Magazine article New Zealand Management

The Economics of Trust: Trust Is a Rising Tide, It Lifts Everyone's Boat

Magazine article New Zealand Management

The Economics of Trust: Trust Is a Rising Tide, It Lifts Everyone's Boat

Article excerpt


United States author and management/ leadership consultant Stephen MR Covey (son of Stephen R Covey) was in New Zealand last month to present workshops based on his best-selling book The Speed Of Trust which argues that trust is an economic measure, enabling organisations to move faster and at lower cost. Ahead of his visit, he gave a telephone press conference to reporters from Asia Pacific, talking about how trust is measured economically and the risks of not firmly embedding it in an organisation.

How do you define trust?

In a very simple way we might define trust as confidence. In fact in many languages, the words trust and confidence are the same word. Another way of looking at this is to look at its opposite--the opposite of trust, distrust, is suspicion. If I don't trust someone, I'm suspicious about their motive or their agenda, or I'm suspicious about their integrity or their track record.

But I do trust when I've got confidence. It's like Jack Welsh, the CEO of GE, said "I could give you a dictionary definition of trust, but you know it when you feel it."

What you feel is confidence, as opposed to suspicion. But it's not a blind confidence or blind trust, it's a confidence that emerges out of character and competence. And it's that combination of character and " competence that enables us to have more' confidence in a person or in a company, or in a brand or in a partner--that they can deliver, both because of their character but also because of their competence, their 1 ability to perform and their track record of performing.

Where trust really works well and where you see what I call the dividends of high trust, is in companies, in organisations, in societies that have learned to earn and maintain that confidence. And they get huge advantages from moving at greater speed and at lower cost.

Your book talks about the economics of trust, are you able to elaborate on that?

The premise is that trust is not just a soft, nice-to-have, social virtue. Trust is a hard-edged economic driver. The basic formula for the economics of trust: when trust goes down in any relationship--in a team, a company, with a customer or client, or for that matter in a community--when trust goes down, speed goes down with it. Everything takes you longer to :to, while cost goes up, everything costs you more. This is a tax, a low-trust tax. Distrust doubles the cost of doing business effectively and triples the time it takes to get things done.

Thankfully the opposite is true as well. When the trust goes up in that relationship--in that team, company, or with the customer--speed goes up with it. Everything happens faster and the cost comes down--that is a dividend, a high trust dividend. It really is that simple, that real and that predictable.

We also point out that trust is quantitative, it's measurable. You can measure an improvement. Or if it's going down, you can actually get good at moving the needle on trust and improving it. As that trust needle moves up then you'll find that every other measure tends to go up with it because trust is like the rising tide that lifts all boats. That's economic and that's exciting to take this soft topic and make it hard-edged.

It's interesting that we often take this for granted. We ignore it and neglect it until it gets abused. We shouldn't do that, we should become deliberate about it, explicit about this, because the very act of doing that helps us increase it.

What are the key behaviours of trust?

We have identified the 13 key behaviours that are common to high-trust people, organisations and companies around the world. [They are: talk straight, demonstrate respect, create transparency, right wrongs, show loyalty, deliver results, get better, confront reality, clarify expectations, practise accountability, listen first, keep commitments, extend trust. …

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