It's no great leap to suggest that the recent scandals have contributed to the erosion of trust in business. While we're not naive enough to think that our institutions are entirely free of unscrupulous behavior, many of us feel that a basic understanding is being violated. As an entrepreneur, I am a firm believer in the promise and opportunity of our free-market system. I also believe there is a fundamental level of trust necessary to sustain that system, a trust that has been subverted by an unscrupulous few—with, as we have seen, very damaging effects.
Noted social scientist Francis Fukuyama defines trust as an expectation among people that stems from "regular, honest, and cooperative behavior" and is based on "commonly shared norms." In his book Trust: The Social Virtues and the Creation of Prosperity, Fukuyama argues that "high-trust" societies such as the United States, with its capacity for forming spontaneous communities and associations, have been at the forefront of the global economy and wealth creation. Fukuyama warns, however, that distrust in America is on the rise. As evidence he cites the breakdown of families, churches, neighborhoods, and workplaces, as well as the increase in crime and litigation.
In the larger context of American culture, public trust in institutional leadership has taken a beating in the last fifty years. In the 1960s and 1970s it was challenged by the Kennedy assassination, Vietnam, and Watergate. In more recent times, the public has seen a presidential impeachment, questions of due process in the O.J. Simpson trial, revelations of sex abuse in the Catholic Church, and uncertainty over terrorism and war.
So our high-trust society is being tested, and not just by the recent corporate scandals. In many real and disturbing ways, our expectations of "regular, honest, and cooperative behavior" have been betrayed. Inevitably, these betrayals erode the faith we put in institutions.
But what about our trust in each other, or what I'd call "eye-level" trust? How do we understand its role in our daily lives, relationships, and work?
In civilized society, some eye-level trust is assumed. This trust underlies everyday interactions between strangers, like taking a cab ride in an unfamiliar city. In our daily encounters with people, we trust that they will act in a way that is in our best interests—or at least isn't harmful to us. We don't have the time or the reason to form deeper relationships with most of the people we meet as we go about the smaller business of life, but we all have an understanding that everything will run smoother if we operate at a basic level of trust in each other.
But when we look at the relationships in which we have a lot at stake—such as business relationships—we can't assume that eye-level trust will simply "be there." Raymond Spencer is chairman and CEO of Kanbay Inc., a global systems integrator that provides high-value, technology-based business solutions. The company, named one of ComputerWorld magazine's "Best Places to Work in IT," prides itself on being a "values-driven" organization. Spencer notes, "I think the question of trust is more on the forefront of people's minds today, not as assumed but as something that you in a sense have to earn, and which is very easily lost. Something in the past that might have been quickly forgiven … now can almost totally ruin a relationship." As Spencer points out, this trust is a kind of knowledge, something we learn to be true through experience.
Spencer notes the great importance of building this eye-level trust with the clients at service-based Kanbay. "All we are is people," he says. "And the only asset we have, really, beyond their skill, is the asset of trust." Bob Bingham, CEO of The Little Gym, Inc., would agree. Through its franchises, The Little Gym offers curriculum-based, physical skill-building programs for children. "When you drop off your child with someone, you can't almost trust them, you have to have 100 percent trust in them," Bingham says. "And so trust is very much a part of what Little Gym is to the end consumer. Our obligation is to make sure that everyone who is delivering our product is completely well trained and qualified to do so."
Like Kanbay and The Little Gym, trust is at the very core of what my own company, FWI, offers to its customers. FWI delivers timely, concise briefs on the latest developments in medical research and the industry to hundreds of thousands of physicians, health care executives, and patients. However, we are not a news organization in the traditional sense because much of our work is underwritten by corporate clients—primarily health care companies.
These companies hire FWI to provide information services for their customers. For example, a pharmaceutical company may underwrite a newsletter designed specifically for cardiologists. Every week, FWI sends these cardiologists a concise update on the most important research and other news affecting their practice. It is important that the sponsoring company have no editorial control over the information that the cardiologists receive from FWI—that the information we provide be objective and unbiased. Thus, the pharmaceutical company builds trust with those cardiologists through a genuine commitment to improving patient care by offering relevant continuing education. So, one can say that FWI is in the business of building trust through information. Thus, our product—and by extension, our brand—must stand for integrity and quality. For if the FWI brand doesn't earn trust with our readership, it ceases to have value … and the company ceases to be in business.
When it comes down to it, this story is the same no matter what business you're in. In the marketplace, your company is only as good as the eye-level trust it inspires in your customers. And internally, your organization is only as good as the eye-level trust that exists among its members. Consider how trust is earned and lost within the workplace. For example, a fundamental principle of management is establishing clear and defined objectives. When a person is new to a job, it's important to immediately set expectations so that he understands the rules of the game. Over time, as the employee meets or falls short of his agreements, trust in him is either built up or lost. Meanwhile, the new employee is assessing the situation from his perspective, looking at himself (Can I do this job?), his supervisor (Will she help me to learn and treat me fairly?), co-workers (Will they support or undermine me?), and the company as a whole (Will this be an environment that allows me to grow and perform well?). When those at the new workplace keep up their end of the bargain, the employee's trust in them—and the company—builds accordingly.
Eye-level trust within organizations can and should be maintained even when tough choices must be made, according to Santo ("Sandy") J. Costa. In the mid-to-late 1990s, Costa served as president and COO—and later, vice chairman—of Quintiles Transnational, an S&P 500 company that provides integrated product development and commercialization solutions to the pharmaceutical, biotechnology, and medical device industries. During Costa's tenure as president and COO, Quintiles grew from fewer than one thousand employees in eight countries to more than twenty thousand employees in thirty-one countries. "I've always viewed relationships in organizations as being covenantal and not contractual," says Costa. "A covenant is a shared commitment, and I think that you can only have shared commitments when you have trust." While Costa acknowledges that companies sometimes have to make hard decisions and take actions that may have negative effects on employees, this can be done in a way that nonetheless honors and respects those employees’ trust. When a negative action is necessary, he says,
it shouldn't be taken in a way that seems haphazard, unjustified, or not clearly communicated. If you don't feel like you can take the time to let your people know what's going on in their lives within an organization, it shows you don't value them. And if people don't feel like they're valued, they certainly won't trust [you].
This is a lesson that one embattled company, Agilent Technologies, appears to have taken to heart.
Every year, Fortune lists its "100 Best Companies to Work For in America," based on an employee survey called the Great Place to Work Trust Index as well as an evaluation of company benefits and practices. Employees’ opinions matter most, as their surveys count for two-thirds of a company's total score. In February 2002, Fortune featured a several-page spread on Agilent Technologies, which placed thirty-first among that year's honorees. The article talked glowingly about the "Agilent Way" and featured photos of smiling employees. The article's title? "How to Cut Pay, Lay Off 8,000 People, and Still Have Workers Who Love You."
"It may seem odd to award the Best Companies moniker to a company that laid off 8,000 people," Fortune conceded. However, the magazine went on to credit Agilent CEO Ned Barnholt with "driv[ing] his business forward through tough times without violating the workers’ trust." And times have been tough indeed for the Silicon Valley-based tech giant. As business soured in 2001, Agilent fought to avoid layoffs with cost-cutting measures and a temporary 10 percent pay cut across the board. It wasn't enough, however, and the company was forced to cut four thousand jobs at first, then four thousand more.
Fortune interviewed dozens of Agilent employees—both past and present—and found that nearly no one had a negative word to say. The company offered a generous severance package, but interviewees preferred to talk about the other ways Agilent handled the situation: "the Hail Mary steps the company took to avoid downsizing; the barrage of e-mails and face-to-face meetings with top management down; even the tired sound in the CEO's voice as he delivered news of mass layoffs."
The magazine noted how Agilent, which was spun off by Hewlett-Packard in 1999, "considers itself the true keeper of the ‘HP Way’—the management objectives devised by Hewlett and Packard that spelled out how to treat customers, shareholders, and most of all employees. The Way's key precept is that workers will give their best if they're treated honestly and listened to." Barnholt made sure the Agilent Way was compatible with the demands of the market by also incorporating three new company values: focus, speed, and accountability.
These values have been put to the test. When Agilent needed to cut costs in 2001, it relied on the ingenuity of its employees instead of handing down directives. Agilent employees took the initiative, embracing cost cutting as a "calling." When the company temporarily cut salaries, employees cheered the move, understanding it might help save jobs. And finally, when layoffs were necessary, Agilent embarked on a downsizing campaign that was "two parts communication, one part execution." Fortune concluded, "Agilent had succeeded in turning the ‘us vs. them’ of corporate downsizing into just ‘us.’"
As of this writing, the jury is still out on Agilent. The downsizing has continued as the company struggles with losses; its workforce has now been reduced by approximately 30 percent from its peak in early 2001. Nevertheless, in an interview posted on the company's Web site, Ned Barnholt stressed his pride in how the people at Agilent have responded to the downturn: "Because they're staying the course, I'm confident that we'll come out of this difficult time a strong company."
By the way, Fortune released its 2003 "Best Companies to Work For" list. Agilent was number thirty-three.
Francis Fukuyama, Trust: The Social Virtues and the Creation of Prosperity (New York: Free Press, 1995), 26, 51.
Raymond Spencer, chairman and CEO of Kanbay, Inc., interview by author, July 26, 2002.
Bob Bingham, CEO of The Little Gym, Inc., interview by author, June 25, 2002.
Santo J. Costa, interview by author, March 17, 2003.
Robert Levering and Milton Moskowitz, "The Best in the Worst of Times," Fortune 145, 3 (February 4, 2002): 60.
Daniel Roth, "How to Cut Pay, Lay Off 8,000 People, and Still Have Workers Who Love You," Fortune 145, 3 (February 4, 2002): 64.
"Agilent President and CEO Ned Barnholt and CFO Adrian Dillon Discuss Q4 Fiscal 2002 Results," interview posted online at http://www.agilent.com.