Adapted from “The Payoff of Trust,” by Iris Bohnet (Professor, Harvard Kennedy School), first published in the “Negotiation newsletter.”
It’s natural to fear trust betrayal, or the violation of pivotal expectations of trustworthiness. Recent corporate and religious scandals have tragically demonstrated the substantial costs of such betrayals. Victims suffer emotional harm, and their ability to trust may be forever destroyed. Those who have been betrayed in the workplace perform worse than others and are more likely to want to leave the company.
Yet good things happen when people trust one another. Trust allows us to interact, engage, and trade with one another even in the absence of formal contract enforcement. Trust also helps us negotiate in good faith, exchanging information and trading on differences to reach integrative deals that make everyone better off.
How can we cope with our aversion to betrayal and learn to trust others-and to be trusted ourselves?
Whether they’re assessing trustworthiness or trying to build trust, wise negotiators recognize the value of reputations. To get a better feel for how trustworthy your counterpart is, gather as much reputational information as you can about her. Knowledge of her reputation can help you interpret and more accurately predict her behavior.
This tactic is especially useful in markets where sellers know more about the true quality of a good than the buyers do. In electronics and diamond markets, for example, buyers often rely on a seller’s reputation when assessing a product’s quality.
It follows, of course, that cultivating a reputation for trustworthiness yourself can make you a more effective negotiator.
Many people are reluctant to rely on secondhand reputational information, preferring instead to gather information themselves. Yet our own experiences are rarely more accurate than secondhand data. Why? When we look at past experiences, we tend to focus on the most recent, extreme, and negative events, thus failing to gain a balanced perspective.