Does Your Company Have a Culture of Trust?
Posted on Harvard Business Review: September 16, 2011 8:55 AM
Walking around Munich on a recent trip, I was impressed by the throngs of bicyclists whizzing by (move over, Amsterdam!). But what struck me even more was what the cyclists did when they dismounted. They left their bikes unlocked.
In Boston—a relatively safe city—I’ve become paranoid about bike theft, carrying around two locks in addition to my “saddle leash” to keep the seat away from the prying hands of criminals. But along the streets of Munich, even at night, I walked by literally hundreds of bikes that either weren’t locked at all, or were only locked to themselves (i.e., they weren’t secured to a bike rack or a parking meter). Anyone could grab them, pop them in the back of a truck (admittedly, a lot more Germans seemed to drive Smartcars than pickups) and spirit them away to a warehouse where the lock could be easily sawed off. But, apparently, no one did.
And that reminded me of the correlation between trust and economic growth. Munich, a city of 1.35 million, is almost ludicrously tranquil and prosperous. It’s a financial hub ranked by Monocle magazine as the world’s #1 most livable city, and it ranks seventh in a similar survey by Mercer. Perhaps the barely-locked bicycles are a clue to its success?
Nobel Prize-winning economist Kenneth Arrow wrote in 1972, “Virtually every commercial transaction has within itself an element of trust, certainly any transaction conducted over a period of time. It can be plausibly argued that much of the economic backwardness in the world can be explained by the lack of mutual confidence.” (A gazillion other economists agree with the premise.)
It makes sense, of course—you aren’t going to loan someone money, or conduct big deals, if you’re not confident you’ll be paid back. (Or at least that the law will stand up for you if you’re wronged—see Max Chafkin’s recent take on doing business in Argentina in Inc. Magazine). Conversely, if there are some guarantees in place, you’re more likely to take on the risk necessary to back a new venture (that would be the basis of Silicon Valley), try out a new product, or make a trade. (The potential dark side to guard against is that studies have also shown the “culture of trust” is much stronger in ethnically homogenous countries—i.e., people trust folks who are like them, not that that’s a shocker for anyone who’s thrown business to fellow Rotarians or alumni from your alma mater).
But overall, creating a culture where people feel secure in dealing with others is a long-term recipe for success—whether in geopolitics or your own company. The key is building a shared expectation that deadlines and agreements will be kept, and having a central authority (at the city level, it’s government or law enforcement; in companies, it’s the boss) that backs those guarantees.
What does your company do to foster—or hinder—a culture of trust? And how does that impact your bottom line?
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