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9 Ways to Mitigate the Downsides of Over-Trust

June 28, 2012

It’s only responsible for leaders to understand both the benefits and the downsides of trust in a business context. Only then can they put in place measures to mitigate the potential for opportunism.

Gleaned from my research in marketing, economics, business strategy and ethics literature, here are 9 ways you can mitigate the downsides of over-trust.

  1. Thoroughly assess the trustworthiness of the new partner [individual or organization] to avoid cross-domain errors. Seems obvious but think about Bernie Madoff!
  2. Be aware of the tendency to routinize trust decisions (Goel et al., 2005). Systematize the inclusion of critical and constructive thinking in your business relationships.
  3. Institutionalize routines that create checks and balances.
  4. Expand the number of people involved in the relationship.
  5. Encourage functional conflict to stimulate innovation and joint-problem solving and create a culture where people feel free to raise concerns in a constructive way (Morgan & Hunt, 1994). This avoids a tendency to make relationships ‘frictionless’ and to tend towards group think.
  6. Address untrustworthy behaviour immediately and decisively.

Fichman (2003) writes  “It would be adaptive for those who are trusting to have (1) effective strategies for dealing with exploitation in the population, (2) a reputation for in-kind responsiveness to others’ actions, and (3) the ability to detect potential defectors” (Fichman, 2003, p. 140).

7.  Rotate boundary spanners to deter excessive insularity (Fang et al., 2008, p.94)

8.  Involve an external third party to terminate a relationship (Ring and Van de Ven, 1994)

9.  Implement formal and informal governance mechanisms to reduce the risk of misplaced trust. These include contracts and legal regulations, professional codes of conduct, standards of employment contracts as well as industry, organizational and inter-organizational norms of behaviour (Bachmann & Inkpen, 2011, p.285).

If you go back through Twelve Weeks of Trust you’ll see that I have listed 22 Benefits of Trust, 12 Downsides and 9 ways to Mitigate them. I’m no mathematician but it’s a safe bet that the benefits still largely outweigh the downsides and the mechanisms to mitigate opportunism can actually help build trust as well.

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