In the aftermath of Enron and other assorted accounting scandals of 2002, there has been a lot of discussion about the trust factor in the professions. Terms such as the trusted advisor have become common in mission and value statements at firms.
In fact, many firm leaders seem to believe that trust is a core competency of their profession. I have a different perspective on this issue, which I have learned is very controversial (when sharing it with many colleagues it ignites quite a debate).
There is no doubting the importance of trust in business relationships. In fact, the accounting profession, for instance, owes it origins to this very issue, since, from the late fifteenth century on, businesses that were originally based on kinship and family ties grew to a size that made it imperative to hire outsiders. In addition, as personal finances became further separated from business finances, double-entry bookkeeping became a necessity in order for the principals of an enterprise to monitor the agents they hire.
In any economy, a high level of trust acts as an expedient to commerce, reducing the need for lengthy negotiations, protracted contracts, and costly litigation, or what economists refer to as transaction costs. Nobel Prize-winning economist Kenneth Arrow explains the function of trust:
Now trust has a very important pragmatic value, if nothing else. It is extremely efficient; it saves a lot of trouble to have a fair degree of reliance on other people’s word. Unfortunately this is not a commodity that can be bought very easily. If you have to buy it, you already have some doubts about what you’ve bought. Trust and similar values, loyalty or truth-telling, are examples of what the economist would call “externalities.” They are goods, they are commodities; they have real, practical, economic value; they increase the efficiency of the system, enable you to produce more goods or more of whatever values you hold in high esteem. But they are not commodities for which trade on the open market is technically possible or even meaningful.
With high levels of trust, commerce is more fluid and transactions costs can practically be lowered to zero, as economist Thomas Sowell points out in Race and Culture:
Commercial transactions that require trust and reliability are more readily concluded among people who share not only certain traits, but whose possession of these traits can be verified more easily. An extreme example of this are the Hasidic Jews of New York’s jewelry industry, who give each other consignments of precious gems to sell, without the need for contracts or other costly safeguards that would be absolutely necessary if dealing with strangers. Lebanese traders in the interior of Sierra Leone likewise have had to depend on the honesty and reliability of other Lebanese traders in the port city, who sold their consignments of produce in the international market and shared the proceeds. The Chinese in Southeast Asia have also been noted for the large and complex transactions which they conduct among themselves without written contracts.
You can’t purchase trust; it is a table stake in a free market economy, and not just for professionals, but for all businesses. All transactions require trust; it is a basic expectation when conducting business. It certainly is not a core competency, because it is not an attribute you can do better—or at lower cost—than your competitor.
Trust is complex and, obviously, there are different levels of trust, as it is a contextual concept. It is one thing to purchase a pack of gum at a convenience store, or get a shave from a barber, and quite another to trust a babysitter with your child. But it is a mistake for any firm to advertise or market its trustworthiness; it is frankly something that must be demonstrated and earned (one way to accomplish this is to offer a money-back guarantee on all of your work). Merely having trusting relationships with your customers does not ensure they will remain loyal.
I fly quite extensively on United Airlines; I trust them with my life, which certainly requires a higher degree of certainty and confidence in a complete group of strangers than in my accountant or lawyer. In the airlines, safety is simply a table stake—it is necessary, since it is hard to sell anything to a corpse—but it doesn’t ensure customer loyalty, or even profitability.
If United’s service ever begins to decline, I will defect. We witness the same response among customers of professional service providers. Moreover, no airline would advertise: “Fly with us, we won’t kill you.”
The majority of transactions that take place in the world-wide economy are done under an umbrella of trust. Professionals are among the most trusted advisors. So what? This is a subtle point, but an important one. The professions—or any firm therein—does itself no favors by continuously trumpeting its level of trust. Like your technical quality, it is merely a table stake. Those who talk about it, injure it, and are perceived less believable.
Your reputation, like trust, is based on what other people say about you.
Certainly you can lose customers if they lose faith or trust in you—and usually, like husbands, you will be the last to know—but that is not the reason the majority of customers defect from their professional. As we know, most defections occur over the service experience, not issues of integrity and trust.
I cringe when I see a professional’s business card, Web site or brochure that touts “trusted advisors.” It makes me want to immediately count my spoons.