MHI Solutions Improving Supply Chain Performance
In ways both big and small, we choose to trust every day. When we get into our cars for the commute to work, we trust the brakes will work. We trust the food set before us has been prepared correctly and is safe to eat. We trust that our employer will deposit a paycheck in our account at the end of the pay period.
Unfortunately, organizations and individuals find themselves in business relationships where trust is more elusive. And when the hint of a lack of trust kicks in, we tend to fall into micromanagement and protocols that add time and cost money.
In our work, we often get asked questions such as: Are relationships with higher levels of trust better than those that are less trusting? And can you measure trust levels? Which relationships should we prioritize? And, of course, there is always the question: What steps can we take to increase trust?
Let’s explore each of these questions.
Are Trusting Relationships Really Better?
Over a decade ago, we set out to develop the Compatibility and Trust survey (CaT) which has been administered to almost 200 buyer‑supplier trading partner relationships. The findings are clear. Trusting relationships have less friction and are more collaborative, ultimately delivering more value.
Let’s look at the oil and gas energy as an example. In a study involving 34 companies, we found that team members working in “good” relationships used mostly positive adjectives (85%) such as aligned, collaborative and trustworthy to describe their relationship. But, when team members were describing “typical” relationships, they used positive words much less frequently, only 63% of the time. Instead, they used words like frustrating, restrictive and distant. And, in 9% of cases, they used negative words such as difficult, strained and even dysfunctional.
Measuring the Trust Gap
Why was there such a big difference in the words used? And what does it mean?
It’s far too easy for trading partners to find themselves worlds—and words—apart, and for the trust gap to be ever‑widening. One reason for that misalignment is self‑serving bias. Simply put, organizations (and the individuals in them) are likely to view themselves positively and see themselves as being better than their counterparts. Such biases can intensify trust gaps between organizations, which in turn could force trading partners to respond in ways that are not advantageous for the partnership. For example, a lack of trust can cause a buyer to increase quality checks, micromanage production outputs or add buffer stock to inventory.
That is why we developed a tool—the Compatibility and Trust (CaT) assessment—to help organizations understand the perceived trust levels with their trading partners. The CaT assessment takes perception gaps between the parties into account through an “index” score and penalizes the partnership as the perception gap widens. Unlike one‑dimensional or narrow assessment tools, the CaT allows each partner to reflect inwardly while taking true stock of the relationship and sharing how they really feel. That reflection—while sometimes viewed as awkward—is important in getting partners on the same page, especially if trust has been diminished.
Make Investments to Build Trust When It Matters
Not all relationships—especially in business—are the same. Walmart has over 100,000 suppliers; P&G has over 80,000. Many of these are transactional, with multiple suppliers where prices are set by the market. Suppliers can be easily added or removed.
But, some relationships are more strategic, and their success—or failure—can impact the firm. As part of our research, two of us (Karl and Kate) began to do deep‑dive research into companies that were delivering results by choosing to build longer‑term trusting relationships with their trading partners. We profiled some of our favorite case studies in the book Vested: How P&G, McDonald’s and Microsoft are Redefining Winning in Business Relationships in 2012.
Why did we call it vested? Because our research showed that the best relationships come when buyers and suppliers have a vested interest in each other’s success. And that starts with choosing to build a trusting foundation.
Throughout the years, over 600 companies have sent over 11,000 people to the courses we teach in the University of Tennessee’s Certified Deal Architect program. Today, we have had the opportunity to help over 250 of those companies close by applying the concepts we teach in practice.
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