poingology: Trust and Business

In our whiz-bang society a word like trust may seem as fuddy-duddy as grandma's doily. But look again.

Trust is an expectation based upon a fundamental human need: safety.

When I say I trust you, I am really saying that I trust that you will behave in a way which I expect, and that way will be in my interest.

In other words, I believe, based upon my experience, that you will not hurt me.

In a business environment trust plays an important role. When we provide goods or services, we trust, based upon our experience, that we will be paid.

If we have no experience, or if that experience is not stellar, we need to rely upon other tools which restore equilibrium to the business relationship. These include:

Payment upon delivery (COD)
Written agreements
Personal guarantees
Bank references
Bonds
Liens
Lawsuits

These things require effort. Effort is a cost to protect the company.

Relationship Between Trust and Cost

One could propose a formula in which trust should be inversely proportional to the cost to protect the company. The less you know or trust the business entity, the more you would need to expend in order to protect the organization..

Consider three points along the trust scale:

Scenario 1: High trust, low cost to protect.
Personal example: Loving marriage with no pre-nuptial agreement.

Scenario 2: Medium trust, medium cost to protect.
International example: Detente. Both sides have powerful tools to defend against the other.

Scenario 3: Low trust, high cost to protect.
International example: War. Absolute opposite of trust.
Closer to home: Lawsuit.

It is in the interest of the business to build trust. As demonstrated above, trust reduces cost.

Trust is a Quality of Life Issue

Trust is also a quality of life issue. Worrying about whether you will be paid detracts from the quality of life. Harmonious business relationships not only cost less but they also allow you to enjoy life and business more.

Business is fundamentally exchange. One party exchanges goods or services in exchange for money from the other party.

Trust is a Form of Currency

Trust is also a currency which is exchanged as the business transactions progress. Each party, through experiencing business transactions, learns more about how the other party will behave, and eventually gains expectations about how the party will behave in the future.

If, based upon previous experience, the parties begin to feel that the other party will act in their interest, and not hurt them, then trust goes up, cost goes down and quality of life goes up.

The Balance of Trust - Finding Equilibrium

Interestingly, trust has a way of equalizing on both sides of the transaction. If both parties were reasonably trustworthy, and if enough time has elapsed to give the parties experience with the other, eventually each side will move toward a similar trust level.

Factors which disturb the trend toward equilibrium include non-performance or errors or actions by one party which adversely affect the other. In these cases there will be an exchange of actions and responses which could ultimately restore a previous status-quo, or improve it, or could also herald an era of a lower mutual trust level.

Even more interesting, people tend to trust others in the amount that they themselves are trustworthy. A shark in the waters of commerce tends to mistrust others, knowing the damage he is willing and capable of doing to others. Equilibrium will occur with this individual as others learn his business ethics and respond accordingly.

Similarly, a "Mother Theresa" might also judge others by her own standards and act accordingly. In the tough world of business, however, this approach can prove to be expensive and dangerous, and will eventually force either a shift toward trust parity or a closing of the doors.

Build Trust to Build Business

Building mutual, balanced trust must be a key philosophy of business.
How can we build mutual trust in our business relationships?

1. Act in a trustworthy, predictable way. Do what you say you will do. Give schedules and hold to them. Don't arbitrarily raise prices. Answer phone calls promptly.

2. Observe trust-related behaviors in others and use those behaviors as a gauge to determine the level of trust you will invest in others. Treat a shark like a shark. Treat a Mother Theresa like a Mother Theresa.

3. Remember that sometimes business transactions can hit rough patches. How you perform when the going gets tough will play a huge role in how much you will be trusted in the future. Performance under fire, successfully and responsibly executed, can be a critical turning point in the development of trust. Anyone can do business when there are no problems. It takes a real champ to turn a bad situation around. Successful turnarounds can be huge trust boosters.

4. Observe your own actions the same way you view the other guy's. Do you communicate that you will always act in the interest of your customer? Developing a sense of how you are seen and what your actions communicate will help you fine tune your game, and in the process, build trust, repeat business and a more enjoyable business life.

Like this article? Bookmark it at Del.icio.us

Mark Meshulam offers
keyboard shortcuts,
small business articles,
web master resources, and a powerful
email reminder system, all at
www.poingo.com

To receive these postings hot off the keyboard,
subscribe to poingology, the newsletter