Rebuilding Battered Corporate Trust

by Mike Armour

Originally published in the online edition of HR Management magazine.

Dozens of studies, dating back over a decade, confirm an unsettling reality: trust is at all-time lows in corporate America.

A study released by the Conference Board in 2003 found only 23% of Americans trusting corporate executives. Indeed, CEOs ranked lower in trust than any profession other than used car salesmen.

In the intervening years, polls and surveys have continued to confirm abysmal levels of trust inside American corporations and institutions. In 2006 the Manchester Consulting Group studied 325 companies spread across twelve industries to determine the level of trust within these companies. On a ten-point scale, the average trust level was only 5.1.

Now, with the latest round of corporate scandals, trust in corporate leadership is taking another series of body blows. For months Americans have watched a continual parade of prominent CEOs being grilled by a finger-wagging Congress. And securities frauds, perpetrated on an almost unthinkable scale, have shaken the public's faith in the entire investment system.

Lost Trust — The Uncalculated Cost

What will these corporate scandals and bailouts ultimately cost us? We've heard estimates in abundance. But no one fully knows. Whatever the true figure, none of the estimates include one expense that will increase the cost immensely. I'm speaking of the adverse impact bottom line performance due to eroded trust among corporate workers.

There is a demonstrable direct correlation between high levels of trust within the workplace and a company's overall profitability. In an oft-quoted study by Watson Wyatt Worldwide Consulting, shareholder returns were 43% higher for companies with high internal trust as compared to those where trust was low.

This comes as no surprise to perceptive executives like Roger Staubach, NFL Hall of Fame quarterback and a legendary Dallas businessman. In a recent interview Staubach noted, "If you don't have trust inside your company, you can't transfer it to your customers." In other words, low internal trust leads to diminished sales, hence reduced profitability.

Research at Case Western University confirms the significance of Staubach's observation. In studying business-to-business transactions, researchers found that trust is the most influential consideration in decisions to buy. Trust even outranks perceived value. Businesses will apparently pay more to work with suppliers whom they trust.

Moreover, where customer trust is already strong, companies gain added revenue by taking this trust to a higher level. QVC Home Shopping Network offers a case in point. Using a one-to-seven scale, QVC asks customers to rate their personal trust in QVC. A rating of six, of course, suggests significant trust. But when customers rate their trust at seven rather than six, the likelihood of repeat purchases goes up 80%.

Trust-Building — A Strategic Priority

Profitability, then, rests on trust, not just customer trust, but the trust of employees, as well. We are still too close to recent corporate scandals and failures to know their eventual impact on employee trust. But there is no reason to believe that these events will improve trust inside American companies. If anything, the current corporate crisis will actually increase distrust due to widespread fear and anxiety among workers.

We therefore face the prospect of low corporate trust exerting a serious drag on economic recovery and on sustained profitability once recovery occurs. Nor will the problem with corporate distrust reverse itself quickly. Trust, once lost, is not easily restored.

Given these realities, wisdom dictates that leaders should place internal trust-building at the top of the corporate agenda. Trust-building is now a strategic priority. While this effort must be comprehensive and multi-faceted, it should focus heavily on the most critical trust-relationship in organizational life, the relationship between employees and their direct manager.

Why focus on the employee-manager relationship? Because people leave companies primarily due to problems with an immediate manager. In exit interviews, four out of five workers typically point to issues with their manager (or their manager's manager) as root causes for their decision to leave. It is here, therefore, in the pivotal relationship between manager and worker that trust-building must be pursued in earnest.

Hidden Distrust

As a leadership coach and consultant, I've helped numerous organizations develop or rebuild internal trust. From this experience I've learned that the degree of distrust in organizations is almost always higher than managers perceive. Distrust, it turns out, is a master of hiding its presence.

But when we delve deeply into thorny corporate problems, we start to unearth this hidden distrust. As we peel back the layers of the problem, one at a time, we routinely uncover issues of trust that have gone unrecognized, unaddressed, or unresolved.

As a result, even when I'm engaged to assist with problems seemingly far removed from issues of trust, trust-building often emerges as a priority. Having now worked with trust-building in scores of venues, I've learned that trust cannot be built or sustained unless people feel five things.

Feeling Safe And Informed

First, they need to feel safe. Physically safe, naturally. But psychologically and emotionally safe, as well. Among other things, this means safety from ridicule, humiliation, intimidation, betrayal, retaliation, belittling humor, sexist or racist remarks, and mean-spirited pranks.

If people do not feel safe, no exercise in trust-building will yield telling results. The need for safety is wired into our very nature as human beings. When people feel unsafe, they react with fear and anxiety, the polar opposites of trust.

Indeed, the depth of trust within an organization can be determined indirectly by measuring the level of fear and anxiety in the group. To the degree that fear and anxiety are present, trust cannot prevail.

Second, people must feel informed. When managers or co-workers routinely leave us in the dark — especially on things that impact us directly — we easily conclude that we must not be very important to them. Either that, or we conclude that they are oblivious to our needs and well-being. In neither case do our conclusions foster an atmosphere of trust.

Being left uninformed also damages trust by giving rise to speculation. As human beings we are driven to make sense of what we experience and observe. Speculation is the way we make sense of things in the absence of information.

Unfortunately, speculation in the workplace rarely posits a positive explanation for what is going on. Speculation is more likely to project outcomes that are untoward. As this kind of speculation grows, anxiety starts to rise, taking a toll on trust. The best way to disarm harmful speculation and its damage to trust is simply to keep people well informed.

Feeling Respected, Valued, And Understood

Third, in order for trust to flourish, people need to feel respected. Or to put it another way, we do not tend to trust people who routinely treat us disrespectfully. We see their disrespectful behavior as a character flaw. And since character is always pivotal in deciding whether to trust someone, disrespect poisons the soil in which trust should grow.

Fourth, trust only thrives where people feel valued. Feeling valued and feeling respected are closely related, but with significant distinctions. We can be indifferent to people, yet still respect them. (For instance, when standing in line at a checkout counter I treat others in line with respect, even though I may never see them again in my life.) But I can never be indifferent about a person whom I truly value.

Thus, when people feel valued by leaders or peers, they sense that these colleagues care for them in a way that respect alone does not convey. And because we fear no harm from someone who truly cares for us, feeling valued also increases our sense of safety, which furthers the cause of trust.

Fifth, for trust to prosper, people must feel understood. No nation in history has had the benefit of a workforce as educated as ours. People are well informed. And they know they are well informed.

They therefore believe that their opinion counts for something. They likewise feel that they have enough to offer that their views, concerns, and preferences deserve a fair hearing.

This is not to say that employees expect management to implement every tidbit of wisdom and counsel they offer. People will accept a decision that goes against their preferences if they feel that in the process of reaching the decision, the leader took their concerns and viewpoints into consideration.

By promoting an atmosphere in which people feel safe, informed, respected, valued, and understood, managers convey a genuine sense that they care personally for each person on their team. Nor can we overstate the importance of this sense of care. When workers are asked what leads them to trust their manager, the most common response is, "A manager who really truly cares for me."

Can We Truly Earn Trust?

Yet this kind of atmosphere, while conducive to trust, is no assurance that trust will actually become strong. Ultimately trust is a decision controlled entirely by the person who puts trust in another person.

This principle is easily overlooked, because we speak so commonly of "earning trust." Yet, trust is not so much something we earn as it is something which others choose to bestow upon us. It's their choice, not ours. If they choose not to trust us, there is little we can do about it. Trust, like beauty, is in the eyes of the beholder.

Our task as managers is not to create trust (which we cannot do), but to make it easy for employees to trust us and to trust their peers. Nurturing an atmosphere conducive to trust is one way that we "make it easy." Another way is by conducting ourselves with such authenticity, such integrity, and such genuine concern for our people that they find it easy to invest trust in us.

In my most recent book Leadership and the Power of Trust (available on Amazon or at www.trustispower.com) I lay out seven essential traits for leaders who want to be trusted. Space limitations preclude detailing the seven here. But to list them briefly, they are humility, integrity, truthfulness, responsiveness, unblemished fair play, providing support and encouragement, and showing genuine care for the team.

These seven patterns of behavior, consistently pursued, speak volumes about a manager's character. And proof of character is vital to gaining trust. In interpersonal relationships, indeed, we may opt to trust people merely because of their quality of character.

To be trusted as leaders. however, managers must rise to a higher standard. I sometimes speak of leadership trust as sitting on a three-legged stool. The legs are character, competence, and concrete results. Leaders may be trusted as individuals solely on the basis of character. But unless they also prove themselves competent and unless they produce a steady stream of concrete results, the trust they enjoy as an individual will not translate into trust in them as leaders.

The Battle To Rebuild Trust

The challenge of rebuilding trust in corporate leadership is a daunting one, complicated by factors beyond management's control. One of these factors is prevalent distrust within society as a whole. Today the American people are more polarized on more issues over a broader range of subjects than at any prior time in our history. Prolonged polarization, and the acrimonious debate that accompanies it, inevitably sows deep distrust. The result is that society itself has conditioned workers to be untrusting.

They have also been conditioned to expect spin in official pronouncements. Thirty years ago, when news coverage was less pervasive and talk radio was all but unknown, there were few talking heads putting a spin on every story of consequence. Today spin masters are everywhere. Conditioned now to look constantly for spin, workers are distrustful of corporate and institutional communication to a degree unknown a generation earlier.

Yet, daunting or not, the task of rebuilding corporate trust must be undertaken with resolve and determination. There is simply too much at stake to leave our spiraling trust-deficit unaddressed. While the battle to rebuild trust must be enjoined by corporate boards and C-level executives, the frontline action will be where managers and workers interact.

It is here, in the interaction between manager and worker, that employees form their general attitudes about the company. If employees have little trust in their immediate manager, they are unlikely to view the company itself as trustworthy. The battle to rebuild corporate trust is thus in the hands of every manager, whose artful decisions will determine whether the battle is ultimately won or lost.

Copyright 2009