Charles Handy on the superiority of trust over signed agreements
Fifty years ago, I was the branch manager for Shell in the South of Malaysia, called the Malacca Branch. One of my duties was to finalise the terms of trading with our agents, the people who ran the service stations in my area. And I still had to do the big one which was run by a gentleman named Ahong in Malacca, the big town where I lived.
I was good friends with Ahong and I had no reason to think that there would be any problem. He knew the standard terms and he had given me no indication that he was going to argue. Still, it had to be done. So I went along on one afternoon to his light office looking out over the sea. I went through the items, I extended his credit terms which he was very pleased about because it helped his cash problems. The Chinese are instinctive businessmen, you can’t teach them anything about business. But I refused to budge on the discount we allowed him on the sales we made to him I had used up all my discretion on the credit terms.
Anyway, we were both happy. We had both given a little and both got more or less what we wanted. We shook hands, as the Chinese do as well as the Westerners. He produced a bottle of brandy as well as some ginger ale and we toasted ourselves and our future happy prosperities together. And then I produced the official agency agreement that Shell required him and me to sign, covered all over with the Shell emblem, about three pages of it. I filled in the numbers we had just agreed and gave it to him to sign.
And he looked at it, and he looked at me, and he said, “what’s this?” I said it was the agency agreement that we’ve just agreed, you just have to sign it. He said, “well, I’m not so sure I want to sign that, that suggests to me that you think you have got a better bargain than I have and you want to use the law to enforce it. I see this as a breach of our trust.”
“Well,” I said, “I understand your point, and I will take it back to my bosses in Kuala Lumpur but in the meantime I am required to get you to sign this. It is just a formality, it is a bit of Shell bureaucracy, it has nothing to do with your relationship with me. Of course I trust you.”
He said, “well, in China, we don’t use that sort of thing, we say any agreement that is going to last must please both of us, we must both feel that we’ve got what we want from it.”
I said, “well that’s right, and haven’t we?”
He said, “well yes, but when you produce this document, it looks as if you think you’ve got the better of me. Why should I trust you?”
I persuaded him that it was just a bit of stupid English bureaucracy and should not interfere with our good relationship. So in the end, reluctantly, he signed it and I took it back to my bosses and told them what he said.
I still think of that Chinese contract every time I have any argument with anybody about anything, even when I negotiated with my children about when they should eat their food, or go to bed. If both sides think they’ve won, then they are more likely to keep the agreement.
And so, “give to get and trust”, is my motto in life. It helped for a very good marriage, I think, and I think my wife would have agreed. Give to get, then trust. Don’t sign or use the law. When you have to bring in a lawyer, something has gone wrong.
So, may you have a happy time without too many fraught negotiations. But if you do have an argument with anybody, make sure that they get out of it as much as you do and then you should trust them. If you can’t trust them, it means that they haven’t got enough. So give them more.
Good luck. Trust breeds relationships and they’re worth their weight in gold.
Charles Handy’s books on management have sold over a million copies and have changed the way we view business and society. His latest book, 21 Letters, is now available in paperback and on audiobook. Read more here. Charles suffered a stroke in 2019 following the death of his wife in a car crash in 2018. This piece was dictated to his carer.