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Can you manage people without destroying trust? May 28, 2013

Posted by Jason in Management.
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Most of us might not readily associate project management – or any other management – with the fields of sociology or political science.  But just as engineering is the application of scientific principles toward a specific objective, management is very much the application of social sciences to coordinating groups toward an objective.

Unfortunately, sociology is rarely given much consideration in engineering curricula, and only passing interest in many business courses.  Surely, many business concepts are founded on sociological and psychological theory, but students aren’t often exposed to the raw studies or how more obscure analysis might be applied in new ways.  What is business and economics but a subset of the continual interactions we have with others every day of our lives?

Columbia University sociologist Herbert J. Gans wrote Middle American Individualism in 1988 as a short examination of the public’s relationship to Big Business and Big Government, especially Americans’ unique distrust of large organizations.  Though focused on how government can better reach such a disaffected population, the book yields some very interesting insights – several of which crop up again in the more recent Bowling Alone by Robert D. Putnam.

Putnam highlights the significant drop in “social capital” since the 1960’s and uses decades of survey data to analyze reasons and consequences.  He singles out our collective trust in each other – or rather lack of it – as being a contributing force in our declining social capital, the glue that allows our various short- and long-term activities to be reciprocated in the future.  Social capital could in some ways be a synonym for a more familiar business buzzword: synergy.  In short, the sum of our social connections is greater than the individuals we know.

In particular, Putnam highlights the concept of economic “transaction costs” as a consequence of less social capital and trust.  It is these transaction costs that hold particular pertinence to management.  We can think of transaction costs as the various tangible and intangible investments, such as research, bargaining, and enforcement (especially through contracts and courts), of any particular exchange.  These may be informal and individual (the time and effort involved in preparing a dinner for a sick neighbor) or complex business agreements (the process of hiring an engineer, preparing a contract, and executing the work).

Whenever we use a written contract, we increase the cost of that transaction – sometimes literally when we pay attorneys to draft them.  Aside from this, there are other intangible costs derived from the effort involved in setting up the agreement, managing the specific deliverables, and enforcing any variances.  To be sure, complex engineering designs do require clear contracts.  But has our litigious society forced us into formal agreements for even trivial matters?  When we micro-manage a project, do we inherently distrust the other parties when we insist on written documentation of every single activity?

Many businesspeople around Montana pride themselves on the magnitude of agreements executed with a handshake.  Similarly, master consultant Alan Weiss has noted that contracts are part of the implementation, not the sales process.  If you haven’t established the deliverables beforehand, the contract is premature at best.  Quite often, you may find yourself explaining away these written documents as “formalities”.  By requiring them, we are expressing at least some degree of distrust.  When developing relationships, that is the last thing you want to do.

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