Lack of “trust” – It is costing you personally and professionally!

Preamble and intent

In January 2016, I wrote an article called Erosion of Trust, which is still available to read at? https://blog.crgroup.com/erosion-of-trust-economic-consequences-and-lessons-for-leadership/. It was based on an observation that the Trump phenomenon in the 2016 election is a direct result of a general erosion of trust. I also drew from some data from the World Values Survey and my personal experience from?the six countries in which I have worked. ?I concluded that countries with the “least trust in others” lead to lower productivity and higher stress.

I thought that since eight years have gone by since that article, I would revisit this issue of trust with more recent longitudinal data and add/elaborate on the three lessons for leaders I recommended in that earlier article.

Recent Data on Trust

There is now longitudinal 2010-2022 survey data available from https://ourworldindata.org/trust on the overall level of trust as expressed by individuals across multiple countries.[1] ?Amongst the many charts they provide, the most telling chart (reproduced below) is by far the most interesting one.? ?It compares the percentage of respondents who agree with the statement "most people can be trusted" against those who agree that "most people would try to take advantage of you if they had a chance." Let us compare two pairs: Sweden versus Uganda and China versus India. The United States data is also interesting; it has a score of 38% on both dimensions, which probably justifies the high degree of litigiousness and continued polarisation in the U.S.

Those who know, or have worked or travelled in, Scandinavian or Northern European counties such as the Netherlands must have felt ?(I have) that in these countries everyone trusts others to do the right thing unless found otherwise. Compare that with countries closer to Uganda in this Map – where the trust level is very low and essentially you are guilty unless you repeatedly prove your innocence to become trusted. ?Not surprisingly, doing business in these countries creates immense friction between the “buyer/seller” and the “employer/employee” ?leading to delays in decision making and thus increased costs of doing business and manifests into a lower per capita GDP growth at the aggregate.

In this regard, comparison between China and India data in the graph above is interesting. First, here are some statistics to note:[2] Both countries were neck-to-neck in?both GDP per capita?and in PPP terms till 1991. By both methods, India was richer than China in 1990. However, as of ?2024, China’s GDP per capita? ($13,136) is almost 4.8 times higher than India’s ($2,731) on the nominal and 2.47 times higher ?under the PPP method.?Of course, we can not conclude that there is correlation or causality between trust and economic growth knowing that there are many other reasons for these differences, including political framework and need/desire to work. However, a question one may ask is whether trusting each other actually reduced business friction and thus contributed to relatively high per capita growth in China.? Note that 55% of people in India state ?that “most people will try to take advantage of you if they get a chance” compared les than 20% in China.

One may also say that the reason China and India are so different ?on the Y axis because the penalty if found to be cheating is very high in China and the justice system is swift. In India on the other hand, the probability of being found out is low and if found, the penalty is also low since the legal system is slow and ponderous and can be manipulated.?? This environment also results in corruption and a higher degree of difficulty for doing business.[3]

Trusting too much may also be hazardous to your (business) health/performance

Needless to say, in “low trust” countries, trust has to be earned. By now, we all know the origin of the phrase “trust, but verify”. It is an old Russian proverb and became part of our vocabulary during nuclear treaty negotiations between U.S and Russia. President Ronald Reagan used this phrase to describe how the U.S. would proceed with its Soviet counterparts.[4] ?In the context of business, Claus Langfred of the Olin School of Business at Washington University in in 2005 ?found that too much trust could actually be bad for business …..when it comes to working on team projects. ?His study suggested that in a specific type of team, one where members are both highly independent and trusting of one another, deliberate monitoring/verification is still important. Langfred concludes that regardless of levels of trust, failing to keep an eye on team members’ activities can be naive. So managers may want to require a modicum of oversight rather than let a team decide for itself. A little skepticism never hurt anyone—or any team.[5]

Business consequences of a ?“Low/No trust” culture

It may come as no surprise that when people do not trust each other in their daily life, they may also bring the same low/no level of trust when they come to work or engage in a commercial transaction, or in interactions with the police, the judiciary and financial institutions. Also the lower the degree of trust, the higher the need for regulations, which then can be used and abused in a selective manner leading to even more distrust. You would also find that in many of these “low trust” countries, business is done with or within one’s own community or based on people who they know or someone who they know vouches for the other person’s honesty thus increasing trust.? ?Also in these countries, almost every business transaction is negotiable since no one believes the initial price. ?I remember what one of my highly successful clients in a “low trust” country told me: when I do business, I not only want my supplier to sharpen their pencil, but I want them to cut it into half. It is because I know they are inflating their price knowing that I will negotiate hard – I just don’t trust them”. I can also relate a personal story while growing up in India. My mother was known to always ask for a discount where my father never did or never liked to do it. One day my mother came home saying she bought a carpet by negotiating a 30% discount. My father went and without negotiating anything bought the same carpet for less than what she paid. The reason being when my mother entered the store, the store owner quoted a higher price knowing she would ask for a discount. Of course, now in many of these countries the government forces “MRP” to be put on every product ?– to reduce distrust. So one can legislate/regulate their way out of low trust but the cost to economy is obvious since in these distrusting countries, people do not even believe that printed prices are real prices.[6]

The more interesting scenario is in “B to B” services where one cannot put a “MRP” on services as services do not only have a Cost component but also a Quality and a Timeliness component. ??This well known CQT triangle trade-off makes it difficult to choose based only on price/cost. In these situations, we still see procurement negotiating a lower price or going to a reverse auction or always asking for a quote from multiple vendors. There is no concept of relationship based partnering.? The impact is obvious, the receiving party may get the lowest possible cost but potentially lowest quality ?and “Change Requests” are routine. The same is found in CVs/resumes in these “low trust” countries – these are often inflated and require rigorous validation – further increasing “friction”.

Five lessons for Leaders, managers and employees in a “low trust” ?world

So how do we work in these “low trust” countries and build trust not just within the enterprise but also across the stakeholder eco system.

1.???? At a macro level, practices that work in “high trust” countries will simply not work in “low trust” ?countries. For example, acquisitions by a company from a high trust country of a company in a “low trust” country will fail more often than succeed unless the acquiring company puts in checks and a balances, and even then chances of success are limited.[7]

2.???? As leaders, we must work hard to create an internal trusting culture. This must start from the top and include some simple principles like: if you, as a leader, ?promise something then deliver on it; do not tell stories that are not true; do not talk behind people’s back – a simple policy one company has adapted is to forbid anyone to talk about a person in a negative manner in that person’s absence; do not change your mind too frequently and if sometimes you do, then explain the rationale for the change. If you want people to trust you, then show them that their leader(s) is trustworthy.? The same goes for building trusting relationship with stakeholders – remember the old adage “your word must be your bond”.

3.???? As managers and in addition to the above (as relevant for your position) we must build trust by being a professional and be fact based and do not generalise. Also whether one likes it or not, a key requirement from managers is oversight. Managers need to hold everyone equally accountable with no favoritism. So assign activities/tasks and metrics to your team and then monitor – do not ?just assume that it will get done. A question a manager must ask of their direct reports is “what did you deliver in a 40 hour week this week (and every week)”.[8] Of course, it is easier to monitor a transaction/output based position but ?less so when the position does not have specific short term outputs. High performing folks typically have no issues with being monitored, whereas non-performing people usually do not like it and complain of being ?micro managed. [9] This has become worse under the new WFH/hybrid mode of work. Also note that ?Langfred research concludes that deliberate monitoring is important for any team. I lead/have led successful professional services businesses and we tracked every hour including my hours.[10] ??Also recall the Price’s Law - Half the work of a team of size “N” gets done by SQRT(N) members of the team. Still the remaining team is needed and will have to be paid.[11]

4.???? In terms of stakeholder relationships, be as open as possible assuming the stakeholder is worthy of trust.? If you can not build a trusting relationship, then plan to walk away. ??Walking away is not easy but no one succeeds in the long run in an untrusting business relationship. Yes, you will make money in the short run but I call it? bad money. Nothing is wrong in walking away from a distrusting customer or supplier.

5.???? As an employee/ team member you need to build trust in others and your manager by doing what is asked of you on time and with quality. At the most basic level, acknowledge emails, and when you commit to do something, do it on time and exceed expectations. Building trust comes only through delivery excellence – there are no short cuts.[12]

I think for many of you these five lessons may be just common sense. But we know that common sense is not so common and many do not even know definition of “being a professional.” And it is not what Google search defines a professional: one that engages in a pursuit or activity?professionally.? It is way more than that. Build trust by walking the walk. ?It will make a better world and success for you and your colleagues, and give you and others a much better work-life balance.

[1] These are within country surveys. For a survey of “across country” about trust, see https://www.pewresearch.org/short-reads/2020/12/15/around-the-world-people-who-trust-others-are-more-supportive-of-international-cooperation/ which covers only 14 western countries and in a very narrow context.

[2] https://statisticstimes.com/economy/china-vs-india-economy.php#google_vignette

[3] ?See? “‘A Lifelong Nightmare’: Seeking Justice in India’s Overwhelmed Courts - With 50 million criminal and civil cases pending, it would take 300 years to clear the country’s judicial backlog”,

?https://www.nytimes.com/2024/01/13/world/asia/india-judicial-backlog.html#:~:text=Delays%20are%20endemic%20in%20both,at%20least%20five%20years%20old.

[4] See for more behind the origin of this phrase https://en.wikipedia.org/wiki/Trust,_but_verify#:~:text=The%20phrase%20became%20internationally%20known,discussions%20with%20the%20Soviet%20Union

[5] There is even a Journal to Trust Research https://www.tandfonline.com/journals/rjtr20 ?which publishes research enhancing the understanding of trust and trust-related management, focusing on organizational and social contexts.

[6] For a very comprehensive work on trust and its impact on various macro-economic and policy? variables, pl. see Yann Algan, Pierre Cahuc. Trust, Well-Being and Growth: New Evidence and Policy Implications. Aghion, Philippe, Durlauf, Steven N. Handbook of Economic Growth, Elsevier Science, pp.49-120, 2014.

[7] See, ?Min Maung, ?Trust and cross-border mergers and acquisitions, International Review of Financial Analysis 83 (2022) 102262

[8] This was a fundamental concept behind Activity Based Costing (ABC) and Activity Based Management (ABM) and later on for ?“Shared Services”. We even created Software application called FlexABM to be able to track and report and improve and we implemented it around the world. ?https://crgroup.com/flex-abm/

[9] ?Another approach to build trust can be adoption of? open book management

See https://www.nceo.org/articles/open-book-management.

[10] As an added benefit, it allowed us to evaluate capacity, identify inefficiencies, separate highly productive members from the non-productive ones, plan learning and development etc. I cannot see any professional company not doing it. We even designed a software application PM-Studio for it which we are using rigorously.

[11] Price's Law is named after Derek J. de Solla Price, a physicist and science historian, de Solla Price, D. J. (1965-07-30). "Networks of Scientific Papers".?Science.?149?(3683). American Association for the Advancement of Science (AAAS): 510–515. Also see Lotka, Alfred J. (1926). "The frequency distribution of scientific productivity".?Journal of the Washington Academy of Sciences.?16?(12): 317–324.

[12] If you are wealthy, then you may have reached a post work-life balance state. For you, “ Passion to excel” may replaced by “I will work when I feel like it, not when my manager tells me or when client needs it.” ?Please quit the work force and go to the beach – you are negatively impacting team productivity.