The Challenge of Trust

For the Successful Startup the issue of trust is a bit of a double-edged sword. On the one hand we have adopted an outsource business model. The vendors are likely to have years of expertise so it is easy to trust them to do what we want like make our products or keep our accounts up to date. We trust that they know what they are doing, and there is a tendency just to let them get on with their tasks.

The challenge is for entrepreneurs who have come from employment in a traditionally-structured workplace where no one trusts. I meet more entrepreneurs who are control freaks than ones who are trusting. These people want to get involved in everything and for the outsource vendor they can be a real pain in the butt.

For a long time, management consultants and academics have touted the benefits of trust to the success of businesses. In my experience, however, I have rarely seen it practiced in the workplace. In businesses with a hierarchical structure, I have experienced and observed the opposite. No one trusted anyone else.

It is easy to understand why. In a traditional company everyone wants to win the approval of their manager. If someone we are responsible for offers up a report or a solution, we are unlikely to pass it up the chain without checking it thoroughly.

Most employees are not empowered to make a decision without the consent of their boss, and many times an additional boss several rungs up the corporate ladder. In one company I worked at, when the solution to an issue was accepted it had to be run by the executive team for rubber stamping before being presented to the CEO. Then the CEO sent the proposed solution outside the company to an independent management consultant for verification. The whole system was one of second guessing and it is a common trait in most companies. In a Successful Startup such processes are thankfully dispensed with.

If you come from traditional employment you are likely to start with an emotion of mistrust. That makes selecting vendors and contractors a tougher task. You’ll be tempted to do deep due diligence on many vendors before making a decision. You have to balance that tendency with the fact you are staring out as a small fish in a big pond. The vendor doesn’t really want to be bothering with the small fish, so if you also over do the diligence process they are more likely to drop you.

Once selected you also have to learn to be more trusting of the vendor. After all, you have selected them because they are expert at what they do, more expert than you.

On the other hand, if you come from somewhere else such as being a homemaker, there is a chance you can be too trusting with an inclination to select the first person or company that comes along. Oddly enough, although I had a couple of decades working for traditional companies, I tend to fall into this latter category. I am sometimes too trusting and too much hands off.

Knowing one’s inclination to be too controlling or too hands off will be helpful. I am pretty sure that your personal assessment will be wrong, so ask others (those you trust to be honest of course) for their opinion. Lyn has always told me I can be too trusting and too quickly. It helps me double check my decisions more than I would do without that feedback, and I try to be more hands on than I feel the need to be.

People who trust too much and too readily tend to take an overly rosy view, assuming that most people are decent and would never harm them. They are more likely to share sensitive information about the company too indiscriminately, and less likely to do deep due diligence on the other party of a potential transaction. Their overly trusting behavior sets them up for potential grief later on.

People who are too mistrustful assume the worst about other party’s motivations, intentions, and future actions. I once had an investor who insisted we use his lawyer for contract negotiations. The attorney was the sort of personality that imagined skeletons in every closety. Being a small company, we drove the larger vendors insane with all the questions and wordsmithing. So much so that they often walked away from the negotiation table never to return.

The secret then is to strive for the right balance and to do that you have to be honest about which category you tend to be, mistrustful or too trusting.

Roger Kramer wrote about trust in a Harvard Business Review in 2017:

I have been grappling with this question for most of my 30 years as a social psychologist, exploring both the strengths and the weaknesses of trust. In the wake of the recent massive and pervasive abuses—and with evidence of more scandals surfacing each day—I think it’s worth taking another look at why we trust so readily, why we sometimes trust poorly, and what we can do about it… human beings are naturally predisposed to trust—it’s in our genes and our childhood learning—and by and large it’s a survival mechanism that has served our species well. That said, our willingness to trust often gets us into trouble. Moreover, we sometimes have difficulty distinguishing trustworthy people from untrustworthy ones.

Outside of the Corporation

Away from the business world all the evidence suggests we are hardwired to trust, especially to trust people who are similar to us in some way. Researcher Lisa DeBruine developed a technique for creating an image of another person that could be morphed to look more and more (or less and less) like a study participant’s face. The greater the similarity, DeBruine found, the more the participant trusted the person in the image.

Other studies have shown that we like and trust people who are members of our own social group more than we like outsiders or strangers. This in-group effect is so powerful that even random assignment into small groups is sufficient to create a sense of solidarity. Finally, we tend to trust people more who are slightly tactile. People who place an innocuous touch on an arm, back or shoulder are more trusted than those who stand back. This is just good to know.

Trust is one thing. Good Judgement is another. One tendency that skews our judgment is our tendency to see what we want to see. Psychologists call this the confirmation bias. Because of it we pay more attention to, and overweight in importance, evidence supporting our hypotheses about the world, while downplaying or discounting discrepancies or evidence to the contrary. As we discussed earlier, our reticular activation system helps do this for us. This tends to make us want to hire consultants and vendors we have worked with before. The trust exists and we judge them favorably. Because of my own leaning toward easy trust I deliberately select alternative vendors to compare against my favorites. Surprisingly, in most cases I found the vendor I knew well was not as good as the new one selected.

To make matters worse, people tend to think their own judgment is better than average including their judgment about whom to trust. Unfortunately, the wiring in our brains can hinder our ability to make good decisions about how much risk to assume in our relationships. In particular, researchers have identified two cognitive illusions that increase our propensity to trust too readily, too much, and for too long.

The first illusion causes us to underestimate the likelihood that bad things will happen to us or our business. Research on this illusion of personal invulnerability has demonstrated that we think we’re not very likely to experience some of life’s misfortunes, even though we realize objectively that such risk exists.

I think we can balance this in business by deepening our intuition, and also taking a break from the work period. Sometimes, when we leave the office and go for a short walk, we get that gnawing feeling in the pit of our stomachs, the one we don’t notice if we are slaving away at the computer. That is our warning that something might go wrong and we need to investigate.

Our innate trust also makes us vulnerable to be manipulated or faked. A number of studies indicate that detecting the cheaters among us is not as easy as one might think. Usually, the manipulator smiles a lot; maintains strong eye contact; and occasionally touches the other person’s hand or arm gently. (Women mention touching as a strategy more than men do and also report using it more than men do.) They engage in cheery banter to relax the other person, and they feign openness during their actual negotiation by saying things like “Let’s agree to be honest” and “I always like to put all my cards on the table.” Their efforts turn out to be pretty successful. Most find it fairly easy to get the other person to think they are behaving in a trustworthy, open, cooperative fashion.

As the owner it is your responsibility to find vendors and contractors that you can rely on. It is then your duty to perform objective evaluation of their suitability. Finally, you will need to negotiate fair agreements between you. If we are to trust widely and show smart judgment, we need to implement a couple of safety features.

Build Cancellation Language Into Contracts

If the means of cancelling contracts are clearly laid out it allows both parties to be more trusting. Keep contract lengths to sensible periods like one year with automatic renewal unless cancelled by either party. One of the big advantages a startup has over larger organizations is that changing vendors and consultants is often simply a matter of not renewing a contract. In a regular company it is not easy to remove poor performance from the system.

Give Regular Feedback

When you hire a vendor, you are hiring an expert. Whether a single person or a company they probably know what they are doing better than you. Some innate trust is required. However, if you simply hand over the job and stop communicating the opportunity for the vendor to slacken off or take advantage increases. Regular communication is essential even if it is just you giving them positive feedback.

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