DOSSIER #01 Trust 30 think: act
Trust DOSSIER #01 How trust drives growth CONTROL IS OUT, TRUST IS IN. COMPANIES THAT INVEST IN TRANSPARENCY, DELEGATE RESPONSIBILITY AND RESPECTFULLY COMMUNICATE WITH THEIR EMPLOYEES HAVE AN EASIER TIME OPENING UP NEW AREAS OF GROWTH. A PREREQUISITE FOR THE TRANSFORMATION INTO A TRUST-BASED ORGANIZATION IS TOP MANAGEMENT’S COMMITMENT TO MAKING IT HAPPEN. s WHEN THE FRENCH car manufacturer Renault acquired a 36.8 percent stake in its rival Nissan for €5 billion in the spring of 1999, the industry looked at the Japanese company’s $17.7 billion debt position and shook its head. Five years later, Renault CEO Louis Schweitzer can pat himself on the back. The former economic basket case has transformed itself into a money-making machine and generated almost €1.7 billion, or two-thirds, of the French group’s €2.5 billion in earnings in the past year. “Nissan was a good company with a management problem,” says Schweitzer of the situation before Renault came aboard. When asked about the reasons for the partnership’s success, the CEO takes care to emphasize psychological factors, “To emerge from a crisis it’s extremely important to demonstrate trust and confidence in people’s abilities and good will and to give them an opportunity to come up with the solutions themselves.” Renault, says Schweitzer, respected the interests and know-how of the Japanese from the very beginning. THE STORY ABOUT THIS “merger without merging” (Euro Business) shows that intangible values such as respect, transparency and confidence are gaining even greater significance in a globalized economy with its multinational groups and worldwide networks. Ultimately it’s about making the most of entrepreneurial opportunities, as happened within a relatively short period with the Renault-Nissan alliance. The joint platform strategy halved the partners’ development costs while doubling expertise. The company’s combined purchasing power saves $500 million in costs annually. The potential of such improvements in operating performance, no matter how beneficial they might be for the balance sheet, can only be fully realized if both partners have developed a common objective for the future of their companies and can thereby avoid conflict and inefficiency. SUPPOSEDLY SOFT FACTORS, such as a willingness to change and a respectful communication style, play key roles in implementing a parallel strategy of both continuous restructuring and expansion, according to the “Growth through trust” study by <strong>Roland</strong> <strong>Berger</strong> Strategy Consultants. A company cannot be successful if it is not prepared to grow, explains Burkhard Schwenker, CEO of the consulting firm. “The willingness to contribute to high growth is created in a cultural environment that considers performance a value and demands outstanding personnel management,” he says. Sought-after qualities include ambition, a thirst for competitive endeavor, and commitment. “A company must encourage its employees to pro-actively pursue ambitious goals,” he adds. ROLAND BERGER Strategy Consultants identified transparency, quality awareness, low transaction costs, and a culture of permanent innovation as the basic elements of such a trust-based organization. In its analysis of various international outperformers, the consultancy discovered that companies that transparently communicate values, objectives, requirements and feedback make it easier for their employees to identify with the company. The quality of work and products, a major criterion for a company’s market success, is often a direct consequence of management’s trust in the employees’ ability to perform. Quality control methods alone do not kick off quality improvements. It is the comparatively higher levels of engagement in a trust-based organization that lower transaction costs, because they render formal control mechanisms and monitoring tasks unnecessary. This approach also unleashes more creativity in a working environment where employees feel they can try out new ideas and freely discuss them without having to worry about having the fruit of their labors taken from them. “A company’s success can be increased only when employees are ready and able to contribute their individual expertise,” says the US innovations expert and MIT senior lecturer Peter Senge. It is of great importance that all involved develop a shared goal, if the joint efforts are to succeed. IT IS ESPECIALLY IMPORTANT to proceed in an open and honest manner during restructuring phases, when employees and customers will be worrying about jobs and fulfillment of orders. “In uncertain times, trust can only be created if management is able to communicate hard truths while also standing by its announcements and keeping its promises,” says Thorsten Grenz, CEO of Mobilcom, a German mobile communications provider. Measures serving to create trust also include a joint sense of accomplishment in achieving milestones. “Once we were profitable again in the mobile communications business we had a party and hung a big, fat zero on the wall,” remembers Grenz about the renewed sense of togetherness in the company. In the meantime, Mobilcom is back on track, growing faster than the market as a whole and putting the squeeze on the top dogs with its innovative mobile services. COMPANIES THAT ARE seriously looking to create a trust-based organization face a key <strong>issue</strong>: how to begin? “Our discussions with management executives have shown that the positive elements of a growth-oriented, trust-based culture are familiar to most companies. However, there tends to be something missing in the execution,” says the CEO of <strong>Roland</strong> <strong>Berger</strong>, Burkhard Schwenker. He recommends that the transformation to a trust-based think: act 31