Trust Proxies

March 9, 2008 by
Filed under: People, Teamwork 

I recently sat down for a discussion with a prospect about why they should use our services. I have faith that we are the right people to develop the application they are looking for from the technical perspective. From the purchaser’s perspective, though, everyone they talk to will have that same spin. How do we engender a measure of trust when we’re an unknown?

The strongest form of trust is grown through a series of rich and successful interactions over time. If you manage to demonstrate a track record of paying your bills, the banks will extend more credit. If you have been involved in a relationship and have been able to meet or exceed expectations, you are deemed trustworthy. In both cases, a key element of deep trust involves a lot of time.

The challenge arises, though, in a business environment like this one. We’re responding to an RFP, and we have no history with the purchasing organization. We’re not a public company, so there is no way do dig up financial statements or any audited information about our track record, for whatever that is worth. From my experience, merely being a public company doesn’t instill a great deal more trust.

There are a number of prominent companies with quite a public track record, but it is a record of taking on big projects, running them poorly, making a profit on change orders and ultimately disappointing the client. No names will be mentioned, but this is not my idea of trustworthiness. It seems, though, that as long as we haven’t been burned personally by those big public companies, they still carry the pedigree of being trustable. For some people, being in the public eye or having been able to jump the hoops of fiscal scrutiny, can act as a proxy for trust.

If we don’t have the track record, or the public exposure that can be seen as a reasonable substitute, we need to translate trust into something we can work with. In most situations, we can think of risk and exposure as a way managing trust. A highly trusted source (through one of the more traditional avenues of trust) reduces the likelihood of risk occurrence to an acceptable level. Even if a violation of that trust were to occur, with a potentially extreme cost (including the destruction of whatever level of trust existed), the overall exposure is seen to be reasonable, and we’ll go with that option.

Where traditional trust doesn’t yet exist, we need to turn the equation on its head. We may not be able to provide assurance that the likelihood of problems is low, but we can manage the cost should these problems arise, and hence keep the overall exposure down to tolerable levels. Thinking in this manner, it can then be a reasonable approach to manage the compensation model so that it is more concretely tied to actual deliverables, rather than expecting a large down-payment or periodic payments along the way without having delivered any value. An iterative lifecycle, if managed properly, can serve to balance these payments by providing real usable value along the way (noting that this is far beyond merely something that runs). We need to drive the relationship with an understanding of how ‘trustable’ we are, and propose models that increase our attractiveness accordingly.

If we’re on the client side, the same considerations exist. If we were only to work with people we have done business before, or with companies that have a public record, we are constraining ourselves to a wide range of opportunities. We can work with people we do not yet know, if we manage our trust models accordingly. It’s all in how we drive the relationship.

In working with a publisher on my first book, I was an unknown entity, and the contract was structured accordingly. While I was given an advance, there was very little skin in the game from the publisher’s side until they had a complete manuscript in their hands, 14 months after the contract was signed. At that point, they sat down and asked themselves if they were ready to move forward with publication. Had they decided against it for any reason, they could have even asked for their advance back!

Whenever we enter into a transaction, we need to build structures that give us a reasonable level of trust. Whether reduced likelihood of disappointment because of our past history or reduced cost by managing our cost/value model, we can work with anyone by managing our trust concerns with traditional risk exposure approaches. – JB


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