Public trust in businesses is at an astonishingly high level. Some 62% of people polled by Edelman in May said they trusted businesses, more than the level for NGOs (58%), government (56%), or media (51%). A remarkable 77% of those surveyed said they trusted their own employer.
What is the exact nature of such trust? How can companies and leaders nurture it? And what can they do when they’ve lost people’s trust?
Those are the core questions addressed in The Power of Trust, published this month by Sandra J. Sucher and Shalene Gupta of Harvard Business School. The book is timely given the importance of trust as organizations try to bring employees along for the return to the workplace and other changes. Packed with anecdotes and case studies, it lays out the components of trust—though it’s unclear how new or practical the takeaways are for managers outside of moments of intense crisis.
“Trust in business refers to our willingness to be vulnerable to the actions of an organization,” write the authors. They identify four things that matter for trust:
- Competence—Can someone trust that an organization, or a leader, has the skills and ability to deliver what’s expected, and innovate and adapt over time? This is a necessary foundation for most trust.
- Motives—Is the company or leader motivated by serving the interests of others and not just themselves?
- Fairness—Do they treat others fairly?
- Impact—Do their actions lead to positive or negative impacts, and do they take responsibility for them?
“The more elements on which you perform well in the eyes of your employers or customers, the better,” Sucher and Gupta explain. (p. 27)
Fairness is among the most abstract and subjective of the elements, and the chapter dedicated to it is a highlight of the book. Drawing on another researcher’s work, the authors identify four dimensions of organizational fairness:
- Procedural fairness—Is the decision-making process consistent, accurate, and informed by the views of those who will be impacted?
- Informational fairness—This involves clearly explaining the reasoning and being truthful in communicating. Researchers found this was the most important ingredient for employee trust. “Helping employees understand why a difficult decision was made and why this was the best way to go can help employees accept it,” write Sucher and Gupta (p. 100.)
- Distributive fairness—Is the outcome fair, in terms of the resulting allocation of resources and pain points? The authors suggest some useful questions to ask employees to assess whether they perceive decisions around compensation to be fair, such as “How do you assess the outcomes we achieve through our pay and promotions processes—are they fair?” (p. 111.)
- Interpersonal fairness—Are people treated with respect and consideration along the way?
The authors spend much of the book exploring how to recover trust when it’s lost. “Trust can be regained, but regaining trust is the result of hard, careful, relentless work that never ceases,” they write (p. 185.)
When it comes to apologies, research shows that the most critical elements are taking responsibility, offering to repair any harm, and then explaining the reason for the mistake.
To be sure:
- The Power of Trust is primarily concerned with how organizations and leaders can maximize others’ trust in them. It’s less focused on trust as a central element of individual personal relationships, including those in the workplace. (The authors’ HBS colleague Tsedal Neeley wrote in her recent book Remote Work Revolution about how trust between team members develops, and can be accelerated.)
- The book doesn’t contain a breakthrough idea, though it’s sensible and could be practically useful if you’re navigating a crisis.
Memorable facts and anecdotes:
- Johnson & Johnson’s response to the 1982 Tylenol scandal is perhaps the best-known case study in recovering public trust. But many people don’t realize there’s a sequel in 2009 and 2010, when a J&J subsidiary flubbed its response to quality control problems with Tylenol, Benadryl, and Motrin that reportedly caused sickness and required recalls that cost the company an estimated $600 million in revenue. “Trust, it turns out, is not a constant: it waxes and wanes, and good behavior in the past does not guarantee protection from mistrust in the future,” the authors write. (p. 17)
- Economists Stephen Knack and Philip Keefer estimated that each 15% rise in the number of people in a country who think others are trustworthy increases average income in the country by 1%.
- A study of college basketball teams found that players’ trust in their coach was a determinant of how many games the team won. The team with the highest trust in its coach won the championship.
- Researchers found that the level of trust by employees in managers of Holiday Inn hotels correlated with higher revenue. When the assessment of trustworthiness improved by one-eighth of a point on a one to five scale, revenue was $250,000 higher at the hotel.
- Financial services company HDFC completely dominated India’s market for housing loans until the 1980s, when it helped fund the creation of three rival lenders with the aim of creating a home-lending industry. HDFC’s market share fell, but its growth remained the same.
- After 20% of workers were laid off in an experiment, productivity among layoff survivors—who were told the layoffs were random and motivated by cost cutting—dropped by 12%.
- After disastrous layoffs in 1999, Michelin in 2003 developed a restructuring planning process that various stakeholders including employees and local officials could participate in. It involved them in the decision and allowed them to propose alternatives to shuttering a plant.
- Fidelity found that customers were more loyal to the financial-services company if it made a mistake and fixed it than if Fidelity didn’t make the mistake at all.
- Firing the CEO of a company after a trust betrayal increases its trust scores. But the same increase occurs if the CEO apologizes and gets a pay cut instead of being dismissed. “Our main interest is in seeing the CEO punished, rather than the particulars of how that occurs,” write Sucher and Gupta (p. 175.)
- Students asked about the power their dorm mates held rated most consistently highest those who were most enthusiastic. Kindness, focus, calmness, and openness also correlated with high assessments of power.
The bottom line is that The Power of Trust shines light on the question of how organizations and leaders can cultivate the trust of employees and other stakeholders. It’s likely especially useful for managers as a reference in times of crisis.
You can order The Power of Trust at Bookshop.org or Amazon. (We may make a commission when you buy a book.) All page numbers referenced above are for the hardcover edition.
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