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Trust: The Quantum
Competitive Advantage

   From Built on Trust: Strengthening Leadership Culture training course

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Today, trust is more than a highly esteemed human value. It is one of the most powerful forces available to us in business. We are a society in search of trust. The less we find it—in our personal interactions, in government, in commerce—the more precious it becomes.

An organization in which people trust one another, and which commands trust from the public, has a competitive advantage. It can draw the best people, inspire customer loyalty, reach out successfully to new markets, and provide better, more innovative products and services.

What many people don't realize is that you can intentionally create trust in your organization. You can drive a culture of earned trust that includes everyone in the company and harvests opportunities to increase productivity, profits, and job satisfaction with virtually no cost to you. In this book, we will give you a model for creating that culture, and show you how to work with its two most powerful components—closure and commitment.

What we offer: The book Built On Trust is about building genuine, earned trust in your organization deliberately and systematically, using a proven model based on our combined fifty years of experience. We offer you the revolutionary premise, and promise, that you can actually create a culture of trust in your organization. You don't have to let your organizational culture develop randomly. When this happens, the vacuum often fills with fear, greed, hallway buzzing, and other negative dynamics. The alternative is to design and promote a trust-based culture consciously and systematically, using the principles and steps in this book.

Our Trust Model contains six essential areas that must be addressed in order to build a culture of trust: closure, commitment, communication, speedy resolution, respect, and responsibility. We will show you how to shape guidelines for your organization in each of these areas, and how to use even the process of developing, implementing, and maintaining these guidelines to build trust among your team.

IBM was one of the first major corporations to learn the value of trust. Over the years of their market dominance, they inadvertently developed a culture which punished sound risk that failed. Some people became very careful—more careful than they were creative. They played defense, watched their backs. A rigidity grew, partly based on a sense of entitlement. Innovation suffered. By the late 1980's, some were more concerned with looking good to top management than they were with market performance. The result was that IBM began failing in the market. When they examined their culture, they discovered how much damage the risk-aversion dynamic had caused.

Beginning in 1991, IBM developed risk guidelines that enhanced trust, and executed one of the most dramatic turnarounds in business history. In this book, you will learn how to use one of the most powerful forces on Earth—the ability to trust and be trusted—to generate a dynamic team culture that makes your organization more innovative and self-starting, less fearful of sound risk, and competitive beyond what you thought was possible.

Authentic trust, valid trust, trust felt in the gut, can transform the work experience along lines that people are just beginning to imagine—and give you a competitive advantage you couldn't get any other way. This book is for existing teams facing new challenges, for new teams in the process of being formed, for mature teams going through reorganizations, for already successful teams striving to be even better, and also for teams that are immobilized and may require entirely new strategies in order to survive.

If you want the greater productivity, higher performance, and synergy of people working together toward genuine common values that bring a quantum competitive advantage in business, then this book is for you. You can read this information over the weekend and begin implementing it on Monday morning. We will show you how to get started right away; how to find the highest payoff areas; how to minimize destructive misunderstandings, misalignments, buzzing and trashing; and how to gain a new level of intelligence from your team—usually in a matter of weeks.

The New Competitive Edge. Free markets demand that we keep our competitive edge. But to the business manager scrambling to keep up, Adam Smith's "invisible hand" often feels more like a clenched fist jammed into the small of his or her back. One after another, management theories emerge and capture the collective imagination of the market, only to fade from sight. The business books lined up on our shelves can read like a fashion parade passing in review. Perhaps we are stuck.

We have been preoccupied for most of this century with the notion of organization as machine. This model deals only with what can be observed, measured, manipulated, structured, and modified. Early fascination with time studies—organizations as clocks and people as cogs—gave way to Business Process Re-engineering and Time-Based Competition, both essentially mechanistic perspectives on how to win in the marketplace. Even our language reflects the idea of organization-as-machine.

We speak of systems, hierarchies, structures, processes, interfaces, and cycles. We step on the gas, take off like a rocket, smack one out of the park, turn up the heat, restart the program, and hit the wall. We seem trapped in a mind-set of externals, pursuing the management program du jour to try to squeeze a little more blood out of something that looks increasingly like a turnip.

New business thinking looks for competitive advantage in the realm of the human spirit. As we step into this new territory, we begin to deal in meaning, trust, inspiration, depth, paradox, transcendence, and connection—as well as with their dark-side counterparts of doubt, fear, conflict, isolation, and just plain feeling stuck.

Some striking case studies are emerging in this new realm. From Vermont, Ben and Jerry explain the philosophy that helped them build a $160 million international business on ice cream: "...a values-led company earns the kind of customer most corporations only dream of—because it appeals to its customers on the basis of more than a product. It offers them a new way to connect with kindred spirits, to express their most deeply held values when they spend their money...buying a product you believe in transcends the purchase.

"The Trust Model" combines the practical needs of the organization with the individual needs of people working in teams. It infuses solid business structures with a spirit of trust. It works both with the visible external systems and with the invisible emotional dynamics that are always in play when people work together—and it focuses this powerful combination of form and substance directly and specifically toward trust. This is what gives Trust Model organizations their quantum competitive advantage.

Barbara was a Senior Vice-President of Product Development in a Trust Model company. One of their principles was that she could speak up if she saw that her CEO was making a mistake, or about to make a mistake. The fact that she felt comfortable doing so, and even felt an obligation to do so, added her intelligence and abilities to his—and saved the company from making serious mistakes on several occasions. It was a perfect example of an external, visible system (their relationship on the organization chart) being enhanced by guidelines for invisible emotional support that helped Barbara, the CEO, and the company succeed.

What is Trust? One reason the Trust Model produces extraordinary results is that it is designed to meet trust on its own terms, and to work with the very nature of trust. Trust is a dual concept. It has both a feeling or emotional component, what Webster's calls "assured anticipation; confident hope," and an intellectual component. This intellectual component is based on a track record of performance that confirms trust, or "assured reliance on another's integrity, veracity, justice, etc."

The active result of trust is confidence—in the honesty and reliability of the company's leadership. The passive result is the absence of worry or suspicion. Trust, then, is confidence, the absence of suspicion, confirmed by track record and our ability to self-correct. The Trust Model not only covers all these bases—emotional and intellectual, active and passive—but it also works quickly, which is essential for success in the marketplace.

We know that it can take up to two years to establish trust between individuals. This is why we reserve our greatest trust for our most established relationships—our family, our long-term friends, and our social circles. But in business, we are in a hurry. Time is of the essence. Two years includes eight financial quarters, more than enough time to perish in the current economic climate. We need something faster and more efficient.

The premise behind the Trust Model is that people are willing to trust more quickly when principles that promote trust have been explicitly and universally adopted by the team. And they are willing to continue that trust for as long as people's behavior, particularly the behavior of key leaders, is consistent with those principles. Provisional trust, confirmed by experience, then deepens into institutional trust. So rather than waiting two years to establish trust among the team, the Trust Model lets you establish a substantial level of trust in only a few weeks, the time it takes to develop your particular adaptation of the Trust Model, and a short period in which people watch others (especially the leaders) demonstrate their adherence to it.

It's "Bigger Than Any Of Us". For the Trust Model to work this quickly and effectively, it has to be "bigger than any of us." No one in the organization can be above it, even and especially the leadership. We build into the Trust Model evaluations that are frequent, and include everybody. These evaluations are objective, explicit, open, and not easily evaded. In fact, evasion defines non-compliance, especially when it is attempted by leadership. Since there is no hiding, the team quickly understands exactly how committed the organization is, or is not, to trust as a central principle.

People know the Trust Model is working when trust is more important than any personality, no matter how charismatic, in the organizational culture. It even provides a screening process for selecting new team members, since it clearly defines how the organization will conduct its business. When Tom ran Pretty Good Privacy, for instance, he would always spend about an hour with prospective employees just talking about Trust Model principles—closure, commitment, communication, speedy resolution, respect, and responsibility. They were always surprised when he spent so much time talking about these principles, rather than about specific job responsibilities, but the result was that he hired people who were committed to these concepts, and who were on the same page with one another and with the company. They enjoyed an extraordinary level of unity, because they all thought the same way about trust. They became a community that is still a close personal network, even though many of them have gone on to different companies.

Trust Elevates Performance. When the organization trusts its own, starting with its leadership, a culture grows up that dramatically enhances individual and organizational productivity, and makes the competitive advantage both self-sustaining and self-renewing. It is alive in every moment, active in the spirit of the people who are doing and managing the work.

This is how it works. Stan is a design engineer helping to develop a hot new digital product. As he works, he realizes that a certain new feature will make the product much more attractive to customers—and even expand the market. This is his dilemma: Should he, or should he not, run his idea for the new feature by Marketing? If he trusts the Marketing people to respond objectively and competently, and to respect his desire to contribute even if they don't agree with his idea, then he will probably run it by them. If he doesn't trust that they will respond in this way, he probably won't. He'll either forget about it and just stick to his job description, with the result that the company may lose an opportunity—or he may go ahead and implement the feature within his own engineers' circle, with the result of wasted time and effort if it doesn't work for some reason, or if he is wrong about the marketing advantages.

People have only recently begun to study the role of trust in business. Fukuyama examined the differences in economic prosperity among different cultures and concluded, "A nation's well-being, as well as its ability to compete, is conditioned by a single, pervasive cultural characteristic: the level of trust inherent in the society." In our current global struggle for economic predominance, he believes that "social capital represented by trust will be as important as physical capital." Putnam builds on the notion of social capital, "features of social organization, such as networks, norms, and trust that facilitate coordination and cooperation for mutual benefit." He examines differences in economic well-being in different regions of Italy, and traces success to an abundance or lack of social capital.

We believe that the same principles apply in individual businesses, that trust represents enormous social capital with consumers. Further, we know that the social capital of trust works within organizations to create connections and cohesion among team members, which leads to greater productivity.

Fear Or Trust: Which Is More Powerful? Which makes people more productive—fear or trust? Many corporations have used fear to keep employees "in line" and "on their toes." They have overtly or covertly encouraged people to compete with one another so that they "stay sharp" and keep in "hunting trim." But more often than not, they are finding that this philosophy reaches a point of diminishing returns very quickly.

Jim was president of a subsidiary of an Eastern high-tech organization. He had a strong personality, and a very strong ego. He ran his ship without help, using liberal doses of fear and intimidation. Senior personnel at the parent company called him "Old John Wayne," but never to his face. People who reported directly to him resented him, and people at the parent company were intimidated by him, but his style was overlooked because of his success. His habitual response to inquiries was, "Everything's fine. If you don't like the profits, sell us!"

Gradually, the abyss between the subsidiary and the parent company widened. Jim's staff stopped questioning him, and was afraid to report information that was "bad news." This meant they couldn't deal with changing market conditions, or with the warning signs that were beginning to surround the business's highly volatile financial transactions. The result was a mixture of financial disasters and ugly behaviors. Because of Jim's style, many of those around him had been waiting for his fall. When his underbelly was finally exposed, these people just wanted to "get him," and he was eventually fired. It took four years of diligent effort to overcome the residual attitudes created by his reign of terror, and to turn the company around so that it succeeded.

Trust is a far stronger, and more reliable, motivator than fear. In the presence of trust, people can tap into the power of true teamwork. The foundation of our work is leadership teams bound together by creating and maintaining an overarching set of trust principles. In these teams, the lines of communication among team members are consistently open. Contributions are given and received readily, and there is an assurance that at least most of the members are "for" one another. Earned trust, rather than fear, is the binding agent for this team.

The Leadership Team. The leadership team becomes a new kind of collective entity, one that is vastly superior to the sum of its individual participants. When teams experience the creativity and synergy of coming together around a common set of principles, the result is a passionate dedication to productivity that empowers each individual, the team, and the organization as a whole.

In fear-based environments, we only reveal what we feel is safe. That may be only a small part of us, and the leader ends up trying to conduct a symphony of one-string instruments. We worked with one high-tech company in Silicon Valley whose success depended on keeping secrets. For this reason, management's philosophy was that no one person, especially in the Research and Development Department, should know everything. Even the philosophy of secrecy was kept secret, and a low-grade fear pervaded the organization.

This secrecy required that R&D be highly compartmentalized, and so naturally, Them vs. Us dynamics rose up within R&D, between R&D and Manufacturing, between R&D and Sales, and between R&D and customers. The result was predictable. Despite the fact that people in R&D were highly competent and wanted the company to succeed, their performance suffered. Everybody was playing his or her own one-string instrument.

The leadership team combines not only the intellectual assets of individual participants, but also their instincts, hunches, dreams, aspirations, creative imaginings, gut reactions, musings and moods. In a safe environment of trust and respect, people are free to bring these gifts to the table. When everybody feels free to contribute all their resources, they create a larger network of intelligence. Everyone's contributions are gathered up, unified, and synergized toward a common goal.

This is exactly what happened at our high-tech Silicon Valley company. The market suddenly demanded that R&D become the lead department in the company. At the very time that R&D's performance was lowest, competition demanded that it be at its peak! Management's fear of losing market share became greater than their fear of losing secrets. The CEO called a meeting with R&D, told the truth, and asked for help. His courage and honesty had an electric effect. Everyone saw immediately how the Them vs. Us dynamic had developed, and how disastrous the effect had been.

Within weeks, they found specific, effective ways to share ideas, and the team devised ways for R&D to optimize their creativity and still preserve secrets! The plan included ways to work prospective new employees, who were seen as the greatest security threats, into the system without real risk. The team worked together, bringing all their resources to bear on the solution. A higher order of creativity became available to them that helped them keep their place in the market, and also made the company a much better place to work.

Fear-based organizations face yet another disadvantage. When new people come into an environment where fear is dominant and connections among team members are weak, the team intelligence increases only by what that one person brings to the table. Add another member, and you get only his or her individual potential added to the team. But when trust is dominant, then communication becomes full and open. Emotional reinforcement is generous, and people are committed to resolving issues quickly. When you add team members or reorganize teams under these circumstances, the group intelligence grows exponentially. People interact in ways that create an upward spiral of creativity. Ideas are exchanged quickly and easily, and improved continuously. The whole becomes greater than the sum of its parts.

The leadership team represents team life in its highest, most creative, and most efficient state. Leadership teams created within the Trust Model are not just another management fad providing a new form of competitive advantage; they are part of a process that can keep creating new forms of competitive advantage forever. The Trust Model becomes the generator of technique, not the technique itself. It integrates the raw intelligence and creativity of individual team members into a new synthesis that operates on a much higher plane.

Why Trust Works. The rationale behind the leadership team is that people have a natural inclination to give. We have a need, even a hunger, to be part of something bigger than ourselves, especially when that something bigger reflects and amplifies our inherent values. Opposing the urge to contribute and participate is fear-fear of rejection, failure, loss, retribution, and embarrassment. Sometimes we hang in the balance, afraid to go this way or that, standing at the end of a diving board not wanting to jump, not wanting to back down. Trust tips this balance, especially when the leadership models trust. People feel reinforced, validated, and supported. They are more likely to plunge in and put more of themselves into their work, and far more likely to be creative and generous with their talents. An organizational culture grows up that makes people want to support and contribute to the company.

Carmen was recently recruited from her position as Senior Vice-President of Sales for a cable TV station, where she was a seasoned and celebrated success, to a similar position in an emerging Internet company. Everyone assumed she knew exactly how to build a sales force in this new medium, but she didn't. In fact, everyone in Internet sales was a pioneer. No one really knew how to sell ad space on the Internet. This was Carmen's dilemma: Should she admit she didn't know what to do and ask for brainstorming help from her fellow executives, or should she continue to bluff and tough it out? Which do you imagine would be more productive for the company? If she could ask for help without fear of people judging or denigrating her, Carmen would have considerably more resources available to her. She could access the combined experience and intelligence of the leadership team, use them to network into other sources of information, and certainly do a better job of building and directing her sales force.

We have seen over and over again that trust releases productive energy within an organization in ways that are not possible in fear-driven organizations. To keep our competitive edge, we need to innovate. To be innovative, we need to work in an environment in which we trust and are trusted.

The Trust Advantages. Some of the business advantages of an organizational culture based on trust are:

· Enduring competitive advantage. An environment rich in trust creates an engine for innovation. There is no upper limit to the combined intelligence and creativity of the team, and the Trust Model encourages continuous improvement. No team is just like any other, because each team's true identity emerges in the safe environment of mutual support. The promise of trust is extended to the customer, which makes for an extraordinary level of customer loyalty.

· Self-regulation. People at all levels of the organization are motivated to identify and resolve open issues without unnecessary or intrusive supervision by leadership. People become committed to developing a habit of reliability and follow-through.

· Efficiency. The Trust Model eliminates energy lost to suspicion, unresolved issues, forgotten commitments, unclear agreements, missed deadlines, and the associated propensity toward blame, gossip, resentment, and frustration. All of this energy becomes available for productive use. On the leadership team, somebody always knows when a particular issue has not been resolved, so you do not have to wait for the customer or the marketplace to show you that you are off track.

· Inspired Performance. The leadership team discusses and processes ideas at every stage, so incremental "fixes" and improvements can be made as needed. Ideas pass through many hands and are improved at each turn, so these teams have an unusual ability to create superior products and services.

· Capacity. Trust-based organizations have a knack for holding opposite conditions and points of view simultaneously, with grace and clarity. They may, for example, have tight, structured, disciplined development processes, and yet still be able to react quickly to changing market needs or internal situations such as mergers. The leadership team is a crucible that can stand the heat and contain their reactions until a new synthesis is reached. This gives them a substantial competitive advantage.

· Meaning. Making trust a central principle anchors the organization in a set of values that everyone agrees is attractive and meaningful. People become part of something bigger than themselves-and that results in attracting the best people, and keeping them happy and creative.

A culture of trust makes any organization more effective, more productive, more competitive, and a better place to work.
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