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The erosion of trust and what to do about it

Erosion of trust can have disastrous consequences

Trust is eroding in our society--for leaders, corporations, institutions, governments and each other. And the consequences may be far more damaging than changes in interest rates, GDP or unemployment levels.

The World Economic Forum's bi-annual survey on trust in governments, corporations and global institutions, conducted by GlobeScan Incorporated, showed that trust in a range of institutions has dropped significantly in the U.S. since 2004 to levels just after 9/11. The poll also reveals that public trust in all national governments (except Russia) and the U.N. has fallen. In the same period, public trust in companies has eroded. Recently a report from Germany indicated that corporate giant Deutsche Telekom spied on thousands of its own employees' and Directors' phone messages in an attempt to identify the source of leaks to the media.

According to a FedEx poll, 40% of people say they have little or no trust in corporate America, with 47% feeling that way about Fortune 500 CEOs. The same survey asked respondents to identify a single phrase from a list that would engender the most trust in a company. They chose "ethical business practices," with "sound moral compass," coming a close second.

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The Leadership Quarterly reports that a study found many bosses today are seen as dishonest. The report cited that 39% of those surveyed said their supervisors had failed to keep promises; 37% said their supervisors had failed to give credit when due; and 33% said their supervisors had blamed others to cover up mistakes or to minimize embarrassment.  The authors of the report, from Florida State University, posed the question of whether these kinds of behavior are a reflection of an increasing "it's all about me" society and an increasing lack of honesty and trust.

Bronwyn Fryer, writing on the issue of trust, in the Harvard Business Review,  says that "the business world is shaking like a Wittenberg church door. And no wonder: we're about to undergo a Reformation. Our faith is shaken to the core; our sense of normality unhinged. Wall Street lies in metaphorical rubble. The greatest banker who ever lived, Alan Greenspan, says he misunderstood market mechanics. Jack Welch says focusing on share price was a dumb idea. The future of capitalism itself is in question." 

In their book, The Trusted Leader, Robert Galford and Anne Siebold Drapeau identify three categories of trust within an organization and emphasize how a loss of trust by employees for their leaders can weaken and even destroy an organization.

Stephen M.R. Covey, in his best selling book, The Speed of Trust: The One Thing That Changes Everything argues that trust everywhere is in decline, and cites a 2004 estimate that the act of complying with U.S. Federal rules and regulations along "put in place essentially due to a lack of trust-at $1.1 trillion," and points to a study by the Association of Certified Fraud Examiners which estimated that the average American company lost 6% of its annual revenue to fraudulent activity. In contrast, a Watson Wyatt study showed that high trust companies outperform low trust companies by nearly 300%.

So what is the nature of trust?  Trust between people, within organizations and countries is based on the perception that efforts between the parties will be reciprocated, and that reactions will be predicable and produce a sense of security for the parties.

Covey argues that the first job of any leader is to inspire trust born of character and competence. Character includes integrity, motive and intent. He cites the high trust business deal between Warren Buffet and his company Berkshire, which acquired McLane Distribution for $23 billion from Walmart, a deal that was completed in a two hour meeting and a handshake with all the paperwork completed within a month.

The 2010 Trust Barometer Survey by PR firm Edelman, found that people believe that trust, transparency and honest business practices influence corporate reputations more than the quality of products and services or financial performance.

Dennis and Michelle Reina, authors of Trust and Betrayal in the Workplace, have developed a model of trust, which provides an organizational roadmap describing what they term "transaction trust," based on the key elements of honesty, transparency, admission of mistakes and communicating with good purpose.

Kurt Dirks, a professor of organizational behavior at Olin University has researched the issue of trust, and published his findings as In the Face of Adversity: Trust in Leaders is Essential for Performance. He shows how trust increases productivity. Dirks concludes that "people will forgive a leader who comprises their trust because of a lapse of competence, but not with lapses of integrity." He says that to demonstrate integrity, leaders must do what they say they will do; live up to the values and beliefs they aspire; and be true to themselves.

Kiernan O'Hara, author of Trust: From Socrates to Spin, argues that there is clear evidence trust is declining across Western economies, the cause of which he describes as the "expectation gap." This gap is describes as the result of people expecting that more needs to be done for them that is actually feasible or desirable, which results in a loss of trust when the expectations can't be met.

It's very apparent that the ability to restore, establish, and grow trust among stakeholders in our organizations an institutions is the critical challenge now facing us today.  We desperately need the torch to be picked up by courageous leaders and sustained by all of us in our daily lives.

Web: http://raywilliams.ca

Twitter: http:/twitter.com/#!raybwilliams

 

 

Ray Williams is the author of Breaking Bad Habits and The Leadership Edge.

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