The ability to build trust-based relationships is probably one of the greatest business assets an organization can have; some of the documented positive outcomes of securing the trust of customer and business partners include better financial performance, higher repeat sales, improved flexibility and higher levels of staff and customer satisfaction.
For many organizations, developing or improving the ability to build trust-based relationships will require a transformational approach, with cultural change at the centre. It is crucial to ensure, first of all, that the organization’s core values are promoting the right types of norms and behaviours to promote and not hinder the development of trust-based relationships.
Initially, the cultural changes necessary to improve an organization’s ability to develop trust-based relationships must be clearly identified and communicated to employees. But employees must also be actively involved in discussing the required changes and translating them to their own jobs and areas of work, since in this process new thought patterns are established that will lead to sustainable changes in organizational norms and behaviours.
Effective cultural change also involves the organizational systems that promote and reinforce culture by rewarding acceptable and desired behaviours and penalizing others, or by ensuring that employees have the right skills and expertise to meet the needs of the transformed organization. In particular, seven “change shaping levers” must be reviewed and modified as necessary: the leadership system, the organizational structure, the staffing and deployment system, the performance management system; organizational competencies, the compensation and rewards system, and the communications system.
Schroeder & Schroeder Inc.’s Art and Science of Transformation® framework was developed in recognition that effective transformation requires the right balance of “art” and “science”, with science defined as the tools, techniques and methods of organizational change, and art defined as the softer skills and personal attributes needed to influence the attitudes and behaviours of people. Like any other organizational transformation, making the changes necessary for building trust-based business relationships requires application of the right balance of art and science, with a range of art and science skills involved in both employee-level and organizational-level transformation.
The Importance of Trust in Business
The ability to build trust-based relationships is probably one of the greatest business assets an organization can have; some of the documented positive outcomes of securing the trust of customer and business partners include better financial performance, higher repeat sales, improved flexibility and higher levels of staff and customer satisfaction.
Trust is important because business is a people focused activity; all forms of business are ultimately concerned with directly or indirectly addressing various human needs, and individuals build “organisations” with other people to pursue these business objectives.
This is often overlooked in business; in today’s society we often focus too much on the science of business interactions rather than the art of dealing with people and their needs. In many areas of business, such as banking, human interaction is largely disappearing as customers increasingly use automated online services.
Trust-Based Relationships in the New Business World
The business environment is now rapidly changing, however, bringing a renewed emphasis on the importance of trust-based relationships. The ability to develop these both within the organization and with external stakeholders is fast becoming one of the main differentiators between organizations that thrive and grow in this environment and those who fall behind.
The recent re-emergence of trust as an importance business asset is being driven by a number of factors:
• Web 2.0 technologies have significantly elevated the role and influence of the individual consumer, with more reliance on online recommendations and reviews than on formal advertising. Companies need to engage and interact with customers to build the “relationship capital” necessary for building and maintaining brand loyalty.
• The use of social media is blurring the boundaries between personal and business life for many people. Having strong trust-based relationships within the organization is often the most effective way of ensuring that employees act as positive online ambassadors for their firms.
• Technological advances and economic pressures are driving the adoption of new collaborative relationships between organizations, sometimes spanning the globe, and necessitating a new emphasis on transparency and information sharing.
• Mergers and acquisitions are increasingly common, requiring new relationships to be formed at both individual and organizational levels.
• There are increasing requirements for financial and environmental compliance throughout the supply chain; building trust-based relationships with suppliers or subsidiaries is often more effective than monitoring as a means of ensuring that these firms are aware of and able to meet the requirements.
• At the top of organizations, executives are increasingly seeking trusted advisor consulting services to assist with strategic planning and other management functions.
Nature and Forms of Trust
Trust is a multi-faceted concept and it is important to understand the main dimensions required for successful business relationships. The two most important components, which researchers have found to be important pre-conditions for a trust-based business relationship are:
• Rational trust, which involves making cognitive judgement’s about the ability and likelihood that the other person or organization will deliver what they promise, based usually on their reputation or past performance, and
• Emotional trust, which is based on the feelings that are invoked in response to the words and deeds of the other party; this is promoted by factors such as openness of communications, willingness to share information and evidence of a caring attitude.
Researchers have also distinguished between the types of trust that exist in different types of business relationships, and which are often progressed through when building a strong relationship:
• Weak form trust exists when there is little opportunity for the parties to take advantage of one another;
• Semi-strong trust exists when there are opportunities to take advantage but the risk is managed by a formal or informal governance mechanism, and
• Strong-form trust exists when opportunistic behaviour is avoided without the need for a formal mechanism because this would violate shared standards.
Strong form trust-based relationships are relatively rare and when achieved they constitute a strong strategic or competitive advantage for the business partners.
One of the most useful concepts in the business literature is “smart trust” (Covey et al., 2012), based on the propensity to trust as a starting point, but with the decision to trust being based on rational consideration of the evidence.
Trust and Transformation
For many organizations, developing or improving the ability to build trust-based relationships will require a transformational approach, with cultural change at the centre. It is crucial to ensure, first of all, that the organization’s core values are promoting the right types of norms and behaviours.
Norms are the informal underlying “rules” about acceptable ways of doing things in that organization. These should emphasize, for example, the importance of caring, respect for others and fairness since these factors are associated with the ability to develop trust-based relationships. In contrast, norms that legitimize behaviours involving secrecy, competitiveness and self-interest will hinder this.
The organization must be transparent about its core values and related norms in order to demonstrate its intent to others and influence the behaviours of its employees. Crucially, it must also follow through on this intent in order to secure trust from others, while being prepared to invest smart trust in return.
The Transformation Process
Schroeder & Schroeder Inc.’s Art and Science of Transformation® framework was developed in recognition that effective transformation requires the application of “art” as well as “science”:
• Science is defined as the tools, techniques and methods that are important, for example, when reviewing and redesigning organizational systems and processes in order to achieve a new business strategy or goal.
• Art comprises the softer skills needed to influence and manage the attitudes and behaviours of people in order to achieved the desired outcomes.
Any cultural changes necessary to improve an organization’s ability to develop trust-based relationships must initially be clearly identified and communicated to employees, with reasons why they are being implemented. But employees must also be actively involved in discussing the required changes and translating them to their own jobs and areas of work, since in this process new thought patterns are established that will lead to sustainable changes in organizational norms and behaviours.
Effective cultural change, however, also involves the organizational systems that promote and reinforce culture by rewarding acceptable and desired behaviours and penalizing others, or by ensuring that employees have the right skills and expertise to meet the needs of the transformed organization. In particular, seven “change shaping levers” must be reviewed and modified as necessary: the leadership system; the organizational structure that determines lines of authority and accountability; the staffing and deployment system; the performance management system; organizational competencies; the compensation and rewards system and the communications system.
Like any other organizational transformation, making the changes necessary for building trust-based business relationships requires application of the right balance of art and science, with a range of art and science skills involved in both employee-level and organizational-level transformation.