Presented By Rosh Khan, MD
Trust is more than a nice-to-have, soft, social virtue. It is a hard-edged economic driver. Trust – more than Euros, Yen, or Dollars – is the currency of the new, global economy.
The mistake our leaders make – whether in the public sector, private sector, or civil society – is that they don’t often think about trust in economic terms, much less talk about it or implement systems based on it.
When we look around, we see teams, organizations, and institutions that are mired in conflict. We see a lack of collaboration, cooperation, and communication. This doesn’t happen overnight. It stems from something as fundamental as the lack of trust. And the ripple effect can be felt throughout our entire country.
Some may argue that trust should be a given – a character trait we should all strive for. But perhaps that isn’t enough. By shifting the focus and framing trust in economic terms, one might establish a new appreciation for the concept.
At its simplest level, trust will always affect two measurable outcomes – speed and cost.
When trust goes down, speed goes down and cost goes up. This creates a Trust Tax™.
When trust goes up, speed goes up and cost goes down. This creates a Trust Dividend™.
It’s that simple, that predictable.
3 BIG IDEAS ABOUT TRUST
Trust is a Measurable Economic Driver
High trust increases speed and reduces cost in all relationships, interactions, and transactions. High trust also increases value – value to shareholders and value to customers. The data supporting this is compelling.
In a Watson Wyatt 2002 study, high-trust organizations outperformed low-trust organizations in total return to shareholders by 286 percent. High-trust organizations also consistently create and deliver more value to their customers through accelerated growth, enhanced innovation, improved collaboration, stronger partnering, better execution, and heightened loyalty.
This customer value, in turn, creates more value for other key stakeholders. Look at what’s happening in our financial markets today, where there’s a crisis of trust at its core. In reality, trust not only makes the markets work—trust makes the world go ‘round.
Take away trust, and everything grinds to a halt.
Trust is the #1 Competency of Leaders Today
Leadership can also be defined as “getting results in a way that inspires trust.” The first job of any leader is to inspire trust; the second job is to extend it. Extending trust is the behaviour that separates leaders from managers. The vast majority of managers are better at managing than they are at leading. As a result, most organizations today—business, government, and education—are “over managed” and “under led.”
Real leadership doesn’t happen without followers, and people don’t follow managers they don’t trust. Managers are not trusted when they’re not credible or when they behave in ways that dilute trust.
So how do we fix this leadership vacuum? It all comes back to the credibility and behaviour of the individual. When a person is not credible, no amount of “take charge bravado” will compensate for their lack of credibility.
We feel this lack of credibility even with those who are “perfect on paper” – hitting all their KPI’s – but yet something feels amiss. It stems from the lack of trust, often represented in what we might describe with our Guyanese creole as, “meh spirit ain tek he.”
Trust is a Learnable Leadership Skill
Trust, the verb, is a competency — a leadership skill that can be developed.
It is a learnable and measurable skill that makes organizations more profitable, people more promotable, and relationships more energizing. The good news is that there is a road map to establishing trust on every level, building character and competence, enhancing credibility, and creating leadership that inspires confidence.
7 Low-Trust Organizational Taxes™
Let’s talk about the 7 Low-Trust Organizational Taxes. When trust decreases: speed decreases and cost increases. When trust is low, relationships suffer, production is sluggish, customer retention erodes, employee turnover increases, stocks plummet and the costs are enormous.
Locally, if we look at the recent Parking Meter Saga, we saw a surge in distrust towards the relevant authorities. The economic effects on the city of Georgetown were devastating. Had the situation been approached in a trust-first manner, through a series of consultations – “seeking first to understand, then to be understood” – we may have had a very different outcome.
Once we understand the hard, measurable economics of trust, it’s like putting on a new pair of glasses. Everywhere we look, we can see quantifiable impact. If we have a low-trust organization, we’re paying a tax. While these taxes may not conveniently show up on our income statement as “trust taxes,” they’re still there, disguised as other problems.
Once we know where and what to look for, we see them everywhere:
Redundancy : Redundancy is unnecessary duplication. A costly redundancy tax is often paid in excessive organizational hierarchy, layers of management and overlapping structures designed to ensure control.
Bureaucracy: Bureaucracy includes complex and cumbersome rules, regulations, policies, procedures and processes.
Politics: Office politics divide a culture against itself. The result is wasted time, talent, energy, and money. In addition, they poison company cultures, derail strategies and sabotage initiatives, relationships and careers.
Disengagement: Disengagement occurs when people put in enough effort to avoid getting fired but don’t contribute their talent, creativity, energy or passion. (In the USA, Gallup’s research puts a price tag of $250 – $300 Billion a year on the cost of disengagement.)
Turnover: Employee turnover represents a huge cost, and in low-trust companies, turnover is in excess of the industry standard – particularly of the people you least want to lose. Performers like to be trusted and they like to work in high-trust environments.
Churn: Churn is the turnover of stakeholders other than employees. When trust inside an organization is low, it gets perpetuated in interactions in the marketplace, causing great turnover among customers, suppliers, distributors and investors. Studies indicate the cost of acquiring a new customer versus keeping an existing one is as much as 500 percent.
Fraud: Fraud is flat out dishonesty, sabotage, obstruction, deception and disruption – and the cost is enormous.
7 High-Trust Organizational Dividends™
But what about the flipside? When trust increases: speed increases and cost decreases.
When trust is high, customers buy more—more quickly, more confidently, and more often. They stay longer and they refer more of their friends. High trust enables relationships to grow, employee loyalty to soar, stocks to rise, and organizational dividends naturally increase.
When trust is high, the resulting dividend you receive is like a performance multiplier, elevating and improving every dimension of your organization and your life. High trust is like a rising tide, which lifts all boats.
In a company, high trust materially improves communication, collaboration, execution, innovation, strategy, engagement, partnering, and relationships with all stakeholders.
Just as the taxes created by low trust are significant, so the dividends of high trust are equally as compelling. When trust is high, the dividend we receive is a performance multiplier, elevating and improving every dimension of the organization. They include:
Increased value: Watson Wyatt shows high-trust organizations outperform low-trust organizations in total return to shareholders by 286 percent.
Accelerated growth: Research clearly shows customers buy more, buy more often, refer more and stay longer with companies they trust. And, these companies actually outperform with less cost.
Enhanced innovation: High creativity and sustained innovation thrive in a culture of high trust. The benefits of innovation are clear – opportunity, revenue growth, and market share.
Improved collaboration: High-trust environments foster the collaboration and teamwork required for success in the new global economy. Without trust, collaboration is mere coordination, or at best, cooperation.
Strong Partnering: A Warwick Business School study shows that partnering relationships that are based on trust experience a dividend of up to 40 percent of the contract.
Better execution: As the local franchise holder for FranklinCovey in Guyana, we use an execution quotient tool (xQ) that has consistently shown a strong correlation between higher levels of organizational execution and higher levels of trust.
Heightened loyalty: High-trust companies elicit far greater loyalty from their primary stakeholders than low-trust companies. Employees, customers, suppliers, distributors and investors stay longer.
So, as a leader, what is your role with respect to trust?
First, recognize the business case for trust – be an advocate instead of an obstacle.
Second, see leadership as “getting results in a way that inspires trust.” In other words, personally model trust through character, competence, and demonstrated behaviour.
Third, align organizational systems and structures around trust. In the words of Campbell Soup’s CEO, Doug Conant: “The first thing for any leader is to inspire trust.”
Just remember: Nothing is as fast as the speed of trust. Nothing is as profitable as the economics of trust. Nothing is as central to leadership as relationships of trust.
It truly is the one thing that changes everything.
(Article taken from the Guyana Inc. Magazine Issue 27)