that they will not do it.

Your distrust in someone is your belief that they are not honest and sincere and may do something to harm you.

If you do not trust someone’s judgement or advice, you believe that it is not good or right.

If you say you do not trust that something is true, you mean you do not hope and expect that it is true.”

Most people would not want anyone to say any of this about them. And yet this crucial factor is often overlooked in the way people work together. They focus instead on what is to be done, how much it will cost and how well the work will be carried out.

Whole countries suffer when outside investors no longer trust the actions of the government. That corner store you used to use suffers if something happens that causes you to no longer trust what they sell or how they sell it – and so you no longer choose to shop there. At the most personal level, if someone betrays your trust, then whatever joy you created together will not be repeated.

Exercise: who do you trust, why and what impact does it have?

Think about who you do not trust.

Is there an organisation or person you deal with only grudgingly, or simply because it is convenient or necessary to do so? And, if this is the case, think about what they have done – or not done – to put you in this frame of mind when dealing with them.

It may be a landlord, a colleague or boss, a company you buy goods from, a utility that provides you with something you need, a shop. What did they do? How do you behave when dealing with them? Consider the impact this has on your willingness to do anything for them that involves some discretionary behaviour on your part.

For example: if this is your boss, will you go the extra mile when asked? If it is a company, when you pay them – how do you feel? Do you resent it or are you happy to pay for the service or goods provided?

And, if you were that person or organisation, is that how you would choose for your customers, colleagues or investors to feel about you? Think about the value that is destroyed when this situation exists, when there is no trust, simply a transaction.

Now think of the reverse.

Consider someone or an organisation or company you trust. How does your behaviour differ? What have they done – or not done – to make you behave in this way? And wouldn’t you want others to feel that way about you? Wouldn’t you choose to deal with others who give you this level of confidence?

Think about the difference

That difference is the outcome of trust, whether it is there or absent. It is inconceivable that you would choose for others not to trust you, your team or organisation. Yet you will have thought about people or companies that destroy trust daily, and it is probably true that, if asked, they would say the same. They think they’re trustworthy. Yet you don’t trust them.

When you do this exercise, you may find that the central reason trust does not exist is when your relationship or engagement with others is transactional in nature. In other words, the person or organisation deals with you in a way that is functional and focused on what you do for them, and they do for you. It may be that what you do is simply hand over cash in return for a product or service. Or vice versa. They may be your employer paying you money for your work.

If trust does not exist, then you will do this until you get a better job. You will calculate the value of the transaction and continue until there is a better one. They may do the same: keep paying you until they do not see value in keeping you. And you know it. So, you do not trust them.

Similarly, you will continue to shop at that place until you see a better option. Where you have discretion, you will use it to change without thinking twice. Compare that to shopping at a place where you really believe in the good intentions of those selling to you, and the experience is a good one. That’s a relationship you’d be sorry to lose, to the extent that you will might typically be less price conscious as a result.

This leads to the question: do you really know how much others trust you or your organisation?  

Once, when the village was the typical place to live and its inhabitants worked and shopped locally, every person had to protect their reputation because they lived with the consequences of any betrayal of trust for the rest of their lives. The world today is so very different – and many of the factors that have led to a highly transactional mindset are relatively recent.

How did we get here?

‘My Word is My Bond.’ It remains the motto of the London Stock Exchange, but the idea on which it is based was swept away in October 1986. The Big Bang in the City of London changed the rules about who could or could not trade stocks and shares in London, and led to a wave of takeovers and mergers, many involving overseas banks, that swept aside a culture that had developed over centuries

In the old world, personal relationships between brokers and jobbers was key. Trust was critical to the system, and without it you could not do your job. After 1986 the move towards a highly transactional, impersonal trading system was inexorable and personal trust was no longer a major factor in success. 

The Big Bang paved the way for new digital trading and provided the foundation for a boom in fast-paced transactions that have accelerated, driving stocks up and down at a new pace. Those running listed companies continually focus on volatile stock prices, a system which rewards short term decision making and eye-catching initiatives that may be attractive to transactional investors but can destroy trust among customers, employees and partners.

It's a story that is reflected in the way businesses are financed across the world, however they are set up. The pressure to perform quickly and demonstrate continual growth has led to an increasing focus on short term results and transactional behaviour.

Such specialisation and the drive for efficiency has its roots in the Industrial Revolution.  Instead of small local firms doing everything, larger businesses grew up which focused on one thing and did it brilliantly. This division of labour, international trading and empire-building led to complex supply chains where the users of a product or service had little or nothing to do with the people who contributed to its creation. 

In the professions – accountants, lawyers, engineers, architects – new firms were founded by experts who recruited like-minded people and built their success on selling that expertise into the market.  It’s been a story of success that has a history of over 150 years based on building into the system the idea that expertise can be traded as a commodity like any other.  

As organisations got bigger, they became less personal. The relationships of trust which were critical to a small marketplace got lost in the drive for growth, expansion and financial success.

The rise of the joint stock company – the basis of every limited and listed business today – meant that investors too were no longer directly connected to the firms in which they invested, and vice versa. Stock in a company became itself a commodity to be traded, its value varying depending on many different factors, not all related to the fundamental performance of the business.

Yet as recently as the first half of the 20th century many businesses still behaved according to a strong ethical base. They were led by their founders and underpinned by the strong personal connections that remained a feature of most commercial activity, which largely remained local in nature.

Hyper globalisation after the second world war began to loosen the ties. Technology ripped them apart. The impersonal trading that took over stock exchanges was mirrored by the systemisation of every aspect of business. In the digital world the numbers are what count, and this drives behaviours and intent in every aspect of our working lives.

Covid accelerated history to the world of Zoom, Teams and Google Hangouts. When it all began, many people felt it was great that they could see into each other’s front rooms – wasn’t this personalising business again? But the reality is that this means of connecting moves us even further into a transactional world where every conversation has a purpose and participants take it in turns to speak. Now there are fewer ‘water cooler moments’ which result in human to human, casual conversations.

The result of all this? Many of your customers, employees, colleagues and teams feel disconnected. They view you, your company, its products and services, and their connection with it, as a transaction that they continue while it serves them. And you may view them in the same way. 

As you will see, this leads to bad leadership, salespersonship, colleagueship and partnership. It results in poorer service and much lower value creation. But it also creates an opportunity for people and organisations who go in exactly the opposite direction of travel: to focus instead on building trust, behave in ways that demonstrate that and get rewarded by the value created because they are trusted and more able to trust those with whom they work.

This somehow feels like an old-fashioned concept, dating back to those days when we were all local and accountable to our neighbours. It is. And yet it is also a totally modern idea because consumers, employees and colleagues are becoming alienated from low trust engagement and increasingly choosing to spend their time and money where they feel higher levels of trust, purpose and integrity.

The destruction of value: the transactional mindset

Time and again in the world of work, trust is damaged by this transactional mindset. It’s an approach that focuses on the ‘facts’: the numbers, the deal, the contract, what one person is buying and the other selling, whether that is a good or service or their labour and time.

To trust is a fundamentally human to human emotion which was once the foundation of all commerce. But the way businesses are now measured and controlled puts pressure on everyone to focus on transactions.

From the earliest ledgers to the most recent complex accounting systems, success is judged by a list of inputs (costs) and outputs (revenue), and success is based on the difference between the two.  Business is analysed down to the transaction – the focus is on deals, not customer relationships, profit per month, quarter or year, not employee or customer lifetime engagement. If you are a listed company you are judged by the daily stock price and its trend, not the success of your vision.  

Under pressure, companies seldom, if ever, reflect on their vision or their strategy. They revert to age old donkey leadership – carrot and stick – focus on cost reduction and squeezing the assets (mostly people) and respond by analysing how they can carry out more transactions at lower cost. And when they are successful, what gets rewarded most often are the biggest transactions rather than the biggest contribution to the overall vision.

It's therefore no surprise that the people within this system are led to think and behave transactionally.  They focus first on their own success, not that of the broader team, and not that of their customers and clients. In low-trust, transactional situations like this, collaboration is difficult even within teams, let alone beyond them.

Does that sound familiar? Just by recognising it you can probably immediately see the difficulties that result. But let’s look at this in more detail. 

The impact of a transactional mindset

In his book ‘The Speed of Trust’, Stephen MR Covey identifies that low trust has a very predictable outcome: that the speed of interaction falls and costs rise.  What does this mean on the ground at work? As you read these examples, reflect on the extent to which they are familiar to you in your own experience.

Transactional leadership

You may have experienced low trust leadership, sometimes called Command and Control. Despite many warm words to the contrary, some or all of these behaviours are still common. 

Typically, low trust leaders set goals and supervise based on lag measures – revenue, profit, costs.   

They don’t create a compelling vision; they measure goal achievement and manage accordingly.   Because of this, they take no responsibility for whether the goal is achievable, which means they cannot be clear on how these results should be achieved.

When things go wrong, you really see how low trust leadership damages relationships. In an interview with Nicholas Hale, Group CEO of Movera  – which dominates a specific area of property contract work in the UK – he said:

““You’re going to have stakeholders that pop up when everything’s brilliant, they pop up in more voluminous ways when things are not going well, and they’re silent in the middle. But if you really want to build trust, you need to be there through the whole journey.”

Nicholas has worked at various major companies in senior roles. He remembers one example where transactional leadership above him destroyed his trust in them because of how they behaved when he was facing a challenge. His team deployed a massive technology change. On 70 different sites it worked perfectly, then, at the biggest location, which was processing 50,000 customer orders a day, someone flipped the button on a Monday morning. Everything stopped.

What followed demonstrated to Nicholas how not to lead. He found himself spending as much time managing upwards, to people who failed to extend trust to him and his team, as he did sorting out the problem. As a result, the issue continued for three weeks. His conclusion is stark.

“In a bad moment, trust people more. Don’t trust them less, because if you trust them less the impact on their ability to perform, their mental wellbeing, the way the show up and the way they implicitly cascade their behaviour onto the rest of the team is deeply unhelpful.”

 People at work often have choices. They expect leadership to be trusting and trustworthy, engaging, collaborative, giving them input and ownership to the work they do. Many leaders aspire to this style of management but struggle to deliver. This book will look at ways to do this.

Colleagues in low trust environments

The psychologist B.F. Skinner is the person who first coined the phrase ‘positive reinforcement’. Considered the father of a psychological discipline called behaviourism, he saw human actions as dependent on the consequences of previous actions. It now seems a simple idea: if the consequences of an action are bad, there is a high chance the action will not be repeated; if the consequences are good, the probability of the action being repeated becomes stronger.

 In other words, human beings learn what happens when they act in a certain way and, if this is a positive experience, they do more of it. Think about how children are typically taught ‘right’ and ‘wrong’ behaviours. They are rewarded when they do the ‘right’ thing, punished when they do the ‘wrong’ thing.

 At work, people learn quickly what is deemed right and wrong. If there is a win-lose culture based on top-down goals, carrot and stick leadership, and transactional behaviour, these behaviours and culture will be replicated elsewhere.  Even if colleagues like and trust each other on a personal level, they know that the expectation is that they should behave differently professionally.  Where transactional behaviour is encouraged and rewarded, the result is a culture based on low trust.

 This shows up in familiar ways.

·       Departments or individuals focussing on achieving their own goals, whether that helps the organisation meet its vision or not - sometimes even at the cost of other people or teams.   For example: salespeople complain that delivery teams don’t build relationships for them to piggyback on; delivery people complain that what the salesperson has promised cannot be delivered, or at least delivered in a way which meets their cost and margin goals; someone overpromises to a customer and the team has to simply work harder to deliver on this.

·       Different teams compete for scarce resources at budget time – often bidding for more than they need to make sure their needs are covered.  Inevitably, in this win-lose environment, some teams will be under-resourced while others are in surplus, which reduces the likelihood of overall success.

·       League tables celebrate ‘winners’ and denigrate ‘losers’ without any understanding of the complexity that may sit behind these simple numbers. The focus here is on competition, not collaboration, and that is not an environment to create trust.

·       Innovation is stifled because the high levels of openness and collaboration it requires is lacking. Innovation flourishes when people feel able to be vulnerable so that they can try new things and put forward ideas, comfortable that this will be welcomed. The opposite of a trust environment for innovation is a blame culture, where people feel inhibited about sharing new ideas and thinking in case things go wrong and they are stigmatised as a result.[CG1] [SM2] 

·       People behave as though they are in a gig economy, selling their time to businesses transactionally.  This can work in the short term but over a longer period it risks potential innovation, knowledge within the business and choice about who stays and goes.

 At its core, these are often symptoms of a failure to engage with a vision that creates a big picture that people understand. People ‘play narrow’, focused on their targets or customers, with no reference to a broader ambition for the organisation.

Yet every organisation of every size has a stated ambition of being unified, ‘one company’, with the ability to take advantage of economies of scale across different departments and teams. This book will look at how to achieve this.

Transactional selling

There’s someone at the door. When you answer it, it is clear he wants to sell to you. He tries to engage you in conversation, to connect, to explore your needs.

What is your reaction?

Most likely, you’ll have a similar reaction to most people: to put up a barrier, make it difficult, resist and be suspicious, be on your guard. No-one wants to be ripped off, and this is the danger that a salesperson represents.

In response, salespeople develop ever more sophisticated tactics. They learn clever sales techniques, find a way to grab your attention, maybe even exaggerate the benefits of what they are selling to get the sale. 

What should be an exchange of value becomes a battle of wits, with the walls between the parties getting higher and higher. Even large companies with major needs deliberately make it hard for people to sell to them and try to use procurement techniques to beat up suppliers on cost. The incentive is to quote low and then ramp up prices when the job is won through change notices, new issues or add-ons.

Can you think of a more transactional situation than this? It is literally a transaction, and the result is that neither the buyer nor the seller gets the maximum value from the process. Trust is damaged and, instead of an open, collaborative approach to finding the best solutions, the parties focus on the deal or the sale. Often, this results in things going wrong when the product or service is delivered  because the best solution was not chosen - and guess what happens? Trust is further damaged.

Yet, many hold a belief about selling which is founded in a lack of trust, often compounded by tough targets to close deals. The result is that they focus on this more transactional mindset rather than on the fundamental needs of customers.

Tackling the mindset

If you want to change an outcome, it’s tempting to focus on what people are doing – their actions. But that’s not the place to start. What matters are the beliefs that drive what people do, and they can be limiting or empowering.

Whatever outcome is achieved usually serves to reinforce those beliefs, a process known as confirmation bias – the ability of the brain to preference data that supports its expectations, and to ignore contradictory evidence. 

If, in the case of selling, a buyer has the limiting belief that a salesperson is untrustworthy, this leads to defensive behaviour. The action that results is that buyers restrict access, information flow and time to avoid being ‘sold to’. This is true whether the purchase is a consumer good or a business deal.

By so doing they restrict the ability of the salesperson to really understand them or their business and they often get lower quality solutions than may have been available. That is the outcome.

Confirmation bias kicks in. The results reinforce their belief that they should not have trusted the sales process, and they raise barriers further. In large businesses this shows up as formalised procurement processes that are inappropriate for the acquisition of complex services and goods.

Salespeople, met with the barriers, driven by goals, take a self-interested approach to try to meet their own needs.  By becoming self-serving and deal-focused they confirm the bias buyers have - and so the transactional nature of buying and selling is reinforced.

Salespeople who transact will still sell, of course, reinforcing their beliefs about what works. But the opportunity to grow with the customer has been lost. This book looks at how to change the dynamic by embracing a different set of beliefs, with trust and trustworthiness at their core.

The transactional supply chain

Many supply chain arrangements founder, or at least produce suboptimal results, because they exhibit so many of the same low-trust behaviours that are seen within organisations and between customers and suppliers.

A supply chain is a combination of organisations providing products and services that together make up the final thing bought by the end user. Those in the supply chain are effectively the ingredients of the final product.

The final outcome depends on every link in the chain, so there is real interdependence between the different companies involved. But that is not how it can feel. More often, the primary company purchasing the services acts exactly like that – as a buyer- and so that what they get in return is suppliers selling to them. Those transactional behaviours mean that both sides remain cautious and risk averse. They focus on the contract as the basis for how they work together.

The crazy thing is that the power balance often shifts once the purchase is made. The buyer becomes dependent on the seller to produce the final product or service, but if they have demonstrated a complete lack of trust at the purchasing stage, they will suffer the results in delivery.

Command and control contracting is the norm. The prime contractor or customer looks to maximise the value they generate from their suppliers by imposing tight restrictions, performance clauses and penalties for under performance. They crush suppliers on cost.

One of the real failures of this approach is that suppliers are often hired in parallel, rather than in any collaborative process. They may then be expected to work together, or at least coordinate their activities, but have competing interests. In this situation, there is no incentive or mechanism for the different elements of the supply chain to collaborate. They may meet contractual obligations and, if the buyer has synchronised everything perfectly, this will work. 

But then the real world intervenes. Something changes, or a link in the chain has difficulties, and this is the opportunity for one or more of the other suppliers to ask for more money or time because something happened that was not their fault.

In this situation, supply chains can demonstrate the worst of all the behaviours seen both internally and externally in organisations. Everyone in the chain is meant to be on the same side, producing an end-product or service, like colleagues in a single organisation. But when they are set up as transactions, they behave like distrustful buyers and sellers, focused on their own commercial interests. This creates vulnerability and far less value than would otherwise be the case if they collaborated and worked as a cohesive team, tackling issues together.

Changing the mindset

This chapter has shown why and how trust can be so easily destroyed between buyers and sellers, leaders and the led, colleagues within organisations and suppliers and contractors. The move from small, community-based commerce to national and global trade has led to technical specialism and a focus on transactions, rather than relationships, as the basis for the economy.

 Yet in each specific situation this destroys value.  

 So, what can you do about this? That is the subject of the rest of this book. Moving away from a transactional approach in business to trust-based relationships is not something that one can simply tell somebody to do.  Everyone understands the importance of trust, but people often don’t think to apply that knowledge in their day-to-day working lives.  Building trust and trustworthiness takes work; you have to be intentional about it if you’re going to challenge your own and others’ beliefs and confirmation bias to change how you work.

And that’s why the book now focuses on why and how you should consciously, intentionally and deliberately choose trust.