Why Firms Must Invest More In Trust

In today’s hyperconnected and increasingly transparent business world, senior business leaders and their organizations must invest more in trust with their stakeholders including their employees and independent workers. Acquiring and retaining top performing talent is especially critical to sustaining business success today.

As our hyperconnected and social economy matures, business leaders are are beginning to re-engineer their organizations by flattening hierarchies and breaking down silos in order to respond to ever-changing market demands. B2B and B2C models are all P2P or Peer to Peer interactions and that requires influence and trust to engage, commit, and deliver positive performance.

Dr. Paola Giuliano, is an Assistant Professor of Economics in the Global Economics and Management Group at UCLA Anderson School of Management. Her main areas of research are on culture and economics.

Dr. Giuliano’s recent projects have been related to the role of culture and history in the calculation of economic outcomes. She has studied the relationship between individual trust and individual economic performance.

Dr. Giuliano says “we find that individual income is hump-shaped in a measure of intensity of trust beliefs. Our interpretation is that highly trusting individuals tend to assume too much social risk and to be cheated more often, ultimately performing less well than those with a belief close to the mean trustworthiness of the population. On the other hand, individuals with overly pessimistic beliefs avoid being cheated, but give up profitable opportunities, therefore underperforming.”

The cost of either too much or too little trust is related to the income lost by not attending college. Dr. Giuliano develops a framework to take into account variability in the trustworthiness of the pool of people with whom individuals interact as well as the variable costs of trust mistakes. Both sources of variability effect the relationship between trust and income which is bell-shaped curve for all individuals.

This framework show income that maximizes trust usually exceeds the trust level of the average individual. It also calculates the distribution of income lost to trust mistakes. Dr. Giuliano finds that although a majority of individuals have well adjusted trust beliefs, Ten-percent of the population have poorly calibrated trust beliefs which directly corresponds to lower income by more than 13%. These research findings hold true international survey data, as well as inside a country with high calibre institutions and are also shown by experimental studies.

Dr. Adam Grant, PhD professor at Wharton is author of the book Give and Take: A Revolutionary Approach to Success. The first interaction style is known as the takers, they’re the individuals who are attempting to get as much as possible from others and do not want to give back in return. The givers, on the other hand, are unique individuals who enjoy contributing and assisting others, and they often do so without expecting anything in return.

So what Dr. Grant really got into was asking in Give and Take:

Most people fall in the middle of this give and take continuum, and are called matchers. These individuals try to maintain an even balance of giving and receiving. If you help me, I help you and vice versa. The principle questions that the book answers: Which group is most often at the top of the success metrics and Which group is most often at the bottom?

The research shows that the givers are at the bottom most often. That across sales, engineering medicine, as well as many other industries, people who are helping others without expecting anything in return are often setting themselves up for being exploited as well as early burnout or extreme exhaustion by the takers. Many people assume that since the matchers are not as selfish as the takers and are not as selfless as the givers, that they must be at the most successful. This is not the case.

The interesting discovery made is that at the top of their success metrics, the best sales people, the most productive engineers and the most effective doctors are also givers. So givers are over represented at both the top and the bottom of success metrics.

So what Dr. Grant really got into was asking:

David: I have had an ongoing conversation for several years where I’ve always run the basic working hypothesis that there’s a great accountant in the sky, and so, if you gave and in some way just serve, that somehow there is an accountant who’s keeping score somewhere, and I actually don’t have to bother about keeping score. I just figure, it’s being kept score. And I’ve also heard other people who’ve been around folks that at the pretty top level of the corporate game, big money, big deals, big egos — whatever, and they informed me because they had actually grown up in a household like that. They’re dad had been one of those titans and he said, “Dad never really put words on it, but there was something that he watched called The Point Game. The Point Game was you just kept giving away as much as you could, as much as you could and wait as long as you can to call in your points, because then when you call in your points, you get biggies. Kind of a bit of a Mafioso approach that too, understood.

And so both of those dynamics have been going on in my mind, as least from a spiritual (with a small “s”), from a spiritual standpoint, if you could just keep giving, keep giving and never cash in your points, then you cash in your points perhaps somewhere else, or your points got cashed in just by the quality of life you were living by doing that. So those have been resident thoughts inside of me because, by the way, your book has 30 or 40 pages of references. So this like based on lots of research. This is not just, “Hey, good idea, let’s just formulate this.” That’s fascinating Adam, to see how much validation that you came up with teasing this thing apart. So, let me toss it back to you.

Adam: Yeah, I think it’s an incredibly interesting dynamic and I think David what you just articulated, some might call, “a matchers theory of why givers succeed”, which is, they have this giant accounts receivable that they can call in at any point. What I found especially interesting as I started to study and interview and to, in some cases, follow successful givers around was, a lot of them never called in those favors. And just like you were describing, they found that actually a lot of people were quite willing to help them out without even having to ask. And I think this goes back to the idea, if you think about what a matcher is.

David: It’s fascinating to me, I’ll take this to another level that I’d like you to react to, which is the people that I know that are really givers, that — they attract me wanting to give to them. It’s almost like because there’s a magnification process by doing that. In other words, if I give to them, then I’m giving to the giving process itself and maybe there’s a form of matching in that as well, but from what I’ve seen, when you meet some of those people that just walk around with that kind of attractiveness, very deep sense of attractiveness, people just want to be around them because they have that kind of energy. I think people like giving into that simply because you get a chance to experience some of that, at least vicariously, that freedom or that integrity yourself.

Adam: I think that’s right on target, and yeah, I’ve been intrigued by a couple of these dynamics, one being, of course, that the givers tend to attract fellow givers into their networks and so, the fact that you’re drawn to these people suggest that you might already be a giver. But then they also to nudge people, especially the matchers in their network, more towards this sort of giving without any strings attached orientation and you know, I think again one of the interesting ways they do this is when you look at some really successful givers and I found a bunch of these that are in the book, basically what they end up doing is often refusing to let matchers pay them back. And the next best thing for a matcher then is to pay it forward and help somebody else. And you can sort of feel like there’s some cosmic karma in that. And in the mind of a giver, that’s a great way to sort of invest in creating a network in which everybody is operating by this norm, which, by the way, makes it a lot safer to be a giver; right?

At a deep level, many of us are attracted to givers who practice this standard of trust leadership style. I think much of that comes from the fact that when we look at our core values in life, there is some influential research by Shalom Schwartz and his colleagues, going on Worldwide, where they actually show that altruism, which is a value of protecting and promoting the well being of others, is the single most important value to the majority of people in the world’s cultures.

If everybody in your social network or peer-2-peer business team followed a guiding principle to be proactively generous to you, you would not have to concern yourself so much about shielding yourself against the takers. Not all of us bring this guiding principle to our businesses, but when givers do and they’re able to achieve high performance. Also, givers are very inspiring and that attracts opportunity to them and their business teams and social networks.

To enable a business to become a social business requires authentic leadership. Leaders talk the talk and walk the talk with their stakeholders especially in this digital world.

Up to now, it has been safer for business executives not to participate in social media with their stakeholders because of the perception that it was riskier to say something or share something that would anger a customer, manager, etc.

It is now becoming riskier for business executives not to engage online with their social network and stakeholders. “No” online engagement means you are invisible which could have a negative effect on your reputation, credibility, and influence. Stephen M.R. Covey, says, “Relationship trust is all about behavior … consistent behavior.”[ii] This is important on or offline. Success today is about influence than autocratic power.

There are two sides of trust to consider for success today. Whether you are a CEO or average employee of a for-profit business, it is about earning relationship capital with your stakeholders and demonstrating that belief by where you’re investing firm’s money.

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