I’m sure, that if asked, we’d all like to consider ourselves trusting and trustworthy, but how well do we understand what trust is? At the superficial level possibly, but with its importance shouldn’t we think a bit deeper?
Whilst change has always been a part of the business world, it can be argued that with increases in complexity and interconnectivity there is an increasing pace of change. This in turn leads to a need for improved agility and flexibility to deal with increased uncertainty. Whilst most people and businesses see this as a risk, those that can develop ways of de-risking this are able to turn it into opportunity.
We often see contracting as a fixed and inflexible area, which, whilst aiming to de-risk our businesses, could be argued in the above context to potentially add risk. To help address this, in certain situations, we’re seeing a rise in relational contracting, where the parties approach the traditional contracting lifecycle with the aim of trying to create mutually beneficial outcomes. Relational contracting is an end to end approach to the lifecycle, and accepts, and plans for, change giving flexibility and agility often not seen or achieved in traditional contracts.
In our context of relational contracting we need to build and maintain trust as a fundamental enabler, and therefore it’s important to dissect it to understand what it is. Luckily for us there’s been decades of research into it within academia which can provide a framework for us to understand it from a practical perspective.
Whilst there are a number of differing views, in simplistic terms we’ll consider two types of trust that are important in relational contracting. Firstly, cognitive-based trust, which is based on our trust of the other person’s technical competency. We measure this based on things such as: their shared or recognised professional associations; their predictability in terms of delivery; their track record; the quality of their technical outputs; and their dependability and fairness. Whilst much of this will be subjective, there are a significant number of objective measures that we can draw on, and therefore it can be relatively quick to build cognitive-based trust.
The second type of trust that it’s important to consider is affect-based trust. Affect-based trust, which is equally important in the context of relational contracting, is rooted in emotional attachment, and a care and concern for the other person’s welfare. It’s this that underpins friendship. As we know this kind of trust often takes longer to build and is based on how we act in various situations over time.
Only by understanding and consciously considering trust on both these dimensions and in the context of specific opportunities can we optimise relationships and the outcomes from relational contracting. In the real world it’s likely that relationships will be asymmetric in nature between the two types of trust. This isn’t a problem per se, however, different balances of the two types of trust can drive different approaches and different reactions in discussions and negotiations. It’s therefore important to understand the potential risks from different balances, and plan actions and activities to optimise the balance between the types of trust.
These can include, consciously discussing technical qualifications, ensuring that you deliver on your professional commitments, and finding mutual professional contacts in order to build cognitive-based trust. From an affect-based trust perspective, it could be about spending time finding mutual personal common ground, and spending time together outside of the formal business environment.
Relationships are of course made up of both ‘links’ and ‘nodes’ and in this article we’ve focused on the relationship (the ‘link’). The people (the ‘nodes’) are of equal importance and in the next article we’ll look at the importance of people and some of the influences that we need to consider in the context of relational contracting.