Soundview Live presents Dr. Robert Hurley Discussing “How to Create a High Trust Organization” [0:00:00] Interviewer: Hello and welcome to Soundview Live, an interactive conversation that puts to you in touch with today’s top business authors. My name is Andrew Clancy, Senior Editor for Soundview and I’ll be your host for today’s event.

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Now for our guest, 2012 presents another year of challenges for businesses around the globe. So what will separate the high performers from those who struggle to survive? Our guest would argue that trust, the common thread that runs through all world-class organizations. His book The Decision to Trust is receiving high praise from notable names such as Bill George at Harvard Business School and Rod Kramer at Stanford Business School. Soundview is pleased to welcome Fordham University professor and President of Hurley Associates, Dr. Robert F. Hurley. Bob, welcome to Soundview Live.

Interviewee: Thanks, Andrew and welcome to all of you from various parts of the world and thanks for coming and joining the conversation about trust. I’m going to be talking about this book which is the culmination of about 20 years of research on trust, academic research and research in the field. What I’d like to do is I’d like to help you with five things during our conversation.

First, as a result of our talk, I hope you’ll understand more clearly why trust has been declining. Second, you will learn how to make better trust decisions to reward the trustworthy and shrink the market to the untrustworthy. Third, you’ll learn what trustworthy leadership looks like and gain some ideas on how to model trustworthiness as a leader. Fourth, you’ll learn what’s some successful leaders in organizations are doing to embed trustworthiness into the very fabric of their organizations, to embed trustworthiness into the DNA of their organization. Then finally, you’ll gain a new perspective on the role of regulating distrust in creating high trust system. So let’s dive in.

Let me start with just describing the structure of our conversation. We’ll start with a definition of trust. Not a bad place to start by being clear about what we’re talking about and then I’ll talk about why trust has declined in nearly all industrialized democracies and in many businesses throughout the world and I’ll offer a four-part solution on how we solve the trust problem and then a vigorous Q&A and I can stay a little bit longer to answer questions.

Let’s talk about definition of trust. This picture appeared in a Wall Street Journal I wrote in October, 2011 entitled Trust Me. I define trust as confident reliance on a person, group, organization, or system when there is vulnerability. So when I talk about system, you think about financial system, air traffic control system where all familiar with people, groups and organizations are.

This picture is interesting, right? The lion tamer is in a very precarious position, his vulnerability. This dangerous lion has its teeth wrapped around the head of the lion but yet the lion tamer looks confident, looks relaxed. This lion tamer has confident reliance on the lion. Now let’s hope that this lion tamer has made a good trust decision and we’ll talk quite a bit in this session about how to make a good trust decision.

So with our definition clear, let’s step back and look at what’s happened to trust over a number of years and let’s just look at the U.S. Congress for example. We’ve been measuring trust for quite some time now and you see rather alarming trend of general decline in trust in congress. These numbers represent the percent of people who say they have a great deal of trust in congress and right now we’re below 10% of people who trust congress.

Now, let me point out one other thing about this chart.

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There are periods where trust increases. All right? A couple of periods. One in the mid 80s when congress saves social security, another in the early leading up to the dotcom crisis where there was prosperity. So it’s good for us to know that when trustworthiness increases, signs of trust actually increase also. We’ll come back to that. Now let’s show you some evidence that if we increase trustworthiness and perceptions of trustworthiness, increases in trust will follow.

Let’s take a look at business. Isn’t it any better? Unfortunately, the same general decline. About 15 percent of people today say they have a great deal of trust in business. I can add to this and talk about the Edelman Trust Barometer that looked – well showed 20 percent as point declined in trust after the global financial crisis. We’re seeing declines in trust in the credibility of what CEOs say, declines in trust of business to “do what’s right.” But I will be belaboring a point that you all know.

Trust is in short supply today, but if we’re going to understand trust, it’s really important that we understand why it declined, and I will make the point that some of the reasons for the decline of trust can actually be fixed. Some of them can’t be solved in the short term but there are things that we can actually do to increase trust and that will be what I’ll really focus quite a bit about in this session to try and increase trust.

So why has trust declined? One reason is generation declines. The picture that you see in your screen is a picture what [inaudible][00:06:35] called The Great Generation. Now these people had higher levels of faith in others and trust. Why? Because they came together, they relied on each other during some very difficult times to overcome adversity. What am I talking about? The Great Depression and World War II that developed in that generation a sense of optimism, a sense of trust and we know from research that optimists are 36% more likely to be trusting than pessimists. So this generation developed the sense of optimism that if we trust each other, rely on each other we can overcome great things.

But fortunately, every generation since that level of trust and optimism has declined. Another reason for the decline of trust is more uncertainty and risks in a shrinking pie and trust becomes more problematic and difficult and when there are more risks and we’re usually seeing this in some trust issue in the Euro Zone, Occupy Wall Street and this is obviously something we’re not going to change in the short term.

Another reason for the decline of trust is what I call extreme capitalism. What am I talking about? Short- termism, opportunism versus sustainability, long-term benevolence. We certainly saw this during the global financial crisis when we learned of the expression IBG YBG “I’ll be gone, you’ll be gone.” What is that about? It’s about get in, get yours and get out before things crash.

Now, it’s clearly capitalism has been enormously successful in creating wealth but we’re now starting to have conversations about how capitalism needs to evolve to enhance public trust. So you’re hearing terms like the new capitalism, conscious capitalism, constructive capitalism and all of these is really about how do we strike a better balance between wealth creation, well-being, public justice, fairness and trust. And this conversation is not going away even though we haven’t heard much from Occupy Wall Street recently.

Another reason for the decline of trust is unfortunately there is a shortage of trustworthy leaders and organizations. Now by this I don’t mean that leaders and organizations are less ethical. What I mean is that the environment is so fraught with change and complexity that it’s very challenging to be a trustworthy leader and organization today. Let me give you an example. The European Leadership Program surveyed thousand mid-level executives in the U.K. and showed that nearly 50 percent did not feel confident that their leaders could manage their companies through challenges. So it’s challenging to be a trustworthy leader in today’s environment.

Another important reason for the decline of trust and one that I think is important for us to get a grip on is entitlement and a romance of leadership. Sometimes we fool ourselves into thinking “If I just had the right CEO, if I just had the right president, all these problems would go away.” Well that’s probably unreasonable. It’s unreasonable to think that – trustworthiness really comes from a system that works, not just one person. So when we convince ourselves, we’re entitled to things that reasonable people and systems can’t deliver on, trust can decline. This is actually one of the reasons for the decline of trust in government. The data is quite clear about this.

Now, what’s important here is it’s possible that an excessive sense of entitlement maybe actually is a much of a risk to trust as excessive greed. We need to be reasonable about our expectations with respect to leaders and organizations.

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Another reason for the decline of trust is unfortunately is an ample supply of naïve versus discerning trustors. Unfortunately being untrustworthy sometimes pays. If we had more people like this gentlemen to the right who are more discerning about trust, we’d have more trust violators out of office, out of business and we’d hear fewer stories of outrageous fraud and deception like News Corp, NF Global, Country-Wide, on and on. In fact actually a good bit of our time today we’ll be talking about how do we get better at discerning trust and avoid this naïve trustor status.

Now some of you maybe at this point is saying, “Okay, well, trust doesn’t exist. Fine, move on, get over it.” Here’s the problem: When trust is low, all sorts of bad thing happen in companies, in groups and in nations. Exchange is slower. There’s less cooperation. There’s higher turnover. There’s higher monitoring cost. Profits are lower. There’s less information sharing and less innovation.

So when trust is low, it creates enormous problems for organizations, which is why Andrew said at the beginning, “All world-class organizations are high-trust organizations.” Nations that have higher trust have more productive economies. So we can’t just learn how to navigate a low-trust world better. We actually have to increase trust and I’ll talk a little bit about how you do that.

Let me capsulize[ph] my recommendations into a really four-part solution. I think we can do four things. I can move a needle on trust. The first is we need to become better at regulating distrust. The second is we need to become better trust decision makers. Third, we need to actually learn what trustworthiness is and develop more trustworthy leaders and then fourth, those trustworthy leaders need to understand how to embed trustworthiness in the systems that they lead and I’ll talk a little bit about how you do each of these four things.

So let’s start with a little bit of a conversation about regulating distrust and I’m not going to spend a lot of time on regulation but it would actually be untrustworthy for me to have this talk without mentioning this because here’s the way to think about regulation. People, companies and systems constantly emit trust and distrust signals. And when we judge trust, what we do is we judge those trust and distrust signals. We categorize these signals.

What we need to do is we need some minimal, effective level of regulation to minimize the number of distrust signals because when there’s too many distrust signals we will see those signals and decide that the system is untrustworthy. This certainly was true during the height of the global financial crisis where money stopped moving so effective regulation is important to minimize distrust signals.

Unfortunately, we’re often not very good at judging these signals and sometimes we don’t even have the right information so we need some regulators to help us in that process, but if we over regulate, then it creates other problems. Capital may leave, entrepreneurs may leave so we really got to strike the right balance of effective regulation so it’s not all or none. We have to have effective regulation to minimize distrust signals.

But think about it. Can even effective regulations ensure trustworthiness? My colleagues and I have done a lot of research on this that suggests no, that regulation is necessary but not sufficient. So we actually need to learn how to build more positive spines of trustworthiness and we actually need to learn how to discern trustworthiness ourselves as trustors more effectively. Perhaps we actually need to become better trustors and increase the market for the trustworthy and help the untrustworthy go out of business. That doesn’t mean we become paranoid. It just means we become more careful about discerning trustworthiness.

Now, here’s an example. Let’s get into the decision to trust. What you see up on the screen are four potential presidential candidates. Voters in the United States will make a decision to trust. On what basis will they make that decision? Now what neuroscience tells us is that we’re often fooled. We don’t make very good trust decisions. So what we do is what animals do in some sense.

I live in Connecticut. I have many deer that are often on my yard. Those deer when they graze they pick their heads up and they look around and their ears can actually act like sonar and move to hear noise. They’re vigilant. We, human beings, are wired to avoid dangerous situations and it takes us less than a hundred milliseconds to judge trust. But the research shows that sometimes we don’t actually engage our full brain. So research by Tatari from Princeton show that we actually look at faces and the faces on our right we start to sense trustworthiness and the faces on the left we start to sense untrustworthy. [0:15:00]

Well is that really effective? In fact, the neuroscience shows that certain levels of the brain actually fire when we’re making this instantaneous trust judgment. But as Daniel Kahneman writes in his book Thinking Slow and Fast, this is really system one brain. It’s the automatic, experiential, fast part of the brain and it often fools us. What we need to do is engage the system two part of the brain, which is the analytical part of the brain to supplement that to make better trust decisions. The point here is that we’re actually easily fooled.

Take a look at Bernie Madoff. He has a trusting face. He’s got the right chin, he’s got the right cheeks but unfortunately, we needed to engage system two brain and analyze his trustworthiness. So we need to get better at making trust decisions if we’re going to enhance trust.

Let’s talk a little bit about that and then I want to shift and talk about a second pitch which is trustworthiness in leadership. Now, as far as the trust decision in making better decisions, we want to match degree of trust we offer with the degree of trustworthiness so we want to stay on this diagonal with appropriate caution and appropriate reliance and delegation.

So the people that trusted Bernie Madoff were in this lower left, right? Sorry, the people who didn’t trust Bernie Madoff were in the lower left. These are the people who said, “You know something is not quite right.” The people over to the right who made the excess risk and vulnerability error were the people who trusted Bernie Madoff, who was not trustworthy. They offered trust when it wasn’t warranted. Up on the upper left is another problem. This is where the micromanager lives, the person who systematically defaults to distrust and people who make automatic decisions not to trust they maybe betrayed less but they also miss tremendous opportunities.

In the upper right, take for example Sam Walton’s father-in-law. He lent the hardworking, trustworthy Sam Walton $20,000 to start Wal-Mart. So the idea here is we want to get better at discerning trustworthiness and offering trust where it’s warranted and withholding it where it’s not warranted.

Now, how do we do this? In the book I talked about the decision to trust model that’s really based on a lot of the scholarly research. I mean we have 50 years of research in psychology and sociology and anthropology and economics about what makes people decide to trust or distrust and I’ll go through this model a little bit. There’s quite a bit more in the book. In this decision to trust there are ten factors and the first three factors are what I call trustor factors. So this gets at the issue of not all of us trusts on the same schedule. Some of us have a high disposition to trust and others of us have a low disposition to trust, the three variables that really determine whether someone is likely to have a high disposition to trust or low disposition to trust. When somebody is risk tolerant they’re more likely to trust. When somebody is high in adjustment or low in what’s called neuroticism they’re comfortable, they’re not anxious, they’re more likely to trust, and with people who are high in power they are more likely to trust. So if you are a leader and you want to understand why people trust or be suspicious, the point to understand that the people that work for you vary in their disposition to trust and if we want to build trust we have to appreciate that.

By the way, one of the things that an important here is if someone is low in his disposition to trust, it’s the bottom seven factors that we want to move to the right to gain a higher level of trust, more assurance that the trustee can be trusted. So when situational security is high, trust is easier. When similarities are apparent, trust is easier. When interests are aligned, trust is easier. When the trustee demonstrates benevolent concern, trust is easier. And when the trustee is competent or capable, trust is easier. When the trustee demonstrates predictability and integrity, trust is easier. And when communication is good and transparent trust is easier.

The point here is that these other factors have to do with the relationship between the trustor and the trustee. Now that we know these things we can actually analyze trust and actually manage trust. I will go through a quick example that I talked in more detail about in the book on how you do this. So this is a situation where employee Joe has an issue where he’s a low performer and he may or may not need to get moved out of his job and his boss is Sue.

Well what we did was we took all of these different dimensions of the decision to trust and we analyzed them to see in this relationship between Joe and Sue. Where was Joe? And what were his perceptions of Sue?

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And you can see that Joe had a low tolerance for risk and was in a risky situation. What Sue did was masterful. What she did was she understood the decision to trust and she actually, I will show in the next slide, she actually identified five areas that she could move to the right, work on through her leadership practices to increase Joe’s trust.

So she started with actually at the bottom, open communication, transparent communication, where there was a heart-to-heart conversation about alignment of interest, benevolence and she actually expressed some concern for Joe and his family in this risky situation. She was also very predictable. She practiced what she preached every step of the way and she was sensitive to Joe’s concern.

Do you know that in this risky situation, Sue was able to achieve a win-win situation. Joe was actually moved out her part of the organization to a job that suited him much better, took a demotion and a pay cut and actually reported to people in the workgroup that he trusted Sue even more after this difficult situation. Sue was definitely a high-trust leader. She understood the decision to trust, how to manage trust by understanding the elements that make up trust.

Now, I want to shift a little bit away from the decision to trust and talk a little bit more about trustworthy leadership to reinforce certain aspects here. The bottom six parts of the decision trust model really define trustworthiness and as a leader you can understand these six things and you can manifest them in how you lead and manage to increase trust.

Let me talk a little bit about how you do that. Let’s start with similarities. So, it’s important for you to understand that we tend to trust people who we think are part of our tribe or part of our network. That is basic to social identity; it’s basic to humanity. So, all high-trust leaders are very careful that engineering a clear set of common values in the groups that they lead and they make sure that those values are manifested in behavior. By the way, these are deep values, not shallow networks, right? So, it’s not trivial similarities.

Bernie Madoff, people invested in Bernie Madoff because he was part of the golf club and part of the Jewish community. That was a trivial similarity. It wasn’t deep enough and so high-trust leaders really get deeper in terms of creating common-shared similarities and values.

Let’s talk about alignment of interests. This is a really important one. Is it a good idea to trust someone whose interests are not aligned with yours? Not really, right? So the alignment of interests is absolutely central to building trust. Now let’s just take an example here and really what I’m talking about in terms of alignment of interests is: How do decisions get made? Whose interests get taken into account when we make decisions?

Now let’s take BP as an example. The investigation of the Gulf Oil Spill showed that BP made lots of decisions in terms of how to design that well. They made tradeoffs and in this case they actually saved $7 million by taking a riskier option to design that well and how they’re going to drill that well. Now, whose interests did that decision serve? Did it serve the employees who worked on that rig? Absolutely not. But it did serve shareholders. Now, the point here is that all leaders in organizations make lots of critical decisions. The question is: Whose interests are really considered?

So, what you have to do as a leader is you have to take a multi-stakeholder perspective. There is an old saying, “If you don’t have a seat at the table, you’re on the menu.” So what high-trust leaders do is they know who the stakeholders that they are supposed to be serving and they consider their interests in an inclusive and fair decision-making process. Now, that takes time, that takes respect to those interests and it takes quite frankly quite a bit of diplomacy. This is one of the reasons why trust is a challenge in a lot of organizations today, that this is a hard process to do but we can certainly teach leaders how to take all the multi.stakeholder perspective and how to negotiate multi-stakeholder interests to enhance trust. Let’s take a look at benevolent concern for a second. Now, what is benevolent concern about? We trust people who we think care about us, very simply. When people act in a greedy, opportunistic way, we tend not to trust them and we know this about human beings, right? We all know people who – the very thought of betraying somebody’s trust would be troubling to them and they would lose sleep. And unfortunately we may also know people who would cheat their grandmother if they gave them an interest, gave them an advantage. This is what I mean about benevolence.

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So how do high trust leaders operate? High trust leaders serve others interests when it’s not convenient. We might actually call this stewardship and stewardship is perhaps a lost word these days in organizations and in leadership but it’s a really critical word as relates to trust. What’s an example of this? Starbucks saw that a lot of the coffee farmers that they used to do business with were starting to go out of business because change in the business model, change and different countries were growing coffee and these coffee farmers were becoming impoverished and their communities were suffering. What did Starbucks do? It changed the way it bought coffee at its own inconvenience. And that was an act of benevolent concern for stakeholders. So high-trust leaders demonstrate and manifest benevolent concern.

Capability, is it a good idea to trust somebody who is not competent and to deliver? Of course not. And this is actually one of the challenges of what I call the visionary leader who doesn’t execute. So think about this: We have a level of expressed capability that we portrayed to people and then we have an actual level of capability, our capability to deliver. The people on the upper right, the promise exceeds the capability. They overpromise and under deliver and the probability of disappointment increases and trust become less likely. On the bottom are people who with the capability, exceeds the promise. They under promise and over deliver and the probability of satisfaction or delight increases and trust is more likely.

So what do we want to do? As leaders, we want to build our capability to deliver in this complex world that we live in. That requires an understanding and managing change and it requires understanding of strategy and how to align values and all sorts of critical things. But it also requires us to accurately communicate what we can do and what we can’t do to match the expressed level of capability with our actual level of capability but sometimes people will say, “What do you mean that if I’m a salesperson I shouldn’t over promise? And if I don’t over promise, my competitors are going to get the sales.” And I often ask them “Well what kind of relationship do you want? Do you want a long-term relationship with trust? It’s probably not a good idea to start a long-term relationship with trust by deceiving somebody about your level of capability.” So something to think about in terms of what kind of relationships we want. So, to summarize that, unless there’s a reasonable capability to deliver, confident reliance on another because of shared values or even benevolence is really faith and hope, not trust. So we have to be able to set capability to deliver in the decision to trust.

Next piece is predictability and integrity. At some level, trust requires the ability of the trustor to predict what the trustee will do so people who are random and impulsive tend not to be trusted. Now how does this relate to integrity? We sometimes say one thing and do another and there’s a gap and so this gap really is a lack of integrity. The word hypocrite comes from Greek of playing on a stage, saying one thing on a stage and doing one thing in private. We want to close this gap.

Now, think about this. How many of us in this call today can actually say that always and everywhere we practice what we preach? Probably most of us can’t. Why? Because integrity is about always trying to honor your word. We sometimes say A and we do B. But the high integrity and honorable person goes back and says you know, I said A and I did B and here’s why. Let me explain and I know that I violated your trust there. I will not do it again and they don’t make a habit of it.

Now it’s interesting to ask: What is the practice that one would have as a leader that would enable you to do that? And I would actually argue that you actually need a daily process and method for discernment of conscience, the examination of conscience to see “Am I living my values?” I think I know high-trust leaders do that. They have a method. Bill George actually talks a lot about this on his work on Authentic Leadership of integrity and discernment of “Oh, you’re practicing what you preach,” critical to trust.

Now let’s put the last piece is communication. Think of it this way. Trust is about relationship between a trustor and a trustee. Can you have a good relationship if you don’t have open communication, transparent communication? I think the answer is that you can’t. So communication actually is the vehicle through which a lot of these elements of trustworthiness get manifested and there are some particular best practices in terms of communication and trust.

High-trust leaders share information. They over communicate. Whether you talk about Griffin Hospital or Google or any of these high-trust organizations they always over communicate. They have tremendous number of vehicles to communicate. They know who the stakeholders are. They communicate often to stakeholders and they also tell the truth and they admit mistakes.

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You’ll sometimes hear this described in an organization as “Boy, that was a breath of fresh air. I don’t know what he’s like with what he or she says but I know I’m going to get it straight. I’m going to get the truth and when we mess up, they’ll admit mistakes.” That breathes trustworthiness. High-trust leaders speak simply and accurately. They don’t overpromise. They’re clear when they communicate and it’s very straightforward. It’s not a lot of confusion so it’s very simple and straightforward. They also use narrative and storytelling to really get their message embedded and to get people to listen in a compelling way that sticks. They maintain confidentiality. When somebody tells them something in confidence, they don’t share that. They don’t create rumor mills and that kind of thing which is dysfunctional in a road to trust.

And importantly, high-trust leaders listen. And they listen with empathy. That actually demonstrates benevolence. It also helps them understand what are the stakeholders’ needs. If the trustor doesn’t think he was a leader who understands their needs why would they trust you? And importantly, that actually helps high-trust leaders be more approachable which is an important part of trust. So there’s these six aspects of decisions to trust model that really defined trustworthiness. My point is if you understand them and if you manifest practices in each one of them just like Sue did in the earlier example you will be seen as a high-trust leader and people will offer trust and not suspicion. They will make a decision to trust you and not be suspicious.

Now, so we’ve talked about regulating distrust, we talked about making better trust decisions and we talked about how do you manifest trustworthiness in leadership. I’m sad to tell you that those three things alone will not solve the trust problem and here’s why: We, human beings, are wired to adapt to our environment. If I took a hundred high-trust, trustworthy, ethical people on this call today, I put them in a low-trust unethical company, what will they do? Unfortunately, many of them would start to engage in untrustworthy unethical behavior. Why? Because we’re wired to adapt to our environment. We know this. It’s part of human nature. So in order to solve the trust problem, what we’ve got to do is we got to figure out how to embed trustworthiness in the organizations that we lead.

Now we actually know quite a bit on how to do this and what I want to do is I want to show you a video that analyzes this and I want to give you a little practice on taking these principles and learning how to embed them in the architecture of an organization. We’re actually going to start with a trust failure and then I’m going to actually – and why it occur, one of the organizational element that caused that trust failure to occur then we’re going to flip it and we’re going to talk about what are the practices that high- trust organizations do. So if you would run that video.

Interviewer: And just to let our audience know, if you have any trouble viewing or hearing the video, you will receive an email from Soundview in three to five business days with a link to view the video.

Interviewee: Okay. Let’s take a few minutes and analyze this. Now let me start by saying trust failures almost always occur because of systemic reasons. So they’re not accidents. They’re produced, right? I talked earlier about emitting signals of trust and distrust. So organizations that have a trust failure, major trust failure systematically emits signals of distrust so let’s peel back this little organizational analysis and start to understand what really happened and what aspects of organization contributed to the trust failure here.

So let me talk about a lost academic culture of accuracy. What was that about? It’s about the culture and values in those raiding agency organizations. How did that betray investor a stakeholder trust decision? It was a lack of value congruence. The investors wanted accuracy and integrity in the ratings process and these organizations lost that

Second piece was he talked about a focus on market share. On what organizational element is that embedded in? It’s the mission and strategy. They adapted a mission and strategy of grow, grow, grow. That created then misleading communication saying we’re here about accuracy and investors can trust us but in fact they were about growth and poor alignment of interest.

Let me talk about analysts who were removed if they didn’t play the game. What’s that about? It’s about the HR systems and who gets promoted and who gets demoted.

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It was a poor alignment of interest in the HR systems with investors. He talked about weighed procedures. What’s that about? Flawed core processes in the organization. Some of those processes lacked integrity.

He also talks about overwhelming volume. What was that about? Where did that appear in the organizational architecture? A lot of competencies, not having the right structure and not having the core processes. So that really gets at the decision to trust aspect of lack of capability. So my point here is that this failure of trust has organizational underpinnings that relate directly to a decision to trust or distrust.

Now, we can actually we can do better. We have lots of organizations that have done tremendous things about building trust. So we shouldn’t actually conclude that all firms were low trust. In fact, actually many organizations, Zappos, [inaudible][00:36:03], SAS, Mattel, all the organizations that are mentioned here are high-trust organizations. We know that from surveys and awards that they’ve won.

I want to talk a little bit about how they became these high-trust organizations. So let’s talk about the positive practices. By the way, I want to offer one further evidence of proof that we can do better and fix this problem by just comparing confidence scores in congress which is this bottom line. The confidence scores in the Supreme Court in the U.S. to this upper line which is confidence and trust in the military. When trustworthiness goes up, trust follows. When trustworthiness goes down, distrust follows. So we have less trust in congress because we don’t think right now they’re capable of it, they have common values that our interests are aligned. But yet we have high trusts in the military because they have delivered on their commitments and they have an ethic of service to country. So my point here is this problem is fixable if we can improve trustworthiness.

Now, if you think about it, I’m a leader and I want to build a high trust organization. I need to understand these six elements of trustworthiness and I need to understand how to embed them in an organization. That requires actually – I also understand something about what makes organizations tick which is really the entire field of organizational development. And the good news is we know tremendous amount about what makes organization tick and how to architect high trust organizations.

I’ll actually review some best practices here by talking about some high-trust organizations. Let’s start with mission and strategy. Zappos, a high-trust organization, Tony Hsiesh says, “We believe the company’s culture and a company’s brand are really two sides of the same coin. To get the culture right, then most of the other stuff will happen naturally on its own including delivering great customer service and building the enduring brand.” Hsiesh and his management team were so clear about mission and strategy that they realized they were going to have to buy out there venture investors because their interest did not align with the management themes, a great practice of being really clear about mission and strategy.

Let’s move to the leadership element of organization. I should also say that my view of organizational architecture is that there are two basic elements. The top of the model here is management infrastructure and the bottom is core valuated processes and I think you have to be great at both to have a high-trust organization. So let’s look at the management infrastructure piece on leadership.

SAS, a high-trust organization, has been on a hundred best companies to work for 14 years. Jim Goodnight the CEO says “Treat employees like they make a difference and they will.” You know he declined to make millions of dollars by taking his company public because he felt they would make SAS a less attractive place to work. Was that an example of leaderships, stewardship and benevolence? SAS is a technology firm. It has great people leadership. They model high trust and if you don’t model high trust at SAS you probably will not be a leader there for very long.

Let’s look at values and competencies and look at a best practice from Google. Google has a hard wire to culture that values end users, speed and democracy on the web. It’s part of what makes being part of the Google tribe important. It’s part of the basis for trusting collaboration within Google. They also value making money while doing good. This defines their tribe and promotes trust.

Let me take a look at competencies for a minute. Think about PricewaterhouseCoopers, Ernst & Young, Accentra, all high-trust consulting firms. They have one of their elements of the core competencies that partners help each other no matter where they are in the world. If you are in Bangalore, you try to solve a customer problem and you call a partner in New York, you will get a response.

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It’s embedded in their competencies and their knowledge management systems and their culture.

Let’s move now to structure and talk about a great convenience store chain called QuickTrip. They have a decentralized structure where there’s management accountability in each of the regions they operate in and they’re in various places in the United States. They also give five percent of their profits to charity because they believe that in a decentralized model they want to be part of the community, incredibly high-trust organization.

Let’s take a look at the selection and management of people. Ernst & Young has some tremendous practices on managing people and they have been on the hundred best companies list for about 14 years on a row. Ernst & Young has a listening tour that their firm leaders go on. They have a rotating people advisory form and a global people survey. They even launched a quote Making It Real social media campaign to spark dialogue and solicit feedback. Again, a high-trust organization.

[inaudible][00:41:00] has a terrific planning process and prioritization process where they get people on the same page. QuickTrip has tremendous HR systems around training and pay so that they actually have the highest paid people in their stores and the most productive employee. So those are all critical elements of building a high-trust organization from a management infrastructure standpoint.

But, here’s the thing, if you don’t have perfected core processes, you’re not going to have high trust. So imagine an organization that has a great leadership and a great strategy but they have core processes that are failing continuously. You’re not going to have a high-trust organization. So you have a world class organization like Procter and Gamble who basically builds trust by having a world class product development system.

Mattel, great example, has perfected their procurement and production system. Mattel actually had their lead paint problem in China and actually restored trust at transparent way by reengineering their supply chain and actually doing it in a very transparent manner. Nordstrom has world class customer service system. So the point here is we actually know a lot about organizations to how to embed trustworthiness in these organizations. And we can actually do that in a way that enhances trust.

So, high trust leaders who actually over time, this can’t be done overnight, in all these organizations really built high trust over a long period of time. But when you have high trust leaders that are active day in and day out it certainly can be done and by the way, all of these firms are high-performing firms. They generally beat their competitors, they generally have lower turnover, and by the way, those that are public their stock prize tends to earn a better return for their investors than their competitors and certainly are much higher than low-trust firms.

So trust is important and we know actually how to engineer it. So what’s the four-part solution? One, we need some regulation to minimize signals of distrust. Two, we need to learn to become better trust decision makers. We can’t just blindly expect leaders to do that for us. We need to pick the right leaders. We need to make the right decisions. Third, we need more trustworthy the leaders. We need leaders who understand what trustworthiness is and how to manifest it.

And then finally, we need those trustworthy leaders to put their shoulder at will to embed trustworthiness in the organizations they lead and actually we have a way forward. This 50 years of research that really tells us how to do this. So with that, hopefully I stimulated some questions and I’ll move to the questions-and-answer portion.

Interviewer: And if you have a question for Dr. Bob Hurley, the author of The Decision to Trust, you can submit it to us by going to the chat feature on your player. That should be in the lower left hand corner of your screen if you click private, then click leaders and assistance. If you type your question into the box up there and click the arrow you’ll be able to send it to us as a number of people have already done. I also should mention we’ve had a couple of people ask this. All questions are asked anonymously so we won’t mention your name or the name of your company.

Let me ask your question to Dr. Hurley. I think a good place to start in this instance would be with a question that came up about the way in which organizations are able to measure the level of trust on the part of their customers. Are there methods that can be used to do this and what’s a good way to get some hard data on how much a customer trust an organization?

Interviewee: Well the field of marketing has really done tremendous work in this. One of my colleagues, [inaudible][00:44:47], has done a whole research on loyalty and there are actually firms that do this but they measure customer satisfaction as one element. They measure likelihood to repeat which is sort of a measure of loyalty.

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They can actually measure that by observing people’s behavior. They can also measure by asking people but the science of marketing it turns a measuring trust with customers is actually well-advanced. Actually much further advanced than our ability to really assess trust among employees with senior management, et cetera. So there are lots of techniques to measure customer trust.

Interviewer: Another question about it and I don’t want to get too specific about this person’s organization but he said that the company that he worked with was experiencing a transition in leadership. Halfway through the process, the leader that was due to exit decided against it. A short while later the decision was reversed and he did exit. Now this person is coming in to an environment where there’s extremely low trust because people were sort of thinking back and forth over their leader would be. What can this person do to build that trust from the outside? And also to show that they’re solid direction now.

Interviewee: Being impulsive and being erratic starts to erode trust. So if mistakes were made, by the way, this is also to look at what in trust repair at News Crop versus Mattel versus BA systems. BA systems and Mattel, great best practice examples of trust repair, News Corp not so much, BP, surely not as good. You have to admit your mistakes. You have to acknowledge your mistakes. If a mistake was made, explain to people the reason why the mistake was made and then repair it. Reform it. Fix what’s broken in the organization so that it doesn’t happen again.

The problem is when you don’t do that people start to sit back and say well, they messed up that new leader situation before, how do I know they’re going to get it right this time? So you have to have so much transparent repair process where people can actually look at is the thing that was broken actually fixed, were significant repair is made to that part of the organization that caused that betrayal of trust. You can’t do it with smoke and mirrors but this is what News Corp tried to do. They tried to close down news of the world. They tried to say it was just some rogue employees in 2005 when the first hacking scandal came out. It’s not credible and it will not repair trust.

Interviewer: Following up on that idea about where trust begins in an organization, a listener asked can people at any level of an organization start the process of developing their company’s trust or is it something that really must come from top leadership first?

Interviewee: That’s a great question. Fortunately the answer is both and let me talk a little bit more about that. I have gone into organizations and done work in repairing trust and building trust. I absolutely believed that I will be less successful unless I absolutely have the commitment of senior leadership. They have to live and they have to model these ideas of trustworthiness; otherwise, people will remain low-trust and skeptical.

On the other hand, it’s a cop out to say well, I can’t start to lead with trust until my CEO or my senior management team starts to do that. That actually takes us off the hook. So I think the answer is both. You can actually start to lead with trust no matter where you are and no matter who your senior management is. And if you lead with trust, your followers will tend to trust you.

Now, if you’re in a low-trust organization where senior management hasn’t subscribed to some of these ideas you’re in some ways going to be protecting your folks and you’re going to be trying to create trust in a low-trust environment and part of what you are going to need to do is make sure people aren’t trusting when they shouldn’t be which is really what the decision to trust model is all about but it’s sort of a cop out to say okay, everybody, since we don’t have trustworthy senior leadership, we’re all going to be low trust and we’re not going to take the responsibility to lead as trustworthy leaders. That seems to me a cop out.

So unfortunately the answer is both but without a doubt you can make enormous progress if you get a group of senior leaders who buy into these ideas and actually want to build a high-trust organization. All the organization I talked about that was the case. QuickTrip, Google, Ernst & Young, these leaders understood that trust was a competitive advantage and was morally the right thing to do and they got about embedding it and engineering it into their organizations.

Interviewer: Just to let everyone know we’ll go a little bit beyond the top of the hour so that everyone can get their questions in for Dr. Hurley. Next question is situational but I think it’s really interesting because the person’s organization has an average of let us say a five-year period of trust with a client.

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And this organization sounds like they have multiple clients where at one point the person who is the contact from his company will change and into the position comes a younger person who wants to sort of make his or her mark in the organization and demonstrate control and what that ends up doing is destroying the relationship with the client. How can this listener create a situation where these new younger members of staff are able to come in to an environment in trust and refrain from trying to control the situation?

Interviewee: Great question. So let’s imagine that you’re a leader in that organization. You have to train these younger people what trust is and what trustworthiness is. It’s not about you and your ambition. If it’s about you and your ambition and your opportunistic actions, you’re going to erode trust. So it’s an obligation in terms of how we train people to get them focused on the right goal. The right goal is build trust with the client.

QuickTrip is a great example of this. If you don’t do the right thing for the customer at QuickTrip, you violated the culture there. You’re not going to be in that organization very long. So a part of this is cultural piece is we need to create a set of values where these younger people understand “Hey, we’re about like Google, we’re about end user focused.” The Ernst & Young, we’re about client service. The military, we’re about service to country. That’s got to be embedded in the DNA of the organization. That comes through leadership modeling and the architectural organization.

Leadership modeling, training, reward systems, selection, promotion systems, people who try and feather their own nest opportunistically and erode the client’s trust in the firm are betraying the firm’s interest. That can’t be tolerated in a high-trust organization. So partly what you need to do is teach people about how do you build trust, why is it we want to build trust and why is it that the client is more important than our own individual interests? By the way, here’s another piece to that. If you have a bunch of [inaudible][00:52:16] in the organization, all trying to optimize their own situation, you will get this almost internal tribal warfare that will erode the trust of not only employees but also customers. So high-trust organizations cooperate with each other for the good of the enterprise and the good of the stakeholders.

Interviewer: We have several people that are listening today who have mentioned that they worked for various branches of the Federal government so I will not name specific agencies but the interesting thing is that several of them are asking the same question which is as an extension of the Federal government, they feel that they are either trusted or distrusted depending upon the administration that’s currently in power. How is it possible to better represent themselves so that they are just not instantly either praised or dismissed based on whoever is occupying the White House?

Interviewee: Great question and I’ve been travelling down to Washington to work with some agencies of the Federal government recently. First of all, our system of government is quite frankly largely dysfunctional. I mean this idea that we’re going to change the world every four years that we’re going to manage for the next selection is fraught with distrust. So my hat’s off to the folks that work in the Federal government. It’s a challenge. And the players change every four years and it’s a system that needs reform without a doubt.

But there are things you can do so as a leader of an agency or a group within the Federal government, I think you have to continuously focus on what is your mission, how do you add value, and is it worth it to the stakeholders, is it worth it to the citizens. If it’s worth it to the citizens, eventually you will probably prevail no matter the sort of temporary and sometimes erratic political opinions of the day. So as a leader you have to keep doing that.

One of the challenges in the Federal government also is you have to keep improving your processes and your value creation. You can’t get lax or sloppy because then you invite people to distrust you. So we are seeing this. Certainly many people are saying Washington’s broken and that the government is the problem and actually I think it’s really the problem is not big or small government. It’s effective or ineffective government and we need to be on having effective government.

So I think if you are working for the Federal government you have to deal with this environment that you are in, which is not necessarily the best system to produce trust but you also can use the decision to trust model and say, “How can I manifest trustworthiness as a leader? How can I embed trustworthiness in my agency?”

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By the way, we know that this works because we actually – there are a number of agencies in the Federal government that are actually off the chart on trust. The FDIC is just now hit the top of the list in terms of employee trustworthiness and other agencies are not quite so high. The treasury is making a great strive in terms of increasing trustworthiness. So you can be better and you can build trust even in an environment in Washington that doesn’t lend itself to it.

Interviewer: And I do think it’s a bit of a shame that for people that are in these positions they have to sort of exist in a state where every four years they have the potential to be either liked or disliked but that as you say that can be – they can become more than that and be better represented of trust in their particular agency.

An interesting question that came in about doing the right thing that can occasionally be a costly occurrence, how does a company handle cases where doing the right thing will actually either make it unprofitable or give it a lack of competitive advantage will the honorable path out eventually?

Interviewee: That’s a great question. That’s actually in some sense what ethics is about. Is it doing the right thing even when it is dangerous? Because it’s the right thing. I actually think that the data shows that organizations that follow the high trust path over the long term much more profitable, productive and earn high returns so the data is pretty compelling there. Does that mean that along the way that you may have to do some things that are risky, that put you at risk to do the right thing? Absolutely. I mean many of the firms that I identified did that.

Let me give you an example. PricewaterhouseCoopers at the height of the global financial crisis, they’re struggling, right? Their clients were saying reduce our fees. There was some conversation about should we lay people off? You know what? They didn’t. They made a risky decision to hold on to people in a difficult time. That was a painful decision. That was real expense but they did the right thing for the employees and now I think they’re glad. So the high trust path is not an easy path which is why we don’t have a tremendous number of high trust organizations. The path is clear but it’s not easy.

Interviewer: Another question from a listener about regaining trust or this is interesting because of the situation in which good things are happening for a company. The person asked, he said his company emerged from bankruptcy over the course of the last two years. They have strong leadership in place who was able to bring the company back to profitability but turnover in the organization remains high and there seems to be somewhat of a distrust among customers. Is there any way to improve trust in that situation where internally at least among a leadership perspective, they’re gaining? They’re experiencing profitability again but because of the recent past there’s a state of distrust at large.

Interviewee: So you know this happens sometimes when people do turnarounds, right? New executive group comes in. They make a lot of changes and it actually helps the bottom line and helps market share, helps profitability and return on investment but it’s really important how you do that. If you want long term sustainable trust, if you want a sustainably great organization, how you make those changes matters greatly. So you can have a bleb. You can improve things over the short term. But if you do it in a low- trust way, you’re going to actually erode your long term prospects. So that’s perhaps what has happened here and what those leaders need to now start to do is to say, “Okay, we’ve stopped the bleeding.” Now we actually need to start to think about how would we engineer and architect an organization that was a great organization for the long term.

I don’t know how many turnaround situations focus on that which is why a lot of these high-trust organizations have had great leadership for a long period of time but I certainly think you could do it but it requires – it’s not a short term turnaround mentality. It’s building a sustainably great company in a high-trust way using some of the practices we talked about.

Interviewer: Unfortunately I don’t know exactly what industry this next listener is in but he asked about an efficient way to differentiate your organization from its competitors when all of you are competing in a low-trust industry.

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Is there a way to be able to help to separate yourself from the pack?

Interviewee: Well if trust is important in that industry and to those customers, the clear answer is architect and build a credible high-trust organization. By the way, this is absolutely true in the financial industry right now. Trust in the financial industry is an all-time low. Those companies that figures out how to build high- trust organizations in the financial industry will move up without a doubt be the winners in the future. Why? Because banking is all about trust and so the answer is in that low-trust environment you figure out a way forward that has a high-trust way and eventually you’ll start to win in the marketplace assuming that trust is important to customers and certainly that’s true in financial services and it’s true actually in most situations when I’m talking about commodity type product situations where trust may not be that critical.

Interviewer: I can think of another example actually as well. Would you agree Dr. Hurley that in the airline industry, Southwest is attempting to capitalize on trust by their frequent putting out of the fact that they’ve down on baggage fees or as other airlines do. That’s another area where another industry where trust seems to be at a low point and yet one company is trying to differentiate itself.

Interviewee: I would agree. I would also put Apple in that category. Apple obsesses over delivering on customer expectations and so they in Amazon scored the highest in terms of high tech companies in terms of trust. Why? Because they’re all about serving customers and over delivering. And by the way, Apple sometimes spends a lot of money to do that. But what did we learn this week? That Apple at one point this past week surpassed Exxon as the highest market company. I think it was over $400 billion. This strategy actually does work. Interviewer: We’ll take one more question before we wrap up and it’s interesting because then it gets placed into something you have discussed. Someone is asking about rules and regulations as a way to replace the ethics of trust and I know that one of your main tenets is that regulation alone will never create high trust. Can you for this listener’s benefit, can you just explain a little bit about why that’s the case?

Interviewee: Well you know it’s interesting. Some of the people that want to eliminate all regulation say that when we have regulators who are supposed to make systems trustworthy they don’t do a terribly good job and it makes us less vigilant and so we’re better off not having them and letting people discern trust themselves. That will not work because we have a limited capability to do that.

So we need regulators to create the rules of the game, the rules of engagement that will penalize people that engage in too many distrust signals. And if we don’t do that then we’re going to have those distrust signals in where we don’t want them and that’s going to erode trust. So you always have to have personal responsibility but we do need regulation in some parts of the industry to create standards, minimum standards and that if those aren’t followed there are some sanctions, some penalty.

One of the problems here is that often regulation is ineffective so I might argue that [inaudible][01:03:41] had a lot of cost and red tape and didn’t do an adequate job of actually enhancing trustworthiness among public companies. So it was the appearance of trustworthiness, not actual trustworthiness. Now, does that mean we eliminate all regulation? No. We’ve to go back in and fix it and make sure we had the right regulation.

Interviewer: Let’s close by letting you tell everyone where they can reach you online and we’ll wrap up with that.

Interviewee: So if you want to get some more information on tools on trust you can go to drbobhurley.com and I’d be happy to chat with you and work with you to help build trust. I think we can do it and I’m optimistic.

Interviewer: Dr. Hurley, thank you again for being with us today.

Interviewee: Thank you, Andrew.

Interviewer: We’d like to thank Dr. Bob Hurley for appearing today on Soundview Live with us. We’d like to thank all of you for participating. We have some great questions today. Thank you again, audience. Special thanks go to Ursula Sharp, the executive producer of Soundview Live. Join Soundview next week on Friday, February 3rd. We’ll be on Friday next week for the next installment of our series. We’ll be joined by Mike Figliuolo, the author of One Piece of Paper. We’ll present the simple approach to powerful leadership.

Regardless of your level of experience as a leader you will walk away from this webinar with a brand new outlook on your job so sign up today. Remember if you’re a Soundview subscriber, you can attend Soundview Live for free. For subscription information, to sign up and to look through our catalogue of archived events, visit Soundview’s website summary.com.

Soundview Live is a production of Soundview Executive Book Summaries, a division of Concentrated Knowledge Corporation. This program is copyrighted 2012 Concentrated Knowledge Corporation. For Soundview Executive Book Summaries, my name is Andrew Clancy. Thank you. Have a great day.

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