A Note On Trust | Course Paper

Unlock access to all the studying documents.

View Full Document

9 – 813–058

REV: OCTOBER 9, 2015

________________________________________________________________________________________________________________

Senior Lecturer James M. Sharpe and Charles H. Green, CEO/Founder of Trusted Advisors Associates, prepared this note as the basis for class

discussion.

7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be

digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.

JAMES M. SHARPE

CHARLES H. GREEN

A Note on Trust

A recent New York Times/CBS News poll showed barely 10 percent of the public trusts the government. But

it doesn’t stop there: Trust in public institutions like corporations, banks, courts, the media and universities is

at an all-time low; the military is one of the few exceptions.

— All Things Considered, 20081

The word “trust” may encompass many things. It frames the way we interpret what people say

and how they describe their behavior. It influences our comfort level in sharing information with

others and helps us decide whether we feel other people have our interests at heart.

Introduction

The purpose of this note is to present a basis for understanding the complexities of issues that

surround trust, both on a business and a personal level.

Thinking about trust quickly takes us to the heart of business and leadership. Trust is easy to take

for granted, because it is so fundamental. Like air or water, we do not notice it, but without trust things

would rapidly grind to a halt. What if we couldn’t trust markets, inspectors’ certifications, signatures,

employment records, or financial statements? We all know how critical even small deficiencies can be

in those areas.

People and organizations with high trust enjoy tremendous support and success. When trust is

present, customers are loyal, innovation prospers, time–to-market is short, costs decline, partnerships

work effectively, and people are motivated. Any manager who believes they can achieve results solely

through the impersonal tools of metrics, markets, and monetary incentives is a manager most people

will not trust—and that manager’s results will be the worse for it.

Trust is at root an aspect of human relationships. We may say we trust a system, but we mean we

trust the people who ensure the system’s integrity. We do not say we “trust” the sun to rise in the east,

because the laws of physics (or metaphysics) are not a matter of trust. Human relationships are.

The effective manager and leader understands and appreciates trust at both the personal and the

organizational levels. The nature of trust is such that a person who tries to run a trust-enhancing

operation, but who does not personally demonstrate the virtues of trust, is likely to fail. Nowhere does

walking the talk matter more than in matters of trust. This is especially important in a crisis.

1 “Trust in America: Recovering What’s Lost,” All Things Considered, NPR, October 30, 2011, accessed August 2012.

Authorized for use only in the course HRMT-502 at Athabasca University taught by Dr. Helen Lam from Aug 13, 2018 to Oct 07, 2018.

Use outside these parameters is a copyright violation.

813–058 A Note on Trust

The Business Case for Trust

When you trust someone, or someone trusts you, things can move more quickly and effectively. For

example, customers will believe your messaging, prefer your products, accept your pricing, and give

you the benefit of the doubt if you make a mistake; employees will accept your view of the world,

follow your lead, and line up behind your direction; and peers and clients will take your advice, want

to work with you, and refer you elsewhere.

Less obvious but no less important are the benefits of trusting others. For example:

 The ability to trust customers allows for greater efficiency and creativity in serving them;

 Trusting others offers them growth and development opportunities; and,

 Most important, trusting others has a powerful reciprocal effect—it makes them more

trustworthy themselves.

Personal trust does not scale well. We trust our life partners implicitly. We may trust a friend, but

the transitive property is weak; we do not trust our friend’s friend nearly as much.

However, it makes sense to talk about trust at social levels as well. Organizations can be more or

less trust-supporting; different national cultures have evolved differing approaches to trust.2 The key

to scaling trust is to create organizations that lever the dynamics of personal trust.

It starts with personal trust dynamics. People who trust and who are trusted have greater impact;

they are generally more successful and happy with their lives. Organizations that cultivate trust within

themselves and with external stakeholders also are more successful.3 Even at a national historical level,

high-trust cultures have evolved more successfully than low-trust cultures.4

Trust: A Personal Relationship

As a manager, you will not be able to lead with trust unless you yourself are personally trustworthy

and capable of trusting. To be inconsistent in trustworthy behaviors, to be seen as manipulative or

insincere, is to be seen as untrustworthy by definition. And someone unwilling to trust is seen as

suspicious, self-serving, and solitary—again, not trustworthy by definition.

You will not be trusted if your motives are selfish and controlling. This is not a moral exhortation,

merely an empirical statement of fact. Humans have evolved, over millennia, exquisitely tuned senses

of trust. Trust is very, very hard to fake.

Trust is personal Former U.S. Speaker of the House Tip O’Neill famously said, “All politics is

local.” Similarly, all trust is local; it is primarily an emotional phenomenon. Trust is conditioned by or

“caused” by larger social or environmental phenomena, but it is always experienced as personal.

2 Francis Fukuyama, Trust: The Social Virtues and the Creation of Prosperity (New York: Free Press, 1995).

3 Next Decade, Inc., “The Most Trustworthy Companies in America,” Trust Across America website, http://www.trust

acrossamerica.com/documents/media/Media-WhitePaper.pdf, accessed August 2012.

4 Fukuyama, Trust.

Authorized for use only in the course HRMT-502 at Athabasca University taught by Dr. Helen Lam from Aug 13, 2018 to Oct 07, 2018.

Use outside these parameters is a copyright violation.

A Note on Trust 813–058

A trust relationship has three aspects:

1. Two asymmetrical roles—one who trusts, another who is trusted.

2. The element of risk.

3. Reciprocating the roles of trustor and trustee.

We often neglect this simple fact. If we say, “Trust in banking is down,” does that mean that bankers

are less trustworthy? Or that consumers, including bank customers, have become less inclined to trust

anyone? These are different problems with different policy answers. When it comes to trust, defining

the problem is thus critical.

Trusting and being trusted The simplest form of trust requires two parties: one who trusts,

and one who is trusted. Trusting is an act undertaken by the trustor (the one doing the trusting); it is a

choice to willingly put oneself at potential risk of harm by the trustee (the one being trusted), knowing

that there is no guarantee of safety.

Trust and risk What sets trust apart from other human interactions is the presence of risk. In

the absence of all risk, trust is irrelevant. The goal of trust is not to eradicate risk, but to work with it.

Trust is an alternative to risk-averse behavior.

Under conditions of threat or stress, people react with the “fight or flight” response; both those

responses act to protect the person against the perceived threat from the outside. The trust-risk

dynamic has a time dimension as well: we overreact to short-term threats with fear, and we underreact

to long-term opportunities with trust.