To read more from Rodger, visit HIS BLOG.

It’s often said—and rightly so—that trust is earned when actions meet words.

That simple formula is painfully obvious when political “leaders” try to camouflage their incompetence and/or duplicity with circuitous talking points. It’s obvious in divorce court testimony. It’s obvious in customer complaints about poor products and shoddy service.

Like it or not, our world operates on trust. A typical consumer may share credit card numbers and other confidential data with dozens of businesses. Facebook, Instagram and other social media platforms know more about us that we dare imagine.

Trust has never mattered more—especially in our business relationships. Yet trust continues to erode. The 2021 Edelman Trust Barometer reveals an epidemic mistrust of institutions and leaders around the world. A troubling 56% of respondents say they believe business leaders are purposely trying to mislead people by saying things they know are false or gross exaggerations.

Trust is indisputably critical to a thriving society. But it’s fragile—and well worth protecting.

That’s the view of Sandra J. Sucher and Shalene Gupta, coauthors of The Power of Trust: How Companies Build It. Lost It, Regain It.

Sucher is a management professor at Harvard Business School and internationally known for her research in organizational trust and leadership behaviors. She’s also served on corporate and nonprofit boards. Gupta is a research associate at Harvard and previously served as a financial analyst for the U.S. Department of Treasury.

Sucher and Gupta distill two decades of research to provide a framework to help companies understand what trust is and how to earn and maintain it.

Their framework has four components: Competence, Motives, Means, and Impact.

This framework helps explain dilemmas like why people continue to use Uber even though they’re angry about how it treats its employees, or why they continue to use social media platforms they believe are egregiously biased in how they judge the “appropriateness” of content.

Rodger Dean Duncan: The idea of “trust” seems to come in many shades and flavors these days. In the context of people’s willingness to do business with a company, how do you define trust?

Sandra Sucher: Trust refers to our willingness to be vulnerable to an organization with power over us. Trust is a relationship. When we trust, we give people and organizations power over us, trusting that they will not abuse this power.

Often, we take this trust for granted and don’t even realize we are trusting—like when we get on a plane, believing it will take us from point A to point B without crashing. We have no ability to check whether the plane will work and have to trust that we will be safe. It also helps to understand that trust is limited. When we get on that plane, we’re trusting the airline to deliver a safe ride, but not, for example, to get us to or from the airport.

Both of these ideas help operationalize trust. Understanding that trust is based on relationships makes it familiar because we manage relationships all the time. And understanding that trust is limited means we are working on trust in specific situations. This is how other things in business work. Trust is not some magical vapor we can’t grab hold of. 

Duncan: You write that a company’s reputation for trust is based on four components—Competence, Motives, Means, and Impact. How did this particular framework evolve in your thinking, and in what ways are the components interdependent?

Sharlene Gupta: We developed the framework—Competence, Motives, Means, Impact—after studying how situations involving trust played out in companies. We learned that trust isn’t just one thing. The foundation of trust is competence. No one trusts a company that can’t deliver on its brand promise. But after that, we found three other components. Motives matter. It turns out that a lot of mistrust in companies has to do with motives—why companies do what they do, and whose interests they promote and protect. Means matter. People care about how fair companies are in achieving their goals. Impact really matters. Impact is the “on the ground, I can see it with my own eyes” effects of company actions, both those that are intended and those that the company didn’t intend but still caused.

Competence alone is not enough to be trusted. Consider Uber’s history. Motives, Means, and Impact are needed for sustainable growth. They also buy goodwill in the face of missteps. 

Duncan: You note that trust is in the eye of the beholder. How can an organization—or an individual person—operate effectively when the definition of trust is a moving target?

Sandra Sucher

Sucher: It’s not that trust is a moving target, it’s that each group and individual who trusts you has its own reason for doing so. These reasons are generally, well, reasonable. Customers trust that a business will deliver what it promises. Employees trust that companies will be fair as employers. Investors trust that the return they make will be in line with companies’ public statements about business prospects and risks. Communities and members of the public trust that companies will safely manage impacts on them.

To operate effectively, you have to start by understanding why you are being trusted, and to accept that these reasons will differ by group. Doing this is the path to stakeholder capitalism—the belief that companies will be better off when they serve the interests of all of the groups they effect.

Duncan: What can leaders do to model trust behaviors in their organizations and to hold others accountable to high standards?

Gupta: Leaders need to model the behaviors they want to see. They need to be competent, to look out for others’ interests as well as their own, to treat others fairly, and to take responsibility for the effects of their actions on others.

Leaders have one additional bar for trust: they need to obtain their leadership role through a fair process. Once a leader has trust it doesn’t mean that people stop evaluating them—rather, people are constantly evaluating leaders on whether they deserve trust. Leaders don’t have the option of dropping the ball or modeling trust only part time.

Duncan: When trust has been violated, what can a company (or an individual) do to heal the breach?

Gupta: The biggest challenge for leaders is to actually prioritize regaining lost trust, rather than following the well-worn playbook of denial to limit legal liabilities and costs.

The first step is to acknowledge the harm your company has made and apologize for it.

Second is to hold people accountable for what’s occurred. Fixing accountability at the right level is crucial. Organizations are hierarchies, and people reasonably hold the person at the top responsible for trust breaches, especially major ones.

The third step in trust recovery is to identify and fix the parts of the business that led to the breach.

Duncan: In personal relationships, what role does extending trust play in earning and maintaining trust?

Shalene Gupta

Gupta: In our research we found that companies who trusted their employees received trust in kind. For example, after Nokia’s 2008 layoffs went really badly (they ended up paying 80,000 euros per employee to close a plant in Germany), Nokia realized it needed to create a new process for restructuring. In 2011, it built a program for soft-landings which ranged from helping employees find their next job to offering them funding to start their own ventures. By the time layoffs occurred, 60% of 18,000 employees knew their next step.

You might think that because Nokia announced layoffs early, everyone left. But employees actually agreed to stay on up until the last day and keep building innovative products. Sales from new products continued to represent one-third of revenues during the restructuring, which is no small feat.

Duncan: Most every day we see headlines about a company that’s violated the trust of its customers. Presumably, these companies are run by smart people. What seems to be the common elements in their not-so-smart behaviors and practices?

Sucher: The structure of CEO compensation certainly plays a role in aligning leaders’ interests just with shareholders. Yet there are smart CEOs who, despite this, can perform the balancing act that trust requires.

Consider Dave Cote, who, when he was CEO of Honeywell, decided during the Great Recession to use furloughs rather than layoffs. Cote prioritized the needs of customers first, believing that the path to a strong recovery started with making good on Honeywell’s commitments to customers. He then balanced the needs of employees and investors. Employees had to take between one to five weeks without pay, but they got to keep their jobs. Investors were told about the strategy, and while they would have preferred layoffs, Cote knew from two previous recessions that layoffs were a trust-killer and bad for the company in the long run. And when Cote refused a bonus for 2009, all of his direct reports volunteered to do the same.

This balancing act based on trust paid off. Honeywell’s three-year total stock returns between 2009-2012 were 20 points ahead of its nearest competitor, and the kind of turnover that usually comes when a recession ends never materialized.

Duncan: The old saying is that “when you find yourself in a hole, stop digging.” Yet when some companies find themselves caught in trust violations (think Facebook, Twitter, Uber), they issue denials and excuses. Are these cases of sheer arrogance, or do they simply not “get it” when it comes to matters of trust?

Sucher: “Getting it” requires companies to understand the impact they’ve had and to acknowledge that their actions have created harm.

We prefer to think of ourselves as moral, so it’s easy to succumb to moral disengagement by minimizing that harm, explaining how we didn’t really benefit from it, and claiming that everyone does what we’ve done. Arrogance comes when we refuse to engage with others and understand how they view our actions. The fact that other companies can come to an honest reckoning shows that this is not inevitable. It is, in effect, a choice to not be trusted.

Duncan: In considering a job opportunity with a company, how can a person confidently assess the degree to which that company “walks the talk” of its corporate values statements?

Gupta: You really are the master of great questions! We’d recommend taking a look at the company’s actions. Do a news search. What scandals, if any, was the company involved in? How endemic were these scandals? What could have been avoided?

If you can, ask about employee turnover rates. It’s not a great sign if everyone keeps leaving. Take a look at the annual report. If there’s reporting about ESG metrics (environmental, social and corporate governance), it means the company is actually thinking about its impact and how to measure it, even if the results aren’t perfect.           

Duncan: What do you see as the best steps to restoring violated trust?

Sucher: We often subscribe to the myth that trust, once lost, is gone forever. But that’s not the case. Of course, we don’t suggest losing someone’s trust deliberately. But if you have lost someone’s trust, don’t lose hope. You can regain it by starting with a good apology, being accountable, and finally taking a long, hard look at what caused the problem. Then fix it.
