Leadership and Trust is the genesis of economic prosperity

I had the fortune of being invited to a lively debate on Friday 25th February 2022, joining the debate was Lieutenant Cornel Oakland McCulloch, Douglas Lines, and our podcast host Scott Hunter, Purpose. Trust and Societal Impact expert and practitioner, discussing the role of leadership in creating trust.

“Today’s leaders have a responsibility to inspire the leaders of tomorrow.”
– Lieutenant Colonel Oak McCulloch

Douglas Lines: Douglas is a senior business leader, executive committee member with substantial global commercial experience, operating principally in financial services.

Geoffrey M.J Hudson-Searle: Geoff is a serial business advisor, CSuite Executive and Non-Executive Director to Private and Publicly listed growth-phase tech companies. An author of 5 books including the best seller ‘Purposeful Discussions’ and rated by Agilience as a Top 250 Harvard Business School authority covering; ‘Strategic Management’ and ‘Management Consulting’

Oakland McCulloch: Oak is a Retired Lieutenant Colonel. He is the author of the 2021 release, Your Leadership Legacy: Becoming the Leader You Were Meant to Be. Based on 40+ years of leadership in the U.S. Army and subsequent civilian positions, Oak highlights principles that will benefit today’s leaders and inspire the leaders of tomorrow. Oak is also a well-known speaker who gives presentations on a variety of topics including leadership, success, military history, college preparation and others.

In previous eras, trust was more often a product of ongoing relationships between individuals who did business together. People knew their bankers, merchants, and employers personally and could assess the content of their character.

These days, business transactions tend to be less personal and more far-reaching than they were even a few decades ago.

Trust remains a vital form of business currency, but customers rely on different signals to convey a company’s trustworthiness — including, in many cases, a wealth of information about its ethical track record and the experiences of its customers and employees.

In fact, globalization is making adherence to commonly accepted ethical standards necessary not just for building trust with employees and customers, but for full-fledged participation in the worldwide economy.

Just as common technological protocols have made the rapid spread of mobile phones and the internet around the world possible, common ethical standards provide a consistent set of rules that allow parties from different cultures and institutional environments to have confidence that they can do business together without being taken advantage of.

The success of global “sharing economy” platforms like Uber and Airbnb has been possible, in large part, because those businesses have developed transparent rating systems that help customers feel they can trust millions of new drivers and hospitality providers.

However, trust has also become a more important consideration within organizations.

Given the rapid pace of change in many industries, driven by digitization, globalization, and emerging technologies such as artificial intelligence, many employees wonder if their jobs are secure and need to feel that their managers are always open and honest with them.

Perceived trustworthiness has also become an important recruiting consideration.

Expectations for corporate responsibility have changed since the “greed is good” ethos of the 1980s.

Employees want to know their organizations operate in a socially responsible manner. Those who believe their company will always choose to do the right thing over making an immediate profit are more likely to say they would recommend it as a place to work and that they will stay there for another three years.

Gallup’s research has shown that millennial-age employees, in particular, want their careers to coincide with their personal values; they view their jobs as sources of meaning and purpose, rather than just a way to make a living.

Three essential elements of a high-trust culture

Businesses that sustain trusting relationships with employees and customers are distinguished by three central priorities, around which leaders build high-integrity organizational cultures.

Trust directly influences the actions and outcomes of business every day. By embedding trust in a company’s business, leaders generate value for their stakeholders and society more broadly now and in the future.

Make strong customer value the ultimate business goal.

Organizations need an authentic, customer-centric purpose to guide their strategic focus and daily activities. Such a purpose, clearly and commonly articulated by leaders and managers, encodes ethical standards into the DNA of an organization.

If a company exists to improve the lives of its customers, violating their trust or harming their communities through unethical behavior becomes not just a moral issue, but a strategic concern.

As an example, in restructuring their operations after suffering massive losses in the global financial crisis, many retail banks made restoring customer relationships their paramount leadership concern, with many articulating a renewed focus on customer-centricity supported by a set of clearly stated ethical standards and responsibilities.

By contrast, widespread concerns about Facebook’s data-sharing policies and possible privacy violations have led to a slower user and revenue growth and prompted a major ad campaign intended to regain users’ trust.

Establish integrity as a primary organizational value.

High-trust organizations make integrity a core value that influences all HR processes, from performance incentives to hiring criteria.

However, simply hiring principled employees isn’t enough, particularly in an era when ethical implications aren’t always obvious or clear-cut.

Recent research in organizational psychology points to “blind spots” that may lead people to behave unethically without being fully conscious of it.

The concept of bounded ethicality suggests employees often fail to recognize their own moral transgressions, either because the moral dimensions of their decisions aren’t salient enough or because they conflict with other personal or organizational interests.

For example, in the accounting scandals of the early 2000s, major accounting firms were hired and paid by the companies they audited, motivating them to overlook inappropriate – even fraudulent – bookkeeping practices.

Employees need to see their colleagues acting under the assumption that integrity is an essential component of – rather than an obstacle to – their organization’s success.

Such cultural norms ensure employees never feel that their own ethical behavior leaves them at a disadvantage. Conversations about ethics and trust and the consequences of business decisions should become part of a daily routine, especially as organizations embrace experimentation and constant innovation.

Ensure ethical issues are a major leadership focus.

For large organizations, trust is largely a product of leadership.

Business leaders help ensure employees are attuned to ethical issues by calling attention to them on a regular basis.

Unfortunately, many businesses pay lip service to compliance programs without conveying to employees the organization’s commitment to building and maintaining customer trust through ethical practices.

Trust between employer and employee and among employees enhances human capital investment. Trust influences the behaviours of both employers and employees. Deloitte research suggests that employees who highly trust their employer are about half as likely to seek new job opportunities as those who don’t.

At the same time, workers are more likely to invest in their own skill-building if they trust that their employer will reward them for their efforts. This is especially true regarding non-transferable or firm-specific skills, which suggests that trust can raise the level of institutional knowledge that can lead to more productive work.

The world is in crisis. Economies are unwinding; jobs are disappearing and our spirit is being tested. In light of this, it’s imperative for leaders to demonstrate compassion. But the research from Harvard University has shown that compassion on its own is not enough.

For effective leadership, compassion must be combined with wisdom, i.e. leadership competence and effectiveness. This often requires giving tough feedback, making hard decisions that disappoint people, and, in some cases, laying people off.

Showing compassion in leadership can’t come at the expense of wisdom and effectiveness. You need both. The research report gathered data from 15,000 leaders in more than 5,000 companies that span nearly 100 countries, showing that leaders exhibit four different leadership styles that reflect different mixes of wisdom and compassion, and the lack thereof. The optimal style is wise compassionate leadership.

EY Consulting survey confirms 90% of US workers believe empathetic leadership leads to higher job satisfaction and 79% agree it decreases employee turnover.

The majority (88%) of respondents feel that empathetic leadership creates loyalty among employees toward their leaders – revealing that empathy could be the secret sauce to retaining and finding employees in the face of “The Great Resignation.”

A staggering 89% of employees agree that empathy leads to better leadership. In fact, 88% feel that empathetic leadership inspires positive change within the workplace, and 87% say that it enables trust among employees and leaders. Additionally, 85% report that empathetic leadership in the workplace increases productivity among employees.

Beyond improving employee satisfaction and decreasing turnover rates, there are tangible business benefits to prioritizing empathy in the workplace. According to the survey, benefits are plenty, since employees agree that mutual empathy between leaders and employees increases:
– Efficiency (87%)
– Creativity (87%)
– Innovation (86%)
– Company revenue (81%)

Leaders have to be resolute about their desire to foster an empowered organization and their commitment to invest the necessary time and energy to make it work. They have to continuously find ways to signal that desire and following key steps constitutes a very effective way to do so. Yes, there might be some hiccups, but once those are in the rear-view mirror, true empowerment will deliver a powerful upside for employees, their leaders, and the entire organization.

Clarity of thinking, communications, and decision-making will be at a premium. Those CEOs who can best exhibit this clarity, and lead from the heart and the head, will inspire their organisations to persevere through this crisis, positioning their brand to emerge in a better place, prepared for whatever may come. Crises like these, with deep challenges to be navigated, will also lead to opportunities for learning and deepening trust with all stakeholders, while equipping organisations for a step change that creates more value not just for shareholders, but for society as a whole.

Getting a regular cadence with a clear voice is critical. Incomplete or conflicting communications can slow the organisation’s response rather than providing better guidance.

In a time of crisis, trust is paramount. This simple formula emphasises the key elements of trust for individuals and for organisations:

Trust = Transparency + Integrity + Relationship + Experience

Trust starts with transparency: telling what you know and admitting what you don’t. Trust is also a function of relationships: some level of ‘knowing’ each other among you and your employees, your customers, and your ecosystem. And it also depends on experience: Do you reliably do what you say?

In times of growing uncertainty, trust is increasingly built by demonstrating an ability to address unanticipated situations and a steady commitment to address the needs of all stakeholders in the best way possible.

In any time, thriving organisations are true to their purpose, rely on their values, and model agility. Today’s pandemic, which will reduce profits all over the world, is a searing test of every organisation’s culture and values. Leaders who have laid a solid culture foundation, authentically committed to a set of values, and defined and depended on an inspiring purpose are leading through this crisis by making a difference in the lives of employees and the communities they serve. This crisis also serves as a furnace for change for those companies that haven’t yet laid the foundation for a thriving culture.

Working with CEOs over the years, I have found that thriving cultures are those that are purpose-driven and characterised by vitality and a growth mindset. Organisations where leaders are purposeful and intentional and open to personal change, and where every employee has a voice and is actively engaged in living the organisation’s values, are those with thriving cultures. Many organisations entered into this crisis with such a culture. Others were struggling. But, like the process of glass blowing, in which beautiful structures are created by manipulating molten glass in a hot furnace, we have observed healthy and resilient cultures emerge from the fires of crisis.

Culture, we know, is the core of resilience, but it alone is not enough. Other work by our firm has shown that organisations that accelerate performance during good times and bad are able to mobilise, execute, and transform with agility. During today’s pandemic, agility matters more than ever. Amidst rapid-fire health updates, market volatility, and the extreme spread of the coronavirus, a company’s foresight, ability to learn, and adaptability will set it apart. Companies strong in these areas have leaders who are future-focused, demonstrate a growth mindset, are able to pivot quickly in times of rapid disruption, and maintain resilience to navigate their organisations.

Uncovering authentic organisational purpose can come quite simply from finding ways to be of service. What’s needed today is for all leaders to look beyond profit and ask, ‘What do I have that could help someone right now? Where can I practice abundance where there is short supply?’

Organisations will be changed by their actions to make a difference in these times of crisis. Connecting with employees at a human level as we enter into one another’s home offices and living rooms, meeting children and pets on the screen, is organically changing and strengthening cultures. It’s happening today by default; tomorrow leaders can shape their cultures with lessons learned by design. Leaders and organisations that count on their core culture and values and make a difference while pivoting to solve for the future will emerge from the fires of this crisis and thrive.

Finally, leadership has got to step up, if you want to save your job in the next 10 years, you need to adopt a balance between IQ, EQ, SI, DI, WI and trust intelligence. Emotional intelligence isn’t just an idea for leadership anymore, it’s a prerequisite for the trust toolbox.

The way to build trust and drive home purpose is to master honest communication and include employees and stakeholders in key decisions. “We’ve seen fax machines, long emails, instant messaging, all kinds of collaboration tools come, go and sometimes stay. Business is about communicating with purpose, active listening, empathy. More trust has got to be to put into the executive leadership. Trust is the glue.”

The more emotional intelligence leadership teams employ across teams, the more you’ll see an increase in trust because people will see it’s not just words but actions. At IBEM, we commissioned a trust report back in January 2020. Even before I commissioned the research, I knew what to expect.

“69% of everyone surveyed said they don’t trust CEO or line manager.”

I would take that as applicable across all business and commerce. We’ve got to communicate more, build trust within organisations more. We can’t deliver anything without fixing this problem.

Inclusion of people into the decision-making process helps cement purpose and values.”

Vincent Thomas Lombardi was an American football coach and executive in the National Football League, who once said:

“A team is not a group of people who play together, a team is a group of people who trust each other.”