I wrote about trust in business relationships a few months ago. But the issue of trust in relationships keeps coming up again and again in the work I do. Really, it is the lack of trust that continues to reappear. The issue is so foundational to healthy relationships, I feel compelled to write on the topic again – and explain the nature of trust more deeply.

What is trust, really? One definition is: “to place confidence in” or “rely on”.

Recently, I have worked with families, family businesses, couples, parents & teens, Boards of Directors (numerous ones) where a number of individuals within these systems don’t trust one another. And, unfortunately, the problem is that they have learned not to trust. That is, in many cases there was some level of trust previously that has now been undermined.

How does this happen?

Let’s first talk about some key components that are needed for trust to exist. One model defines trust as being comprised of three core components: competency, reliability, and looking out for your interests. Let’s look at each component more closely.

Competency. As I have stated previously, trust is situation-specific. Trust can only truly be defined within a context. No adult (except foolishly) trusts someone for all things in all situations. [Children may, but I have to think about that.] This is because no one is competent in every skill needed in life.

I may trust my financial advisor to develop a balanced approach to investing my savings, but I am not going to entrust my body to him to do heart surgery – because that is not his area of competency. We trust people in situations for which we believe they are competent.

Reliability. Part of trust has to do with the belief that a person is going to “be there” when they are supposed to. An employer expects a worker to show up for work day after day. A child expects their mother to “be there” when they need them. When we have a team working together on a project, we expect our team members to show up and be prepared for their role. Conversely, you may have a gifted and talented team member who really shines during presentations, but if they occasionally are late to meetings, come not prepared, or don’t show at all, then your trust for them in those situations is seriously undermined.

Looking out for your interests. If an advisor for your business is highly competent and reliable, but you are not sure they are primarily considering your interests in the work they are doing for you, you probably have an undertow of mistrust in your interactions with them. This is at the heart of the problem of trust in many business relationships – there are competing interests among various individuals and groups. And if you are not convinced that your interests are being considered (at least as highly as others’ interests), then it will be difficult for you to fully entrust your situation to others without seriously evaluating how they will benefit from the transaction.

From this perspective, trust is much like a three-legged stool. You can have two of the legs, but the stool won’t function without all three. Let’s examine each scenario:

Competency + Reliability – Looking Out For Your Interests. This combination leads to mistrust of the other person’s motives. No matter how well they can perform, you always feel like you have to “watch your back” so you won’t be taken advantage of.

Competency + Looking Out For Your Interests – Reliability. This is the “I just wish …” scenario. You have a competent individual whom you trust their desire to help you. But they just can’t keep it together to show up reliably (or on time), be prepared, and follow through on commitments made. You would like to partner with them, but you are concerned about the ramifications when they let you down.

Reliability + Looking Out For Your Interests – Competency. These are quality people who are faithful, will show up when they say they will, and they want to help you out. But they just don’t have the skills, training or experience needed to get the job done at the quality level you need. Often they are “over-reaching” their skill and ability level out of a desire to help (or to grow professionally), and as a result, often others need to come in and help finish the job.

Trust rarely is “all or nothing”. Remember, trust is situation-specific. In most of our relationships, our willingness to trust (or not trust) is not a black-and-white, “all or nothing” position. Rather, there are certain situations that we would be willing to trust the person, and there are other circumstances where we would not be willing to trust them.

This is an important point because in meetings I often hear people say, “I don’t trust him”, or “I’m sorry, but I just can’t trust her” – as if it is a carte blanche position. I work hard at helping people reframe both their thinking and their speech – to more clearly delineate “for what” they currently are unwilling to trust the other person. (“Currently” is an important word as well, because we want to frame the situation whereby the other person could potentially demonstrate they are trustworthy, and be trusted in the future in a similar situation.)

The Creation of Mistrust. An important question is: how do individuals come to mistrust others in their lives (family members, business partners, colleagues, suppliers)? The obvious answer is: “from a lack of one (or more) of the three requisite ingredients for trust.” And this is true. [I would propose that a lack of reliability is a common source of mistrust, especially in personal relationships, while doubt about the other person’s genuine concern for your interests is a more common source in business-related relationships.]

But a closer examination of relationships characterized by mistrust actually leads to some additional sources.

Lack of adequate, clear communication. Unfortunately, mistrust can develop through a lack of information communicated, or communicated clearly. How often do you hear, in the midst of a conflict, someone say, “Oh! I didn’t realize that”, or “Well, if I would have known that I would have reacted differently.”

Guilt by association. Some business professions have a reputation for being largely self-interested (used car salesmen, professionals who sell life insurance) – that their primary goal is to make a sale, whether the product is what you want , need or not. This puts trustworthy individuals in these professions at a disadvantage. They must work harder to demonstrate that they are considering the interests of the potential customer in the transaction they are proposing.

Misunderstanding of the other person’s intent. In situations where self-interest can be a factor, and where there has not been a long-standing trusting relationship, the misinterpretation of motives can easily occur. Many times people mistrust others because they have a misunderstanding of the potential benefits that might be realized, and think the person is acting primarily from self-interest.

Mismatch of expectations. Sometimes relationships are strained with one party’s expectations not met by another’s well-intended actions. If a friend volunteers to help decorate the banquet room for a fund-raising event, and the quality of the work is below your expectations, tension can arise. Often this is the result of lack of clear communication about what is expected.

A summary word: trust is easily lost, especially when people quit communicating with one another. Whenever possible, if you believe another person is struggling with trusting you in a situation, be proactive and find out what the issue is. I think you will find that the beginnings of mistrust can quickly be corrected either through an apology (if you have not followed through on a commitment made), clarifying your actions and intent, or coming to an understanding of unmet expectations and how these might be addressed in the future.

Recently, I went to our state high school track and field championship meet — it is a wonderful spectacle — thousands of student athletes, coaches, friends and family members in one stadium. Vibrant colors are displayed in the uniforms, supportive T-shirts and baseball caps, and tents (to keep the students out of the sun). Lots of sunshine, sunscreen and water bottles.

The Saturday morning before I went to the meet to watch a friend run in the sprinting events (100 meter, 200 meter, 4 x 100 meter relay), I went for a jog by my house — which meant I was running on a dirt road with pot holes and “washboard” on the road. In the evenings, my wife and I often take walks together down the road, as well.

And I started thinking about the differences between walking, jogging and sprinting — both physically, but also in life.

Sprinting. Sprinting is cool. It is flashy. In track, the sprint events are the high profile events. At the highest level of competition, the winner of the 100 meter dash is known as “the fastest man in the world”. And man, these guys and gals can fly. They are smooth and they move with beauty.

But the events only last 10 to 50 seconds, depending on the event. “Crack”, goes the starting pistol. The athletes fly down the track. And then it is over. Someone often gets hurt — falling at the finish line, or pulling up gimpy with a pulled muscle.

Jogging. Jogging — or in track, the long distance races (1600 meters [the metric equivalent of a mile], 3200 meters or the 4 x 800 relay) — are less flashy. For some, they are boring. Young women and men steadily running around the track several times. There is a little excitement and jostling for position at the beginning of the race. Many times there is an exciting finish between two runners sprinting for the finish. (And many times there is no excitement, given the large distance between the runners.) The runners are exhausted at the end and require quite a bit of time to recover from the race.

Walking. In most track meets, there are no walking races. At longer running events (2 mile races, 10K races) they may have a two mile walking race, but they aren’t very common. Walking just isn’t much of a sporting event for most people. It is boring to watch for very long. It isn’t as physically demanding for the individual — so most athletes pursue other events.

Let’s discuss some observations and lessons for daily life that can be derived from the characteristics and differences between walking, jogging and sprinting.

Sprinting is flashy, takes a lot of talent and preparation but isn’t used much in daily life. I don’t know about you, but I don’t have the need to sprint (literally, to run as fast as I can for a short distance) very often. Jogging is more for trying to keep in shape. But mostly, I walk.

In life, there are people I see from a distance or occasionally meet who seem incredibly cool. They are mega-talented, have a lot of style, and they seem to have the world by the tail. They go at a fast pace and are high profile.

But as I watch them over the long haul, many of them don’t really have staying power. They are a “flash in the pan” — bright lights & a lot of energy — but they are gone tomorrow. And often, their careers are short.

If I get in the mode of trying to sprint at work — moving real fast, making quick decisions, trying to impress others, and being primarily focused on image — I burn out fast. I don’t really get that much done. And I burn a lot of resources that require substantial time to recover. And often, I make mistakes.

Jogging takes a fair amount of effort and the distance people can jog varies greatly. Some people are in better shape than others (obviously). But even among runners, their stamina differs greatly — and you can’t necessarily tell by just looking at them.

In life, individuals differ significantly in how much emotional, mental and relational energy they have. And people’s level of personal discipline varies significantly, too. There are a lot of people who don’t have a boat-load of talent, but through commitment to get good training and daily personal discipline of doing what they need to day-in and day-out, they get a lot of work done (or develop stamina to run long distances.)

But jogging, and working consistently at a fast pace, takes energy and commitment. It is easier to walk (or not do anything), and in life, it is easier to “hang out”, do leisure activities, and not pursue goals. That is why — both for those who run long distances and those who get tasks done — joggers usually have a goal and work a disciplined plan to get there.

Most of life involves walking and walking allows for other things to be done at the same time. The majority of our life involves walking — around the house, at work, while shopping, etc. And we know walking is good for us physically. By definition, walking means you are going somewhere (versus being stagnant and passive.) In career development, I tell my coaching clients one of the major mistakes people make is to “not be going anywhere” — they are passive and waiting for something to happen.

One of things I like about walking is that I am able to do something else at the same time — think and reflect, pray, talk with Kathy, or just enjoy nature around me. When I jog (or on the rare occasion I may sprint for a short distance), my focus is on the physical activity. I am not thinking about much else.

The same is true at work or in life. If I am going at a normal walking pace, I am able to think and reflect, interact with others and enjoy the world around me while I am working. I get things done but I am not exhausted at the end of the day and I have energy left to do other things. And yes, it seems like it takes longer to get tasks done at this pace versus when I am rushing, but like the hare and the tortoise, I probably come out “ahead” at the end.

Steve Prefontaine, one of the preeminent long distance runners in the 1970’s said:

“Life’s battles don’t always go to the strongest or fastest man, but sooner or later the man who wins is the fellow who thinks he can.”

What are other lessons we can learn from these three activities? Think about it this week as you are walking.

As many of you know, I do a fair amount of consulting with family owned businesses. One of the common issues I help business owners and their families work through is the sale of their business (either preparing to do so, or dealing with the results afterward). Recently, a friend who meets with a number of business owners starting to think about selling their businesses asked me to outline some of the key issues that I help families think through. Here is what I came up with:

Integrating Business Ownership Succession, Business Management Succession, and Personal Estate Planning. Most people don’t distinguish between ownership succession planning and management succession. This creates significant problems — especially when the owner wants to sell but the company doesn’t have the management ready to take over the company. Often we have to work to develop a “bridge plan” for getting an interim management team, so the sale can occur.

A second common problem is when the owners’ personal financial estate planning isn’t integrated with business succession planning. Business owners want to get their financial investment out of the company when they sell it, but if not done correctly, they can pay excessive capital gains taxes.

How will the sale of the business affect your family? The sale of a family business significantly impacts the whole family. This includes family members who work in the business and those who do not work in the business. There can be issues of “fairness” within the family — those who work in the business may lose their jobs (or the perks previously associated with ownership). But if they own some of the business, they can reap a large financial benefit while non-owning family members get nothing.

A secondary, but significant issue, can be the impact of the sale on the career development for succeeding generations. If the family has a large influx of money from the sale, this can create challenges (and disincentives) for career development for younger family members. How the sale is structured — and how things are communicated to the family — can help avoid these issues.

How do you decide how much money to give to family members? Key questions we work to answer are: How much is enough? How much is too much? In reality, we have learned these are not the most important questions. Rather, we have identified the key factors that avoid destroying family members with money.

What plans do you have to keep the family together in the coming years? Often families in business communicate primarily about the business when they get together. When the business goes away, many families struggle to stay together — they have no history or tradition for family gatherings outside of the business. So they need to answer questions like: What will be the basis for family interactions and gatherings? What type of communication process will be in place? How will you keep the extended family connected?

The most common “big impact” mistakes owners make when selling their business:
-Not involving their spouse in the process.
-Not preparing their children for managing the wealth they will be receiving.
-Not involving children’s spouses in the process.
-Not integrating the sale of the business with their personal / family estate planning, and paying unnecessary taxes.
-Not developing an adequate plan to finance buy-sell agreements
(between family members, or in the case of death).

The reality is: Most business owners and families need help both “thinking through” and “working out” a business succession plan. My advice to business owners: Don’t risk losing two of your most valuable assets you have spent years building (your business and your family) by making un-informed decisions. A little “pre-work” with a family coach can go a long way to saving a lot of heartache later on.

Some books are just incredibly thought-provoking. I was recently referred to The Language of Conscience by two good friends whom I highly respect. So I ordered it and have been reading it (it is one of those books you do not finish in a couple of hours). And I am intrigued. I am not sure I fully understand all of the concepts — and I think I agree with most of the premises. But I am still thinking about it. The author, Tieman “Skipper” Dippel, Jr., sounds like a fascinating man. So I thought I’d share a bit — possibly to whet your appetite as well. Here are some quotes from the book:

“Conscience is good for society and civilization whether it is taught or whether it is instinctive. . . It is important to look at conscience as if it were a muscle or a nerve. The more you exercise it and the more you sensitize it, the more effective it is going to be.”

Tielman uses the term, “enlightened conservatism”, but do not think that he is talking about political conservatism — otherwise your assumptions and associations will lead you astray. “Enlightened conservatism, as a concept, is well described as trying create an environment in which ethical actions of character can best be performed. . . the character of choice of conscience and concern for others prevails over-self-interest.”

He goes on to contrast decisions made through convenience versus decisions made through conscience. “(D)isciples of conscience look to the future and their children to build a greater society. The disciples of convenience look more to their gains at the present. . . Leaders of convenience often have to step on teh people below them and pull down the people above them. Their weapons are personal attacks, distraction, and the negative emotions. Leaders of conscience use constructive leadership to help others move forward positively. . . Their weapons have to be integrity of purpose and devotion to common goals.”

“In order to achieve the common good, the world’s people must reach the point of saying, ‘What do I think about that?’ rather than just ‘How do I feel about that?’ . . It is in reasoning together in toleration and in appreciation of common values and common moral codes that one can seek the common good by looking beyond personal self-interest and past historical prejudices.”

Note that the book is actually a compilation of papers written and lectures given from the 1970s to early part of the twenty-first century. Tielman shows an amazing foresight on a number of issues:

“I do not see the future as being dominated so much by clashes of great ideologies such as capitalism vs. communism, as by more subtle but extremely potent influences on the culture that determines civilization’s direction. The new subtle concept is victimization and victimhood. It argues that society owes more than basic rights and that government should grow in order to fill those rights.”

“The right question is not whether you want big government or small government. The right question is what should be the role of government as the expression of the combined will of the people in regard not just to the protection of individual rights and dignity, but to the granting of economic benefits on the concept of victimization vs. individual responsibility.

“Character is the acceptance of individual responsibility. . . You cannot build character and courage by taking away initiative and independence, and you cannot help men permanently by doing for them what they can and should do for themselves.”

He then quotes Theodore Roosevelt: “The things that will destroy America are prosperity at any price, peace at any price, safety first instead of duty first, and love of soft living and the get-rich-quick theory of life.” Wow. And that was state over 100 years ago.

He later comments on the Internet. “One of the Internet’s great benefits is that it will make information readily available to an enormous quantity of people on an individual basis. But, it is a double-edged sword since one benefit and detriment of the Internet is that it will provide information easily available to an enormous quantity of people on an immediate basis. With quick availability to information, people will feel less of a need to read books and to think about the concepts that help them remember those individual parcels of date and weave them together. Without the knowledge that is gained from in-depth thought, it is difficult to gain the wisdom of how to use the ever-increasing amounts of data.”

“it will likely occur in an information age that will have two parts — an age of knowledge that expands rapidly with the dissemination of information. And than an age of wisdom necessary to process the excess of information where trust and experience are very valued and character re-emerges. . . Wisdom requires a perspective, a very basic position from which to make judgments. It is at this point that leadership becomes particularly critical in providing guidance and direction. Leadership defines culture and thereby defines civilization, and whether those leaders are directed by conscience or merely by their own convenience will determine the direction that civilization will take. . . The contrast of the Renaissance and the Dark Ages shows that leadership can move culture both ways.”

There is much more thought-provoking (to me) content — and incredible foresight on issues regarding China, the movement of politics in the U.S., and the increasing role of non-profit organizations in our culture. I would highly recommend this book to others who are trying to make sense of the macro-economic, cultural and political confusion which seems to exist.

[A final side-note: This book has been translated into Chinese and reportedly is one of the few Western books used as a text in Chinese universities.]

Over the past few months, I have had the opportunity to work closely with business teams comprised of highly talented and successful professionals. Some of these high-powered teams work together well and achieve amazing results, while some of the teams are struggling a bit in working together effectively. And one of the teams had to reorganize because the team members couldn’t figure out how to work together.

I’ve made some observations as well as pulled some information from other sources, about what needs to happen for a team of “All Stars” to be successful as a team.

Characteristics of Successful Individuals

First, let’s look at some of the characteristics of highly successful individuals. Successful people:

*Know how to accomplish tasks. They get things done. And typically, they have found ways of doing things that work for them. (With a team, they may have a hard time approaching a task differently from their personal strategy.)

*Are confident in their abilities. Since they have had success, they have developed confidence in their abilities and their approach. They believe their way works (and sometimes believe that their way will work for everyone.)

*Are proactive. They take initiative, develop action plans, and act on the plans made. (In a team context, they sometimes can act before coordinating with other team members.)

*Persevere. Persevering, “stick-to-it-tiveness” is generally a positive personality characteristic. (But perseverance can translate into stubbornness, if the individual is unwilling to accept and adapt to reality-based feedback – that this strategy just isn’t working in this context.)

*Have high energy. Most successful individuals have a lot of energy – mental, emotional and physical. They often run at a fast pace. (But in the context of working with others, they can have difficulty waiting, and sometimes can “act” before they should.”

Characteristics of Successful Teams with Highly Talented Individuals

Although working with a team of very talented, capable and successful professionals can be challenging, there are ways that these “All Star” teams can become incredibly impactful. There are many areas of life from which examples can be taken: music groups, sports teams, legal and political teams, strategic business partnerships. (And unfortunately, there are probably more examples of “Super Teams” that failed.) What seems to be necessary?

*Team members voluntarily submit to a selected leader. There has to be a clear, designated leader. And the team members must consistently follow their leadership, even when they disagree with the leader (and they will).

*Individuals “hold back” in fully using all of their talents and focus their efforts on what is needed for team success. In a team setting, individual stars don’t “shine” and do everything they do as individual stars. They have to pull back and figure out how to mesh with the other team members.

*Team members value and appreciate the role and contributions of other team members. Not only do team members constrain their performance, they also truly value the strengths of others and the strengths their teammates bring to the team effort. There is usually a genuine mutual respect among the teammates.

*The approach or strategies used by the team to reach success may be different than previous successful strategies used by the individual team members. Certain strategies work well for individual tasks, but frequently different approaches are needed for cooperative ventures. Deference to the team leader and accepting their approach for the team is critical in this area for the team to be successful.

*There is a disciplined, strategic approach to reach the team goal that the team members are willing to submit to. This may seem redundant, but the issue is that many times “All Star” teams are put together for a specific project or limited time. Otherwise, most successful professionals would not be willing to participate in a cooperative project – because it would interfere with their personal career and requires them to perform in ways they are not typically used to.

Lessons from The Five Dysfunctions of a Team

(by Patrick Lencioni).

Finally, let’s look at lessons shared by Patrick Lencioni in his best-selling book. These principals dovetail nicely with the observations described above.

Issues That Lead to Problems on a Team

*Absence of Trust (resulting from a lack of vulnerability among team members)

*Fear of Conflict (which can lead to artificial harmony). Team members need to be able to engage in passionate debate about ideas.

*Lack of Commitment (by keeping goals and plans ambiguous). Lack of true “buy in” by all team members leads to poor execution and implementation.

*Avoidance of Accountability (which keeps performance at low standards of acceptability). Team members must be willing to confront off-task or counterproductive actions and behaviors of other team members.

*Inattention to Results (stemming from a focus on individual needs such as status, ego and recognition). It is critical for team members to agree on the categories of results to be tracked to assess success for the team as a whole.

Five Aspects of Functional Teams

1. They trust one another. (The confidence that their team members’ intentions are good.)

2. They engage in unfiltered conflict around ideas.

3. They commit to decisions and plans of actions.

4. They hold one another accountable for delivering against those plans.

5. They focus on the achievement of collective results.

So take a look at yourself and the teams on which you are functioning. See which of these issues are strengths and areas which need to be strengthened. It is pretty fun to be on a successful team, especially when the other team members are really talented!

Recently, in a variety of settings I am observing the issue of trust impacting business relationships.

Obviously, trust is at the foundation for business transactions – that the vendor will provide the goods or services purchased, that the goods or services will be at the quality level described initially, and that the customer will pay for the goods or services in the time frame agreed upon.

Another area of business where trust is impactful is in the employer / employee relationship – where the employer follows through on commitments communicated to the employee and the integrity level of employees to be trusted to access to information and resources.

This past week I was talking to a business owner who described a situation where he had hired a sales manager (in early 2008, prior to the financial crisis hitting) who in turn started hiring a fairly high cost sales staff. Whenever the current owners or management team raised issues or asked questions of the sales manager, he reported replied, “Do I have to earn your trust or earn your mistrust?” (implying they should trust him until he proved untrustworthy.)

I replied that this was the wrong question. And, in fact, I find much communication around the issue of “trust” is not laid out properly. I do not believe that the question is: “Do I trust you?” (or “Do you trust me?”). This is too broad.

Trust is situation specific. The more appropriate question, I think, is: “For what do I trust you?” Or, “What am I willing to entrust to you?” (responsibility, privileges, resources). I may trust you to hire staff within a budget amount but I may not trust you to have total access to all of the company’s financial data. Or, I may trust you to pay bills with appropriate procedural checks and balances but I don’t trust you to have total access to the company’s financial resources without monitoring.

Think back to common family situations. Teenagers often complain to their parents, “You don’t trust me!” But again, the real issue is “trust you to do what?” I do trust you to choose good friends and to tell me the truth about where you are going, but no I don’t trust you to drive three hours late at night in a car with four of your friends on a snowy night.

Generally speaking, trust is earned — either from prior behavior with other individuals (that is why we trust professionals who have gone through training and certification in their profession, but we often also check references of people with whom they have worked) or in their behavior with us. We trust others (in the defined areas of responsibility) based on previously demonstrated responsibility in similar areas.

[I do admit that in many daily interactions we confer trust to others when we have no specific basis to do so, other than assuming most people are trustworthy in daily life transactions. However, this level of trust varies greatly across individuals’ own personal history and life experiences.]

I find that people (both business owners and parents) tend to get “burned” when they give more trust and responsibility to others when the person hasn’t demonstrated a basis for that trust.

A second area where I find business owners and managers tend to get taken advantage of by others in the business world is when they ignore early warning signs of mistrust. Partly due to the self-reinforcing tendency that we don’t want to admit that something may be wrong (and that we made a mistake in hiring this person), and sometimes partly due to people’s propensity to want to believe the best of others - we wind up overlooking early warning signs of a person not being trustworthy. As a result, we continue to entrust responsibilities and resources to the individual and find out later they weren’t trustworthy in how they handled the responsibilities - digging a deeper hole and creating more problems for the business.

So, where do we go with all of this?

First, I would suggest to accurately define the parameters of trust in relationships. Using a framework such as, “I am willing to trust you to…” Sometimes, it may be appropriate to say, “I am willing to trust you with… because you have shown yourself responsible by… ” Additionally, sometimes you may need to add, “…but I don’t feel comfortable yet in giving you the responsibility to …” Finally, it is helpful to clarify what responsibilities need to be demonstrated in order for you to trust the individual with more areas (this is really helpful in dealing with teens - versus the arbitrary “when I feel comfortable”.)

Secondly, I would strongly encourage each of us to pay attention to early warning signs of problem behaviors. This can take many different forms, including:

*the facts just don’t add up

*you are getting reports from clients and customers and other trusted team members, about some problems in a team member’s behavior

*the team member responds to questions and challenges with a “don’t you trust me?” type of response

*the team member is quite adept at making excuses, blaming others or circumstances versus admitting they made a mistake or error in judgement.

How should you respond to early warning signs?

a) talk to the individual about your concerns; often your concerns may be due to misperceptions or miscommunication;

b) obtain verifying information by an independent third party;

c) set up processes and procedures to monitor transactions

d) document the issues and behaviors which are creating concerns for you. Often the weight of evidence over time becomes significant, while no one specific incident is that large.

I think it would be wise for each one of us to consider the following old saying,

“Wise individuals see danger ahead and avoid it, but fools keep going and get into trouble.”

Given that I have the opportunity to interact and observe with businesses across the country, it gives me the potential to learn from those whom I serve and interact. In preparing for a presentation to a chamber of commerce luncheon, I decided to share some of the observations I have gathered over the past months. I have seen businesses who are doing relatively well and those who are not (or who have closed their doors). And these are the patterns I have seen.

Businesses who do well in difficult financial times:

Are able and willing to make and implement tough decisions. Some companies who were not able to make tough business decisions quickly are no longer around. Those who hesitated and waited before making cuts have suffered and made the path more difficult for themselves. It is important to note that family-owned businesses often struggle in this area — either because they do not have the processes and decision-making mechanisms in place to make authoritative decisions, or because the “difficult” decision may be to let family members go.

Realize that marketing is a way of life. I am using the term “marketing” to essentially mean: a) letting people know what you do; and b) being easy to find by potential customers. Those companies who were doing well, had a large back-log for their services or products, and who had fallen asleep in their marketing, often had difficulties “gearing up” their marketing plan when tough times hit. However, those companies who had continued to actively market were in place to adjust their plan and keep going.

Combine focus with diversity. Although I firmly believe in Jim Collins’ “hedge hog concept” (knowing what you do well and using that product/service to drive your business, I also believe there can be focus with diversity. Many of the companies who are now doing well in this tough economy had some diversity built into their business plan — either a variety of markets to which they applied their product/service, or they had a secondary line of products that they could “ramp up” in response to a need that arose. A number of companies who have only one primary service or product line are struggling to survive and/or develop a new product or service in times where there is not a lot of available capital to do so.

Understand that the focus of “networking” is not primarily about finding potential customers but looking for opportunities to serve others. Given that I was at a networking event, this was an important topic to address. All too often (almost always, in fact) business representatives go to networking events (luncheons, educational seminars, receptions) with the primary focus in mind to meet potential customers, give them your thirty second “elevator speech”, and press your business card into their hand. And with what do most of us walk away from these events? A blurred memory of who we met and a stack of business cards. Consider the following scenario. How much would you remember the person who actively sought to hear about any needs or challenges you are experiencing and was able either to connect you with a resource that could help or introduce you to someone who may have the service you need? Now that is impactful.

Actively encourage their employees. I have been working on a project of applying the Five Love Languages (a book used in personal relationships) to work-oriented relationships.

Initially, when Dr. Chapman and I started the project, the economy was good and one of our primary applications was in “how to keep valuable team members”. For many companies now, the issue is how to keep your employees from becoming discouraged and burned out — they have more work to do and increased responsibilities with the same (or maybe less) pay and resources.

We have developed the Managing By Appreciation Inventory to help managers and business owners how to communicate encouragement and appreciation to their employees through non-financial means, and how to do so in a way that is significant and meaningful to the employee. Whatever tool or method you use, it is critical to find ways to encourage and show appreciation to your employees in these difficult times. Briefly think of what a discouraged employee looks like in day to day life, and quickly calculate the costs to your organization of having a discouraged team — loss of productivity, poor customer satisfaction, negative attitudes, increased mistakes.

So, if your business is still alive and kicking, take a minute and see if you can take any of these factors and apply them to your organization — and hopefully increase the probability of your survival!

I live outside of town (for those who grew up in a rural setting, it would be a stretch to say we live in the “country” — although for those who live in an urban setting, they would think so — lots of trees and animals, and we live on a dirt road).  And I love to take walks in the woods.  This morning I hiked around in the early morning sun, through some surprisingly thick woods and undergrowth.  And it “got me to thinking”.

For many of us, our daily lives are quite segregated from nature.  Hence, we tend to miss many of the foundational lessons we can learn by making some basic observations (and observations that would seem self-evident to most of our ancestors).

• Growth occurs naturally when necessary conditions are met.  In nature this includes light, nutrients, and water.  In business, core conditions include customers who have the ability to pay, the goods or services you are providing to others, getting the word out about your product (marketing), and collecting payment for your product (there are probably more I am missing).  Interestingly, in both nature and business, the lack or absence of one core ingredient means eventual death.
• Controlled growth produces more fruit.  When all of the necessary conditions are present, and especially in times of abundance, there actually can be too much growth.  Pruning, cutting out unwanted growth, planning and planting desired plants, taking out weeds, thinning out plants to provide more room, light and nutrients for selected plants — all are mechanisms for controlling growth.  In business, too many products or services offered, or not being able to manage large surges in demand can actually hinder the company’s ability to maximize their profits.
• Unrestrained growth leads to chaos and little beneficial results.   Have you ever seen a tree or plant that has grown for years without any management of its growth?  They are typically unattractive, not well organized, and don’t produce as much fruit as a tree which has been systematically pruned and thinned.  Similarly, businesses that just grow everywhere and in every direction possible become difficult to manage, and the resources needed to be productive (time, energy, human capital, financial capital) are squandered in helter-skelter fashion rather than in a focused direction.
• Healthy production comes from a combination of planning, preparation, hard work (at the right time), monitoring, maintenance, and long-term effort.  Contrary to some business books (usually in the sales & marketing field), there is no one solution that will make a company successful.  Rather, healthy businesses — like healthy gardens — require a combination of planning & preparation, long hours (at times), monitoring what is actually happening and taking corrective action.  Generally speaking, both in nature and in business, there is no quick pathway to success.  Rather, a series of actions over a long time period lead to healthy production.
• For good results to occur, challenges, lack of resources and destructive elements must be dealt with successfully.  To make plants and trees grow, it is not just a matter of providing what they need (focusing on the positive).  Healthy plants come from dealing with the threat of destructive elements as well — insects & pests, being eaten by animals, fungus or mold or blight, and a harsh environment (drought, extreme heat or cold).  In the same way, focusing on one’s “business plan” without taking into consideration the risks that may be encountered can lead to failure.  Unforeseen competitors, changes in tax law or governmental rules & regulations, or a harsh economic environment — the lack of available financial capital, the lack of adequate human capital and expertise — can tank an otherwise healthy business.

I am sure there are other lessons and metaphors from nature that apply to business-life.  Take a minute and reflect (or better yet, go on a walk, observe and ponder).  I’d love to hear your thoughts.

Today’s economic environment is taking a huge emotional toll on business owners and managers.  Given the shrinking economy, with orders for manufacturing being canceled or put on hold, with little happening in the construction industry, and with the general public spending less at the retail level — many businesses are having to either cut back employees hours or let them go altogether.

The “hidden” story behind this pattern is the huge emotional strain business owners and managers are experiencing.  And I am hearing from more and more of them each week.

One manufacturing executive told me he volunteered to take a 50% pay cut (his company is owned by a larger private corporation), even though his superiors suggested a 4% reduction for management.  He told me he couldn’t, in good faith, see his employees take a 20% reduction (by means of going to 32 hours per week from 40 hours), and not take at least the same level of reduction.

Other business owners are sharing with me the pain of having to let good team members go, because they don’t have the work needed to cover the overhead.  Some owners are losing sleep and experiencing a level of anxiety they state they never have had previously.

I grew up in a family-owned business.  My father, mother, grandfather and uncle worked together in a manufacturing firm.  And I vividly remember during the economic struggles of the 1970’s conversations during mealtimes about my dad’s concerns.  As a teenager, I was struck by the level of responsibility he felt for providing work (and thus, income) for his employees.  He frequently would share he felt terrible whenever he would have to let someone go, because of the impact it would have on the family — especially the children.  So he tried everything he could to keep them employed, even if it meant having them do tasks that were not directly revenue producing.  The stress of the situation wore him down emotionally, and physically.

Today, business owners struggling with the same issues.  Here are some of the burdens I see them carrying:

• A sense of responsibility in providing for others.  Often, in our culture, business owners are viewed enviously of “having it all” — financial success, time freedom, prestige … Those who own businesses know the other side of the coin — the financial stress of making payroll and paying creditors, and the knowledge that other individuals and families are counting on you to provide for their income.
• Balancing competing needs and demands.  Yes, your employees need work and income.  But the owner must also “keep the ship afloat” — you can’t keep people employed and risk losing the whole business.   Similarly, a business’s vendors and suppliers need to be paid (they have employees, too), but if you pay them, you may not be able to have sufficient funds for your own payroll.
• Guilt.  “I should have …”  or “I shouldn’t have …”  Business owners are experts at second-guessing themselves and expecting themselves to have perfect judgment.  Business owners feel guilty for having to let employees go.  They feel guilty to the remaining team members for not letting other employees go sooner.  And they especially feel guilty for “not having seen this coming.”
• Lack of knowledge about the future.  As the saying goes, no one knows what the future holds.  This is also true for business owners.  But, ironically, they are often asked by others (colleagues, employees, customers, family members, friends) to divine the future:  “When do you think this will turn around?”  And the lack of predictability in our current economic environment wears heavily on business leaders — it is very difficult to make decisions about the future when even the short term (3 to 6 months) is highly unpredictable.
• Pressure from numerous fronts.  Business owners have numerous parties who place pressure on them — their customers, their vendors, their employees, the community, their family, their church and charitable organizations.  And most of these groups are generally unaware of the other parties involved in the business leader’s life — and they are primarily focused on their needs.
• Need for wisdom and discernment.  Most successful business owners (that is, those who have endured difficult times previously) are humble individuals.  They know that they don’t know everything, and that, almost more than anything, they need wisdom and discernment in how to manage during these tumultuous times.   The goal often becomes survival, and they are willing to do what is necessary to accomplish this goal — even if it means not “looking” successful, or taking on responsibilities that are beneath their title and position.  And they are almost always willing to accept counsel from others.

So, the next time you are interacting with someone who owns or manages a business, take some time to listen to them.  Ask them how they are doing.  Give them a word of encouragement or appreciation for all they do for their employees and the community.  And try not to ask them to do something for you — they have enough demands in their life as it is now.

There is plenty being written about the current financial crisis and, like the political elections this past fall, it is easy to become overloaded with information.  Obviously, there are a lot of opinions about what has happened, who is at fault, and what should be done.  Some of the comments are driven by philosophical beliefs (for example, about macroeconomics), some by political beliefs, and less seemingly by looking at the data in longer term historical perspective.

One interesting voice in the milieu is Peter Schiff, who has a video on YouTube with over 1 million hits, where he predicted the burst of the mortgage bubble and the ensuing market crash back in 2006.  In 2007, Schiff published a book entitled Crash Proof: How to Profit From the Coming Economic Collapse. And in a recent article in Fortune magazine, Schiff discusses his beliefs how best to deal with the crisis:  “shrink the government radically, cancel all bailouts immediately, take plenty of tough medicine, and let the free market do its job”.

Now I obviously am not a macroeconomist, nor a financial analyst, but it seems other business leaders are calling for similar (although maybe not as stern) actions.  Jim Collins, author of Good to Great,  also has an interesting article where he attempts to put the current economic situation in historical perspective.   Consistent with his message in Good to Great that business leaders must force their management to deal with the harsh realities they face, and not act like they aren’t there, Collins reiterates the point that the companies who survived the Great Depression and continue today remained true to their core values. Often these core values included commitment to their people, providing quality products even if it was costly, and maintaining a long-term perspective.

Often as a psychologist I assist people in dealing with their feelings.  And, in contrast to the old days of just helping people “get in touch with their feelings”, we now know that emotional reactions are intimately linked to an individual’s expectations — what “should” happen (or what “shouldn’t”).  So a person’s emotional reaction is an interaction between their expectation and what they actually experience — if the expectation is met, we feel pleased; if it isn’t, we can become angry, disappointed, hurt or discouraged.

I believe we are entering into an important time in recent history where individuals’ beliefs about life (about the way things should be) are going to be challenged with the reality we each experience.  And I personally believe that a lot of the psychobabble about “perception is reality” and “reality is whatever you want it to be” will crumble in the face of the difficult times many will encounter.

There is an objective reality (and, yes, our experience of it is influenced by our perceptions and beliefs) — and the choices that we each make will have increasingly important consequences for our lives.   This is true both at an individual level, as well as corporately for businesses, and also for our country.  There are some foundational economic principles — and the various macroeconomic belief systems will be proven either true or false by the results that occur.

But at a more foundational level, the following principles seem to be true over the centuries and across cultures:

• Work is the process of providing goods or services that others want or need and are willing to pay for.  Trying to make money fast on some scheme that is not grounded in providing goods or services ultimately will not work over the long-term.
• Spending less than what you earn, saving for purchases ahead of time, and “saving for a rainy day” (i.e. when you are not able to work) seems to be a wise strategy.  True, you won’t be able to maximize your opportunity for gain by leveraging your resources, but you also minimize your risk if everything does not turn out as planned.
• Often circumstances bring change that was not expected, and to survive (and thrive) we must adapt to the new circumstances, adjust our expectations, and not focus on the “good ‘ol days”.  Reminiscing about the past, and grumbling about how things aren’t like they used to be, doesn’t do much to help deal with the present.  And you can either accept the new aspects of the current reality, and learn to deal with them, or you can try to continue to live according to the rules of the past and probably fail.

I am sure there are other foundational rules that will become evident over time.  I would just encourage each of us to begin to re-evaluate our expectations, our beliefs about the way things “should” be, see if they match reality as we know it today, and determine if adjustments in our beliefs, habits and expectations need to be made.