As the ultimate expert on the role of trust between organizations, Professor Reinhard Bachmann talks about the importance of risk and vulnerability: you do not need to trust if you are not vulnerable, nor if you want to avoid any kind of risk. What role play competence and integrity?
In this new episode of the TrustTalk podcast, he speaks about his research into the role of trust and power in two types of inter-organizational relationships, vertical relations (supply chain) and horizontal relations (M&A, joint venture, cooperations) the “system” or “institutional” trust in liberal capitalist countries (like in the UK) versus coordinated capitalist countries (like in Continental Europe).
In the case of acquisition transactions, two organizations need to be integrated, it is not uncommon that one side distrusts the other (job loss, uncertainty) and why is it that many M&A transactions or joint ventures fail, due to lack of trust? In organizational trust you need to see real persons who represent an organization: if it is an abstract organization and you would not associate any human face with it, it is very difficult to trust.
Too much trust is dangerous too: the global financial crisis of 2008 was for a part caused by too much trust in financial advisers (“blind trust”).
He reflects upon organizations that say they do not need trust because they can control and monitor operations more closely by technical means (surveillance, video, etc), wondering whether trust becomes obsolete (he thinks it is not).
On the definition of trust
(…) a trustor always makes positive assumptions about the future behaviour of the trustee. So I think these are common themes that run through all kinds of definitions of trust. Also, we work on the basis of limited knowledge. So if you know everything you don’t need to trust, if you know nothing then is also stupid to trust.
Competence, Integrity and Benevolence
we come to issues such as competence, but also integrity, which is a big difference. So you can trust someone on the basis of competence. You trust someone that he or she is competent enough to fulfil a certain promise, or you focus on integrity so someone can completely fulfil your criteria of integrity but is incompetent. So if that’s the case, then it’s a different situation with regard to trust, then, if that is the other way round. Someone can be very competent, but basically a crook and not trustworthy. And there are other people who would also add a third dimension, which is benevolence, so this is well established. The main difference here is really competence versus integrity.
Trust and why many M&A transactions fail
Surprisingly, a majority of acquisitions does not work very well. And one of the things is that there is a lack of trust from both sides and there are misunderstandings, there’s a problem of integrating different corporate cultures
Organizational trust and the need for a human face
when we talk about organizational trust and we think about trust in an organization, then it seems to be essential that sometimes you need to see, as Anthony Giddens has said in one of his famous writings on modernity and trust into the whites of eyes of people. So you have to have access points to the organizations, and that needs to be persons. Sometimes you have to see real persons who represent the organization. So if it’s just an abstract organization and you would not associate any human face with it, it would be very difficult to trust it for many people.
Interview with subtitles (TrustTalk YouTube channel)
Transcript of the Interview
If you like the TrustTalk podcast, please SUBSCRIBE to receive future episodes on any of these platforms:
Audio Studio Editing by Nate Grizzle