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Friday, 20 June 2008

The importance of trust

Partnerships and alliances help us achieve goals that would be out of reach if we were on our own. But how much can you trust your allies and partners? How confident are you that they will deliver what they promise?

The issue of trust in business relationships is a vexed one. On the one hand, too little trust means that the relationship cannot be productive. At some point we need to work with others, so that we can work toward goals that would be out of reach on our own. But too much trust leaves you vulnerable to being 'burned.'

Dr Don Porritt of Taverner has been researching trust for over twenty years. Don said "there are three parts to having trust in your business partner. They are competennce, commitment, and goodwill."

Competence means asking, "does this person (or that organisation) have the skills and ability to deliver when I need them to?"

Commitment means asking, "is my business partner really committed to making this work?"

Goodwill is sometimes called 'integrity.' It means asking, "are they trustworthy? Are they of good character?"

Don said, "Often when we talk about trust, we are referring to the last of these three things, goodwill or integrity. Lack of trust means that you are suspicious of the other's tendency to act in a co-operative way when there is an option to act in a selfish way."

The general message from modern management literature is that higher default levels of trust tend to be more efficient and more conducive to productive outcomes. This does not mean blind faith in others but an aware attitude that allows for re-evaluation as time goes on.

We want to have confidence that those we work with will deliver and help us achieve our goals. There are two ways we can try to get that confidence: through trust or through control. This is the view outlined by management theorists Das and Teng in 1998 their classic management paper, "Between trust and control: developing confidence in partner cooperation in alliances."

Das and Teng's idea was, in short, that if you don't trust someone, you try to enforce cooperation, for example through service agreements or other means. This can make sense where the other party is unknown or there are reasons for having little trust. However Das and Teng claim that the very attempt to exert control will reduce mutual trust!

They suggest that in the early stages, service level agreements should be loose and vague, and increase in specificity as time goes on. As the parties solve unexpected problems to mutual benefit, these things can be codified in agreements and contracts.

But trying to tie someone down to complying with rigid agreements at the outset can suffocate a budding relationship and reduce the likelihood of success.

(thanks to Don Porritt for his insights and for recommending Das and Teng's work in this area)

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posted by Dave

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