The economy of trust

Regaining trust in our leaders

Numerous publications highlight and list the value of trust and there is no shortage of recommendations for building trusting relationships. Yet, international surveys show a continuously declining level of trust in leaders and organisations. Only one in four general public respondents trust business leaders to correct issues and even fewer – one in five – to tell the truth and make ethical and moral decisions. Government leaders score even lower across the board. ^[1]  

Trusting is a key component of human life. It emerges in response to consistent action and behaviour demonstrating good intent. Trust means confidence in someone or something. Distrust, the opposite of trust, is suspicion. We need and use trust in different forms in all areas of life. We need to trust ourselves and others to make choices that will have an impact on our lives and on the lives of others today and in the future. There are plenty of examples of trust as a scarce resource and it is often noticed and defined by its absence.

We easily pick up signals of suspicion and are acutely aware of the contractual limitations of trust in organisations. Without trust, the workplace is a group of individuals who focus on personal survival rather than creation and contribution. Research in the field of knowledge management and knowledge creation conclude that trust is a prerequisite to creativity in an organisational context. If we are to make the fullest use of the knowledge locked in our minds we need to trust and be trusted. We need to feel protected and cared for so that we can focus our energies on creation rather than survival^[2].

If an organisation expects its people to be fully productive through hard work and commitment, it will ultimately have to convey a message of protection, security and demonstrate good will.^[3]

Trust is tangible

Trust is not a ‘nice to have’ extra in business but a necessity. Leading Author and educator Stephen Covey ^[1]  argues that there are quantifiable economic benefits of trust and also quantifiable costs of distrust, so it makes business sense to take a pragmatic look at the level of trust around us and consciously invest in building trusting relationships. Trust is an indispensable factor and it is both tangible and quantifiable.

↓Trust = ↓ Speed   ↑Cost

When trust goes down speed also goes down and cost will go up. If you do not trust a supplier for example but you need their product you will spend longer time protecting your interest and will draw up a detailed contract involving legal experts. It will cause delays and add to the costs.

↑ Trust =  ↑ Speed  ↓ Cost

When trust goes up speed also goes up and cost will go down. If you have a supplier that you trust elaborate contracts will not be necessary. Speed will go up and the cost of the business deal will go down.

There are different ways to conceptualise trust. Some authors^[2] suggest that to build trust we need:

ability (knowledge, shills, professionalism), benevolence (showing interest, recognising individual needs, being approachable), integrity (personal and organisational values, ethical behaviour) and predictability (acting consistently, walking the talk)

The Covey model of trust

Covey believes that trust is a function of character and competence.[1] Character includes integrity, motive and intent. Competence includes capabilities, skills, results and track record. Both character and competence are vital to trust building. Character is necessary for trust in any circumstance while competence is situational and it depends on what the circumstance requires. For example, you might trust your friend to look after your children, but you will probably not ask your friend to sort out the electricity problem in the house unless they were qualified and had the competence to deal with electric faults.

Covey proposes a Five Waves model of trust. The waves are interconnected and reinforce each other.

1. Self-trust is our level of confidence we have in ourselves to achieve goals, to keep commitments and to inspire trust in others. The key principle underlying this is credibility.

2. Relationship trust is our ability to establish and increase our ‘trust account’ with others. The key principle here is consistent behaviour. This includes behaviours which can be learnt and improved by regular practice, such as straight talking, respect, transparency, honesty, loyalty, delivering results, confronting reality, clarifying expectations, practicing accountability, keeping commitments and extending trust.

3. Organisational trust is about the leader’s ability to create trust in the organisation. The key principle here is alignment. It helps leaders to create structures, systems and symbols of trust that decrease or eliminate redundancy, bureaucracy, politics, disengagement, turnover and fraud. High-trust organisations increase both shareholder value and customer value. They accelerate growth, enhance innovation, improve collaboration, achieve stronger partnerships, better execution and heighten loyalty.

4. Market trust is about the company’s brand which reflects the level of trust of customers, investors and the market at large. The underlying principle here is reputation. It takes a long time to develop a good reputation and it can be lost easily. 

5. Societal trust is about creating value for others and for society. The underlying principle behind this wave is making a contribution. It is the intent to create value and give back rather than to destroy or to take. Contribution is important to a healthy society.

Companies that are committed to building a trusting and transparent cultural reap the reward both economically and socially. Leaders initiating honest reviews of the level of trust in their organisation and are committed to a collaborative, transparent and growth focused organisational culture will be rewarded by a trusting environment with loyal and inspiring colleagues and good economic indicators.