Trust is integral in top-performing organizations. | iStock/Mark Airs
Joel Peterson could have written his first book on any number of topics. As treasurer, CFO, and then CEO of Trammell Crow Co., the world’s largest private real estate development firm, he helped craft countless deals. As the founder of Peterson Partners — a private equity group with $1 billion in investments — and JCP Capital, he has become a savvy judge of companies and entrepreneurs. And as chairman of the board of JetBlue and a director at dozens of other companies over the past 35 years, he is an expert on corporate management and governance.
Yet Peterson, the Robert L. Joss Consulting Professor of Management at Stanford Graduate School of Business, chose to write about trust.
“I believe that trust is more powerful than power itself,” explains Peterson. “It supports innovation and flexibility, and it makes life more enjoyable and more productive. People who live in high-trust environments thrive.”
Peterson defines trust as a giving up of control, at some level, to another person. His book, The 10 Laws of Trust, which he wrote with David Kaplan, explores the mechanisms of trust creation in organizations. “You have to be intentional about building a high-trust environment. It doesn’t just happen,” he says. “It’s just like diet or exercise.”
Peterson provides three tests for deciding who to trust. The first is character. “We can’t trust a leader without integrity, who we can’t count on to do what he or she says,” he explains. Next is competence. You trust your mom, for example, but would you trust her to fly a 747 to London? The third, he says, is authority to deliver. There’s no point in trusting a pilot to fly to London if she doesn’t have permission to take off.
“It’s folly to trust anybody if all three aren’t present,” Peterson says.
But encouraging trust in an organization is more than exhibiting it at the top level. Leaders must also learn to trust their followers. “Leaders empower followers through trust,” says Peterson. “And by empowering people, they create a virtuous cycle of productivity and flexibility and innovation.”
Peterson’s 10-point codex is intended to guide leaders as they seek to raise the level of trust within in their organizations. Trust-building requires rigor and intentionality. It also requires a realistic mindset that admits that inevitably something will happen that damages trust, like in 2007, when JetBlue passengers on a flight to Cancun got stranded for eight hours on the tarmac at New York’s John F. Kennedy International Airport.
“Trust and betrayal are two sides of the same coin,” Peterson notes, “and you need to start out understanding that there is a risk of betrayal. But I make the argument that it is worth the risk and that there are ways to limit it.”
One way to limit this risk is through accountability. Clear accountability is a necessary feature of a high-trust culture, Peterson says. If people don’t know what is being measured, then they don’t really trust. They’re cautious and wary. “When I’ve got managerial responsibility, I say, ‘Here’s exactly what we’re trying to do. Here are the deliverables. Here’s the timeframe. Here’s the budget. Let’s remain accountable to each other.’ Because the more accountable we are to each other, the higher trust goes.”
What should you do when trust is betrayed? “You have to fix it,” he says. “You need to apologize. If it’s early on in the game, you can correct things. You can provide direct feedback.” On the other hand, there are certain betrayals that are so serious that you’re really better off parting ways. It may not be worth fixing if the value differences are too great, the priorities are too different, or the betrayal is too profound.
“In all betrayals of trust, however, there’s a healing process that you have to go through,” Peterson says. “The most important thing to do is forgive. Forget it and start thinking about the future.”
As a dealmaker, Peterson has found that special care must be taken to create and preserve trust during the negotiation process. We’ve been trained to think of negotiations as a zero-sum game, and the whole negotiating process is geared that way, he says. “But by holding onto the notion of win/win, and ‘solving for fair’ and listening hard enough, I’ve often found that I can give the other party what they want at a price that’s right,” he says. “So I’m prodding and trying to figure out something that works for the other party as well as for me. If you can do that, you can create trust right up front.”
Creating and building trust requires a consistent effort, but Peterson is convinced that it is worthy work for leaders. “Flying the way that I like to fly, you do run some risks,” he admits. “You have to expect there will be betrayal, and you have to overcome that. You have to be careful about who you go into business with. You have to be rigorous about following the laws of trust. But it’s a better way. It’s a more excellent way of living a life.”
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