This is “Trustworthy Leadership Is Valuable and Rare”, section 3.4 from the book Beginning Organizational Change (v. 1.0).
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To secure competitive advantages today, organizations need valuable and rare resources. Previous research has demonstrated that trustworthy leadership is not only valuable; it is also rare.Barney and Hansen (1994). For example, recent research has shown that trustworthy leaders are often able to establish trusting climates within organizations, and that the higher the trust level, the more profitable the organization is.Burton, Laurdisen, & Obel (2004). Furthermore, other research has demonstrated that trustworthy leadership speeds up the decision-making process as well as the implementation speed of new strategies.Roth (2008). This suggests that trustworthy leadership helps to assure not only the organization’s survival but also its future prosperity.
Fortunately or unfortunately, trustworthy leadership is relatively rare within today’s organizations. In a recent national poll, it was revealed that 80% of Americans do not trust the executives who lead major corporations. Even worse, roughly half of all managers do not trust the top executives in their own firms.Hurley (2006). In another national survey, 62% of all workers claim to have no aspirations to any leadership role within their organization because they perceive the leaders to be untrustworthy.Harris (2010). Clearly, having a trust gap between consumers and corporations is problematic, but it is even more challenging when middle managers and frontline employees lack trust.
There are many reasons given for the rareness of trustworthy leadership within today’s organizations. Clearly, many executives did not act in a trustworthy fashion in the aftermath of the Enron, Worldcom, and AIG scandals.Pellet (2009). Indeed, some observers even declare that “trust is dead.”Kempner (2009). While I personally do not believe that trust is dead, I do agree that the level of trust that Americans have for their leaders is not very high.
Another reason given for the lack of trust in today’s corporate leaders is the view that compensation levels are becoming excessive, and that executive leaders are greedy and self-serving above all else.Williamson (2008). While many workers have been laid off in recent years, or are assuming increasing duties with no pay increases, executive compensation has been increasing dramatically. Clearly, the perception of injustice and unfairness on the part of executive leadership is not conducive to fostering trust and cooperation among the rest of the organization.
A third common reason why it is getting harder to trust executives is because the shareholder value ethic is eroding the trust of the general public, especially in publicly held corporations. The consulting firm McKinsey notes that building trust among key stakeholders is a strategic concern for any corporation, and that generalized stakeholder trust is a major competitive advantage since it is so rare.Bonini, Hintz, & Mendonca (2008). In sum, trustworthy leadership is not only valuable; it is also rare. The good news here is that when the strategic leader is viewed as trustworthy, a noteworthy competitive advantage is generated.