A ‘high trust’ economy will be more productive - John Sturrock

“It’s all about trust, isn’t it?” observed my assistant mediator in a recent mediation where property investors resolved a long-running dispute with their professional advisers, having incurred considerable legal costs. It was good to see the parties achieve a satisfactory resolution, assisted by very able solicitors and counsel, in eight hours of negotiation.

Back to trust: what had happened to enable the parties to reach a creative outcome which, incidentally, could not have been achieved in court? Essentially, working relationships were established on the day, communication lines opened up and really effective dialogue took place, so that those involved understood what the dispute was really about. Then, they explored, objectively, the options for resolving it. They rebuilt trust and enabled mutually beneficial cooperation. It seems so simple but this is what is usually missing in disputes which have become contentious and polarised. The absence of really effective dialogue means that trust breaks down and mutual suspicion and enmity fester and become self-reinforcing.

My colleague Charlie Woods recently argued, in a paper for the David Hume Institute, that there is a strong relationship between levels of trust and economic performance. He observes that a “high trust society” is likely to be more efficient and productive as the transaction costs of wasteful disputes and avoidable breakdowns in relationships are reduced. He suggests a high trust society is likely to be more innovative and enterprising if potential innovators and investors feel they will have the opportunity to reap the benefits of their efforts. In the book, Why Nations Fail, the authors conclude this may impact on countries as a whole. Consider the state of things in the UK today.

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Woods also argues that, in dealings involving companies and organisations, it is important to pay attention to building deeper and stronger relationships rather than just viewing things on a transaction-by-transaction basis. This takes me back to that recent mediation. If we reverse engineer what happened there, we can see how important it is to build effective relationships at the outset, ensure really good communication throughout and design effective safety valves (conflict avoidance or dispute resolution systems in the jargon) so that any difficulties can be nipped in the bud. That is what is likely to build and sustain trust. Again, easy to say: building trust takes time and is hard work; in our frantic world, these skills, competencies and investments are often missing.

John Sturrock QC, Founder and Senior Mediator, Core SolutionsJohn Sturrock QC, Founder and Senior Mediator, Core Solutions
John Sturrock QC, Founder and Senior Mediator, Core Solutions

Incidentally, a less commented upon aspect of the CalMac ferry situation is that apparently relationships among key stakeholders broke down so badly at a relatively early stage that they could not be in the same room together. Communication was so poor that things came to a complete standstill, probably with a complete absence of trust. Had things been dealt with differently back then, who knows how many tens of millions of pounds of public money might have been saved.

Back to Woods and the direct link between levels of trust and economic performance. If trust is poor, the outcomes may be at best sub-optimal or at worst, zero sum. That is simply not affordable in today’s financially constrained world where every pound needs to count. Those who advise and influence companies and organisations surely have a responsibility to encourage behaviour which supports a more trusting and productive economy.