Most words have a denotation and a connotation, and “trust” is no different; In a very generic sense, I think “Trust is a condition, or internal state of mind, I reach over time that allows me to set my expectations with relative confidence as to the future behavior of, or the outcome from a commitment made by, another person or organization.” Even though trust, in a somewhat perverse application of my definition, can be the state of mind that allows me to define it as “the confidence in my expectations that you will behave unethically, will not meet your commitments, and you will lie to me”, that’s not what this blog entry is about. It is also not about using that word the same way I would use in a social setting; You see, telling me you are “trustworthy”, or asking me to “trust” you in a business setting, will not get the same response as it would in a personal, or family setting, even if I may consider you to be the most “trustworthy” person I know in those situations.
The formula for trust in a social setting is generally “Trust is directly related to my experience of one’s Character, which emerges from an understanding of one’s Intentions multiplied by their Integrity over time.” In other words, we tend to trust individuals who we come to believe have good intentions towards us, and will behave with integrity in their interactions with us.

But business requires another dimension to trust. That dimension is competence, and the formula becomes “Trust in Business is Character multiplied by Competence, where Competence is the product of Capability and Performance over time.”

The reason for the different approach is simple, in business, as much as we all want to work with people we “trust”, time to assess may not be sufficient, and an individual’s character may not always be apparent, or relevant. For example, the character, intentions and integrity, of a purchasing manager may be irrelevant, if the starting point is a simple purchase order for goods at the lowest price based on a transactional relationship, but extremely relevant when operating on good faith, the way I personally prefer to start negotiations and drive business relationships. In that case, trusting the intentions and integrity of that purchasing manager is extremely relevant, because things don’t always go as planned, and contract language can not anticipate and protect the parties from bad faith going in, every intention to mislead, or close all avenues to wiggle out of a commitment. In the same vein, the character of the executives of the company the purchasing manager works for may not be relevant, if all goes as planned; but if a deal was negotiated in bad faith to begin with, the company doesn’t pay its obligations, or doesn’t honor the terms of the contracts their purchasing managers sign, the intentions and integrity of the company’s leadership team are definitely relevant. The absence of that at the executive level generally leads to litigation, and tarnishes the company’s reputation…

But even assuming the character of a business associate, an executive team, or a potential business partner, is impeccable; meaning their intentions are always honorable, and their integrity is unquestionable, that is still not sufficient for a trusting business relationship. Competence is the second, and equally required component. For example, if the same purchasing manager has impeccable character, but is not capable, e.g. does not possess the necessary knowledge or understanding to value a service and properly structure a contract, or has performance issues, e.g. repeatedly fails to deliver on promises made during negotiations related to the contract, trust is not established. The absence of those components generally leads to missed expectations and failed projects.

Here is an example; I have a close friend who, on a personal level I “Trust with my life, my family, my wallet”, because after many years of friendship, I know both his intentions and integrity are above and beyond reproach. But I would never trust going in business with him, because I also know that he is incapable of any kind of operating discipline, does not understand even basic business concepts, and every time he has attempted to execute on any of his ideas, it was a disaster. The high score on Intentions and Integrity, is countered by the very low scores on Capability and Performance.

An opposite example is a business associate whose character depends on the situation, meaning it has somewhat honorable intentions, if it serves him, and displays acceptable levels of integrity, if all is going well. When he takes on a project, and all is going well, he has the skill-set and knowledge to deliver, and has done so many times before. The average of a mediocre score in Intentions and Integrity and a high score on Capabilties and Performance is acceptable, so, even though I would never trust him in a new project where there is high risk and honest and immediate feedback is critical, I trust him with most routine projects and non-critical clients.

So before you decide whether or not to trust someone in a business context consider the formula “Trust is the product of Intentions, Integrity, Capability, and Performance over time…”