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How to Build a Company People Trust

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I recently spoke to Stephen M. R. Covey, who is the cofounder and CEO of CoveyLink Worldwide and author of the new book, Smart Trust: Creating Prosperity, Energy, and Joy in a Low-Trust World. He is a sought-after and compelling keynote speaker, author, and advisor on trust, leadership, ethics, and high performance. His last book was called The SPEED of Trust. He is the former CEO of Covey Leadership Center, which under his stewardship became the largest leadership development company in the world. In this interview, Mr. Covey talks about why smart trust is important to business leaders,which leaders are getting it right, why high-trust organizations outperform everyone else, and more.

What is "Smart Trust" and why is it important to business leaders?

Smart Trust is knowing how to trust in a low-trust world. It is a third-alternative approach that moves leaders and organizations from the extreme of "blind trust"--where they're gullible and trust too much--and the opposite extreme of "distrust"--where they're suspicious and don't trust enough. Smart Trust is the informed judgment that flows from optimizing a high propensity to trust (flowing from your heart) with equally high analysis (flowing from your head). This judgment becomes a competency that enables people to minimize risk while maximizing possibilities.

Smart Trust is important to business leaders because research overwhelmingly shows that leaders and organizations perform better and people are happier and more engaged with high trust--and yet they're operating increasingly in a low-trust world. Smart Trust helps leaders and organizations navigate effectively with trust, turning it into a competitive advantage by opening themselves up to opportunities and possibilities, without taking naive risks in a world where not everyone can be trusted.

Can you name some leaders who have used smart trust to their competitive advantage?

Warren Buffett of Berkshire-Hathaway operates on the premise of what they call "deserved trust," enabling them to do deals faster and at less cost, and to operate with high efficiency--with what two Stanford professors called "the lowest ratio of corporate overhead to investor capital among all major corporations" in the world. Tony Hsieh, of online retailer Zappos, operates with trust, both with his customers (free shipping both ways) and his employees (no scripts in his call centers).

Isadore Sharp built Four Seasons hotel chain on trust as their code and compass, "the primary reason for [their] success." Pierre Omidyar founded eBay on the premise that most people are basically good and can be trusted, enabling them to create a business in which buyer and seller "have learned they can trust a complete stranger." Leaders from Google, SAS Institute, Southwest Airlines, Virginia Mason Medical Center, W. L. Gore, IBM, Whole Foods, and countless others deliberately operate on the explicit premise of trust with employees and customers.

What would you say to companies that have a command and control environment, having strict policies and procedures for employees?

Smart Trust is not a one-size fits all approach. In certain contexts, strict policies and procedures may be appropriate given the level of risk involved (such as strict policies and procedures on a nuclear submarine), and/or based upon the credibility of the people involved. But in most environments, such a command and control approach typically leads to decreased speed and increased costs. Also, less energized, engaged, and happy people. And, ironically, less control.

In a low-trust culture, it's literally impossible to put enough rules and policies into place to control people's every action. By contrast, when an organization creates a high trust culture, the culture itself becomes self-monitoring and reinforcing of trust, weeding out violators, and can become a more effective form of "control" than additional rules and policies.

In your research, what helped you prove that high-trust organizations outperform low-trust ones?

There's external research from multiple sources that demonstrates that high-trust organizations outperform low-trust organizations by up to 3 times, be it in total return to shareholders (stock price plus dividends), or improving test scores in schools. For example, a Watson Wyatt study showed that high trust organizations outperformed low-trust organizations in total return to shareholders by 286%.

What are some ways for a young professional to build trust in the workplace?

At its core, building trust comes down to your credibility and your behavior. In the book, we identified 5 Smart Trust "actions" that were common to high trust leaders and organizations. For example, the 5th action of Smart Trust is to "lead out in extending trust to others," highlighting the reality that one of the best ways to create trust is simply to give trust. This is because of the reciprocity of trust—when we give it, people return it; when we withhold it, they withhold it.

Yes, a few may attempt to abuse it: but we shouldn't allow the few that we can't trust to define for us the many that we can. Instead, focus on building a high trust culture around the many that will help us weed out the few. And it's the leader's job to go first in extending trust. That's what leaders do. The first job of any leader is to inspire trust; the second job is to extend trust. Leaders need to be smart about it, of course, because there is risk in trusting. But there is also risk in not trusting—in fact, not trusting is often the greater risk. Smart Trust helps us find the sweet spot and develop the judgment of how to wisely extend trust in a low-trust world.

Dan Schawbel, recognized as a “personal branding guru” by The NewYork Times, is the Managing Partner of Millennial Branding, a full-service personal branding agency. Dan is the author of Me 2.0: 4 Steps to Building Your Future, the founder of the Personal Branding Blog, and publisher of Personal Branding Magazine.