Trust pays dividends

Mar 16 2009 by Dan Collins Print This Article

I began my business in the summer of 1991, in the midst of the last recession with a handful of contacts, a few ideas and a very limited amount of cash.

I was pretty naÔve back then and assumed that if you treat people well they will honour that with hard work, loyalty and dedication. I believed then that if you were open with customers about pricing they would pay promptly and come back again and again.

After 17 years there have been numerous moments when I've needed to toughen up and become a bit more hard-nosed but as I write this, surrounded by economic gloom and the news that Bernard Maddof's unknown accomplices seem to have 'made off' with billions of dollars of other people's money, I'm reflecting that maybe I wasn't quite so naÔve after all.

Gordon Gecco's legendary line "Greed is good" in the film Wall Street seems utterly ridiculous now. Conspicuous consumerism is being replaced by ethical shopping as the cool way to display wealth.

The Sunday Times Best Companies to Work For survey is full of good, friendly businesses who share those values that I started out with and despite this are doing rather well.

Smoothie-maker Innocent drinks was founded by three university friends with £500-worth of fruit. Just seven years later it was turning over £100 million and still giving 10% of its profits to a charitable foundation, committed to investing in the communities which grow the fruit that goes into their smoothies.

Timberland, the giant maker of trendy outdoor shoes and clothing, is reinventing itself to be an example of a genuinely responsible corporate. Quite a bold step given the worldwide practices in the garment trade where employing child labour and paying less than living wage are endemic.

And numerous brands have realised that trust is a rare commodity and that if they've got it they should shout about it.

Specsavers have a poster campaign listing the fact that they have been the most trusted optician in the Readers Digest Most Trusted Brands Survey for the past several years. Both Nationwide Building Society and Santander have recently run advertising campaigns telling investors how trustworthy they are.

You could be forgiven for concluding that this is all a reaction to the credit crunch. Supported by the fact that trust in banks and business is at an all-time low with 62% of Americans stating that they don't trust business to do what is right.

Evidence suggests that trust in business has been diminishing for several years, with just a handful of businesses choosing to stand their ground and operate with integrity. Not just as a marketing tactic but as a value that attracts and retains the best people. Businesses like Virgin, innocent and John Lewis that place trust in their employees, customers and even suppliers, consistently outperform their competitors over the long term.

The example that first triggered this thought in my mind was a little restaurant in north London that was always full, predominantly with repeat customers.

Despite being quite a trek from the centre of town, it was renowned around the world. The reason for this was largely that there were no prices on the menu and never a bill at the end of the evening. Vasos Michael, the 4'10" diminutive proprietor didn't ever give his customers bills for their meal, he simply presented a list of what had been served, including drinks, and asked that the customers paid what they felt the meal was worth.

On the whole people rewarded his trusting nature by paying more than a comparable meal would have cost elsewhere and if someone abused the relationship, by paying too little, Vasos wouldn't hesitate to ask why, gaining either valuable feedback or the satisfaction of publicly embarrassing a miser. The little restaurant was still doing brisk business right up until Vasos's retirement 18 years after it opened.

At the other end of the spectrum in 1999 Warren Buffett, one of the world's richest men, bought the North American furniture retailer Jordan's from Barry and Eliot Tatleman for a rumoured $250 million - on a handshake. There was no contract stating that the brothers would stay with the business, although that is Buffett preference when acquiring companies. This is particularly important in the case of Jordans, where Barry and Eliot always fronted the firm's TV commercials.

When Barry Tatleman was asked by a reporter why the billionaire had taken them at their word he replied, 'it's a new concept in business, it's called trust'.

So what difference can trust make in our businesses? One of the greatest benefits is that it speeds things up. Think of how much time is taken up doing things that assume mistrust. Back when I worked for a multinational someone calculated how much it cost the business to process an order from an outside supplier. Nearly 20 years ago that figure came out at over £100 (about $150), making items like stationery and training materials incredibly expensive.

But let's assume that the people who place the orders can be trusted not to purchase unnecessary products or waste company resources. Why not encourage them simply to use a company credit card or even give each department their own cheque book? Of course fraudsters could take advantage of this but if someone wants to steal from their employer, they will find a way, no matter what precautions are put in place. So cut out all the paperwork, add some spot checks and place some trust in the highly-paid executives.

In teams where trust is high, individual performance is significantly better than in teams where supervision is used to track progress. High trust teams don't need to measure every step they take, they simply keep working towards their agreed goal and when a team member gets stuck they say so without fear of blame or recrimination. This openness leads to a better working environment where people give their best and are committed to the company, so staff turnover tends to be lower and overall productivity higher.

Communication is also much smoother; imagine not being cc'd on emails just because someone feels the need to cover their back. And knowing that when a colleague tells you something, it's what they really mean not what they think you want to hear.

Success can be defined by many things, typically how much and how big, but I wonder if - once we've all lived with a bit less during these leaner times - we won't come to realize that the most important things in life aren't things at all. Perhaps it's our relationships and our character that truly represent our achievements in this life, whether at work or at home.

In his best selling book "The Heart of Success" Rob Parsons wrote:

"The Quakers believed that when you lived so that your character matters more to you than success, you discover that people trust you. Bosses will trust you, as will those who work for you. Even some customers will trust you! And, in the long run, trust pays dividends. They may not be as large as if you'd manipulated lied and short-changed others Ė but they will be sweeter."


About The Author

Dan Collins
Dan Collins

After starting his career with a global engineering company Dan Collins founded Fresh Tracks, a team development consultancy, in 1991. He is is co-author of Trust Unwrapped, a book about ethics, integrity and chocolate.