Blog: 3 Things Every Leader Needs to Know About Trust, the No. 1 Leadership Competency


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In his 1996 book “Trust: Human Nature and the Reconstitution of the Social Order,” Stanford political scientist Francis Fukuyama described the difference between high-trust and low-trust societies. In a nation or community with a low-trust culture, people take extra steps to compensate for the lack of trust. Often, they use the legal system as a substitute for trust — but that approach is a slow and costly alternative to collaboration based on trust. “Widespread distrust, in other words, imposes a kind of tax on all forms of economic activity, a tax that high-trust societies do not have to pay,” he wrote.

 

Fukuyama’s insight is just as relevant to organizations and teams. High trust is the ultimate accelerator and performance multiplier, while low trust is a tax on every project, initiative and relationship.

 

Case in point: A large company that invests heavily in research and development has focused on building a high-trust culture for more than three years. Senior leaders report that higher trust increased the company’s speed to market for a lucrative product by a full year — a stunning result in terms of revenue and profitability.

 

Numerous studies have linked trust to greater innovation, employee engagement and financial performance. But in the United States and around the world, people have become less trusting in recent years. A 2019 Pew study found that 71% of Americans thought trust was lower than it was 20 years earlier. Such interpersonal distrust extends into the workplace — many are equally skeptical of organizations and institutions. Yet, despite the decline, 71% of Americans said it’s better in most situations for people to work together with others, compared with 29% who said “it is better to be self-reliant.”

 

In an era when trust is hard to come by — and more important than ever, as we work to solve vital and unprecedented problems — leaders at all levels need to understand three fundamental truths about trust:

 

1. Trust Is an Economic Driver

 

Indeed, it’s no exaggeration to say that trust is the economic driver — in fact, it has become the coin of the realm. A recent study by Accenture, which studied 7,000 companies over two and a half years, found that if trust declines in an organization, the organization will experience a material decline in both revenue and EBITDA (earnings before interest, taxes, depreciation and amortization). The reality is that most organizational performance issues are actually trust issues in disguise.

 

Leaders — from first-time managers to C-suite executives — must understand that trust is inextricably tied to all the success metrics they care about. If you have a low-trust culture, you can force people to coordinate, and you might even be able to get them to cooperate to some extent. But you can’t force them to collaborate — and without trust, they couldn’t do it if they tried.

 

High-trust organizations are more profitable, because trust fuels collaboration, which translates into far greater speed and innovation. A 2016 LRN study found that employees in high-trust organizations are “thirty-two times more likely to take risks that might benefit the company” — and 11 times more likely to innovate than employees at competing organizations.

 

When you stop paying the low-trust “tax,” your organization becomes more efficient. One technology company credits higher trust with a 30% decrease in operating costs.

 

2. The Trust Problem Is Not “Out There” — It Starts With You

 

Trust works from the inside out, which means that as a leader, you must examine yourself — and change your own behavior — first. We have 15-plus years’ worth of data to back up that statement.

 

If you’re a leader, especially a senior leader, you can’t “PR” your way into a position of trust relative to your employees. It just doesn’t work. Study after study has shown that people don’t leave organizations — they leave bad bosses. If employees don’t trust their immediate supervisor, it’s unlikely they’ll trust senior leadership or the company as a whole.

 

Trust has to be part of the culture and part of how leaders and managers operate on a daily basis. Most of the time, it’s not monumental ethics violations that destroy organizational trust; it’s small, seemingly inconsequential acts and behaviors that erode trust over time. Thankfully, the converse is also true: Employees who trust their team leader are 14 times more likely to be fully engaged at work, according to 2020 research by the ADP Research Institute. And since trust is reciprocal, employees also need to feel that their leader trusts them.

 

3. Your First Job Is to Inspire Trust, and Your Second Job Is to Extend Trust

 

I’ve said for years that trust is the No. 1 leadership competency. It’s a bold statement; there are a lot of important leadership competencies out there. However, if you’re able to inspire trust, it will make you better at every other leadership competency. If not, the lack of trust will dilute and diminish every other leadership competency you develop.

 

To inspire trust, you have to be credible. Part of your credibility comes from your professional expertise and track record of results. But those things don’t matter unless you’re also modeling the personal attributes that make people see you as trustworthy: integrity, humility, courage and authenticity as well as vulnerability, empathy and caring.

 

Your second job as a leader is to extend trust. Again, trust is reciprocal. Almost everybody understands what it means to be trustworthy, but few understand the importance of being trusting. We see it every day: two trustworthy people working together with no trust between them. The reason? One of them is not willing to extend trust to the other.

 

- Ask yourself, “What’s my own propensity for trusting others?” The people you extend trust to reveal your most foundational unconscious biases. Whom are you willing to extend trust to?

 

- Practice saying out loud: “I trust you.” “I have confidence in you.” “You can do this. I believe in you.” It’s not enough for you to trust people; they have to know that you trust them. Tell them — and be explicit.

 

- Experiment with extending trust in smart ways. Risk is inherent in trusting, but in most situations, there’s far greater risk in not trusting. However, that doesn’t mean you just blindly trust everyone. Extend “Smart Trust” by pairing your propensity for trust with a careful analysis of the situation, what’s at stake and the credibility of the people involved. And be sure to always extend trust with clear expectations and an agreed-upon process of accountability. That keeps trust smart.

 

What distinguishes good managers from great leaders is their ability to invest in the latent potential of another person — their ability to extend Smart Trust. When people feel that their boss genuinely trusts them and has confidence in their abilities, it’s inspiring. In fact, to be trusted is the most inspiring form of human motivation.

 

Credible leaders know how to build the trust necessary to propel their organization — and the people in it — forward. Share this tool, created by FranklinCovey, to help leaders in your organization develop this critical skill. And, to learn how FranklinCovey can help you build a high-trust culture of collaboration, innovation and creative problem-solving, visit https://franklincoveyme.com/solutions/trust/speed-of-trust.

 

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