Leaders: Trust Gives You A Competitive Advantage, So Why Not Promote It?

By HEC Paris Insights, Contributor
“When millennials believe their company has a high-trust culture, they are 22 times more likely to want to work there for a long time.” Shutterstock

The past ten years have seen an increase in skepticism and pessimism over the societal role of business with regard to the critical challenges of our times, be they ESG related, political or environmental.

Only 48% of respondents in the Deloitte global 2021 survey on millennials and Gen Zs believe business corporations behave ethically, a drop of 17% over the past four years. Similarly, a mere 47% believe business leaders are committed to a better society, down from 62% the previous year. It’s not that they think business leaders’ discourse on stakeholder capitalism is insincere, mind you, it’s that these generations “want to see concrete impact to match corporate promises.”

For organizations that want to do well while doing good, which want to spearhead change and have impact, the recurring question is: what can be done?

Rampant skepticism finds its roots in a lack of trust. Trust is the cement of social cohesion, “When millennials believe their company has a high-trust culture, they are 22 times more likely to want to work there for a long time,” concludes a 2018 Best Workplaces for Millennials survey. Its authors add: “At companies where managers show sincere interest in millennials as people, the organization sees an 8x improvement in agility and a 7x improvement in innovation capabilities.” So trust isn’t only a good thing for a society, it’s good for business.

The S.H.I.F.T. Framework For Trust

For years, we have been studying organizational trust at leadership level and find it to be a vital yet complex and fragile construct requiring persistent attention, supportive processes, routines, and skilled governance. Trust is the driver behind other levers of competitive advantage. My research, begun years ago while with Duke Corporate Education in Asia, and developed since at HEC Paris, points to the following:

-      Trust is the platform for speed, which requires us to make decisions in complex and ambiguous situations. 75% of CEOs interviewed in our research said the key to business success is the ability to respond quickly enough to new market needs, often dictated by external factors such as politics, economics and competition. This speed of response is only possible if there is trust in the people and decision-making mechanisms, be they intuition, innovation or deep market research.

-      Trust operationalizes the diversity which feeds into human centricity. This plays out both internally in the way organizations embrace employee wellbeing, diversity, inclusion etc but also in the way in which they work with their customers to design the best product or solution.

-      Only trust can build the imagination needed to innovate, experiment and, yes, sometimes fail. Allowing failure to happen is counter-institutive at the organizational level as it is time consuming and expensive. Organizations are designed to be efficient. Supporting innovation requires trust that employees will propose feasible solutions and that organizations will back great ideas.

-      And trust stimulates the flexibility companies must have to manage interconnected and complex systems of multiple stakeholders. This goes beyond partnerships with external stakeholders, but as the recent pandemic demonstrated, calls for flexibility in work arrangements. Furthermore, it questions several aspects of in-person management: our ways of leading and managing teams, the need for office space, the way in which we delegate and organize workflows, the way to direct teams across the world. As a result, new forms of work are emerging.

A Trust Signature Springboard Towards Generational Change

To gauge trust at a granular level, recognized leaders shared with us their trust quotient, both internally and externally. This ‘trust signature’ builds bonds with employees and broader stakeholders. It goes beyond personal integrity by encouraging accountability and transparency. These leaders have become role models thanks to a core of strong values and guiding principles they uphold on a daily level. They encourage employees to have a sense of ownership and faith which motivates their work. Furthermore, they motivate them by demonstrating empathy and impeccable ethics.

At HEC Paris business school, we aim to develop our participants and students’ trust signatures as these future business leaders focus on purposeful leadership and inclusive growth. We seek to guide them on transformational missions and priorities, sometimes by exploring innovations in the circular economy, sometimes by changing our entrepreneurial culture through meaning and purpose, what we’ve called Purposeful Leadership. For, make no mistake, these millennial and Gen Zs are seeking to drive change by rebuilding trust between stakeholders and across public and private partnerships. Or, as the Deloitte survey concludes: “From #MeToo to Black Lives Matter, from convening marches on climate change to the Arab Spring, from demanding eco-friendly products to challenging stakeholder capitalism, these generations are compelling real change in society and business.”

Anne-Valérie Corboz is Associate Dean at HEC Paris Executive Education.

Daniel Brown is Chief Editor at HEC Paris.

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