"How do I know you're who you say you are?" That's a question many investors are asking their money managers in the wake of the unraveling of Bernie Madoff's $65 billion Ponzi scheme. But it's also a question many employees are asking about their bosses. Misdeeds by leaders at Enron, HealthSouth, Tyco, and WorldCom a few years ago caused an outbreak of mistrust in corporate leaders. No sooner had those corrupt leaders gone to jail than the financial meltdown of 2008 served up a fresh roster of misdeeds, from money laundering to securities fraud, making many wonder whether any boss or company can be trusted in a tough economy.
It isn't just criminal behavior that destroys trust between employees and organizations. Among the 9 million jobs lost to date in the current recession are many once held by high-performing loyal employees who thought their competence would protect them and that their companies would always be there for them.
But the fallout from individual acts of betrayal goes far beyond the companies where they occur. Trust in U.S. corporations is at an all-time low according to the 2009 Edelman Trust Barometer. In 2009, only 39 percent of respondents said they trusted businesses to do the right thing. A year earlier, 58 percent agreed with that statement.
The key question is whether trust, once broken, can be restored. Is trust a renewable resource in a work relationship or in an organization? Or is it like glass - once shattered, never the same again?
Steve Gladis, author of The Trusted Leader: Understanding the Trust Triangle (due from HRD Press in 2010), maintains that there are specific leadership behaviors that build trust. Based on theories developed by Aristotle and supported by contemporary experts such as Noel Tichy, Dan Goleman, and others, he describes three things a leader must have to win trust: good character, good sense, and good will.
Good character is demonstrated by candor and consistent communication, says Gladis. "Trusted leaders have the courage to tell the truth." Good sense concerns self-knowledge, expertise, and the ability to learn and to teach. "It is basic leadership competence," says Gladis. Good will is a form of caring for others, for the organization, and for the community, and also includes honoring oneself.
"All great leaders possess these three characteristics to a strong degree," says Gladis. Weakness in any one makes it difficult for a leader to win and keep trust, and all three are needed when trust must be restored.
Because organizations often reflect the character of their leaders who set the emotional and cultural tone, high trust is highly contagious. "Unfortunately, so is low trust," says Gladis. Trust can be restored, agree most experts on the topic, but the process is slow and painstaking. "Trust is rebuilt one brick at a time," says Gladis. Specific steps for rebuilding trust include
- admitting the breach of trust quickly
- apologizing
- saying what you will do to prevent future breaches
- promising to take action to repair damage
- asking for forgiveness.
"But here's the kicker," says Gladis. "You only have one good shot at this." Failure to keep promises or make things right will take away your chances for redemption, and another breach of trust could erase any hope of success.
It is even tougher to restore trust in a fallen organization than in an individual transgressor. Gladis advises that the top leader publicly humble himself and apologize on behalf of the company. This often takes the form of a letter published in a major newspaper. When Chrysler was found in 1987 to be rolling back odometers to sell used cars as new, then CEO, Lee Iacocca, placed ads stating, "Testing cars is a good idea. Turning back odometers is a bad idea. That's a mistake we won't make again at Chrysler. Period."
Ed Cohen knows better than most the consequences of broken trust at the highest level. He was chief learning officer at the Indian software firm, Satyam, when in 2008, CEO Ramalinga Raju published a letter to the board of directors admitting to sweeping financial fraud and asking to be prosecuted. For many years, with Raju's complicity, the company's books showed inflated cash balances, faked earnings, and understated liabilities among other misrepresentations of its value. Instead of being a $2.5 billion company, its numbers ended up being far lower (the company is still under investigation). Following his disclosures, Raju was jailed, more than 50 percent of the employees left, and the company was sold.
Cohen has co-authored a book with Priscilla Nelson, due from ASTD Press in 2010, based on their experience at Satyam. He maintains that it is possible for a company to restore trust if it does things differently and shows that it has no tolerance for unacceptable behavior. The organization must also eliminate the cause of the breach. "From my perspective," says Cohen, "an organization with trust is like a healthy body. Breaking trust is like a cancer that spreads quickly. There is no such thing as taking care of part of it. You must eradicate it from every part of the system."
Satyam and other companies like it are extreme cases. But companies that laid off employees to optimize costs during the recession may find themselves facing delayed consequences of a perceived breach of trust. "I predict that when the recession is over, we will have tremendous turnover in companies that broke employees' trust," he says. Those hardest hit are likely to be the ones that had no employee retention strategies during the recession.
Some critics lay the blame for cultures that are ethically lax, on business schools. Their case studies often cover companies that came back from hard times, but they overlook underlying causes that permitted risky behavior in the first place. "MBA case studies rarely explore the lack of leadership and integrity that cause a company to go wrong," says Cohen. "Without realizing it, they're teaching that there are no consequences for the people who caused the problem, and it's a short leap to the assumption that such behavior is not only tolerated but necessary for success."
There are some who believe that organizations must do more than apologize and be truthful about past sins. Leadership experts James O'Toole and Warren Bennis caution that trust requires more than honest behavior from leaders. Rather, it takes cultures that reward honesty and punish dishonesty. They note that "a new metric of corporate leadership will be the extent to which executives create organizations that are economically, ethically, and socially sustainable."
And as President Ronald Reagan once advised, "Trust, but verify."