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CHAPTER
2

THE TRUST OF CHARACTER: CONTRACTUAL TRUST

Have you ever been disappointed by people because they didn’t do what they said they would, didn’t do what they had promised?

Have you ever been frustrated because a leader made an unreasonable request of you, and you were not given an opportunity to negotiate that expectation? Did you end up with no time to do the job right in the first place, having to sacrifice the quality of the project for the sake of expediency? Did the company have to spend five times as much energy and money fixing the mistakes because the project was rushed?

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Have you ever felt irritated because you schedule meetings, notifying people well in advance; get to meetings on time in spite of your busy schedule; yet find yourself waiting for the same people who are consistently late?

WHAT IS CONTRACTUAL TRUST?

Whether the situation involves an employee-to-employee or employee-to-supervisor relationship, unmet expectations, disappointments, broken promises, and frustrations happen every day on the job. They result in decreased risk taking and creativity, increased employee absenteeism and turnover, unhealthy and unproductive workplaces, and decreased contractual trust.

As we will discuss further in this chapter, contractual trust involves managing expectations, establishing boundaries, delegating appropriately, encouraging mutually serving intentions, keeping agreements, and being congruent in our behavior. How we practice these behaviors demonstrates the quality of our character as perceived by ourselves and others. Therefore, in our model we refer to Contractual Trust as “Trust of Character” (see Figure 1A).

Contractual trust implies that there is a mutual understanding that the people in the relationship will do what they say they will do. Contractual trust deals with keeping agreements, honoring intentions, and behaving consistently.

Contractual trust forms the basis of most interactions in the workplace. Employees have a strong need for confidence in the intentions of their boss and one another, and they need their leaders to be consistent and reliable. Likewise, leaders need to have confidence in the intentions of their people, and they need employees to be consistent and reliable in meeting business objectives. The greater a leader’s span of responsibility in the organization, the more the leader must rely on others to meet the objectives and the more imperative it is that the leader effectively model the behaviors that foster contractual trust.

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BEHAVIORS THAT CONTRIBUTE TO CONTRACTUAL TRUST

Committed action, not empty words, builds contractual trust in relationships between individuals, on teams, and in organizations. Six specific behaviors are crucial to building contractual trust. Let’s look at each.

Manage Expectations

Contractual trust relies on our managing expectations: our expectations of others, their expectations of us, and our expectations of ourselves. There are two kinds of expectations when dealing with others: explicit and implicit. Both kinds have their place, are appropriate and useful in everyday workplace relationships, and contribute to the development of contractual trust.

People often experience their leaders’ expectations as unrealistic. In today’s organizations, people feel they are being asked to do increasingly more with less. They understand what is expected of them, but do not receive the necessary clarity, direction, resources, or support to meet expectations successfully. This leaves employees feeling overwhelmed, underresourced, and ultimately resentful.

Is there a difference in the level of trust generated by one-sided or dictated expectations as opposed to mutually negotiated expectations? Contractual trust grows when expectations are mutually agreed on. Conversely, dictated expectations do not have the benefit of contributions from the person(s) expected to produce or deliver, and may undermine trust or even create betrayal. A leader can be trusted when making benevolent one-sided contracts with her employees if her expectations are reasonable. A leader whose expectations are unreasonable creates mistrust; people working with such leaders feel set up to fail. In law, contracts made under duress are not enforceable. Unfortunately, such contracts are enforced daily in many workplaces. Failure to fulfill unreasonable contracts costs organizations significant money and time. That doesn’t even count the losses that come from the more subtle events resulting from the loss of contractual trust.

Leaders sitting down and discussing goals with employees and ensuring understanding of the steps, resources, and relational support needed to achieve those goals are critical to the success of any deliverable. Identifying the challenges and necessary assistance is important. When we strive for greater clarity we are managing our relationships and meeting business needs.

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A leader’s expectations of people greatly influence their performance. Leaders can empower people by setting realistic expectations and trusting in people’s competence. If expectations of employees are set high and they are given proper support, they will be motivated to meet and even exceed the original expectations. And by setting expectations high, a leader demonstrates trust in people’s abilities. It is in essence saying, “I trust you to do this work.” However, if a leader’s expectations are too high and employees are not given appropriate support, they will be demotivated and may even be demoralized by the unrealistic expectations.

Employees’ expectations of leaders also affect contractual trust. Employees respect leaders who take their expectations into account when making decisions. Expectations reflect needs we have, relational and business needs. When employees’ relational needs are met, trust grows between coworkers and leaders and among coworkers and employee engagement and collaboration grows. When employees’ business needs are met their performance is enhanced and productivity grows.

At times, expectations are not met because they have not been identified or understood, or because they are unreasonable or inadequately supported. A lack of clarity regarding expectations causes misperceptions and misconstrued intentions. When people’s expectations are not met, they may feel a range of emotions. They may feel disappointed, discounted, taken advantage of, angry, or hurt. The result may be distrust and feelings of betrayal.

Explicit expectations How clear are we in communicating our expectations of others to them? How much do we understand what the people we work with need and expect from us? When expectations are unclear, leaders and employees have difficulty aligning toward achieving the organization’s goals.

Explicit expectations are clearly stated and understood requirements. Trust comes out of the understanding of responsibility—that is, an understanding of what is expected of an individual and what the individual may expect in return. When people have a clear understanding of what is expected of them and they meet those expectations, trust grows and relationships prosper. When expectations are unclear and go unfulfilled, trust erodes and relationships decline.

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Zack is too ambiguous in his expectations of his direct reports. When his employees don’t deliver what he expects of them, he gets frustrated and angry at them. He attacks the individuals, not their performance. His behavior further pushes his employees away and destroys any trust that may exist between them.

Healthy working relationships require clear expectations, whether they are in regard to starting a project, forming a task force, developing a unit, or working on any number of initiatives. It is difficult for people to meet expectations that have not been made clear to them. When people don’t find out what is expected of them until they run into a wall, go down the wrong road, or fail to get a promotion or pay raise, it’s too late. In these kinds of situations, people may experience a range of emotions from disappointment to betrayal. Clarity around expectations affects relationships and productivity, determining what can get accomplished. Performance is significantly enhanced when leaders are candid and explicit about their expectations, because employees need to know what is expected of them and “need to understand, up front, the rules for engagement,” as a telecommunications company division manager pointed out.

Contractual trust between leaders and employees serves as a relational foundation of understanding. With such a basis in trust, people are given more freedom to do their jobs and are able to manage that freedom appropriately. Obviously, the flip side of that coin is responsibility. As employees are given more freedom, leaders expect them to take on commensurate responsibility. Likewise, trust erodes when employees are given a task or a project but not given the corresponding authority to carry out the assignment. When employees are given the necessary resources and authority to fulfill expectations, they get the message that they are trusted, and they perform.

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Implicit expectations Have you ever taken a risk, tried something new in an attempt to solve a problem at work, thinking you were being resourceful and creative, only to get reprimanded for going “outside the bounds”? Were the rules of engagement implicitly understood by everyone else, but, being new to the organization, you had not yet learned them?

Implicit expectations are unwritten and unspoken rules, requirements, agreements, or understandings between people. Cultural norms of the organization influence implicit expectations: “That’s the way we do things around here.” Previous experiences also contribute to implicit expectations: “The person who held that position before always did it this way.”

Unfortunately, implicit expectations are often difficult to notice until we feel the consequences of not having met them. For example, if a new hire takes liberties that he was accustomed to at his old job without checking to see if they are appropriate in his new work environment, he may be setting himself up for a downfall. Furthermore, the more responsibility one holds in an organization, the greater the implicit expectations are.

Managing relationships up, down, and across the organization is important to success. When expectations are worked out specifically and in detail, contractual trust begins to develop. However, during times of change, expectations become increasingly difficult to manage. They can shift and become vague. The level of contractual trust may begin to decline, and relationships may be jeopardized. To help gain clarity around expectations, leaders will benefit from reflecting on the implicit contracts they have with the people with whom they work. Leaders should consider the degree to which the contracts are mutually understood and beneficial. They may need to clarify implicit expectations and make them explicit.

By and large, people want to meet the expectations others have of them, or would like the opportunity to negotiate if they feel the expectations are unreasonable. People look to their leaders to take the time to clarify expectations. Leaders look to their people to fulfill those expectations. People want to be successful and want the organization they work for to thrive. People seek work environments where expectations are shared, discussed, and mutual. In these work environments, relationships are valued and contractual trust flourishes.

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Establish Boundaries

Are roles and responsibilities clearly defined? Are the parameters and direction of the project clearly mapped out?

Establishing and maintaining clear boundaries provide a framework for accountability in an organization and thus play a strong role in developing contractual trust. Boundaries refer to the roles and responsibilities of individuals, and the purpose, policies, and procedures of teams, departments, and units.

Clearly defined roles and responsibilities describe who does what and with whom. As stated by an employee we have worked with, establishing clear boundaries means “cultivating an atmosphere in which employees are not left hanging without enough information to complete tasks they are assigned within given parameters.” Policies and procedures establish how things should or should not be done. The purpose and mission of an organization identify its “reason for being,” and thus function as a kind of boundary for the people of the organization.

Boundaries help define the relationships between individuals, teams, and units, and within the organization. Although some may contend that boundaries separate people, boundaries actually aid in connecting people by serving as points of contact or terms of engagement. Today there is a greater need than ever for teams and people to work across functional lines and to collaborate. Clear boundaries help identify the points of exchange that foster collaboration.

Delegate Appropriately

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When people are given the responsibility to do a task or function but not the necessary authority and resources nor a voice on how it is managed, it is difficult to accomplish the goal; trust breaks down between the leader and his or her employees.

In contrast, when leaders delegate appropriately—in other words, give employees not only the responsibility but also the necessary authority, resources, and voice—they invest trust in their employees to do their jobs. Delegation demonstrates trust in people’s abilities. It further defines people’s roles and the boundaries of their responsibilities. To develop contractual trust in delegating, leaders must ensure that individual objectives are clear, explicit, visible, and mutually understood. Leaders and employees need to define and mutually agree on checkpoints and follow-up procedures. This approach helps everyone know the status of a project. It further helps develop people’s readiness to trust in themselves and the organizations in which they serve.

Because trust is a reciprocal process, it is critical, as one project account manager explained, “to create a two-way feedback loop with employees to ensure mutual understanding.” When people operate under an assumption of shared understanding rather than an explicit understanding, they set themselves up for some form of disappointment, frustration, or betrayal. Although it may be an unintentional betrayal, it is a betrayal nevertheless. The level of trust diminishes. “When we delegate a project to employees without giving them the authority, feedback mechanisms, or support to do the job well, we set ourselves and the employees up for failure, and put deliverables at risk,” said the senior partner in an international accounting firm.

Linda, a project manager in an engineering firm, was overseeing a major project in which Ted played a role. The project was promised on time and on budget to the client. Linda reviewed the parameters three times with Ted and was confident that he understood them. However, Ted’s part of the project came in over budget and behind schedule. When Linda questioned Ted regarding his performance, Ted’s response was that “other things came up.” Linda was furious with Ted and felt betrayed. She had given her word to the client, and now her word meant nothing.

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Linda realized, however, that she had to own her part in the performance breakdown. She had not delegated appropriately; she had failed to establish periodic feedback mechanisms and regular progress checkpoints with Ted to ensure on-time, on-budget deliverables. Linda went back to Ted and reassigned him the project, this time setting up clear feedback mechanisms and support for Ted to be successful. “I gave him another chance. I had a heart-to-heart talk with him. I reviewed the expectations, clarified his questions. I checked for his understanding by having him repeat back his understanding of the expectations. Then I asked for his agreement to the new expectations, with incremental goals with deliverables at regular intervals. In validating the agreement, I shared the burden of project success with him.”

Linda continued to clarify expectations and manage Ted’s performance with incremental goals and deliverables each time she gave Ted a project. Over the next six months, Linda’s consistent and firm behavior with Ted began to pay off. Within a year, Ted was one of the most reliable project engineers in the group.

Encourage Mutually Serving Intentions

People can build contractual trust in their teams and organizations when they encourage mutually serving intentions. That is, when they think and act with others in mind. For example, as exemplified in the following comments by a head nurse in an intensive care unit.

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Mutually serving intentions exist when individuals support each other and operate with a sense of shared interests. “We may be going through some tough times, but if we pull together, we can all get through this.” When there is a shared interest in helping one another serve customers or produce products, people develop a sense of community. When they support each other’s intentions and are aligned in their purposes, contractual trust is reinforced and peoples’ trust in others is enhanced.

Trust is facilitated when people are interested in each other’s welfare. Trust is hindered or broken down when people are self-serving, driven by hidden agendas, and uninterested in other’s well-being. It is hard to experience mutually serving intentions when we do not have a shared sense of why we are here and what we are to collectively produce. As one frustrated team member shared, “Some employees aren’t team players. They only care about what will make them look good, even if it is at the expense of others.”

Building trust is reciprocal. We have to give it to get it. Yet many people are unable to understand this and are reluctant to risk being the first one to give trust, for fear of revealing themselves and thus putting themselves in a vulnerable position.

Our perceptions of another’s intentions influence our tendency to trust or be suspicious. What we perceive or attribute to another’s intentions will affect our relationship with them. An attorney admitted, “I perceive that Jeff tries to manipulate me for his own advantage. As a result, I don’t deal with him unless I have to!”

Unfortunately, if trust is low in a situation, most people perceive danger and tend to go into protective mode. In this hypervigilant state they personalize everything and assess risks in dealing with everyone, tending to cast themselves as the intended recipients of other people’s harmful actions. This obviously makes getting the work of the organization done much harder.

Operating with a sense of mutually serving intentions makes it much easier to focus on and fulfill agreements with others. It builds contractual trust. Yet there are times when our behavior is not mutually serving and produces results we did not intend. For instance, we may have inadvertently left someone out of a decision-making loop, failed to include all pertinent parties in the circulation of a report, or left someone off the invitation list to an off-site planning meeting. Such actions, though not intentional, cause others to feel hurt, disappointed, and perhaps angry and are not mutually serving.

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Although the outcome is not what we initially intended, we still need to assume responsibility for what occurred because our behavior was not mutually serving. People are especially frustrated and disappointed when leaders refuse to accept responsibility for unintentional acts. Hearing “but that was not my intention” strikes them as a lame defense. They consider that response an abdication or shirking of responsibility or a diversion of blame. People understand that the outcome may not have been intentional; nevertheless, they still look to their leaders to be responsible.

Denying responsibility or blaming others or the surrounding circumstances may allow one to deceptively save face in an awkward situation, but only temporarily. It certainly is not mutually serving and does not build contractual trust and is often experienced as a betrayal. Contractually, employees look to their leaders to talk straight with them and to admit and accept their role in performance outcomes. Every employee deserves nothing less.

Be Consistent

Leaders can create contractual trust when they act consistently toward their employees. As demonstrated in the following comments by a manufacturing team leader.

Consistency is crucial to trust. A leader’s consistency creates boundaries for employees, giving them parameters within which they can operate; employees know where they stand with a consistent leader. Further, consistency helps them remain connected to the leader when all else is changing. When leaders are not consistent in their expectations, unfair in evaluating employees’ performance, or incongruent or untrue to their word, or when they play favorites, it is abundantly clear to employees. Leaders’ behaviors are observable and have consequences; employees make evaluative conclusions about them. “How can I trust him when I don’t know what he is going to do?” “How can I know whether I’m going to get equal or fair treatment or an honest performance evaluation?” employees ask. Likewise, a leader may have an employee who is totally unpredictable. “He’s a loose cannon. He shoots from the hip. I never know what he’s going to say.” Inconsistent behavior makes it hard for people to know what they can expect or where to place their trust.

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In our rapidly changing business climate, leaders must face the challenge of maintaining consistency in their treatment of employees while also being flexible enough to meet shifting business conditions. The direction leaders set for their company eighteen months ago may no longer be appropriate because of evolving market conditions. Adapting one’s strategy to meet the demands of the changing business landscape does not mean that one is inconsistent in one’s behavior, which should be based on principles and values, not expediency. Inconsistency in behavior may be perceived as dishonest, unfair, or self-serving and will undermine trust, especially when employees don’t understand the rationale behind changes.

“Here we go again,” Carlos said sarcastically to Susanna, his colleague on the XYZ project, as he read the latest email memo from their boss. “Why doesn’t he just make up his mind and stop changing priorities every quarter? We can’t ever seem to complete the projects we’re working on before the boss shifts to a new ‘top priority.’”

“Yeah, but at least you can count on him to listen to your concerns and brainstorm solutions with the team,” Susanna retorted. “You know the whole industry is changing so fast, and he doesn’t have control over the marketplace. He’s just trying to keep up with the changing demands—just like we are! You can trust that he’ll work with us.”

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Consistency in leaders’ behavior toward their employees becomes particularly important during times of change. It isn’t easy—leaders need to work hard at being consistent for themselves and for others. Consistency is a form of being true to oneself. People’s perceptions become their reality; when there are gaps between what leaders say they are doing and what they are perceived to be doing, employees become distrustful. One senior manager of a utilities plant put it bluntly: “More trust is lost or gained by whether a leader is true to his word.”

When times are good and things are going well, we may not notice how important consistency and the resulting trust are, but when times are bad, they are absolutely vital. Trust among employees and leaders is what will get an organization through the tough times.

Keep Agreements

Do we do what we say we are going to do?

Keeping agreements speaks to an individual’s and an organization’s reliability in carrying out their commitments. The first example illustrates the cost of not keeping agreements. The employees of the newly acquired unit have low contractual trust in the new management because they see the management as constantly changing the rules.

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The second example demonstrates the positive payoff of keeping agreements. When we keep agreements with ourselves, we feel good, we know we can be counted on, we feel trustworthy. When we keep agreements with others, we empower our relationships; we build and nurture the trust between ourselves and others. “If I repeatedly meet my agreements, I enhance the readiness for trust between us,” said a financial analyst. “There is an emotional payback you get from keeping your word and following through on your agreements—you feel better.”

When we break agreements with ourselves—for example, if we fail to meet deadlines, even if they were a bit unrealistic—we disempower ourselves. We lose trust in ourselves. If we repeatedly fail to meet our agreements, we decrease our readiness to trust ourselves and our sense of trustworthiness.

When we break agreements with others, we disempower the relationship and compromise the trust between us. If we repeatedly fail to honor our agreements, we decrease our trustworthiness. The comments of a frustrated financial services manager reprimanding her employee illustrates this point: “Sally, if you can’t do it, tell me. If you say you are going to come through and don’t deliver, I am not able to meet my commitments. You lose credibility with me, and I lose credibility with my customers.”

When we don’t have a say in unrealistic agreements that we are expected to meet and that we can’t renegotiate, we are set up to fail. “I feel as though this project deadline was shoved down our throats,” exclaimed a frustrated employee. In these situations, we are unable to keep the agreement with ourselves and with others—a double disempowerment. However, by renegotiating broken agreements with more realistic expectations, we can renew and possibly strengthen the relationship. “This is a real opportunity to make or break your credibility,” an international consultant pointed out. When you are rebuilding broken trust, it is not easy work and requires a great deal of commitment. Yet we as leaders need to persist in our commitments, regardless of the pitfalls. Know that you will make mistakes and when you do, some employees will be very unforgiving and critical and say, “I told you so. I knew you wouldn’t keep your word.” This comes with the territory of leadership.

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Trust becomes more solidified when our actions match our words and we follow through on our intentions. Words help articulate our expectations, but actions demonstrate our trustworthiness. The most difficult challenge for a leader is to behave consistently, on a daily basis, in a way that reflects the organization’s vision and values. As important as it is, walking the talk is not as easy as it sounds.

So we must be careful of what we promise. Leaders get into trouble when they want to make a good impression and promise the world, only to fall drastically short on their promises, lose credibility, and damage their reputations. If we fail to keep our promises, it is harder for us to regain people’s trust. Unfortunately, people will forget the promises you kept and remember the promises you didn’t keep.

Trust erodes when we fail to act consistently or follow through on our promises. Through their actions, leaders demonstrate their commitment and belief in people and the organization. By fulfilling their responsibilities and commitments and delivering what they promised, leaders produce business results and build their employee’s trust.

In developing contractual trust with employees, it is important that the appropriate parties acknowledge that they have entered into a contract, that expectations have been set. Some leaders establish written contracts with their employees, often in the form of a written summary. And even some employees and teams have written contracts with one another! These are not used as weapons to hold over someone’s head. On the contrary, they are used to develop trust: to make implicit expectations explicit and to establish clear boundaries. They are further used as a vehicle to track progress and to identify areas where additional support and resources may be needed. They provide a foundation for success.

Once the contract is established, whether it is in writing or verbally understood, both parties have a responsibility to themselves and others to keep agreements, monitor activities, measure performance, continually review commitments, and renegotiate when necessary. Relationships are work. Developing trust takes time, energy, and intention.

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TRUST BUILDING IN ACTION

Reflecting on Your Experience

1. Where in your personal and work life do you experience high levels of contractual trust?
2. Of the six behaviors that contribute to contractual trust, choose one or two that you feel represent opportunities for you to build more trust in your relationships with others.
   • Manage expectations
   • Establish boundaries
   • Delegate appropriately
   • Encourage mutually serving intentions
   • Be consistent
   • Keep agreements

Application Exercises

The following questions are intended to facilitate dialogue as a team. Reflect on the following behaviors that create contractual trust. Share those thoughts with your teammates. Observe how you practice each of these behaviors and its impact on contractual trust.

1. Manage expectations. Are there expectations I have of my employees, peers, or boss that are not clear and explicit? If so, what implicit (unwritten, unspoken) expectations or working contracts should be made explicit?
2. Establish boundaries. Are there boundaries that I need to establish with my employees, peers, or boss? Are we aligned on goals, roles, and procedures? What is each person’s level of commitment to the goals, roles, and procedures?
3. Delegate appropriately. When delegating a project or a job to an employee or peer, do I make sure the objectives are clearly understood? Do I describe tangible, measurable results of performance that are to be achieved by specified due dates?
4. 32Encourage mutually serving intentions. In my interactions with my employees, peers, or boss, are my intentions self-serving or mutually serving? Do I operate with hidden agendas? What disagreements or misunderstandings do I need to reconcile or resolve with others?
5. Keep agreements. Do I keep my agreements? If I am unable to keep an agreement, do I renegotiate with the affected individuals promptly? What agreements do I need to renegotiate?
6. Be consistent. Am I generally consistent in my behavior in relating to others? Are my actions congruent with my words? Do I walk my talk? In what actions am I incongruent with my words? In my interactions with others, do I operate with integrity?

Trust Note

Contractual trust implies that there is a mutual understanding in the relationship that people will do what they say they will do, Whether it be producing a report, delivering a product, providing a service, managing priorities, attending a meeting on time, or simply returning an email or a phone call when they promised.