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What role does trust have?

Businesses have to make money to survive – and to develop new products and services, to provide quality support and, of course, to deliver returns to shareholders and attract top managers. Yet at the same time, they are driven by social and customer values.

So what is it that we care about?

Business v customer values

On one level, we see a world where many are driven by abundance and often over abundance.

Sometimes this spills over into exaggerated greed demonstrated by a hunger for low prices. The American retail practice of deep discounting on Black Friday was recently introduced by British supermarkets and there were instances where the police were needed to restore order from the chaos of customers fighting with each other in trying to grab bargains.

On the other hand, we often obsess about business values and the lack of morality in the execution of their activities and about the profit motive being too all-consuming.

Perhaps we think about the work conditions of people (including children) in other countries who provide us with our low cost products. But we must ask, do we really care enough about this to pay higher prices in the hope that some of this will trickle back to them?

A consequence of this questionable morality is we often use regulation to create a balance or establish control over – the environment, child labor, conflict minerals, revenue recognition. It’s a long list and often society pushes for more.

In certain circumstances the power of one party to force another party to behave in ways which are clearly unfair and possibly inhuman, needs to be controlled by legislation making such behaviour illegal.

Aspects of slavery, child labour and exploitation (through the removal of workers’ passports, hidden immigration and therefore threat of exposure and deportation), are all examples of the bad side of some human characters.

Societies tend at some stage of their evolutions to address these issues but much more can always be done and sometimes organisations operating above local jurisdictions also try to have an impact.

Further information about this topic is available from links at the bottom of this page to the human rights organisation ‘Anti-slavery International, Guardian online articles on ‘Human Trafficking. and the United Nations Development Programme’s Millennium Development goals (Eight Goals for 2015)

Recently the UK government passed the modern slavery bill to address the new versions of this ages old practice. While there are attempts to open up the supply chain to greater transaparency in these things it is not clear that all is yet completely thought through.

Building a trusting relationship

In some societies the nature of commercial behaviour is very influenced by the nature of interpersonal trust. In this case, business cannot take place between strangers since there has been no opportunity to demonstrate that each party is worthy of building a trusting relationship with them.

If we could trust everyone in our work place, (both internal to our own organisation and external to it, to the client and supply side), to behave with consideration to the justifiable positions of the other parties with whom they interact, then the world would be both a safer and a more satisfactory place for more of its people (we add to this discussion with a case study in week 2).

The role of contracts in generating confidence

One important role for contracts has been to generate confidence even if trust comes later once behaviour justifies it.

If you are dealing with someone you don’t know well, the contract is a formal and enforceable record of rights and obligations.

But what happens if it isn’t really enforceable - either because the cost is too high or perhaps you have bought from an overseas trader with a different legal situation?

Increasingly, our commerce is international and online.

A result of this is that eBay, the online shopping site, is the worlds biggest dispute resolution organization. Last year it resolved 65 million disputes - many more than any traditional court system.

But eBay was not designed for this purpose and organizations like the United Nations are exploring alternative approaches to online dispute resolution.

In the UK, a recent report proposed setting up online courts so that private individuals and small companies could have access to a system they could afford and trust.

So in summary, trust is more efficient but hard to establish and demonstrate and so contracts try to do some of this so that business transactions can go ahead with some confidence.

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This article is from the free online course:

Contract Management: Building Relationships in Business

University of Southampton