The Challenge of Trust with Vendors
“Y2K is a crisis without precedent in human history.” – Edmund X. DeJesus, editor of BYTE magazine
(Fortunately, Jan. 1, 2000, came and went without major incident.)
As a sole proprietor adopting the hub model management style shifts from the typical supervisory communication channel to more of a peer-to-peer trust.
The vendors are likely to have years of expertise. We trust that they know what they are doing and we hire them to get on with the job without the regular supervision of a traditional corporate structure.
Our role is more like the conductor of an orchestra rather than training and supervising musicians how to play their instruments better.
The challenge is for entrepreneurs who have come from employment in a traditionally-structured workplace where no one trusts at all. The very structure of a hierarchical organization means no one can or does trust the person above them or the people below them. In that environment I meet more entrepreneurs who are control freaks than ones who are trusting. That style will not work in a hub model.
For a long time, management consultants and academics have touted the benefits of trust to the success of businesses. In my experience, however, I have rarely seen it practiced in the traditional workplace and the smaller the company the less trust exists.
It is easy to understand why. In a traditional company everyone wants to win the approval of their manager. If someone we are responsible for offers up a report or a solution, we are unlikely to pass it up the chain without checking it thoroughly, filtering it, editing it or asking for a newer redacted version. What is reported to the manager has to impress the manager and also be good enough for the manager to impress his or her manager.
At the same time, most employees are not empowered to make a decision without the consent of their boss, and many times an additional boss several rungs up the corporate ladder. In one company I worked at, when the solution to an issue was accepted it had to be run by the executive team for rubber stamping before being presented to the CEO. Then the CEO sent the proposed solution outside the company to an independent management consultant for verification. The whole system was one of second guessing and it is a common trait in most companies, rarely did a good idea see the light of day in this system.
If you come from traditional employment you are likely to start with an emotion of mistrust even if at first you don’t realize it. That makes selecting vendors and contractors a tougher task. You’ll be tempted to do deep due diligence on many vendors before making a decision. You’ll investigate several vendors and try to pick the best or the cheapest. Such analysis is largely a waste of time and most vendors will call you out for the naivety. If one of your vendors already works with several successful companies, why do due diligence at all? It has already been done by companies and entrepreneurs far more experienced than you. Put your ego aside.
Once selected you also have to change your supervisory instincts. You need to learn to be more trusting of the vendor. After all, you have selected them because they are expert at what they do, more expert than you, and do it for other companies as well. Why do they need the supervision of a virgin entrepreneur? Why do they need to attend dumb “are we there yet” meetings?
But the truth is they do it all the time and it drives them mad. They get hired by people who can’t do what they do and then have to give weekly updates on what it is they do and have done. It is madness. Leave them alone to do their work… the real work that you are paying for.
On the other hand, if you come from somewhere else such as being a homemaker, there is a chance you can be too trusting with an inclination to select the first person or company that comes along. That is okay, but check in with your intuition. Make sure it feels absolutely right. How do you know? From The Transformation Experience: The vibration of intuition, of knowing, is absolute calm in the pit of your stomach. It just feels right.
Knowing one’s inclination to be too controlling or too hands off will be helpful. People who trust too much and too readily tend to take an overly rosy view, assuming that most people are decent and would never harm them. The feeling in the pit of the stomach is excitement. We leery. You are more likely to share sensitive information about the company too indiscriminately, and less likely to do adequate analysis.
People who are too mistrustful assume the worst about other party’s motivations, intentions, and future actions. I once had an investor who insisted we use his lawyer for contract negotiations. The attorney was the sort of personality that imagined skeletons in every closet. Being a small company, we drove the larger vendors insane with all the questions and word smith tennis, so much so, that they often walked away from the negotiation table never to return.
The secret then is to strive for the right balance and to do that you have to be honest about which category you tend to be, mistrustful or too trusting. Then go for in between. Success with balance.
Roger Kramer wrote about trust in a Harvard Business Review in 2017:
I have been grappling with this question for most of my 30 years as a social psychologist, exploring both the strengths and the weaknesses of trust. In the wake of the recent massive and pervasive abuses—and with evidence of more scandals surfacing each day—I think it’s worth taking another look at why we trust so readily, why we sometimes trust poorly, and what we can do about it… human beings are naturally predisposed to trust—it’s in our genes and our childhood learning—and by and large it’s a survival mechanism that has served our species well. That said, our willingness to trust often gets us into trouble. Moreover, we sometimes have difficulty distinguishing trustworthy people from untrustworthy ones.
Outside of the Corporation
Away from the business world all the evidence suggests we are hardwired to trust, especially to trust people who are similar to us in some way. Researcher Lisa DeBruine developed a technique for creating an image of another person that could be morphed to look more and more (or less and less) like a study participant’s face. The greater the similarity, DeBruine found, the more the participant trusted the person in the image.
Other studies have shown that we like and trust people who are members of our own social group more than we like outsiders or strangers. This in-group effect is so powerful that even random assignment into small groups is sufficient to create a sense of solidarity. Finally, we tend to trust people more who are slightly tactile. People who place an innocuous touch on an arm, back or shoulder are more trusted than those who stand back. This is just good to know.
Trust is one thing. Good Judgement is another. One tendency that skews our judgment is our desire to see what we want to see. Psychologists call this the confirmation bias. Because of it we pay more attention to, and overweight in importance, evidence supporting our hypotheses about the world, while downplaying or discounting discrepancies or evidence to the contrary. As we discussed earlier, our reticular activation system helps do this for us. This tends to make us want to hire consultants and vendors we have worked with before. The trust exists and we judge them favorably. Because of my own leaning toward easy trust I deliberately select alternative vendors to compare against my favorites. Surprisingly, in most cases I found the vendor I knew well was not as good as the new one selected.
To make matters worse, people tend to think their own judgment is better than average including their judgment about whom to trust. Unfortunately, the wiring in our brains can hinder our ability to make good decisions about how much risk to assume in our relationships. In particular, researchers have identified two cognitive illusions that increase our propensity to trust too readily, too much, and for too long.
The first illusion causes us to underestimate the likelihood that bad things will happen to us or our business. Research on this illusion of personal invulnerability has demonstrated that we think we’re not very likely to experience some of life’s misfortunes, even though we realize objectively that such risk exists.
I think we can balance this in business by deepening our intuition, and also, taking a break from the work period. Sometimes, when we leave the office and go for a short walk, we get that gnawing feeling in the pit of our stomachs, the one we don’t notice if we are slaving away at the computer. That is our warning that something might go wrong and we need to investigate.
Our innate trust also makes us vulnerable to be manipulated or faked. A number of studies indicate that detecting the cheaters among us is not as easy as one might think. Usually, the manipulator smiles a lot; maintains strong eye contact; and occasionally touches the other person’s hand or arm gently. (Women mention touching as a strategy more than men do and also report using it more than men do.) They engage in cheery banter to relax the other person, and they feign openness during their actual negotiation by saying things like “Let’s agree to be honest” and “I always like to put all my cards on the table.” Their efforts turn out to be pretty successful. Most find it fairly easy to get the other person to think they are behaving in a trustworthy, open, cooperative fashion.
As the owner it is your responsibility to find vendors and contractors that you can rely on. It is then your duty to perform objective evaluation of their suitability. Finally, you will need to negotiate fair agreements between you. If we are to trust widely and show smart judgment, we need to implement a couple of safety features.
Build Cancellation Language Into Contracts
If the means of cancelling contracts are clearly laid out it allows both parties to be more trusting. Keep contract lengths to sensible periods such as one year and also with automatic renewal unless cancelled by either party. One of the big advantages a start-up has over larger organizations is that changing vendors and consultants is often simply a matter of not renewing a contract. In a regular company it is not easy to remove poor performance from the system. Human resource departments excel at keeping poorly performing employees employed.
Give Regular Feedback
When you hire a vendor, you are hiring an expert. Whether a single person or a company they probably know what they are doing better than you. Some innate trust is required. However, if you simply hand over the job and stop communicating the opportunity for the vendor to slacken off or take advantage increases. Regular communication is essential even if it is just you giving them positive feedback.
Above all trust yourself
Enough said.
This a great TED talk about the challenges of not just trust but a sense of belonging and a feeling of worthiness. I include it here because it speaks to the mindset of many startup entrepreneurs who have all the self doubts bouncing inside their head.
