Assessing Trust and Compatibility in a Business Relationship

trust_pro-zacAccurately assessing trust and compatibility is not easy. It’s often one-sided: a buying company will evaluate a supplier’s trustworthiness without understanding the supplier’s perceptions of its own trustworthiness.

That’s why professors Gerald Ledlow and Karl Manrodt developed the Compatibility and Trust AssessmentTM (CaT) to measure the strength of a business relationship across five dimensions, with trust being the first dimension. The CaT defines trust as “the consistency of actions and words over time that focuses on mutual benefit of the parties. Trust is the foundation of the relationship.”

The CaT achieves what a self-assessment cannot: a global or 360-degree view of the relationship. For instance, the buyer assesses its trustworthiness and its perceptions of the supplier. The supplier likewise assesses its trustworthiness and its perceptions of the buyer. The scores reveal alignment or misalignment between the companies. If the buyer (or supplier) perceives itself as trustworthy but its counterpart does not share that perception, there’s a problem. The parties will have to address these differences in perception before continuing on the path to the We mindset.

The 5 Dimensions of Business Relationships

The CaT measures the strength of business relationships across five dimensions:

  1. Trust: Trust is the consistency of actions and words over time that focuses on the mutual benefit of the parties. Trust is the foundation of the relationship.
  2. Innovation: Innovation is an organization’s ability to deal dynamically with change, as well as its tolerance for risk and trying out new ideas and solutions. Strong and trusting relationships allow the parties to share risks and rewards, investing in each other’s capabilities and collaborating to achieve common goals.
  3. Communication: Communication is the efficient and effective transfer of meaning through words and actions to achieve and grow mutually beneficial outcomes—the open and timely sharing of all information that is relevant to a partner’s decision-making ability.
  4. Team Orientation: Team orientation is the ability to focus and direct individual goals and objectives into a cohesive group strategy. Team orientation is the enabler and drives compatibility.
  5. Focus: Focus is the ability to combine individual roles into a corporate direction for the benefit of all stakeholders. There is common purpose and direction. A common strategic focus on innovation drives value in the relationship.

A company’s culture is made up of these five dimensions. A business relationship’s strength—or weakness—depends on how each organization aligns its behaviors on each of the CaT’s five dimensions. Partners in a healthy relationship are aware of how well the organizations align and actively make efforts to close the gaps in order to mitigate opportunism and promote collaboration.

Awareness Can Inspire Change

By comparing self-views and each party’s perception of the other, the assessment can determine how well the organizations are aligned. Aligned cultures build value and result in decreased transaction costs, broader solutions and agreements, and more options for innovation. So, aligned organizations are often more ready to move on to develop a Vested relationship than organizations that have some areas of misalignment.

That said, misalignments can often be addressed and repaired. In fact, many organizations that want to pursue Vested have at least one dimension of misalignment. Discussions to close the gap are often revealing, and the process of opening up and putting issues on the table builds better and more trusting relationships. Those relationships that do close alignment gaps are perfectly positioned to embark on their journey to a Vested relationship.

Image: Trust by Pro-Zac via Flickr CC

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