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How Leaders Build Trust

Companies with high levels of trust enjoy higher stock prices, improved profits, and better retention of key employees. Here's what trustworthy companies do to strengthen ties.

Trust me. When's the last time you actually believed those words on the job? If your answer is a long time ago, you're not alone. In fact, many people instinctively recoil from those two words—especially when uttered by business leaders or professional colleagues.

A sign of the times, perhaps, but there's a ray of hope—good news, in fact, for leaders looking to make quick progress in building trust in their organizations.

First, I'll share some perspective on the challenge leaders face regarding trust.

The Downward Spiral

Trust—and its close-cousin, confidence—is way down everywhere you look. In fact, confidence in most of the 16 public and private institutions tracked by Gallup has either remained flat or decreased this year.

Four years of research into the overlapping areas of trust, leadership, and collaboration conducted by us at Interaction Associates has shown steady erosion in the level of trust people feel at work. Trust took a nosedive in 2009 and has continued to decline each year during the recession. The 2012 results show trust at its lowest level since the start of the recession.

The Edelman Trust Barometer has looked at a similar set of questions for a dozen years, and their findings around the decline confirm this grim outlook.

Trust is a necessary component of successful leadership—leaders need trust in order to drive business results. Yet trust in business has been eroding for some time. Judging by many employee engagement scores, employees have been disengaging for at least a decade.

While it's hardly surprising given the economic downturn, layoffs, and employees being asked to do more with less, the decline in trust poses a risk to business results.

But there are important hopeful indicators—and some tangible, highly effective steps for building trust that leaders can take now.

Bright Spots Of Trust

So, what's the silver lining in all this? In the 2009 Trust in Business survey, findings showed that companies with self-assessed high levels of leadership capability, collaboration, and trust enjoyed a premium in their stock's price/earnings ratio of over 25%. In other words, higher levels of trust inside a company correlate directly with higher P/E ratios for that company.

In 2012, looking even more closely at companies with highly engaged and highly involved employees, findings show that high-profitability companies are twice more likely to have high involvement cultures than low-profitability companies.

Another key data point: high-engagement and high-involvement companies are more confident in their ability to retain their key employees—a group that makes a disproportionately large contribution to business results.

Why We Trust

The Building Trust in Business study specifically identifies three reasons why we trust our work colleagues:

  1. Past Behavior: If you've behaved as expected in the past, I trust you to behave that way in the future. In this case "past performance" may very well predict "future returns."
  2. Capability: We trust people based on our perception of their capability, so I trust my doctor to treat my illness because of her training.
  3. Alignment: If you and I are trying to achieve a common goal, I'll trust you to do your part. Soldiers trust each other with their lives, because they are pursuing a shared goal.

While all three reasons frequently come into play, in high trust organizations, alignment was cited as a trust driver by over 90% of the companies.

How Leaders Build Trust

Building trust doesn't happen overnight—but there are important steps leaders can take to foster a more trusting climate. Steps that do impact business results.

Here are three important steps to consider:

Involve people in decisions that directly affect them. When people are involved in a decision, even if they don't make the final call, they are more likely to support the decision. This means bringing people in before you've made the decision. If you've already made the decision, and you're not open to changing your mind, don't go through the motions of bringing people into the process. You won't get buy-in. In fact, people will feel conned. On the other hand, treating people as capable adults shows you trust them to be part of good decisions. They'll trust you more in return.

Be transparent and consistent in your actions. We tend to focus on outcomes and ignore the process. Understanding how a decision was made, and the thought process behind that decision, can have a huge impact on how people feel about the decision. In one study, employees who understood how their performance bonus was determined were more satisfied than employees who received more money, but didn't know how the bonus had been determined. If you are transparent and consistent, people will see your motives and learn to rely on you.

Pay attention to relationships. It's a given that people join companies but leave managers. The connection between employees and managers makes a huge difference in the degree of engagement and involvement people will feel. If people know you understand what matters to them, they'll trust you to act in ways that align with their interests.

Those strategies work. Trust me.


Andy Atkins is the Chief Innovation Officer of Interaction Associates, a global leadership development firm headquartered in Boston.

[Image: Flickr user Mo Riza]