How (29 page)

Kindler has long been recognized not only for his business acumen, but also for his leadership in the areas of pro bono legal services, diversity, and corporate social responsibility during his tenure at General Electric and McDonald’s. The board’s selection expressed a conviction that he could take the company in a new direction, make it more nimble, less bureaucratic, and more responsive to the needs of the market. In a sense they were looking for someone to restore the trust necessary to launch Pfizer on a TRIP. To his credit, Jeff has tackled this challenge head-on. In his first public communication upon taking over the company, he promised Pfizer would do nothing less than “transform virtually every aspect of how we do business.”
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When we spoke, I asked Jeff how he was approaching the monumental task of restoring trust with Pfizer’s stakeholders and the public at large. “The first step is to listen to people,” he said. “I have spent an enormous proportion of my time since I got this job listening to employees, listening to customers, listening to investors, listening to analysts, even listening to the media. My first objective is to find out what is on their minds, what bothers them about the industry, what bothers them about the company, what is frustrating them, and whether we are serving appropriate objectives. I’m trying to fully understand the source of the mistrust. Then I am trying with my team to build into our plans, our activities, and our decision making ways in which we can be responsive to those concerns, large and small. How are we going to be more customer focused? How are we going to not just
tell
patients that we care about them, but
demonstrate
that we care about them in actions that they will find credible?”

Though Jeff’s challenge is to turn around a very large ship sailing in stormy seas, his journey is similar to the challenge any team of any size faces when trying to get a TRIP going, and it begins by knowing who you are and where you want to go. Listening—the first crucial step toward gaining trust—helped him establish stronger connections with those he hoped to lead. By showing that he understood and embraced the challenges everyone knew were ahead, he was able to begin the process of building strong synapses throughout the organization. Listening truly earned him the benefit of the doubt, the first step in fertilizing the soil in which true change can grow. He was then able to begin to express his vision for a new Pfizer, one dedicated to a highly focused and highly energized commitment to serving others. “I am constantly looking for ways to represent, stand for, and behave at all times consistent with the fundamental values that define who we are, culturally and otherwise,” he said.

I asked Jeff for a specific example of how he planned to restore the market’s trust in Pfizer. “Although the patients are the ultimate consumers of our drugs, a lot, if not most, of our products around the world are being paid for, to a large extent, by governments, insurance companies, or other commercial entities,” he offered. “In the past, in situations where we had a really great drug, we could almost impose upon those payers a demand that they reimburse the product and make it available to the patients. We do not live in that world anymore, and so we must change. We have to be thinking about the payers not as adversaries that we have to argue with and push to solve our problems and address our business issues, but as partners. We need to understand what is driving their concerns and their issues to emerge with a win-win solution. Over time—not overnight, but over time—if we can demonstrate that we are open to that, that we are listening, that we care about their concerns, and that we are taking steps to respond to them, then I think we will engender trust.”

What Jeff is attempting is pretty easy for leaders to say, but something altogether different to achieve. The pharmaceutical industry has many bridges to repair. Changing the way people perceive you and rebuilding trust doesn’t happen overnight. It requires self-reflection and hard work, struggles in the Valley of C necessary to build a team that can really thrive in a hyperconnected world. Jeff’s honesty in the face of this challenge is a powerful first step. “It is a long process,” Jeff admitted. “It takes wrestling and struggling to change these behaviors, but if you really start to go to this gym and build muscle in this area, you will have much more mass around you, and you will outperform your competitors. A cornerstone of trust is credibility. If people think that either you do not acknowledge reality or you acknowledge it but don’t admit to it, why would they trust you? You are saying things that are inconsistent with the reality that they see. So, obviously, an essential element of credibility—if not the entire essence of credibility—is being honest and open and realistic about things.”

Keeping promises, acting in a consistent manner, building upon and extending the work of your predecessors (frequent shifts in policy and procedure create uncertainty in others and undermine the trust response), acting from principle, thinking in values terms and putting those values into operation, and pursuing activities of significance are all larger ideas that inspire trust in others. Filling the interpersonal synapses between you and others with trust-producing conduct will increase the profitability of those relationships, in both human and financial terms.

TRUST, BUT VERIFY

James Paul Lewis Jr. was a trusted man. A devout Mormon and churchgoer, for nearly 20 years he ran Financial Advisory Consultants (FAC) from its offices in Orange County, California, where he administered two investment funds aimed at those looking for a high rate of return on their retirement funds. His promotional material promised up to a 40 percent annual return in FAC’s Growth Fund and an 18 percent annual return in its Income Fund. According to reports, Lewis “did not accept investments from anyone unless an existing investor referred them,” and most of those investors were church members and clergy.
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He ran a trust-based business, and people trusted him despite the fact that he was never very specific about what his funds were investing in to make such spectacular returns. If asked, Lewis would make vague references to distressed businesses, leased medical equipment, insurance premium financing, and other business activities. Investors received newsletters and monthly statements, many of which showed the returns that he promised. Over nearly 20 years, FAC raised about $311 million, of which exactly none was ever invested in any fund. The funds, quite simply, didn’t exist.

Before he was apprehended in 2004 and sentenced to 30 years in prison, James Paul Lewis Jr., a trusted man, ran perhaps the biggest Ponzi scheme in U.S. financial history. He used the money he raised from new investors to pay returns to old ones, meanwhile skimming millions of dollars for personal use, including supporting the usual assortment of wives and girlfriends. Over the years, Lewis defrauded as many as 5,000 investors of the money they had earmarked for their retirement. (Ironically, he was eventually discovered by Barry Minkow, who had spent seven years in prison for defrauding investors as owner of ZZZZ Best carpet-cleaning company. Minkow is now a private fraud investigator.)
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Extending trust is a rational act. To whom you extend it, under what circumstances, and to what end are questions resolved in the complicated interstices where certainty, predictability, behavior, and opportunity meet. Sometimes the choice is made consciously, as an analytical calculation: “This guy has treated me fairly and conducted himself honestly, so I’ll trust him.” “This woman’s reputation is impeccable. Surely, she can be trusted.” Sometimes the decision comes from deep, unconscious triggers, a feeling that a certain person can be trusted. The oxytocin fires in your brain, and a doorway to trust opens. But even these unconscious beginnings must be backed up by a procession of trustworthy actions, or they, too, fall off the ladder.

Ponzi schemes, like all con jobs, thrive on trust. Trust is such a powerful thing that it fuels the worst in us as well as it does the best. The world is a dangerous place, and business, even in the best of times, can be rough as well. I don’t want you to think me a Pollyanna, suggesting that if we all hold hands, trust one another, and sing Kumbaya that all will be well. Of course it will not. There will always be people out to game the system, abuse your trust, and operate out of limited self-interest and opportunism, and they often think that those who do not are either naive, fools, or both. We must be vigilant and wise, and perform our due diligence at all times and in all situations.

Although Ralph the doughnut guy ran a trust-based business, his daily presence acted as a built-in deterrent against wide-scale cheating and abuse. Within large organizations, everyone must be vigilant for incidences of fraud and abuse of trust, because no matter how much trust you extend, there will always be some small percentage of those who will cheat or game the system. “Somebody is doing something today at Berkshire that you and I would be unhappy about if we knew of it,” Warren Buffett wrote in a 2006 memo to the Berkshire Hathaway’s top managers. “That’s inevitable. . . . But we can have a huge effect in minimizing such activities by jumping on anything immediately when there is the slightest odor of impropriety. Your attitude on such matters, expressed by behavior as well as words, will be the most important factor in how the culture of your business develops. And culture, more than rule books, determines how an organization behaves.”
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It would be impractical to run a large business without some sort of monitoring and compliance system, for instance; you would have anarchy. But how you maintain an environment of trust while catching and punishing malfeasance makes a difference. That’s what the old Russian proverb,
doveryai
,
no proveryai
, “trust, but verify,” is all about. (Although President Ronald Reagan made this something of a catchphrase that he applied regularly to diplomatic relations with the former Soviet Union, writer Damon Runyon is widely credited with first using it in English.)

At first blush, “trust, but verify” seems oxymoronic. If you are verifying, doesn’t that mean you’ve stopped trusting? Let’s work through an example using employee expense accounts and to see if this is true. (Not all of us make this kind of decision, but it provides a good example for anyone working within a team.) You are the head of the stadium, you have invited people in, and you’ve said, “In this stadium, I trust you.” Then you institute an expense reporting system that relies on rules (forms, manager approvals, accounting sign-off, lots of hoops to jump through). As we have discussed, these rules create all the predictable antirule responses; people feel externally monitored, and respond accordingly. You words say one thing—“We trust you”—but your program says another.

If you take those rules away, however, don’t you get anarchy? Actually, no. If you say to your employees, “Fill out your forms honestly and you will be reimbursed,” your value-based statement sends a powerful message. “We are on this journey together,” it says, “and we get there faster and more profitably when we work together and trust one another.” By inserting trust into the relationship, you can trigger all the responses in others that we know lead to cost-saving efficiencies: less transactional costs to process reimbursements, higher voluntary compliance, and the social bonding that results in greater alignment. In doughnut terms, you let them make their own change. You even get increased internal vigilance, as those who see the benefits of the approach watch out for those who might jeopardize a good thing.

But what of the shirker, the cheater, the one looking to get over on you for a few extra bucks? You can’t rationally assume that no one will cheat, so how do you protect against fraud? You verify randomly. Everyone knows that you have a vested interest in how money is being spent, so everyone knows you will be paying attention. Everyone also knows that the only way to find the people who betray your trust is to pay attention; attention is care as well. The key is to do so in a way that honors the needs of the company without undermining the commitment to trust. Random checks allow ongoing vigilance without imposing a compliance tax on the trustworthy. That’s what it means to trust and verify.

When you do find a transgressor, how you respond makes all the difference. In a rules-based system, cheating is often immediately followed by an e-mail that says, “ From now on, all expense vouchers must be . . .” followed by a new set of rules and regulations. This is a prime example of rules governing our past; someone has been caught cheating, and now everyone must pay though added bureaucratic busywork. It harkens back to elementary school discipline, when the teacher would say, “Because Johnny couldn’t stay in his seat, the entire class will remain behind for five minutes.” This primitive attempt at group-responsibility building in fact has exactly the opposite effect; it makes everyone hate Johnny, fracturing class cohesion. Similar responses occur in business when managers respond to the transgressions of an individual with added burden for the group. Rather than keep people in line, it encourages them to act as free agents, protecting their own space.

Steve Kerr, former CLO of GE and Goldman Sachs, showed me a better response: “An empowering leader, when she finds out that one of the ten has cheated, then micromanages that person. The transgressor will now feel externally treated, but he will deserve to be. If you ask him to evaluate his superior, he will probably say, ‘Oh, she’s an autocrat and is always on my back,’ but the other nine people won’t know what he’s talking about. Their sense of trust will remain intact.”
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The penalty for breach of trust (provided that it is not severe enough to warrant the ultimate penalty of dismissal) is the withdrawal of trust. If adult Johnny is caught fudging his expense reports, then he must be externally monitored until trust can be reestablished. This also sends a powerful message to the rest of the stadium: Trust is not a gift to be taken lightly. We’re all climbing the same ladder together.