To Build Trust, Ethics are Not Enough

By Michael Maccoby

Published in: Research Technology Management, September-October 2003. Page 59-60

Even before the recent corporate scandals, I wrote about the difficulty of creating trust in companies (“Building Trust is an Art”, RTM, September-October 1997). In the past trust was built on the foundation of corporate paternalism. Employees at companies like IBM, AT&T and H-P, could trust that as long as they performed well they could look forward to continued employment leading to a fat pension. Those days are gone forever.

Nevertheless, the past wasn’t all sweetness and light. Even within the best paternalistic companies, people jockeyed for position and managers couldn't trust everyone to tell them the whole story. In the early 1970s, I interviewed technology managers at IBM who confessed to me that they got themselves transferred from flawed projects rather than speaking up and risking making enemies. The result was wasted effort and distrust among corporate climbers.

Of course, there are degrees of trust, and we can construct a continuum. At one extreme is more than the absence of trust—it’s active distrust, the conviction that someone is dishonest and can’t be believed. That was what resulted in companies like Enron when employees were urged by management to buy stock that became worthless. It also happened to the CEO of American Airlines when employees were asked to sacrifice while executives got special treatment. The CEO resigned; he had lost the trust of the employees.

In the center of the continuum is the kind of trust that is essential for any organization to function: confidence that others can and will keep their commitments. This means confidence in their competence and their integrity. However, this kind of trust can be stronger or weaker, as when Ronald Reagan was dealing with the Russians and said “trust, but verify”. In a company, verification can be taken to an extreme by obsessive managers who feel compelled to check everything they're given by subordinates. If you really need to go over everything someone hands you, you had better either replace that subordinate whose work is not trusted or get out of management into a profession where you don’t need to delegate.

In contrast, the ideal relationship is when you can trust someone beyond the confidence that they can and will do what they’ve promised. It means you can trust that someone wants other team members to succeed. This was what was lacking in some of the IBM managers I interviewed 30 years ago. They didn’t lie and they fulfilled their commitments, but they did not tell their managers the whole story. They were protecting themselves at the expense of others.

A Few Bad Apples

What is the state of trust in companies today? Do employees distrust corporate leaders? The answer appears to be that people blame a few bad apples for the corporate scandals. At least that is the view of MBA students surveyed by Aspen ISIB and reported in the Financial Times (May 26, 2003). The students ranked the flawed personality of leaders as more important than a general lack of commitment to corporate ethics, pressure to deliver shareholder value, or the failure of corporate boards to police management.

Another survey carried out by the Ethics Resource Center of Washington, D.C. and reported in the Financial Times (May 22, 2003), indicates that employees are seeing less misconduct and feel under less pressure to compromise on ethical standards than in 2000 when the ERC carried out its last survey. When staff do witness ethical breaches, they are generally reporting them more frequently and getting a more satisfactory response.

Building Trust Today

By getting rid of unethical leaders and enforcing ethical codes, companies are dealing with distrust. But that does not mean they are building trust, either of the top management or among team members. To do that requires more than doing away with criminal behavior. Since management can no longer promise lifetime employment and may be forced to eliminate your job, how can leaders gain your trust?

Charles Heckscher, a professor and director of the Rutgers University Center for Workplace Transformation interviewed middle managers who were being ”downsized“ at major corporations in the mid ’90s. (White Collar Blues, Basic Books, 1996). He found that even though the managers were losing their jobs, they still trusted those executives who explained convincingly the business reasons why they were being fired. Studies at Shell find that trust of top management by employees depends on both understanding why decisions are being made and involvement in decisions that affect them. In other words, management can avoid distrust by enforcing rules, but it will build trust only by practicing transparency and increasing participation.

Of course, this will not resurrect the old paternalistic trust that management cares about you. Employees today recognize that they must, to a large degree, see themselves as contractors to a company. Good contractor want to do excellent work. They may hope for long term contracts, but they know they may have to seek new employers at any time.

A Culture of Trust

Let’s suppose top management of a technology firm understands all the above and is able to clear away distrust and start to gain trust from employees. How can management go further to create a culture in which team members trust each other, so that they’ll share doubts about a project, so that their data and information can be trusted and that they want to help one another and the company to succeed? This kind of trust becomes especially valuable in networked organizations where people who rely on each other do not regularly work face-to-face. Furthermore, in technology companies, you often have to depend on colleagues who know a lot more than you do about their specialties.

Building a culture of trust calls for leaders with a high level of strategic intelligence who create learning cultures where people are not afraid to make mistakes and understand that change is a constant. (See my article, “The Seventh Rule: Create a Learning Culture” RTM May-June 2003.) Another way to think about building trust has to do with raising the psychological level in a company from what the developmental psychologist Jean Piaget called authoritarian-egocentric to a cooperative-reciprocal way of operating. Bureaucracies reinforce authoritarian-egocentric behavior, where subordinates look to an authority for wisdom and see their peers as rivals for the boss’s favor.

Reciprocal behavior is reinforced by games that require trust among peers. Consider a professional baseball team. To execute a double play, the shortstop may flip the ball to second base without even looking there. He trusts that the second baseman will be on the bag. Players can put themselves into the roles of other players and recognize how they need to cooperate with each other. Information is fully shared.

Not all teams develop reciprocal trust. It takes visionary leadership, like that practiced by Phil Jackson with the Chicago Bulls and LA Laker basketball teams (see my book, The Productive Narcissist, Broadway, 2003, p 107). Jackson develops reciprocal trust by encouraging his players to get to know each other well and to understand each other’s role within his system of play.

Principles To Follow

I don’t believe there is any sure-fire formula for building a culture of trust within a company, and the process never ends. But I suggest following these principles:

Everyone on a team knows the goal and the strategy for getting there.
Everyone knows how both team and individual performance are scored and rewarded.
Everyone on a team knows the rules or operating principles and can question whether commands or decisions are consistent with these principles. One way of developing this is Russell Ackoff’s circular organization where each manager has a board composed of subordinates, superiors and representatives from other parts of the company (see his book, The Democratic Corporation, Oxford 1994).
People feel they are being treated fairly. If some individuals are given special treatment, the reasons for this are known and considered justifiable.

All this being said, there are further challenges for a technology company. Leadership must not only avoid distrust, not only create a cooperative-reciprocal culture that strengthens trust; leaders must also create trust in their products, customers, with their suppliers, as well as investors. Creating trust is an essential job for leadership and it demands much more than ethics.