Adventure of Strategy

Religious conviction; the national Treasury; a firm handshake: all symbols of trust that evoke expectations. Most importantly: the expectation that one will not be betrayed. If there is one place where trust is paramount, it is in firms that practice professions such as law, accounting and consulting, where the service being delivered is so intangible that trust is the only assurance that the client has, that its work will be done properly. Small wonder that trust-based relationships both with clients and internally are the very cornerstone of the cultures of such firms; certainly those at the 'top of the curve.'

The March/April edition of the Harvard Magazine contains an article on the differences between risk aversion generally and aversion to being betrayed. It makes fascinating reading and, I think, introduces a seldom-considered facet to the process of strategy.

The article posits that humans don't like to trust because trust is a form of risk that can lead not only to negative material consequences, but to personal emotional harm too. This is different to where the risk is as a result of something impersonal. Says Iris Bohnet of the Kennedy School of Management:

"We're saying that risk-taking when the agent of uncertainty is nature is very different from when the agent is another person. A farmer, for example, faces natural risks like weather and soil conditions. But there are also social risks-speculative bubbles, HIV infection, terrorism-where other people produce the uncertainty."

In strategic decisions, there are inevitably winners and losers. Some areas of the firm receive additional resources and are prioritized; others do not and may even be earmarked for divestment or termination. As I said previously, in my posting Love Your Dogs?, one of the differences between ordinary commercial enterprises and professional service firms is that in the latter, the business units are not faceless commercial entities (granted also with people in them) but our partners, colleagues and often, friends. This makes strategic decision making immeasurably more difficult. Strategy here is far more personal!

There are three dangers that this phenomenon can inject into the decision making process, causing serious blindspots.

1)The tendency to be generally tolerant of unprofitable or underperforming business areas or people, in the name of collegiality and trust;

2)The tendency for people to take specific positions in strategy discussions, that avoid betraying a colleague's trust rather than furthering the best interests of the firm overall;

3)An aversion by individuals to being open with their own facts, especially negative issues, for fear that this openness may lead to personal betrayal.

Interestingly, the article raises a cultural dimension to this, too. Bohnet was teaching negotiation and decision analysis to a group of government ministers from the Persian Gulf region: "I started the class by asking them to recall a time when they lost trust in someone," Bohnet recalls. "One minister said, 'Trust is not an issue for us. We never trust.' What a beginning! It opened up a very interesting discussion. A minister said, 'We cannot dare to trust because we may lose face. I would never come to a meeting and put something on the table that other people could decline.' The meeting-before-the-meeting is absolutely critical in the Gulf, because being let down is terribly humiliating."

In different societies and firms, the range of reactions to perceived betrayal may vary widely. In western society trust has a contractual connotation, that betrayal can often be managed because it can be remedied with damages. In many eastern societies, though, it is the very act of betrayal that is anathema. In Islamic law, damages play a much smaller role than in the West. In China, an act of betrayal that might be considered insignificant in the west, could permanently destroy the betrayer's business reputation.

Returning to this issue within the context of strategy in firms, perhaps the most fundamental level of betrayal may be where the person feeling aggrieved believes that the behaviour that he or she experiences is contrary to the values that the group espouses and the culture that has evolved to reflect these. In most firms, this would certainly include anything perceived to be underhand or devious. For instance: where a person is presented with a negative decision 'fait accompli' that is a surprise; that emerges from deliberations concluded behind his or her back; and that is based on assumptions that the person believes to be false. This kind of betrayal can cause major disruption and cancerous dissention if the acrimony is not addressed. Better still to avoid this in the first place!

The key, it would seem, is just process and the simple courage to face issues openly. People are far more likely to accept a negative consequence for themselves where just process is employed; where they have had the opportunity to contribute to the process and where they have been allowed to challenge the veracity of assumptions that have been made.

Thanks to Confused of Calcutta for pointing me to this article. As always, comments are most welcome and may be posted below.