“Smart Trust” Featuring Stephen MR Covey

Interviewer: Hello and welcome to Soundview Live, an interactive conversation that puts to you in

touch with today’s top business authors. My name is Andrew Clancy, Senior Editor for

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with a customized hand out containing key points from today’s presentation. In that

email, you’ll also receive an exclusive invite to attend an additional Smart Trust webinar

as well as links to the video content that will be used in today’s presentation.

Now, for today’s guest, his previous bestseller, the Speed of Trust arrived like much

needed medicine during a time when many elements of business and society were

played with trust-related illnesses. Personally endorsed by more than sixty authorities

from business, academia and media, the book ignited an examination of the critical role

that trust plays in all aspects of our lives.

It went on to sell more than a million copies and it was published in 22 languages. Our

guest’s latest books, Smart Trust, co-authored with Greg Link is again receiving

accolades from a diverse panel of experts and its path for the best-seller list begins next

Tuesday January 10th when it will be released in bookstores and online retailers

everywhere.

Our guest is with us today to discuss the practical applications that are enabling people

and organizations everywhere exercise smart trust to achieve extraordinary results.

Soundview is very pleased to welcome the co-founder of CoveyLink and a leader of the

global speed of trust practice, Mr. Steven M. R. Covey. Steven, welcome to Soundview

Live.

Interviewee: Well thank you so much, Andrew. I appreciate that kind introduction and welcome to all

of you attendees for this webinar. I’m delighted to have this chance to talk to you about

this new book Smart Trust and to share the essence of some of the ideas and the

insights and hopefully to provoke your thinking and interest you in wanting to learn and

understand more.

What I’d like to do is give a brief overview and then go a little bit into some of the key

learnings around what we call the five-key actions of Smart Trust based upon the

research and the practice in identifying as we worked on this book and then we’ll take

some questions as Andrew said at the end of the presentation.

But if I could, I’d like to begin with a story that I’ll do in two parts. I’ll do the first part

upfront and set the stage and then I’ll give you the second half of the story just a few

minutes down the road as we get in to this presentation. But this kind of illustrates the

challenge that we face of deciding when we can trust or maybe when we cannot trust in

today’s world and that’s really one of the big challenges that people face everywhere

today. It’s that everywhere we see a crisis of trust. We see trust going down. We see

trust going down in our society at large. We see trust going down in institutions, trust in

media, trust in government, trust in political parties, trust in business is going down.

Trust in education, trust in churches, trust in healthcare, trust in most institutions is

going down with some exceptions.

And that’s true in most places in the world and so there’s a – in affects a veritable crisis

of trust that we’re all enmeshed in. And that’s the context for this world and Smart Trust

is really all about how to trust in a low-trust world and how to do it smartly as opposed

to naively, blindly and getting burned left and right or how to avoid also being so

distrustful of everyone because of the fact that there are people that we can’t trust. It’s

trying to find a third alternative on how we can navigate with high trust in a low-trust

world. Now having said that let me begin with this story.

This happened just a few years ago in 2007. Ted Morgan was the CEO of SkyHook

Wireless. They’re a technology company with location finding services for phones and

the like and a GPS type of thing.

[0:05:00]

They were unknown at the time. They had a good technology and they had many from

private equity venture capital investment but they were trying to get a major phone

company to embed their technology in their phones and so they were meeting with all

the big players and they have them for some time. They still didn’t have any deal. No

one really knew who they were. They’re trying to get a deal.

So they met with Apple, and with the iPhone people and they were extremely interested

in SkyHook Wireless technology, and so Ted Morgan is the CEO and he gets a call and

the call is from Steve Jobs. Ted checks his voice message, “Hey, Ted. This is Steve Jobs

from Apple. I’d like to talk to you about SkyHook. Give me a call,” and he leaves his

number. So he called Steve back and Steve says, “Hey, I really like the technology. Our

team saw it when they worked with you on that presentation and we’d like to do more.”

So they quickly started meeting and they quickly were moving toward doing a deal. This

whole thing happened very fast. But what was right upon them was the Macworld in

2008, in January 2008 because again, this is happening right in a condensed timeline. So

Macworld were just around the corner and Steve Jobs calls up Ted Morgan. After

they’ve had a few meetings they tried to do a deal and they’re close to doing one. Steve

Jobs calls up and says, “Look, Ted. We’ve got this Macworld event coming up and we’d

really like to model your technology at the event but to do that we need your code to be

able to load this thing up and to model it the way we want to.”

And so he said, “So we’re going to respectfully request that we get your code so we can

get this thing done.” Now Ted Morgan is sitting in his conference room with his

executive management team and he cuts the phone and he says, “It’s Steve Jobs. They

want our code, they want our code,” he kind of whispers to the group. And everyone on

the group says, “No, no, no, no. Don’t give him the code.” And so Ted Morgan gets on

and says, “Now Steve, as you might imagine that code is our intellectual property. It’s all

we have and we’ve never given that to anyone. That’s all we have as a company.” And

Steve responded, “Ted, I know that. I understand intellectual property. You’re just going

to have to trust me.”

So Ted Morgan had a decision here. Can he trust Steve Jobs? Should he trust Steve Jobs?

So let me let you think about that and I’ll come back and give you the second half of the

story in just a minute. But that’s the type of question that we have constantly. “Who

could I trust? Who can I trust? How do I trust in a low-trust world and be smart about

it?”

So let’s go through a process that helps you think about this question then I’ll give you

how Ted Morgan answered that and then I want to go deeper into how we create smart

trust in today’s low-trust world and how we operate in a way that really is effective for

us.

So let me first define trust and what I mean by trust very simply. Trust is confidence. The

opposite of that, distrust is suspicion. You see I don’t trust someone if I’m suspicious

about their agenda, their motive or suspicious about their competence to deliver. I do

trust when I feel confident. In fact, in many languages, trust and confidence are the

same word. So our working definition is confidence and a way of thinking about trust is

to look at its opposite, distrust, that suspicion. So I’m talking about confidence versus

suspicion. Now where is that confidence coming from?

What you see on the slide on the second point, the confidence comes from having both

character and competence. Both. Both, they’re vital. Both the character is vital and the

competence is vital. If you have one and not the other, that’s insufficient. But when you

have both character and competence that creates a confidence that enables you to

move forward with trust. Then as a third dimension to this smart trust that I want to talk

about and that’s really going more specifically into the idea of smart trust.

Smart trust is a third alternative. It means that you have both a high propensity to trust

and equally high analysis. So two dimensions here – a propensity to trust, analysis – you

want both to be high in order to have smart trust. Let me go deeper into that idea of

propensity to trust and analysis.

[0:10:00]

On the left hand side here, you will see the propensity to trust. That really is referring to

your willingness, your inclination, your bias, your desire, your tendency to trust people.

You want that to be high. This is primarily something that flows out of your heart. But by

itself, if that’s all you had, you’ll find yourself in trusting too much and in a low-trust

world that can be dangerous so it’s insufficient by itself.

You want to balance that with what we have in our right hand side here, which is the

analysis. And analysis is really always about assessing three vital variables. First, the

situation that is the opportunity, the job to be done. What is it doing in a trust people

one? What’s the situation? What is the risk involved? That’s the second variable, the

risks? What could happen? What’s the likelihood that’s happening? What’s the risk of

not trusting too because there’s risk on both sides of the equation of trusting but also of

not trusting?

And then third, what’s the credibility of the people involved, of the person involved?

How credible are they? And that were the three things I’m looking at constantly. But

then, this is falling out of my head so the propensity to trust is falling out of my heart.

And as this integration that’s harmonizing of heart and head, a propensity of trust with

analysis that moves us into the realm of smart trust because if we have only one of

these dimensions that’s high and the others are low then we will be in different

domains. So let’s take a look at this if we just graph it in a matrix.

So the vertical axis here is your propensity to trust. We want that to be high. The

horizontal axis is your analysis pouring out of your head. We want that to be high. So we

want to be in the top right hand of the corner. Let’s take a look at what all these boxes

would look like.

In the top left, when someone has a high propensity to trust but low analysis that’s

offering out of blind trust. That means gullible, not smart. That’s the person that trusts

anyone and everyone. It’s a person that falls for the internet scams or the person that is

just too trusting of too many people. They extend trust to people just indiscriminately.

And they’ll get burned.

Now again, I’m kind of pushing at the extreme. There’s obviously a different degrees of

this but many people do fall into the trap of blind trust and they can get burned and

then they will find themselves “Thank gosh. You know this trusting stuff doesn’t work.”

So you don’t want to be in the far top left because that’s going to – you’re going to find

yourself not equipped to deal with a low-trust world and you will get burned left and

right.

We also don’t want to be in the bottom left and that doesn’t do anyone any good.

That’s a low propensity to trust, low analysis, there’s no trust there. You’re indecisive.

You don’t trust anyone, not even yourself. So that doesn’t really get things done there

because you yourself are lacking a self-trust.

Let me give you the more common one for managers today. Even more than the blind

trust that tends to be in the bottom right, that fourth quadrant of distrust which is

based upon suspicion. Since the person has a lower, not very high propensity to trust,

they don’t have an inclination or a bias or desire to trust as much, but they have very

strong analysis. They’re very good at it. They’ve been trained to do it and so they can

find all the reasons why they can’t trust somebody and yet that same person might be

fully trusted by others.

For instance, it could be a peer or a colleague on a team and everyone trusts a certain

person but there’s one person that doesn’t trust that person or doesn’t trust anyone

because they have a very low propensity to trust and they have a very high analysis.

They find all the reasons why they can’t trust, why it’s too dangerous, why it’s too risky.

But there’s some risk to that too because they – I’ve heard people say, “You know it’s

just too risky to trust other people.”

Well, yeah, there’s some risk in trusting other people but there’s also a risk in not

trusting them because when there’s distrust, when there’s suspicion operating

everywhere, what about the risk of that, the cost of that? You’re going to see

redundancy and bureaucracy. You’re going to see people hovering over and

micromanaging excessively. You’re going to see also bureaucracy creeping in and

disengagement of people when there’s a low trust and so yeah, there’s a cost to trust

too much. There’s a cost to not trust enough.

Neither extreme is where we want to be. We really want to be in that top right hand box

and I call it Smart Trust. That’s really the quadrant zone of judgment. That’s the person

that’s trusting wisely. So the person at the bottom right and this own

[inaudible][0:14:51] distrust and suspicion, they got to distrust themselves only or

maybe just to settle next to you but they’re missing out on all kinds of possibilities.

[0:15:00]

They’re foreclosing options and possibilities because they don’t even see because

they’re not open to it without a high propensity to trust.

So high propensity to trust means you’re open to the possibilities. We’re also equally

high analysis. You assess the situation, the risk and the credibility. And in some cases, it

maybe the smart trust is I choose not to trust because it’s too risky or the credibility of

the people is not known but it’s a judgment process. There’s no simple answer. It’s not

just a mathematical formula. Now it’s judgment. It’s the harmonizing of this heart and

head to give you that good judgment.

So, let’s come back to the story of Ted Morgan. He has got the situation and he wants to

do the deal with Apple. Steve Jobs was saying “I need the code,” and it’s right upon

them. It didn’t have time to go through all the normal finalizing all the different

documents. And they’re close to a deal. His team is saying, “Don’t, don’t, don’t, don’t.”

They’re kind of saying there’s too much risk here and there is some risk but he uses his

judgment and determines it “Yes, I am going to trust.” And so he does this. He said,

“Okay, Steve, we’ll trust you. I’ll trust you.”

And it was just a few days after that the wireless, the Macworld happened and they

weren’t quite sure what was going to happen and how they were going to be presented

but it was pretty remarkable what happened because this is the big conference and they

were talking about – Steve Jobs is talking about the iPhone and he gets up publicly in

front of really the whole world and he gave the presentation and in that he said, “I want

to introduce two partners that we’re working with and that we’re going to be working

with.”

And again, you got to remember SkyHook is an unknown. Nobody knows who they are.

So I got a little video clip here from Macworld from this event itself. So Ursula, let’s go

ahead and run this clip and it will show you what happened.

Interviewer: Just a reminder to everyone, if you have any trouble seeing the video clip, you’ll receive

a link to it in the follow up email.

[video]

Interviewee: Alright. Well, I think this is all the clip. There’s a few of you who didn’t see it so I’ll briefly

describe it. Steve was on animation described this great technology, really cool like oh,

coming from SkyHook Wireless, which he talked about first before he talked about

Google with great enthusiasm and described the technology with animation. Ted

Morgan said this was the biggest publicity event any company could ever imagine or

have and it launched them into a whole different world. They did the deal with Apple

and they did multiple other deals afterwards with other organizations, and they became

embedded in all kinds of devices everywhere and they came out of nowhere.

So yes, there was a risk in taking and trusting there also could have been a real risk in

not trusting. I asked Ted Morgan, “What do you think would have happened if you

would have told Steve ‘No and I can’t do this, I can’t trust you? In effect they can’t trust

you. I just can’t do this.’” And Ted Morgan said to me, “Well you know what? You never

can predict. You never know for sure. But personally, I think there’s no question. Steve

would have just nod and walk away. He had other choices, other options. He would

have done the deal with someone that was going to trust them.”

Now again, you don’t know for sure but the point is this is a judgment. It’s balancing risk

and return. It’s balancing the opportunity and possibilities with the risks that’s out

there. But here is the point: There’s always risk in trust either direction. To trust is to

take a risk. There was a risk for Ted Morgan there but they’re not to trust or to take a

risk. If he didn’t do it, there would also be some risks. Not trusting is often the greater

risk and so it’s really coming back to this judgment. But we got to balance both the high

propensity to trust with equally high analysis, and because if you didn’t have the high

propensity to trust you wouldn’t even be open, wouldn’t even see the possibility. You

find all the reasons why you couldn’t trust.

So smart trust is really a third alternative that’s saying, “This is a way to operate with

high trust in a low-trust world where you’re minimizing the risk but maximizing the

possibilities.” Now, let me go into some of the outcome that result and flow from smart

trust. See, trust creates many things. Let me focus on three particular profound

outcomes. The first is prosperity. Trust creates prosperity and you see that in profound

ways. Why? Because in speed of trust that I talked about trust always affects two major

outcomes, always – speed and cost.

[0:20:00]

Whenever trust goes down, you’ll see speed go down and cost go up. That’s a tax. When

trust goes up, you see the speed go up and the cost will come down. That is a dividend,

a high trust dividend. And that is operating in relationships on teams in organizations

and the effect is people and teams in organizations perform better with high trust,

seriously better. Here’s the data. Watson Wyatt study that he showed this. High-trust

organizations outperform low-trust organizations by 286% in total of return to

shareholders. That’s stock price plus dividends. It’s nearly three times higher when

there’s high trust.

A similar study, you take the hundred best companies to work for. This is done by

Fortune Magazine in conjunction with the Great Place to Work Institute. Well, to be in

this list you have to have high trust. It is two-thirds the criteria. It’s the threshold

criteria. Why? Because 25 years of research shows this, that the number one defining

characteristic of what makes a great place to work is mutual trust. People trust each

other. And with that kind of trust they perform better.

Well these companies in a rolling 13 years study now is repeated every year. They

outperform the market by 288%, nearly three times higher. So two independent studies

showing there is about a three times performance multiplier to high trust. It truly

creates prosperity for organizations, for teams, for individuals, even for societies and for

nations. You see a similar thing taking place among nations. So trust creates prosperity.

Let me give you a second outcome. Trust creates energy. And by energy, I’m talking

about actual physical energy which the Chinese called chi but also emotional energy

which is passion. Trust creates that. But also, we could go deeper into organizations and

the energy of an organization, the engagement of an organization’s people, that’s

energy and the creativity and the innovation. That’s energy and trust creates all of these

things in abundance.

Let’s just take engagement as a form or organizational energy. To engage your people is

a big important objective. Many organizations have today that are focused on increasing

the engagement of their people and of their partners and so forth. Well, there’s nothing

that drives engagement like trust and being trusted. There are a lot of factors for

engagement of that. The conference where the candidate in the study in which they

identify – they studied 12 different engagement models, 26 drivers of engagement but

at the end of the day, the biggest driver is the relationship of trust that the person has

with their immediate supervisor and the trust that they have with their – in their

company, in their management at large.

Trust is the critical driver of engagement. It’s like a study of the Dublin City Business

School in Ireland showed that trust and engagement like two twins mutually reinforcing

engines and when their trust goes up, the engagement goes up which also then

reinforces the trust and it becomes a mutually reinforcing virtuous upward cycle. So

energy flows from a trust.

And I’ll give you the third dimension and that is joy. And by joy, what do I mean by joy?

By joy I mean happiness, satisfaction, fun. When there’s high trust you enjoy it. It’s fun,

it’s pleasant. When there’s low trust, it’s draining, it’s exhausting, it’s painful. It’s true on

a relationship, it’s true on a team, it’s true on an organization, it’s true everywhere you

turn. And trust creates joy and happiness.

In fact the Canadian economist Helliwell, his data shows that the number one factor

correlate in happiness even more than income and even more than health is trust in

relationships of trust because of what that does to people.

And so in organizations the data is overwhelming that shows if you can increase trust in

an organization, you will increase the satisfaction in your people dramatically. In fact

that Helliwell when a study showed this that a 10% increase in employee satisfaction – it

should be “A 10% increase in the level of trust in an organization has the same effect as

a 36% increase in people’s pay.” Let me repeat that. “A 10% increase in trust has the

same effect on satisfaction as a 36% increase in pay.”

Yes, people want to be paid, that’s important but they want to be trusted and when

they are trusted it energizes and it engages them, creates energy but it also makes them

satisfied, happy, joyful, it creates some fun and it literally becomes a powerful dynamic

in the organization.

[0:25:00]

So prosperity, energy and joy are three profound outcomes that flow out of this trust

and this smart trust I’m talking about. So those are the outcomes that we’re seeking and

the subtitle of this book Smart Trust: Creating Prosperity, Energy and Joy in a Low Trust

World.

Now, let’s look at how people are doing this and what they’re doing and how people,

leaders, organizations are operating with high trust in a low-trust world and how they’re

doing it smartly. See how they’re in that top right hand quadrant of a zone of smart

trust where they have a high propensity to trust so they’re open to the possibilities but

equally high analysis so that they’re aware of how to navigate and manage the risks and

they can use their judgment in making good decisions.

We found that there were five common actions among these people in organizations

and leaders all around the world that they did in common that became the foundation

for actions of Smart Trust, the key actions that were common. So let’s take a look at

these. I’ll go through each one briefly and then summarize and then we’ll take our

questions.

The first action, the first step that they take is that they choose to believe in trust. In

other words, trust is a decision. It is a choice and they choose to believe in it and they

believe in a couple of key ideas about trust. There are three of them.

The first is: I believe in being worthy of trust that it matters, that it’s a better way to

live, it’s a better way to operate a business and that in the long run it pays. There are

some people that might understand that it’s a pollyanish level but I’m talking about this

works at a practical level that trust pays and you get better outcomes, better result.

Second belief, a belief that most people can be trusted. Not all people, could not

everyone can but most people. That belief enables companies to do things differently

than if you had the opposite belief, which is that most believe most people can’t be

trusted. Imagine you’re a leader of a company. How you would you design your

organization with systems and structures and processes and controls and policies and

procedures based upon which belief you have? The most people can be trusted or the

most people can’t. It would affect everything.

eBay is a great example of smart trust because think about it. They’re bringing together

buyer and seller that have never met and they’re doing deals together online. They’re

buying and selling from each other. They never met each other. In fact Pierre Omidyar,

the founder of eBay was asked “What’s the most significant learning of eBay?” And he

said, “It’s simply this: the remarkable fact that 135 million people have learned that

they can trust a complete stranger.” Trust a complete stranger.

But that’s what is happening here and now it’s 235 million people and it really is

remarkable but they couldn’t do this without that fundamental belief that most people

can be trusted. Pierre Omidyar put it this way: Most people are basically good. Not all

people. But they decided at this for the majority then they focus on weeding out those

that are abusive, those that are untrustworthy that violates the system, that are

fraudulent and try to cheat and so forth. They’re aware of that. They’re not naïve to

that. So that would be if it were everyone is good, let’s just operate and let people do

buy and sell and assume all good faith.

Only that would be on the top left corner of blind trust and they get burned at some

point. It wouldn’t be in a sustainable business model but they’re operating those top

right corner of the smart trust, high propensity of trust. Most people are basically good.

Most people can be trusted but equally high analysis. Not everyone can be trusted

though and there will be people that try to cheat and fraud and so they design a robust

anti-fraud group that goes after and really make sure that the site is safe and that the

right people are on the board and they also create their own radiance in the life they

help, ensure that there is self-pleasing and monitoring and so forth but they go through

great length to make this work. But they start on the promise that they believe in trust.

The third belief then, a belief that extending trust is a better way to lead, it’s a better

way to get results, it’s a better way to build capacity, it’s a better way to create

prosperity, energy and joy. And you have that fundamental belief. This is a decision. It’s

a choice. So this is the paradigm at with which we are pretty much the first action we

found that was common among smart trust leaders in organizations and so they believe

in trust and it was a conscious decision and choice to begin there.

[0:30:00]

Let me give you the second. Oh, actually before I go to the second one, this often gets

quantified into trust becoming like an operating system just like an operating system

software for a computer. An operating system have an organization to operate with

trust. Warren Buffet is a good example with what they do at Berkshire Hathaway. It is

the management philosophy of Berkshire Hathaway is to serve trust. They start with

trust. They operate in the premise that you deserve to be trusted until you prove

otherwise. It’s their starting point. They don’t do it blindly. They have clear expectations.

They have high accountability towards expectations but it starts with trust. They extend

it, people will receive and they return. They reciprocate it and they create a virtuous

upward cycle of trust and confidence creating more trust and confidence.

And here they are operating with a – there’s Berkshire Hathaway, Buffett investment

companies but he also acquires companies and they operate as autonomous units. He’s

acquired some 77 companies, 256,000 people in these 77 companies. If you look at a

typical conglomerate that operates with this kind of business model, typically you’d

have about one person at headquarters really 100 people in the field. In that case you’d

have 2500 at headquarters approximately with 256,000 employees.

But in Buffett’s case, it’s quite different. They operate in the premise of deserved trust.

They get rid of what they call the craziness. The craziness is where you have people

checking people checking people checking people checking people and they can move

with high efficiency, low cost, high speed on the premise of trust and rather than having

2500 people at corporate headquarters they have a total of 21. Twenty one people for

77 entities, 256,000 employees. It’s an operating system. It is a philosophy – deserved

trust. They get better outcomes as a result.

Here is the second action, a smart trust action too. These people on organizations, they

start with themselves. Start with self. It’s the starting point as opposed to the person

that’s blaming and victimizing and in looking at everyone else. I can’t trust the boss, I

can’t trust this person, I can’t trust the colleague, the partner or my spouse or the kids

where have you. They start with themselves. And they really are answering two key

questions.

The first question: Do I trust myself? Do I trust myself? The second question: Do I give

to others a person they can trust? Do I give to my team a leader that they can trust? Do I

give to my partner a partner they can trust? Those are the two questions. You put out

mirror first. Do I trust myself? Because if you don’t trust yourself you have a hard time

building, growing and sustaining trust in your world, in your organization.

And then secondly though they reach out. Do I give to others a person they can trust?

And in other words, am I credible? Do I have character? Do I have competence? And as

an organization, are we credible? Do we have character? Do we have competence? Do

we give to others an organization that they can trust? And so that’s a great put up the

mirror test.

And I’m giving you an illustration of this. It was then powerfully. Peter Aceto, CEO of ING

Direct in Canada, an investment company and has over 1000 employees in his group.

He’d been in play a year and then he put out an email to all of his employees with a

tagline. There’s a subject line that said: Leadership: Your call. Let me read from this

email he put out to his employees.

He wrote:

Dear Teammates,

True leaders are not chosen to lead by boards of directors and shareholders. True

leaders are chosen by their teammates based upon the respect they have earned, result

achieved and the confidence the team has that that team will win without leader in

place.

I was chosen by the shareholders and our board to be your leader. I was not chosen by

you. May 1st was my one-year anniversary as your CEO and enough time has elapsed for

you to decide whether you would like me to leave this great ING Direct Team. Please

click on this link and tell me if you want me to remain the CEO as well as any

constructive comments you may have for our business or for my leadership.

If I do not have your collective vote of confidence, I will move along. This survey is

anonymous so please be honest. If you choose for me to remain this will be your free

choice and I will be honored to continue to lead with all of my ability and follow my

energy and ability.

Please respond or before Tuesday, March 12 for your vote to be counted.

Thanks,

Peter.

It’s a remarkable proposition. Do you want me to lead you?

[0:35:00]

Well he had an over 95% response rate and of those people 97% remarkably said, “We

want you to be our leader.” I think about how remarkable that is when so many people

are against everything all the time. I think with my own kids I don’t know if I can get 50%

of my kids to want me to be their dad but 97% are saying we want you to be our leader.

That’s Peter Aceto giving to them a leader that they can trust. He was aware that he had

built up credibility that he had the character and competence that had been seen and

manifest but imagine the confidence that this group has in him and even more so after

this.

So this type of credibility, where did that come from? Well we go in depth on this on

how it flows as we talked about earlier. It flows from the character which is like the

roots of a tree and the competence which is like the branch and the fruit of the tree and

that combination of character and competence is credibility. And credibility is

trustworthiness. That’s the foundation of giving to others a person that they can trust.

You’re credible, believable. And you do that as a person, you do it as a leader, you do it

as a team, you do it as an organization. And that’s what I mean by start with self. You

trust yourself and you give to others a person or an organization that they can trust as

the second action. So let’s go on to the third action.

Smart trust action three, declare your intent. And there’s a second half to this and that

is to assume positive intent in others. So declare your intent. I’ll take the first step first.

One thing about that by declaring your intent, here’s what I mean: It means that you

are open. You are transparent. You don’t want people guessing or wondering what your

agenda is, what your motive is. You declare it. Here‘s my objective, here is my motive,

here is what we’re trying to do, here is why especially the why behind the what. You

declare your intent.

You see if you don’t declare your intent people are left to ascribe intent to you and they

guess or they project and they usually project worse case or they guess their fears but

generally not their case but when you declare your intent there is no guessing. You’re

open, you’re transparent. There’s not a hidden agenda. You have an open agenda,

nothing to hide. Here is what we’re going to do. Here is why, especially the why behind

the what.

I know of Tony Hsiesh doing the Zappos.com. Zappos.com is great success story from

zero to a billion dollars in a short period of time. Online retailer of shoes of all thing and

high trust they built tremendous happiness with their customers and their employees

that’s their agenda is to build happiness. But they operate in the premise of trust and

yet they went in the global financial crisis. They also were hit. They had to take some

steps back to make sure that they had the right financial structure and enough cash and

they had to do some downsizing.

But so Tony Hsiesh was upfront about it. He declared his intent. Here is what we’re

trying to do. Here is why. He opened up the minute from his board meeting and his

investors’ meeting the same. Here’s our condition, here’s our situation, here’s why

we’re doing this, here’s what it is going to enable us to do, here is what will happen if

we don’t do it. They’re so open about the why behind the what. He was authentic. He

was transparent. He gained people’s trust and confidence. He already had it before and

he maintained it even in doing a very difficult thing, downsizing.

And they came out of that even stronger than before and he built even more trust. He

declared his intent. So declaring your intent you will be amazed how this will accelerate

the building of trust. Now the flipside of that is to assume positive intent in others when

you’re in the other side of that. In other words, you declare your intent but now as a

starting point as you work with other people assume positive intent generally with most

people. There might be a few situations and people that have already proven they have

motive. There maybe that’s not smart to do but as a starting point generally this is a

better starting point.

In fact Indra Nooyi, the CEO of Pepsi Cola was asked the most significant learning in her

life and here’s what she said: She said that this is to always assume positive intent.

Whatever anybody says or does assume positive intent. You will be amazed at how your

whole approach to a person or a problem becomes very different. When you assume

negative intent, you’re angry. If you take away that anger and assume positive intent

you will be amazed. So two halves to this piece, first, prepare your intent so people are

clear, open, transparent, there’s nothing to hide. And then assume positive intent is a

better starting point in most situations. Let’s move now to the fourth action.

The fourth action is very simple: You do what you say you’re going to do. In the third

action, you just told me what you’re doing to do, you declare your intent. Here is what

we’re going to do. Here is why. So I just declared it.

[0:40:00] Interviewee: Now, you got to do it. And then, when you do that, when you do what you say you are

going to do, you’ll build trust. You’ll build it fast. That is best test for whether you can

trust someone. Did they do what they said what they’re going to do?

Now, if they just deliver, you’ll build trust but if they don’t come and declare their

intent, you won’t go to this fast. When you declare your intent, when you say what you

are going to do and then you do what you say you are going to do, you built it even

faster. Why? Because people are aware of it. They’re looking for it and there’s a promise

there, say, like a brand. A brand. There’s a promise. Now, you deliver on the promise.

That builds trust. And you need to have a promise that’s saying what you’re going to do.

That’s declaring your intent.

But the most important thing is you need to deliver on it because if you have a promise

and don’t deliver, you’ll lose the trust. But you built it very fast if you make a promise

and keep it. Have a brand, to promise, deliver on it. Do what you say you’re going to do.

Very simple and yet, we, too often overlook this the correct passage into other things

but this is really the crux of it.

Finally, let’s go to the fifth action. The fifth action of Smart Trust is that they lead out in

extending trust to others. They start it. They don’t wait on others. They lead out. They

know trust is the better way to lead, better way to operate.

The first type of a leader is to inspire trust. The second type of a leader is to extend

trust, to give it, to lead out with it. Let me give you a brief story – Zane’s Cycle, Zane’s

bike shop. They’re in Connecticut, 13 million in sales, largest bike shop. They’re the third

largest bike shop in the US so these shops don’t get really big. This is one of the big

players and they’ve grown every year since 1981, about 20%.

Here’s what happens. You go in and you want to take a test drive and Chris Zane, the

owner – people say, “Yeah, I’d like to take a test drive,” and this might even be a $1,000

bike or even more. The customer might say, “Hey, do you need my license, my credit

card, my wallet, my phone?” and Chris Zane’s philosophy is, “No, just have a good ride.

We trust you. Just come back.” People say, “Oh gosh, isn’t that kind of risky?” And he,

“Yeah, there are some risks there.” He acknowledged that. He says, “But why do I want

to start a new relationship with a new customer on the premise of distrust. I don’t trust

you. I’d rather start on the premise of trust even if it’s dramatic trust.” They say, “This is

who we were. We trust you,” but guess what? He has extraordinary loyalty from his

customers and they work for all kinds of business to him all the time.

Yes, he loses a few bikes a year from a few dishonest people but he sells. Last year, he

lost five bikes but he sold 5,000 bikes and he thinks he’s selling a whole lot more bikes

because he’s operating on the premise of trust and he’s going first. For him, that smart

trust may not be for someone else. For him, it is because he’s navigating the risk in a

way that maximizes the possibilities.

The whole point here is that leaders go first. Trust becomes a performance multiplier

only when the leaders prepare to go first. Leaders go first. Organizations go first and

want a lead on the relationships. So that’s what Craig Weatherup, a former CEO of

PepsiCo said. So, this is an approach, a philosophy.

Let me give you a one last video. I’m going to show you how leading out with trust helps

create our world when we lead out positively. If we lead out with distrust, with

suspicion, we can create a world the other way and then, we’ll open up for your

questions. So, just go ahead and run this video, Does Eddy trust Tanya.

Interviewer: A reminder – if you can’t see the video, you’ll receive a link to it in our follow-up email.

[video]

Interviewee: All right. Well, for those who didn’t see it, basically, it just shows how you can be that

with suspicion. You kind of maybe create your own problems sometimes and that the

point is your starting point what you use to begin with. The propensity of trust is so

important. I’m not saying, be blind about it. That’s blind trust. That’s being gullible. Be

smart about it. Balance it with your head, with analysis but when you do that well, you

create a different world. You create all kinds of possibilities.

These are the five actions of Smart Trust. The people who choose to believe in trust,

they start with themselves. They declare their intent and the [inaudible] [0:44:28] and

ten others. They do what they say they’re going to do and they lead out an extending

trust to others. This book is filled with stories, examples, illustrations of the people, of

the leaders, of the organizations that are doing this and doing this extremely well. They

are succeeding with high trust in a low-trust world.

The Ted Morgans and the Zane’s bike shop and Tony Hseih’s Zappos and SAS and

Southwest and Google and IBM and Amazon and Virginia Mason and many others and

the [inaudible] [0:44:54] of the world, the kind of leaders that they’re leading out this

way. So this is an exciting thing because I’ll tell you why.

[0:45:00]

In a low-trust world, we need examples. We need people. We need to look at people

that we can say, “Here’s how we can do this. Now, we can operate and succeed, and be

effective with high trust in a low-trust world.” So, with that, Andrew, let’s go ahead and

open it up to questions from our audience.

Interviewer: Absolutely and two quick reminders. Number one, you’ll be able to get a copy of Smart

Trust starting Tuesday. That’s next Tuesday, January 10th when it goes on sale at

amazon.com, other online retailers as well as in bookstores. Now, if you have a question

for Stephen M.R. Covey, you can ask it by going to the chat function on your player,

which is in the lower left-hand corner of your screen. You can click Private, then click

Leaders and Assistance. Type your question in the box and click the arrow to send it to

us.

Stephen, I think we’ll start with a very interesting question that came in from one

listener. He works in a company that has, basically, been the result of a merger of two

other organizations and he’s asking, “What’s the best way to create a fresh start and

establish an environment of high trust when you have two companies that have recently

merged?”

Interviewee: Yes, a great question. I’ve been through this myself, personally. I’ve seen this happen in

another challenge and in fact, there’s that old adage that says, “Truth is the first

casualty of war.” The corollary for mergers is this: Trust is often the first casualty of

mergers, and when people merge, sometimes, the first thing that goes is trust and just

because it’s so challenging in many cases. My experience is this is that it’s possible, in a

merger, to create a smart trust culture but it needs to be handled deliberately and

explicitly right up front and you need to declare your intent to grow trust. You need to

signal your behavior of how you’re going to behave, what you’re going to do and then,

you need to do what you’re saving to do.

So, you got to, basically, follow these actions where you prioritize trust so that you’re

not just focusing on all the economic outcomes and all the systems integration thing.

Most mergers don’t succeed, at least, not with the anticipation of what they’re

supposed to do. There’s varying degrees of success but the data shows that, basically,

83% don’t live up to their expectations. Basically, they fell compared to what they were

anticipating.

The main reason for that is not bad strategy. It’s not bad systems structures. It tends to

be that they can’t integrate the people and the cultures. At the core of that is that they

don’t and can’t fully trust each other. So, you got to deliberately go after this. You can’t

just assume that it will happen. You have to declare your intent. If they make the

creation of trust an explicit objective and then go about it deliberately to understand

the behaviors that will build the trust and to create expectations around how we’re

going to behave and how we’re going to do this so that you declare your intent and

then, that you do what you say you’re going to do.

If you focus on it consciously, then, you can really move the needle on this and build

high-trust cultures. This is a big, important part of our practice of what we’re doing this

– helping organizations increase trust at times of mergers because if there ever was a

time that needed it, it’s then to get the better outcomes that you’re desiring. We have

to do it very deliberately and explicitly.

Interviewer: One of the best things about Smart Trust as a book is that it deals with the practical

applications for so many of the principles that Stephen is discussing and along those

lines is a question about matrix management situations where someone in a manager

position is working with or collaborating with people that don’t directly report to that

manager. Do the principles of Smart Trust apply the same way or are there some

nuances for a matrix management situation to that situation?

Interviewee: Well, if you think about it, they apply even more so because you can’t rely upon formal

authority much. It needs to be influenced and it can’t just be say, “Well, I’m the boss.”

Well, there’s another boss, too, here and so, we got to balance this out. We have to be

able to work together and we have to collaborate. What really fuels effective

collaboration is trust.

If people don’t trust each other, they have a hard time truly collaborating. They might

coordinate, or at best they might cooperate but true collaboration falls out of trust.

Without it, it’s hard to collaborate. I’d say, even more so in matrix organizations, we

need trust. Organizations are built on trust, not by force.

That’s what Peter Drucker said. In a matrix organization, it’s trust that needs to be the

operating system and we need to build that in the relationships. We need to build our

own credibility so that it gives us more influence, more clout as we work with people.

[0:50:00]

We need to increase the trust so that we can collaborate in partner and team better

with people and work together better but the team work and the collaboration is

needed.

Overwhelming data that shows that if you increase trust in relationships or in teams or

in partnerships between groups, that your body to collaborate goes up, your body to

execute goes up, your body to team, to partner, to innovate all goes up, and so, that’s

what’s needed. That’s what needed in organizations. That’s what needed in matrix

organizations and just direct organizations that we need to, still, do those things – to

collaborate, to team, to partner, to innovate, to create. We need to engage our people.

We need to grow shelves. When people buy from those who they trust, they buy more

frequently in larger amounts. They give you the benefit of a doubt. They will form a

business to you when they trust you; when they don’t, just the opposite, and on and on

and on.

So yes, they do apply here. We need more trust more than ever before in those

situations because we have to rely on influence, not just on formal authority alone. I

might make this comment because you mentioned this, Andrew, that a big part of book

– what was the question that prompted this book? I’ll tell you what it was. It was when

someone asked me backstage after a Speed of Trust presentation and said, “Are there

really organizations that are operating with the kind of trust you’re talking about?”

So, this person wanted to believe but didn’t believe it and he’s wondering, “Is there

anyone doing this besides Warren Buffett? Yes, I know he is but is there anyone else?”

and he came from a third-world country where there is deceit, corruption everywhere

but it’s hard for him to envision and this book was to answer that question.

Yes, there are. Here’s who they are. Here’s what they’re doing. Here’s how they’re doing

it. Here’s the survival actions they have in common and here’s how you can do it, too.

That’s what this book is meant to answer.

Interviewer: Honestly, I think, one of the more interesting examples of that is the fact that there’s

historical context that you give throughout the book but at the same time, it’s well

represented with modern examples. So, people who feel that, “Well, maybe people

trusted one another 100, 200 years ago but now, we don’t live in that kind of

environment or that kind of business culture.” Smart Trust does an excellent job of

exhibiting to people that there are plenty of examples, globally, of companies that are

existing in a state of smart trust.

Let’s move on quickly because we’re running a little short of time. We have about five

minutes remaining and just to let the audience know, we’ll go a little beyond the top of

the hour because there are so many people that want to ask Stephen a question. We

have a global audience joining us today, representatives from hundreds of companies

around the world and to that end, one person, in particular, asked about beginning a

new international business partnership, what are some of the unique aspects of

establishing smart trust when you’re dealing with international ventures where the

people have very different cultures or there are some basic, what would appear to be

barriers, what is a way that Smart Trust can be used to overcome that?

Interviewee: Yes. Especially as we cross, boundaries cross cultures, we need to work on increasing

the trust because people interpret behavior. They interpret situations differently and if

we are unaware or naïve or blind to how trust is built in different cultures, then we can

find ourselves penalized behind the box, maybe, unknowingly.

So, we need to behave in ways that grow it and that includes listening first so we

understand what’s important to that person, what’s important in that culture, what’s

important in that environment and then, demonstrating respect for what we just heard

so that we don’t just judge it and say, “Well, that’s weird,” or, “That’s odd,” or ,”That’s

wrong.” Instead, we try to understand so, we listen first. We understand and

demonstrate respect for what we hear. That puts us more in a level playing field that

then being able to create trust.

It’s interesting. I presented Speed of Trust in 37 countries in the last few years and I find

that trust is universal. These ideas cross cultures. They cross countries. There are

particular practices and applications that might be very different in a different culture in

a country. Talking straight, telling the truth builds trust everywhere. How that gets

manifest is, maybe, different in the Netherlands that are notorious straight talkers than

it might be in Japan where it tends to be more subtle or in other countries.

So you have to focus on the principle and separate the principle from the practice and

don’t get lost or hung up in the practices. I said focus on the broader principle and draw

practices out of their own cultural experience. The best way to do that is to listen first

and to show respect for what you hear.

[0:55:00]

That gives you a more common starting ground and starting point to do these deals and

do they have clear expectations. I also worked with a – if I mention a story in the book.

The CEO of a company is operating in 180 countries around the world. He said, “Look.

People have different cultures, different values and so forth, but here’s something

we’ve got in common.” He said the best way we knew that we could trust each other

was that fourth action – do people do what they said they’re going to do. This is a

simple test that was common to everyone. They do what they said they’re going to do.

So, there’s a variety of different ways to do it but we got to understand how we build

trust to these different environments.

Interviewer: I think we should, probably, close with this question because I’m counting multiple

listeners that are asking it. It’s fortunate to say but obviously, it’s something I’m sure

you’ve encountered numerous times in the course of your research and writing. A lot of

people are asking about the first step to be taken when trust has been broken. I think it

says a lot that so many people are coming to the table with that because I think it

reflects things they’ve experienced themselves and perhaps, instances in which they

were the trust breaker. Is there a good first step, an initial action that can be taken to

help repair trust when it’s been broken?

Interviewee: Yes, there is and I would say simply is this. You got to own it. You got to take

responsibility for it and that includes acknowledging it. It includes apologizing for it as

needed in making it right but it also includes taking responsibility and behaving your

way out of it. You see you can’t talk yourself out of a problem that you behaved yourself

into.

If trust has been broken through behavior, words alone aren’t going to get you out. The

only way out of that situation is to behave your way out but you can, in many situations

– not in all, but in most, you can behave yourself out of a problem that you behaved

your way into and that’s the only way out – is behavior.

So, you got to take responsibility for it. If you’re blaming, pointing a finger, then you’re

going to have a hard time restoring the trust. You take responsibility on it. You make it

right. You clarify the expectations going forward. Here’s what I’m going to do to make it

up. Here’s how I’m going to behave going forward and then, you do what you say you

are going to do and you behave your way back into trust. So, ultimately, that taking

responsibility has to translate into behaving your way back into trust.

That’s the only way back because words alone won’t do it when trust has been violated,

when trust has been lost but behavior can and will do it. Now, not in very case – there

might be some cases where the trust has been violated so egregiously that people don’t

give you a chance to behave your way back. How you get back is through your behavior

so you take responsibility by how you approach it and by how you behave your way out

of it and back into trust. That’s really the only way out.

By the way, I’m an optimist on this. I know that there are violations of trust, breaches of

trust that have happened and there’s a cost of that and trust has been lost. I’ve also

learned though that if people want to restore trust and really make the effort – it’s not a

PR campaign, it’s not just something that’s just gloss. It’s real. They’re taking ownership,

taking responsibility and they’re going to put it into behavior, into action that in many

situations, maybe most situations, they are able to do that. Not in all, but in most and

they’re able to grow trust, build trust and you know what?

We need that in a low-trust world because if you couldn’t ever restore to get it back,

then we’d all be kind of in a vicious network cycle. It’s not easy. It’s difficult and it may

not be possible, so I’m not naïve on this or pollyanish, but I know that you do it through

behavior, taking responsibility and owning up and behaving your way back into it.

Interviewer: This program today has been giving you quite a bit of a preview about what you’ll be

able to learn in Smart Trust. The book will be released on Tuesday, January 10th and you

can pre-order a copy now at amazon.com, but it will be available for everyone at online

retailers and in bookstores, Tuesday, January 10th.

Stephen, we can’t thank you enough. You’ve given us so much to think about. Thank you

again for being with us today.

Interviewee: Certainly, Andrew. Thank you and thank you to all our listeners. Let me conclude with

this thought. Stephen Carter, the great Yale historian, said this. He said, “Civility, all of

civilization, has two parts – generosity, when it’s costly and trust, even when there is

risk.” So, trust is truly the essence of a civilized society, of a person, of a team, of an

organization, of the society. This is the essence. This is the foundation. This returns to

this fundamental root.

I wish you all the best. I thank you for this great opportunity to be with you all and I

hope you really enjoy Smart Trust.

Interviewer: Thank you to Stephen M.R. Covey for brilliantly kicking off the 2012 season of

Soundview Live.

[1:00:00]

I would just like to thank all of you for participating and providing us with such great

questions. Special thanks go to Ursula Sharp, the executive producer of Soundview Live

and a reminder to all listeners that you will receive an email in three to five business

days that will contain a special document relating to our presentation today. It will also

contain an invite to an additional Smart Trust webinar and you’ll also receive links to the

videos in the event that you are unable to view them during the course of today’s event.

Don’t forget if you’re a Sound view subscriber, you can attend Soundview Live for free.

Soundview Live is a production of Soundview Executive Book Summaries, a division of

Concentrated Knowledge Corporation. This program is copyrighted 2012, Concentrated

Knowledge Corporation. For Soundview Executive Book Summaries, my name is Andrew

Clancy. Thank you and have a great day.

End of Audio