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Warren Buffett has built Berkshire Hathaway Inc. on the basis of trusting the leaders of companies absorbed into his empire.


Smart Trust

By Stephen M.R. Covey and Greg Link with Rebecca Merrill

(Free Press, 296 pages, $29.99)

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When Pierre Omidyar founded eBay Inc. it was an unlikely candidate for business success, given that it brought together buyers and sellers from around the world who would conduct single transactions without knowing each other. Suspicion and distrust seemed a huge barrier. But Mr. Omidyar believed that most people are basically good and could be trusted, and the site flourished.

When Muhammad Yunus founded Grameen Bank, he was also making a bet on humanity's inherent trustworthiness. He lent money to people who nobody else would dream of giving money to: impoverished individuals with no collateral, no steady employment, and no verifiable credit history. But in the end repayment rates at his bank were significantly higher than traditional banking loans.

When Warren Buffett buys a new business for his Berkshire Hathaway empire, he places his trust in the executives of the company he is taking over. Rather than dismissing them immediately, or easing them out after a short interval, as so many other firms do after acquisitions, he only buys companies with executives he would want to keep and then leaves them alone – trusting them to make money for him. Mr. Buffett's headquarters staff is only about 20 people, who oversee 77 operating companies and 257,000 employees, a sign of the trust in the leaders of those companies.

We live in an age of cynicism and distrust. But in a networked world, consultants Stephen M.R. Covey (son of Stephen R. Covey, author of Seven Habits of Highly Effective People) and Greg Link argue that trust has become the new currency, a critical competency for individuals, teams, organizations, and even countries.

"More and more it is becoming abundantly evident that in today's economy, the bottom line is directly connected to trust. Put another way, there is a 'business case for trust' – and it's a compelling case," they declare in Smart Trust, written with Rebecca Merrill.

But it can't be blind trust. It has to be smart trust, which combines the propensity to trust, as illustrated in the stories of Messrs. Omidyar, Yunus and Buffett, with analysis to make sure your trust doesn't go awry. In other words, as the Russian proverb puts it, "Trust, but verify."

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You must establish provisions to deal with the rogues who will take advantage of your trust. At eBay, for example, there is a solid foundation of transparency and feedback procedures that help the traders to police the site.

But the company also has sophisticated measures to detect inappropriate behaviour, fraud and attempts to hawk counterfeit goods. "In other words, the system is clearly based on trust, but it's not blind trust. Though it leads out with a high propensity to trust, it combines it with equally high analysis," the authors observe.

They set out five actions to help build trust:

Choose to believe in trust

Belief is the foundation for getting results in any area of life, and it applies to trust as well. We are guided by instincts that predispose us to trust and also not to trust (dating back to childhood, when we were warned by our parents against strangers). These instincts encourage us to believe that we are worthy of trust, that most people can be trusted, and that extending trust is a better way to lead.

Start with yourself

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Beyond belief in trust, you must also behave with trust – starting with your own actions. It will be easier for people to trust you if you are seen as honest, straightforward, dependable, and genuinely concerned about their welfare. Ask yourself whether your character and competence add up to a person others can trust.

Assume the positive

Signalling you want to be trusted will go a long way toward building a relationship of trust. That signal can come, for example, by simply stating an intention to be trusted in forthcoming negotiations, or showing a new employee you care by some unexpected offer of assistance.

There are two halves to declaring intent, the authors stress: declaring what you will do, and declaring why you will do it. "Sharing the why behind the what makes a profound difference in how others interpret our communication up front, as well as how they interpret our subsequent behaviour."

As well as declaring your intent, you must assume positive intent in others, following the advice of Goethe: "Treat people as if they were what they ought to be, and you will help them to become what they were capable of being."

Do what you say you'll do

Declaring your intent will backfire if you don't follow through. In every country, culture, religion and philosophy for effective living, the authors have found the principle of fulfilling promises is viewed as essential. "Because 'do what you say you are going to do' is a global standard in building trust, this action has become a key evaluator of performance and enabler of multinational and cultural partnering and collaboration in today's world," they state.

Take the lead

You can probably remember a time when someone extended trust in you, and what a difference it made to you. So do the same for others.

Trust (and distrust) is an important aspect of life and work. Smart Trust goes beyond the hortatory – arguing that trust is good – to making the case for why that is so, and using plenty of examples to show how you can build more trusting relationships with those around you.



In Culture Connection (McGraw-Hill, 215 pages, $27.95), Marty Parker, founder and CEO of Waterstone Human Capital, shows how to develop a winning culture based on honorees from the annual program his company runs to find Canada's 10 most admired corporate cultures.

In Confessions of a Reformed Control Freak (Brinley Publishing, 208 pages, $21.99), educator and trainer Brian Smith explores the top 10 sins most managers make and how to avoid them.

Army of Entrepreneurs (Amacom, 207 pages, $26.00), by communications consultant Jennifer Prosek, looks at how to create an engaged work force who act as if they own the company.

Special to The Globe and Mail

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About the Author
Management columnist

Harvey Schachter is a Kingston, Ont.-based writer specializing in management issues. He writes Monday Morning Manager and management book reviews for the print edition of Report on Business and an online column, Power Points. More

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