The value of trust

      How much is trust worth?
For all of the talk about the importance of trust in organizations, we tend to accept the value proposition on faith.  We rarely pin down what trust actually looks like and what it is worth in organizational transactions.
Macro focused in on "In God We Trust"A case:  A consulting engagement  I had with a firm that made large stamped and assembled chassis components and frames for the auto and truck industries made the value of trust clear.  The firm, (MWS*) supplied American and import brands and was organized primarily by ‘name-plate’ customer.  These companies had become more insistent on reducing inventory and negotiated serious penalties for delays in parts delivery.  To meet increased demands, MWS had restructured operations to optimize response to customer needs. 
      In spite of a successful several year-long focus on total quality, operational improvement, and team-based production (initiatives conducted with union engagement) one major bottleneck remained—the “stamping plant”.  It supplied parts to Customer-dedicated plants (other MWS operations at the same 150 acre site—their internal customers).  These parts were formed from steel rolls that stamping pickled (acid cleaned), cut, and shaped into components.  The internal customer plants assembled the parts and sent them to the auto makers.  The internal customers continually complained that stamping caused on time delivery problems (and a constant struggle to not shut down their customers and incur expensive penalties). They protested that stamping created unnecessary costs, including expedited shipping and rework.  In turn stamping complained of excess special orders from the plants that disrupted schedules, caused excessive machine changeovers, and created overtime and quality costs.  
      MWS created a team to address the issues.  It consisted of twelve members—line workers from stamping, a supervisor, and representatives from the internal customers—all of whom were released from their normal duties.  They were given free-rein to examine the operation from start to finish —no issue was to be considered of limits.  They were charged with making recommendations to operations management for implementation. 
      The team identified systemic mistrust as the root cause of most of the issues between stamping and its internal customers.  In short, the dedicated plants often ordered two or more times the number of parts they needed because they did not trust that they would get enough good quality parts to meet their own customer needs.  They “bumped” into stamping production schedules with special and expedited orders.  They kept their own “just in case” inventories for expedited shipping to manufactures to avoid penalties for shutting them down.  The situation wreaked havoc in stamping, creating the unnecessary costs they had noted as well as inventory issues (‘lost’ coils, obsolete parts and steel), and special steel orders created by the operation’s unpredictable customer demands.    At the end of the audit, actual documented costs exceeded $1mm. 
This case is not extreme.  We at People Working Consultants, have seen similar patterns and problems in medical care, not-for-profits, and in the public sector, often invisible to the system.  Trust is not simply a nice thing to have, it is integral to success.  The trick is how to build trust.  More on that topic in later posts.

*Company name changed

Submitted by Jim Kimple

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