What do the following have in common: Banks, The Tooth Fairy, Wall Street and Leadership?
Their existence is based on trust and belief; when trust and belief are shattered their magic vanishes.
The recent collapse of the stock and credit markets isn’t that different from discovering that the tooth fairy was Mom and Dad. When investors learned that investment banks created “tooth fairy” products, trust vanished and the world’s financial system cracked, creating a global financial shock wave.
For years I constantly heard that business was about the “hard stuff” (numbers and profit) and the “soft stuff” (people and feelings) was derided. It’s interesting to see how one feeling, trust, could have such a dramatic affect on the pinnacle of hard stuff, our financial systems. This realization, that all the “hard stuff” couldn’t stop the global financial tsunami caused by the absence of trust, should have all leaders and businesses take heed.
Trust spirals up — or down
When trust is lost, fear rises and our normal reaction is to withdraw seeking shelter and protection. A bank cannot existence unless it has the trust of its depositors. If you lose trust in your bank, you withdraw your money. And if enough people feel like you, that institution will collapse. Trust, distrust and fear are contagious. Recently, as trust sank and fear rose, the financial crisis spread quickly across the globe.
Leadership, at its core, operates on the same principles. Highly effective leadership is built on a foundation of trust. While professional expertise and knowledge (hard stuff) are factors in building trust, high trust relationships are constructed on an interpersonal level. Leaders who value and understand the needs of their people as well as their balance sheets are able to build vibrant and healthy organizations that can withstand market forces. Unlike the tooth fairy, which most of us have never seen, high trust leaders are visible, accountable and keep their commitments. They are congruent in words and actions; they are empathic and transparent.
Leaders who choose to ignore trust (or under-value this asset), do so at their own peril as well as their organization’s. Leaders must work at building trust everyday to sustain a climate where employees invest instead of withdraw their commitment and loyalty. Just as investors leave banks when trust errodes, so too do employees leave leaders.
Employee withdrawals, literally and figuratively, occur on many levels, and all are serious impediments to an organization’s competitiveness. Employees can physically leave or they can withhold their physical, mental and emotional investments, resulting in reduced levels of engagement, creativity, and customer service. Low trust also affects other performance metrics such utilization of sick leave and team morale; leaving an organization vulnerable to the pressures of competition and other market forces.
On the other hand, Relationship-Centered Leaders know trust is a bottom-line asset and treat it as such. They are trustworthy, they build trust, and their organization’s flourish — when others are going the way of the tooth fairy.
- Case: Safety & Quality in Chemical Manufacturing - October 29, 2013
- Trust: The Spiral of Investing (in People!) - December 9, 2008