Warren Buffet on Trust
Trust /trʌst/
noun – firm belief in the reliability, truth, or ability of someone or something.
Why trust is so important
Trust is an essential component of successful entrepreneurship: playing a vital role in building lasting relationships; maintaining a strong reputation; attracting and retaining customers; motivating employees; facilitating financial transactions and partnerships; and ultimately propelling business growth. Without it, as Warren Buffet said, “everyone notices”.
Trust within an organization also leads to numerous positive outcomes like increased productivity, higher energy levels, better collaboration, and enhanced loyalty among employees. This results in reduced stress levels and greater overall happiness, contributing to better overall performance.
Employees at high-trust companies report 74% less stress, 106% more energy at work, 50% higher productivity, 13% fewer sick days, 76% more engagement, 40% less burnout, and 29% more satisfaction with their lives.
But what do entrepreneurial leaders think? A 2016 PwC global CEO survey reported that 55% of CEOs think that a lack of trust is an existential threat to their organization’s growth.
Trust and the brain
Research shows that having trust stimulates oxytocin production, and reciprocally, oxytocin release stimulates trust.
Paul J. Zak, a neuroeconomist at Claremont Graduate School, ran an experiment where participants choose an amount of money to send to a stranger online – knowing that the amount of money chosen will triple when sent. The recipient could either keep all the cash or be trustworthy and share some of it with the sender.
Blood samples were taken to measure oxytocin levels before and right after the participants’ decisions, which showed that the more money people received, the more oxytocin their brains produced, which led to more money being shared. To prove that oxytocin also causes trust, Zak administered doses of synthetic oxytocin to another participant group, who went on to more than double the amount of money they sent to the recipients.
How leaders can promote trust
Zak later went on to create a survey instrument that quantifies trust within organizations by measuring its constituent factors. That survey has allowed them to study several thousand companies and develop a framework for business leaders – identifying eight management behaviors that foster trust. These behaviors are measurable and can be managed to improve performance.
1. Celebrating Achievements
Neuroscience shows that immediate, peer-driven, tangible, and public recognition significantly boosts trust and motivation, encouraging excellence and knowledge sharing within the team.
2. Induce “Challenge Stress”
When a manager assigns a team a difficult but achievable job, the moderate stress of the task releases oxytocin and adrenocorticotropin, which can enhance focus and social cohesion, driving team performance. When team members need to work together to reach a goal, brain activity coordinates their behaviors efficiently.
3. Provide autonomy
Provide employees autonomy in decision-making and project execution to fuel motivation and innovation. Trusting them find their own solutions enhances engagement and encourages creative problem-solving. A 2014 Citigroup and LinkedIn survey found that nearly half of employees would give up a 20% raise for more control over their work.
4. Enable Self-Organization
Allow employees to choose projects that align their passions with company goals, increasing productivity and retention. Accountability and clear expectations ensure contributions are recognized.
5. Be Transparent
Share company goals and strategies to reduce uncertainty and stress, fostering a cooperative and informed workforce. Regular communication is key to maintaining alignment and trust. A 2015 study of 2.5 million teams in 195 countries showed that employee engagement improved when leaders had daily communication with their teams.
6. Promote Social Relationships
Encourage social interactions to enhance trust and performance. Activities that foster connections make teams more cohesive and motivated, as members become more invested in mutual success. Zak’s research shows that when people intentionally build social ties at work, their performance improves.
7. Foster a Growth Mindset
Support personal and professional growth to build a high-trust culture. Setting clear goals, providing autonomy, and focusing on continuous feedback contribute to a fulfilling work experience and strong company loyalty.
8. Ask for Help
Ask for help as leaders to stimulate oxytocin in your team, enhancing trust and cooperation. This not only achieves goals more effectively but also fosters a supportive and collaborative culture. Zak found this stimulates oxytocin production in others,increasing their trust and cooperation.
The ROI on trust
High-trust organizations outperform in productivity, engagement, and innovation. Employees in these environments are more likely to stay, recommend their company, enjoy their work, and align with company values.
In Zak’s later study on trust in US companies, he found that employees working for the top quartile of trusted organization had 106% more energy, 76% more engagement, 70% more purpose alignment, 66% closer work relationships, and 50% more productivity.
Moreover, high-trust companies tend to offer higher average pay – to the tune of an additional $6,450 a year, (+17%) – reflecting the increased productivity and innovation of the business and its employees.
Lessons for Entrepreneurs
For entrepreneurs building new companies, trust should be a cornerstone of everything they do – both outward to the market and inward to their teams. By having a deeper understanding of how the brain triggers and responds to conditions of trust, leaders can implement tactics that enable it, which tends to lead to better performance, more innovation, and greater employee satisfaction.
Entrepreneurs often operate in high-stress environments, which can be trust-promoting, but only if outcomes are achievable and clear. They also tend to work with smaller teams, which allows them to foster less top-down hierarchical structures that can foster autonomy and self-organization, as well as social relationships among colleagues.
As entrepreneurs, particularly in the early stage, are subject to a lot of highs and lows, they can share the celebration of wins with the people in the organization that helped make them happen. And they can choose to lead in a way that display transparency and vulnerability, which leads to greater empathy, understanding, and connection across their companies.
One more thing…
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