Align your words with your actions.
Time to Act
February 2021, Vol. 10 No. 2
charlie goodrich

Trust is a critical ingredient in the smooth flow of business transactions. 

As former Secretary of State George Schultz, the man behind the Reagan-era arms reduction agreements with the Soviets emphasized, "Trust is the coin of the realm."

In today's newsletter, we highlight some of the ways in which you can build –  or break down –  this valuable asset.
Charlie Goodrich
Founder and Principal
Goodrich & Associates
In this issue…
Trust is the Coin of the Realm
Heard on the Street
About Us
Trust is the Coin of the Realm
Trust is an essential element of most human interaction, particularly commercial interaction. Without it, transactions become risky. If we buy something, we trust that what we buy will work. At the same time, the seller trusts that your payment is good.

As the dollar amounts get larger, as in business-to-business transactions, trust becomes even more important. If a customer commits to purchasing a significant quantity of raw materials from you, they trust that your company can deliver and deliver on time.

So, what is the “best way” to build and maintain trust?  There are many options; here are a handful I have found to be most effective over the years.

Do what you say you will do.

Repeatedly. That is the essence of trust and not doing so is the best way to erode whatever trust you have built up with others.

There are two common ways to slip up here. First, by committing to things that you are not capable of delivering. In my world, this usually comes down to an inability to pay someone on time and in the amount promised. Especially in tight times, it’s critical that you project cash flow accurately, so that you can make payments as necessary.

The second way is by making commitments you might later regret –  and thereby decide not to follow through with. Often this is in the form of negative actions, or threats. The classic example was President Obama and his “red line” for Syria. When Syria crossed that line and the United States did nothing, the credibility of the United States –  and other countries’ trust in it –  was eroded by some measure. Obama’s mistake was not inaction –  US military intervention in Syria at that point would have been unwise. His mistake was in drawing the red line in the first place.

This same concept can apply in business. For example, not acting when important employees, customers, and so forth behave badly, undermines employee trust in the company.

Show respect to your business partners, including employees.
It’s important to acknowledge significant events, past and present, to your counterparties, employees, and prospects.

For example, back in the Ronald Reagan days, then Secretary of State, George Schultz , visited the old Soviet Union for the first time. There, Schultz met the Soviet minister of foreign trade who insisted that Schultz tour Leningrad. The first stop was the Leningrad cemetery where Schultz saw huge mounds in which tens of thousands of Soviet citizens were buried from the Nazi Siege. Schultz moved forward, gave a long military salute, and then smartly dropped his hand in a military manner. Then Schultz said “I, too, fought in World War II and had friends killed beside me.” 

That show of respect led to trust –  first between Schultz and the minister of foreign trade, later between Reagan and Gorbachev, without which there would have been no treaty eliminating intermediate-range nuclear arms in Europe.

Take the high road, even when not expedient.

In my world of liquidity-challenged companies, there is often the temptation to make a promise to pay when you know there is no payment forthcoming (in order to get the next shipment, buy another week with the landlord, etc.). Even though there may be unpleasant consequences for you, doing the expedient by holding back the sharing of bad news, is the quickest way I know of to destroy trust.

For example, if your business is having an “off” quarter and you are reasonably confident that you will break covenants with a lender as a result, let them know now , not when a late financial report is submitted. More broadly, let appropriate parties know in advance when their expectations of your company likely will not be met.

Tips for Making This Happen

Building and maintaining trust is not easy. If it were, you likely wouldn’t take the time to read this article. But it takes more than just “character,” particularly for companies and organizations, as opposed to individuals.

A few areas to focus on that are often overlooked…

Know your capabilities and limitations.

Many times, companies or individuals erode credibility by promising to do something they can’t do well (if at all). If you commit to something and blow it, don’t repeat and commit without doing something different, particularly if it’s critical to you or your counterparty. That may mean building that capability internally or going outside. In my work, I encounter many companies that struggle to project cash flow, the balance sheet, and loan covenants. It is often at that point where I am brought in.

Put the necessary processes in place.
Reliable financial controls and projections are the best way to prevent financial surprises. Other aspects of your business require their own processes so that here, too, you can meet your commitments. Examples of this include monitoring capacity when booking orders or buying supplies or, in the manufacturing world, understanding plant capacity, bookings, inventory, and so forth. With services, this may involve having enough of the right people with the right skills on hand, to ensure work is completed on schedule.

Trust but verify.

During the Reagan-era arms reduction agreements with the Soviets, “trust but verify” was a foundational philosophy. With financial statements, an audit or field exam serves the same purpose.

There are other types of certifications as well, such as ISO for manufacturing, SSAE 16 (formerly SAS 70) for certain services, and so forth. Don’t hesitate to ask for these from your counterparties when warranted.

Further, when your company agrees to these sorts of verifications, make sure it is able to readily “pass inspection.” Late audits or hard-to-do field exams erode lender trust in you and your business. Also, consider offering verification. For example, have an audit of your company’s financial statements completed instead of just a review, even when not required.


Trust is critical to human life in general and business in particular. But it’s a lot easier –  and quicker –  to lose than it is to gain.

Make sure that your words and actions align, and that you have established processes to ensure that you deliver on whatever it is you promise.
Please share with your colleagues
Heard on the Street
George P. Schultz, an active Fellow at the Hoover Institute at Stanford University, published “ Life and Learning after One Hundred Years: Trust Is the Coin of the Realm ,” at the end of 2020. He passed away earlier this month.
Prior to joining the Hoover Institute, Schultz was a Professor of Industrial Relations at what is now the University of Chicago Booth Graduate School of Business. Under President Richard Nixon, he was the first director of the newly formed Office of Management and Budget and then became Secretary of the Treasury. Under President Ronald Regan, he was Chairman of the Council of Economic Advisors and then Secretary of State. And there is much more.

At 12 pages, this is not a quick read . But George Schultz’s 100 years of wisdom warrants your time.
About Us
Goodrich & Associates is a management consulting firm. We specialize in restructuring and insolvency problems. Our Founder and Principal, Charlie Goodrich, holds an MBA in Finance from the University of Chicago and a Bachelor's Degree in Economics from the University of Virginia, and has over 30 years' experience in this area.

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