The Importance of Trust for Managing through a Crisis

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Brian Kenny:

You may have heard of the “Butterfly Effect” in which a butterfly flapping its wings in Texas leads to changes in wind patterns that cause a tornado in Brazil. It’s a simple and poetic way to explain Chaos Theory. In February of 2020, the butterfly took the form of a pathogen in Wuhan, China, and the resulting tornado was a global pandemic that created chaos the world over. In the early days of the pandemic, widespread panic led to hoarding of essentials like toilet paper, sanitizers and masks, misinformation fueled anxiety and fear, governments around the world took drastic actions, including lockdowns that brought economies to a standstill. Unemployment soared, stock markets plummeted, and hospitals and healthcare systems were pushed to the brink with the sick and dying. And every day, leaders in organizations, large and small, were facing challenges unlike anything they had ever seen.

Today on Cold Call, we welcome Professor Sandra Sucher to discuss her case, “Twiddy & Company: Trust in a Chaotic Environment.” I’m your host, Brian Kenny, and you’re listening to Cold Call
on the HBR Podcast Network. Sandra Sucher studies how organizations become trusted and the vital role that leaders play in that process. She is the author of, The Power of Trust: How Companies Build It, Lose It, and Regain It, and you are a repeat customer on Cold Call, welcome back, Sandra.

Sandra Sucher:

Thanks so much.

Brian Kenny:

Great to have you here. It’s funny, as I was writing that intro, I was thinking, gosh, this was only four years ago, but it feels like a lifetime, and at the same time, it feels like yesterday. I think we tend to forget in everything that’s happened, just how chaotic it was in the early days, actually throughout pretty much the whole pandemic.

Sandra Sucher:

The pandemic was a three-year exercise in learning how to trust.

Brian Kenny:

Yes.

Sandra Sucher:

We had to trust governments to set sensible policies, pharma companies to create those vaccines that saved our lives, the companies we worked in to keep us and our customers safe, and all those remarkable first responders whose jobs had to be done at work, who couldn’t phone it in, and who we counted on for social stability throughout that period of time. Trust is a willingness to be vulnerable to other people’s actions and intentions. And during the pandemic, everyone felt that vulnerability-

Brian Kenny:

Of course.

Sandra Sucher:

… And they understood what it was like to trust.

Brian Kenny:

Yeah. And I think leaders were just trying to figure out how do we operate in this unexpected series of situations that keep unfolding in front of us every single day? I think we all experienced that in one way or another. So I’m sure people are going to be really interested in hearing how Twiddy & Company found their steadiness throughout all of the unsettledness that was going around. Let me ask you to begin by just telling us what the central issue is in the case and what your cold call is to start the discussion in class?

Sandra Sucher:

Clark Twiddy, who’s the protagonist of this case, and I were doing some beginning conversations, he said, “have you ever heard of Cynefin theory?” I said, “no, what is that?”

Brian Kenny:

That just rolls off the tongue very nicely.

Sandra Sucher:

For sure. In fact, I always have to Google how to pronounce it, it’s really embarrassing. And he said, “well, that’s a theory that says that there are different kinds of contexts in which depending on how much you can know, you actually have to manage differently.” So it’s a really powerful idea, and so I of course got the article and read all this, and so a chaotic environment is an environment in which there are unknowables, so no amount of time and attention is going to get you to an answer to what to do. It’s not like it’s not expertise that’s needed and all that sort of stuff and the managerial challenge in a chaotic environment is to gain control. And so this was a remarkable opportunity to study a leader trying to do that at a time where no one knew what to do.

Brian Kenny:

How do you kick the class off?

Sandra Sucher:

I actually start by asking people to think back to March and April of 2020, where were they? What were they doing? Who in trust terms were they vulnerable to at that moment? What were they counting on? And then we do spend some time upfront in the class thinking about different kinds of business contexts and what it means for a leader to have to manage in a simple environment where if you’re at the Ritz-Carlton, it’s just like, do what you do really well every single day.

Brian Kenny:

Sure.

Sandra Sucher:

Most businesses operate in a complicated environment where there are multiple paths to greatness and they have to figure out what it is. Lots of stakeholders, many moving parts, some businesses like Boeing operate in an area of expertise where if they don’t do and rely on expertise, we’re all cooked. And then there’s this very peculiar moment when you’re in a chaotic environment where no amount of forethought or planning can actually tell you what to do. It’s not even a question of getting the right people in the room, this is a question of, every single day I have to figure out what makes sense to do right now, so this was what this case is about.

Brian Kenny:

How did you hear about Twiddy & Company?

Sandra Sucher:

My co-author in the book, Shalene Gupta, she had been doing some research on Twiddy for their use of big data. So Twiddy is in the vacation home rental business, and they’re a platform and they connect homeowners with people who want to spend a week on the Outer Banks in North Carolina. And she had heard about them because of their use of big data, they’re only (only in HBS would you say this) a hundred million dollars in sales, which for us is a relatively small business to study. And she was just taken with the notion that they were using big data in this business, so she said, “why don’t we go and investigate?” And then we found out about what they had done during the pandemic, it was like, well, we’ve got to write a case about this.

Brian Kenny:

This was post-pandemic that you had started conversations with them?

Sandra Sucher:

Yeah.

Brian Kenny:

You started to talk about trust earlier, that’s something that you study deeply, that’s the subject of your book and of a case that you’re leading here at HBS. Can you just for our listeners, put a definition on trust, how do you think about it in this context?

Sandra Sucher:

Trust is a relationship between some party who has to trust another party. And we usually think of it in that sense as kind of dyadic, it’s you and me, Brian and Sandra. But the important thing is, it’s mediated by the action that the other party is supposed to perform. So I don’t trust in people, I trust in the actions that they’re doing, the things I’m relying on them for. And so once you get that architecture right, what it means is that, on the one hand, if you’re the trusted party, a company, a leader, it means that you actually have power over the people who trust you, they’re vulnerable to your willingness to actually make good on your promise. And if you’re actually trusting that other party, you know you’re vulnerable and you have to be willing to do this.

The thing about trust is so interesting to study, is that you can’t demand it. And so you need reasons to trust and the reasons are all in the actions and intentions that are behind them.

Brian Kenny:

And how does loyalty relate to trust?

Sandra Sucher:

Loyalty is an outcome of trust. So what happens is that if you trust me over time long enough and I deliver for you, you become loyal. And most of these decisions are pretty rational, but that’s the connection. And so what you’re trying to do from a business standpoint, is to create that loyalty in people so that they feel that they understand what you can do for them and that you’re going to keep doing that.

Brian Kenny:

Mm-hmm. But you have to earn it.

Sandra Sucher:

For sure.

Brian Kenny:

Bottom line, you have to earn it. So Twiddy is interesting because they’re trying to build trust in multiple different facets of their business, can you describe what their business is like?

Sandra Sucher:

Imagine a professional Airbnb, so that’s the business that they’re in, they connect homeowners, people who own houses that they rent out on the Outer Banks in North Carolina with people who want a vacation there. And what distinguishes Twiddy, and they’re very proud of this and they well should be, is that they’re a professional, this is, as they say, not a side gig for them. And so from a homeowner’s standpoint, what they do for them, they help them make their homes ready to rent, they help them maintain their homes while people are in them. They do projects for them if they need to have some upgrades to the home, they recommend things that would make the home more saleable.

And then on the other side, if you’re a guest, because of their deep local roots, they know what it’s like to vacation there. You say, I’m coming with my mother, my two kids, and my husband, what is there to do on the Outer Banks? The business is rooted in what they call southern hospitality, and that’s not just like a term, it’s a real thing.

Brian Kenny:

It’s a real thing.

Sandra Sucher:

It’s a real thing, and their job is, and the way that they perceive it is to actually have both sides of this platform be really happy to be doing business with them.

Brian Kenny:

And the employees obviously play a really important role in that?

Sandra Sucher:

Huge role.

Brian Kenny:

Twiddy is part of the second generation, the business was founded by his parents. Can you talk about what the second generation has brought into the business as it’s grown more sophisticated?

Sandra Sucher:

What they do, is they actually have created an environment of development for employees, it’s quite unique. So among the things that they do, it’s an environment of empowerment where the employees are trusted to use their instincts for what would satisfy a guest. There’s a great example we write about in the case about one of their field engineers who got a call from someone for a backed up toilet. And the person said in passing, “God, it’s really hot, I’d love some ice cream.” And he said, “well, like what flavor?” And he went out and got the vanilla ice cream that the guest wanted, brought it, and he described to us, he said, “that’s what it’s like to work at Twiddy.” The other thing that they do, which is quite unique, is they take all 145 of their regular employees, not their summer employees, on a major trip to one of the world capitals, so this can be Paris, it can be Rome, it can be London, it can be in New York. And they do this, they say, for two reasons, one is, these are trips these people probably could never afford, and the other is so that they can experience service from the other side of the counter. So they want to know what it’s like to be served and to be able to polish their skills and learn things. So that’s a very unique kind of a development approach to people who work in a business that usually has remarkably high turnover and very little loyalty.

Brian Kenny:

And all along they’re building trust with their employees by doing these kinds of things. How would the employees describe Ross and Clark?

Sandra Sucher:

I think they describe them pretty differently, Ross is the internal guy, so he’s managing culture, he’s managing internal operations, he’s deliberate, he’s thoughtful, and he’s the kind of guy that you just know he’s thinking and he’s talking. Clark was in the military and he has a leader presence about him, he’s the external face of the business, and he’s the guy that really thinks a lot about how it is that they can connect to all of their external stakeholders and how to manage all these relationships.

Brian Kenny:

And both of these roles become critically important as we talk about COVID and the impact that had on the hospitality industry. Broadly, travel and leisure suffered immensely, and this is a great microcosm of what that might’ve looked like and felt like. So can you talk about how COVID impacted Twiddy & Company in the early days?

Sandra Sucher:

Their moment of truth came when in late in March, the state of North Carolina decided to close the bridge that connected the mainland of North Carolina to the Outer Banks.

Brian Kenny:

So they’re literally cut off at this point?

Sandra Sucher:

They’re literally cut off. And so at that moment, they would have guests who were in Trader Joe’s buying food for the weekend, and the other guests would be already on the island because they got there early. And their job is to try to figure out how to bring these people together, what to do because they’re separated. And then you have all these people who have booked vacations who are trying to figure out whether or not they will actually be able to either get their money back or is it a good idea for them to book? Does anybody know whether it makes sense to actually say, well, this is March, what do we think is going to happen in August?

Brian Kenny:

And nobody knew how long this was going to go?

Sandra Sucher:

Absolutely not. And so that’s what they are managing their way through every single day, their call volumes went from 200 a day to a thousand a day. They basically melted everybody’s phone because everyone was trying to get in touch, and what was happening was that people were pulling money out of the business, they couldn’t reach them to say, I’m just going to take my deposit back, and so at one point, they had a three and a half million dollars pulled out of their accounts. If you’re a hundred million dollars business and most of your business is payroll, that’s material.

Brian Kenny:

And this is probably going to sound painfully familiar to a lot of people who have the very same thing, vacation plans and all kinds of things, and airline tickets. How were Ross and Clark able to prioritize amidst things as they were coming at them so quickly? How do you even begin to triage that?

Sandra Sucher:

It’s interesting, one of the things that I’ve learned in writing the case from them is how important it is to keep your timeframe tight. And so what they started to do, something they’d never done before, is they started having weekly town halls by phone and through the internet and all that with their homeowners. And Clark developed a four-step process for what he would communicate about, so he would say, “here’s what we know, here’s what we don’t know, here’s what we’re doing in response, and here’s what next week should look like.” And he said he deliberately didn’t plant his flag any further out than a week because that was as far ahead as he could get. He did the same thing with employees, with employees, they were very candid. They called it information equity about how many weeks they had of payroll before they would have to face either job cuts, pay cuts, or potentially closing the business down.

A lot of the crisis management had to do with actually being extremely clear and transparent about where you were at any given point in time and being smart enough to know to not try to get too far ahead of yourself. And I learned a lot from that as someone who’s never had to manage in that particular environment about the importance of timeframe and clarity of communication and a willingness. When Clark was on those calls with the homeowners, he gave them his personal cell phone number and he made it a habit of always taking the toughest questions first, and he stayed as long as people wanted to ask questions.

And so if you’re managing through a crisis where everyone is starting to feel vulnerable not knowing what happens, what they really want is someone they can trust to tell them at least what’s going on right now. And he got huge credit and, well, he should for doing that with employees he said he started out trying to be conventional kind of military leader like, we’re going to get through this, it’s going to be great. He said he spent the first day or so doing that and everyone turn to him and said, “you just can’t do that, we don’t know this, that’s not appropriate, that’s not going to make us feel any better, why don’t you tell us the truth about what’s going on, don’t speechify.” And that was how they moved into this other space.

Brian Kenny:

I think we all experienced leaders taking different approaches to how they communicated during the crisis. And I think one of the challenges was fighting the urge to not say too much, to not speculate, to not talk about things that you’re not certain of. Is that consistent with the approach they took?

Sandra Sucher:

Yes. And they also relied on experts, so what they would do is, they would bring in to these calls and they’d make videos of, for example, the people they were buying their cleaning equipment from. And they would have an informational video saying, here’s what this cleans, here’s how it operates on surfaces, here’s how we’re applying it in the homes. They did the same thing with state and local government officials to come in and talk about, here’s what’s going on, here’s how we’re managing this right now. And so they really did a very good job of becoming a source of information. And the employees told us as we were developing the case, that Twiddy became their touch point for good information because they figured out that whatever it was that they found out, they thought was about as reliable as it’s going to get. And in fact, a lot of companies became that source of information during the pandemic for the people who work for them.

Brian Kenny:

So communication, one very important thing that they did to regain trust. What are some of the other steps that they took that helped to rebuild that foundation?

Sandra Sucher:

The most important thing that they did was to get refunds to customers who wanted to cancel their vacations. And because they couldn’t command their homeowners to do that, because this is homeowner money, they got the local real estate government commission to write a letter that said that, this is the policy that they thought that homeowners should follow. So they said, “we knew it was the right thing to do, there was no law that specified that we had to do it.” And so what they wanted was some additional heft in dealing with homeowners who might be reluctant to give the money back. With guests, they spent a lot of time doing what they called “reservation preservation” and just saying, well, would you be interested in spending some time and thinking about whether October might work for you? But far enough out for us to know, you can always get your money back. And lots of people were glad of, as you know, international travel ground to an absolute halt, but at that time, for people who actually wanted to go someplace, domestic travel was the only thing they could do.

Brian Kenny:

Yeah, you could get in your car.

Sandra Sucher:

Right, exactly, so they did that. And then from an employee standpoint, I think one of the most impressive policies that they set were for the people who clean the houses. So imagine you’re going into a house, you’re not sure whether anybody in that house is sick, they’re not sure whether you’re sick, and your job is to make all those surfaces clean because at the time, that was what we thought was actually the way the virus was passed. And what they developed was a policy that said that the people who were in the home could not crowd the people who were doing this work, and that if at any time someone who was doing the cleaning felt unsafe, they could just leave and that the company would back them up.

Brian Kenny:

That’s a bit of a trade-off there because you’re trying to build trust with all of these, and sometimes there’s a tension that exists there and you have to choose a side.

Sandra Sucher:

Exactly. And one of the most important features of trust is that it’s built from the inside out. So it’s pretty impossible to be trusted by people outside your organization if the people inside don’t trust you. And Twiddy didn’t need me to tell them that, that’s something that they know, and that was why they were so people-centric in the way that they went after this.

Brian Kenny:

In my role, I’m often dealing with the communications side of all of this, and one of the things that we always try to do in a crisis situation is come back to your core values and let that dictate how you behave in that situation. And the case talks about this, about how they went back to their core values to let them figure out a path through where it wasn’t clear what to do.

Sandra Sucher:

Exactly. And that’s actually what matters at the end in terms of both being trustworthy and being trusted, is that you have to stand for something. And it’s at that moment where people kind of go, that’s what they said they were like, and that’s how they’re behaving right now. And so that integrity, that fidelity between what I believe and what I’m actually doing in my actions, that’s the fundamental building block for trust.

Brian Kenny:

Yeah. And for brands, it’s also a really important thing to be true to who you are because particularly in situations like this that the potential for brand damage is real.

Sandra Sucher:

Right. And for them, because this was a brand built on person to person interaction, all of a sudden they had to shift the brand to being equally personable but not in person. And that’s everything from closing down the front desk that used to greet everybody so that people had to go immediately to their homes that they had rented and then had to build all these relationships up by phone, by text, any way that people wanted to communicate and to create a new way of being personable with them.

Brian Kenny:

Yeah, really important. The case does talk about the fact that when things were probably most challenging, private equity came into the picture and offered to maybe buy up the business, how did they think about that?

Sandra Sucher:

The thing that we haven’t said so far, and it’s one of the things that makes the case so interesting is, this is a family business, and you mentioned before it started by their parents, and so they said that they knew that they could probably sell the business to get the money they needed, sell a stake in the business. And then they thought about that and they just didn’t feel that that would actually allow them to maintain the standards and the approach to the business that they have as owner-operators. And as appealing as it was, and there were definitely people from North Carolina, private equity firms who said, we can help you guys out here, it wasn’t clear if they could get a loan from a bank.

And Clark describes what it’s like, he’s on the board of the bank to go to the bank and say, well, I think we may need a personal loan from you guys. And then the question is, well, when could you pay it back? And the answer is, we’re not sure. And so these were absolutely critical moments for them, but in the end they decided that staying 100 percent family owned was actually going to be the hill they were going to die on. And that was just their decision about how to maintain the business that they loved and cared for.

Brian Kenny:

Mm-hmm. And therefore, the trust part of this becomes even more crucial because you need customers to come back, you need the homeowners to continue to make their properties available, you need the employees to provide the service. What if we pull the lens back a little bit from Twiddy & Company, and I’d love it if you could just talk about how you know whether or not you have the trust of the stakeholders that matter most to you, how do you know if your employees trust you or your customers trust you?

Sandra Sucher:

There’s some great research actually from PWC on how lousy we are at predicting how much we’re trusted. So there’s this study that they’ve repeated it now, this is the third year they’ve done it, and here’s the data. So it basically says that everybody, 90 percent of people agree, both customers and employees, that trust is important, trusting you is important. So executives think that they’re trusted to a level of 80 or 90 percent, there’s a 60 point gap with customers-

Brian Kenny:

Enormous.

Sandra Sucher:

… As to how much customers actually trust them compared to how much the senior leadership think. And there’s a material that’s much less 20 point gap between how much we think our employees actually trust us and how much they really do.

Brian Kenny:

What leads to that? Is it just that they’re insulated, it’s like the emperor has no clothes?

Sandra Sucher:

In my research, what I found is that the people don’t understand that trust is actually a real thing, it’s not like a feeling. And so my research says that people trust fairly systematically on four dimensions, the first dimension is just that you’re competent, so no one’s going to trust you, and why should they if you’re not good at what you do? And then there are two dimensions in the moral domain because if you have power over me, I’m relying on you, I care about what your motives are, it actually really matters a lot to me where I show up in your stacked rank list of who’s important and how you do things, it also matters to me how fair you are in how you go about accomplishing your goals. So those are three dimensions, competence, motives, means. And then the last is impact, what’s the actual result that your actions have had on my life? And each one of those is actually measured differently, so in the lousy days of Uber, they could be great at competence and not so great on motives and means.

But what’s useful about understanding that, is that makes trust something that you can manage. This is a parsing mechanism that says, well, is our competence being questioned here? Is it a question of our motives, what people think? Maybe just we’re not being fair, or actually, does anyone know the actual effect of what we’ve had on the people? And so the companies I work with, and this has proved to be a pretty effective framework that allows you to begin to get a handle yourself from an operational standpoint on whether or not you’re trusted. And then many companies are actually, certainly the big consulting firms are doing good work at trying to figure out how do you actually measure trust for people who want kind of an all-in-view where you look at social media, you do data scraping off of that, you look at what people look at the inside.

Deloitte has a good process, they’ve identified 17 different domains in which you could build or lose trust from cryptocurrency to culture to compliance. And each one I think because trust is being built and lost all the time in businesses, and the trick is, how can you actually understand what are the critical risk areas for you where you’re relying on people to trust you, and how good are you at those things? So it’s a very systematic, quite strategic approach that you need to take if you actually want to improve something or recover it.

Brian Kenny:

Right. And there are a lot of organizations that rely too much maybe on one indicator, you hear about NPS, Net Promoter Score, if you look at that, but you don’t look at the dimension of employees and how they’re experiencing working for you, then you’re missing something.

Sandra Sucher:

Yeah, that’s definitely true. Although I have done research on a great company in Kazakhstan Kaspi.kz, and they’re a combination of a FinTech payments platform and marketplace, it’s a remarkable business. And their NPS Score, they only look at two questions, would you recommend us, and why? They actually audio tape these and they do this 30 or 40,000 times a month because people have endless numbers of contacts with them because of all these businesses. Their senior leadership listens to them or what they listen for the people who are not happy. And they have a philosophy that basically says, if you don’t trust me with the current products I have, you’ll never trust me with the next product.

Brian Kenny:

That makes perfect sense.

Sandra Sucher:

People get pretty good at this if they actually develop a trust mindset and care a lot about how it is that the other party is thinking, that’s at the heart of trusting.

Brian Kenny:

And you have to pay attention to it, are there early warning signs? Is there a canary in the coal mine that people should be looking for?

Sandra Sucher:

That’s a great question. I don’t know, so I’m going to pause here and just think rather than try to answer off the top of my head. And I would say that the first thing I would look at is actually inside the organization, I think there’s usually a desire to externalize this issue, but I would definitely start because of all that I know about how trust is built from the inside out to just seeing what the indicators are inside my business about, are people leaving for reasons I don’t understand? Are people not coming to me as often? Have I had layoffs, which is a known trust killer, how people responded to that? This is just the real things that happen that cause people to either build or lose trust, and you can’t pretend it’s like some other thing that somehow operates outside the dimension of all the management decisions you make. So I would probably start inside and just try to understand how well we understand are people engaged and how they’re doing their work.

Brian Kenny:

It makes a lot of sense, particularly since those are the people that are building the products or providing the service that you offer to customers. This has been a great conversation, Sandra, I knew it would be, I love having you on Cold Call. I have one more question for you so you can have the final say here, I’m wondering what lessons listeners can glean from the Twiddy & Company case, if there’s something you want to stay with them, what would that be?

Sandra Sucher:

I think the biggest thing is just to understand that even in a situation like the pandemic, you can operate in ways that allow you to build trust. And that’s a pretty remarkable thing because you look at that as something that, well, it’s like a good news philosophy, I’ll be trusted during good times, but don’t try to trust me on the bad times. And this shows that you can be quite intentional as long as you try to really work very hard at understanding what the other person is experiencing and what you’re doing to either help that or hinder that. And that’s what you can learn from this, is that even during the pandemic, you could do this, and to me it was very inspiring.

Brian Kenny:

Sort of the old, never let a good crisis go to waste.

Sandra Sucher:

You got it.

Brian Kenny:

Sandra Sucher, thank you so much for joining me on Cold Call.

Sandra Sucher:

Great, thank you so much.

Brian Kenny:

If you enjoy Cold Call, you might like our other podcasts, After Hours, Climate Rising, Deep Purpose, IdeaCast, Managing the Future of Work, Skydeck, and Women at Work, find them on Apple, Spotify, or wherever you listen. And if you could take a minute to rate and review us, we’d be grateful. If you have any suggestions or just want to say hello, we want to hear from you, email us at coldcall@hbs.edu. Thanks again for joining us, I’m your host Brian Kenny, and you’ve been listening to Cold Call, an official podcast of Harvard Business School and part of the HBR Podcast Network.

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