In many marketplaces, customers rely on their service providers or suppliers to help them make purchase decisions. But whenever there is potential for a conflict of interest, the best way for a supplier to earn trust from a customer who needs help is to share information rather than offer advice or accept delegated authority.
New research by a team at the Naveen Jindal School of Management suggests that this more hands-off approach by suppliers and service providers builds the most trusting and trustworthy relationships. The paper, “Information Sharing, Advice Provision, or Delegation: What Leads to Higher Trust and Trustworthiness?” was written by Jindal School faculty members Dr. Özalp Özer, Dr. Upender Subramanian and Dr. Yu Wang, who has since joined the faculty at California State University Long Beach. The article recently was published online in the scholarly journal Management Science.
“Advice is telling them the action that should be performed, while accepting delegation is performing it for them,” said Özer, an Ashbel Smith Professor in the Jindal School’s Operations Management Area. “If you want to build a trusting relationship, don’t advise and don’t accept delegation. Instead, provide the information — tell them what you know.”
If, for example, Kroger were to ask Proctor & Gamble — which has intimate knowledge of its own products — for assistance on deciding how much shelf space to devote to the P&G products Kroger distributes, then P&G could take one of three approaches.
“The way we design processes in business may have an impact on trust and trustworthiness,” Özer said. “Even though we are only thinking in monetary terms, the processes that we put in place may have an impact on whether or not we are going to build trust.”
The first, and least effective, way to build trust with Kroger would be to accept Kroger’s delegation of the assignment to decide how much space to allocate. Any limits Kroger set would often be seen by P&G — or any supplier who had the delegated authority — as permission to do what it pleased as long as it didn’t surpass that limit, according to Özer — even if the ideal allocation might be lower than the limit that Kroger had set. Furthermore, Kroger would anticipate the supplier seeing those limits as permission, and therefore would often set those limits too tightly in the first place.
A second, more effective but still not ideal, way to build trust would be for P&G to advise Kroger on the amount of shelf space to devote to displaying P&G products. P&G has a fiduciary incentive to tell Kroger to use more display space than is needed.
The third, best, way for P&G to build trust, according to the findings of Özer and his research team, is simply to provide Kroger with market information and let Kroger make its own decision about how much space to allocate for P&G’s products based on that information.
This research can be extrapolated, Özer said, to any relationship between an expert and a person or entity seeking the expert’s opinion.
“The majority of the time, that relationship is such that the expert often has an incentive to manipulate his or her opinion to gain personal advantage,” Özer said. “But, even in those contexts, we still seek the opinion of the expert because we need assistance despite that conflict.”
The key to look for while deciding the best approach to take, Özer said, is whether there is a conflict of interest. If there is one, then the best approach is simply to ask for information, not advice or delegation.
