Value Inside

Late last year, the New York Times published a series of reports based on Harris and Roper polls. In one report, the Times noted that a grand total of 2 percent of survey respondents felt that Fortune 500 CEOs were “trustworthy.”

It’s hard to imagine a clearer message that Fortune 500 senior executives have a major credibility issue with the public.

That presents a problem with cascading implications because it’s likely that these “public opinions” have roots deep within the organizations themselves.

Lack of trust on the outside usually mirrors a lack of trust on the inside. And if employees don’t trust their top managers, then sustainable value creation of any kind will be compromised.

The company has launched a major new social/good initiative? “Sure it has; but it’s probably a PR stunt.” The company has agreed to partner with a nonprofit to provide global disaster relief, or alleviate suffering in a particularly hardhit region? “That’s well and good, but it’s not doing much to help its own employees.” Value has to be built internally first, or even the most generous of external efforts will not ring true and may not gain the traction needed to succeed fully. So what can be done?

First things first: Top managers have to understand that the survey results apply to them, whether or not they think they do. The tendency is to read a public-opinion survey and assume that the results are skewed because of a few major scandals at “other organizations.” But that’s a dangerous assumption.

Fred Reichheld, of the Bain and Co. consulting firm, has recently done some outstanding work with regard to customer satisfaction. He has found, essentially, that customer satisfaction, as tracked by surveys and the like, is not as great a measure of the health of customer relationships as is the customer’s willingness to actively recommend the company’s goods or services to others.

My corollary to Reichheld’s work is that the same is true of a company’s relationships with its employees. If your employees don’t feel good enough about their workplace to encourage others to work there and to generate some positive spin on their own, then there’s room to strengthen trust internally, even in the absence of a scandal. Do you know if your employees could and do recommend the company? You’d better find out. Companies, and their top managers, rarely get the “benefit of the doubt” these days.

Second, top managers need to understand what trust inside a company looks like. In any organization, there are essentially three types of trust. There’s strategic trust (trust, for example, that your company is in the right businesses, is making the right things, selling the right things, serving the right customers). There’s organizational trust (that is, trust that the company has the right systems and processes in place to carry out its strategy). And there is individual trust (trust that you and the other people leading the organization are regarded as personally trustworthy).

Put another way, inside any organization, there are issues of trust between employee and employer with regard to the employer’s judgment, capabilities, and personal motives and intentions.

Third, top managers have to take explicit steps to build trust inside their organizations.

The first two of the three types of trust can be strengthened or repaired fairly readily. If employees lack or lose strategic trust, but the company’s performance improves, then that trust is on the mend. If the ability to execute had been
compromised but then is repaired (with new processes, measurements, or systems), then organizational trust gets a boost.

But when people begin to question the intentions and motives of the top managers, the road to recovery is far more difficult. The financial returns may be solid and the processes may be seamless, but the infrastructure of the organization can splinter, unnoticed, until the inevitable fracture is too big to fix.

That’s why senior managers have to work to be sincere, to integrate internal and external value creation, and to do all of the above visibly.

Sincerity_ One of the Marx brothers, either Karl or Groucho (I don’t know which), said: “The most important thing in the world is sincerity. If you can fake that, you’ve got it made.” Any campaign or effort to build value on the part of the company simply has to be sincere. It’s not even enough to do something just because it’s the right thing to do. A belief in the effort has to permeate the organization. The weakest links (in terms of that belief) must be addressed. If they’re not, someone (the press, for example) will discover them and “out” them, and the effort will fall short.

Integrating internal and external value-creation_ We’re all familiar with companies that “do good” in the world and seem, at the same time, to leave their own employees twisting in the wind. We know these companies (or we think we do) because we hear about them – in the press and, increasingly, from the employees themselves, who are increasingly willing to stand up and be heard. Those companies have not integrated their value-creation efforts. Here’s an example of the flip side: British Petroleum (BP) was the first major energy company to acknowledge that carbon-dioxide emissions had to be addressed. The company has been vocal about the global need to reduce those emissions. Internally, BP has met targets to reduce its own carbon-dioxide emissions (at its own plants) nine years ahead of schedule. The company’s external initiatives are matched by its internal initiatives, and as a result, both get a trust booster.

Visibility_ This isn’t about having an open-door policy. By visibility, I mean that a company has to be able to talk about what it is doing and not just run through a scripted campaign. Think about the opening of a blockbuster movie for children. The movie, the action figures, the clothing, the trinkets that come with fast food – all of these things converge at the same time. The same idea applies here. If an effort is internal and external, if employees are supportive, if even those corners of the company that might not be involved or supportive at least understand the value of what is being done, then an effort is much more likely to result in increased trust and better results across the board.

Improving trust all around can have a positive effect on those poll results mentioned at the top of this article. With continuous effort, the results can be seen favorably in the most meaningful poll of all–in how your tenure as leader is perceived by others and in the legacy you leave your employees and colleagues in terms of behaviors they’ll take forward.

Robert Galford, managing partner of the Center for Executive Development in Boston, has taught in executive education programs at Columbia, Kellogg, and Harvard. He is the co-author of The Trusted Advisor (with David H. Maister and Charles H. Green) and The Trusted Leader (with Anne Seibold Drapeau). His latest book, which explores the legacies that all leaders leave, will be published by Harvard Business School Publishing this year.