People + Strategy Journal

Winter 2021

Trust Is the New Leadership Test

The COVID-19 pandemic has placed new demands on senior leaders around trust. Different mindsets and new competencies are needed for each stage of the crisis—and for the future.

By Veronica Hope Hailey, University of Bath
Trust Is the New Leadership Test
​Trust leads to greater resilience in a crisis. If people trust their leaders, they are more willing to take risks, to commit to change and take leaps of faith because they believe their leaders have their best interests at heart. 

High-trust organizations benefit from faster decision-making along with greater efficiency, information-sharing and innovation. If you had these assets in your grab bag as the crisis started, you are likely to come out better than those whose trust grab bag is pretty light. However, the dilemma of trust is captured by this Dutch proverb: trust comes on foot but leaves on horseback. You can’t manufacture trust during a crisis; it has to be built beforehand. Organizations can lose trust in an instant; and trust repair takes a very long time as Volkswagen, BP, Facebook and others know all too well. 

Why do people decide to trust? I use the framework established by Mayer et al.1 and further developed by Dietz and Den Hartog.2 They argue that we decide whether someone or something is trustworthy based on whether we perceive them to be able and competent at their job; whether they are benevolent toward others in their activities and decisions; whether we perceive them to have integrity and whether we can see all three of these attributes over time in a consistent fashion so that we perceive a predictability in their actions and behaviors.

The global pandemic has been a jolt to the system, and it may lead to seismic shifts in the world of business. It is a crisis with different stages: the first stage is a health crisis with the shock, denial and then acceptance that we have all experienced in recent months. The second stage will be a deeper economic crisis across the world that leads to tough decisions around redundancies and reshaping business structures. Each stage of this crisis demands different mindsets and competencies from leaders. 

This article seeks to describe these new demands placed upon the senior teams and determine the new competencies that will build trusted leaders for the future. From June to August 2020, we asked 44 C-suite directors from 20 employers about decision-making during COVID-19, their dilemmas and challenges as well as successes, and their predictions about the path forward.3

Figure 1, Attributes of Trust

Stage 1: The Immediate Challenge for the C-Suite

The leaders talked to us of how in the early stages they had had to face the fear of not having data to inform their decisions on how best to navigate the challenges created by the pandemic. As one CEO said, “You need judgment...you’ll get things wrong. You have to decide and move on rather than wait for a perfect set of data. There’s no data on where we’re going.”

These C-suite leaders talked to us about the speed with which that had to trust and empower local management to take quick decisions and how they listened to others more than they had in the past to inform their own decision-making. 

Said one C-suite leader, “You’re hearing frontline feedback and you’re hearing colleague feedback. We’ve paid a lot of attention to those things because we realized that that was what was going to derail us, if we weren’t careful, because we were going to make sensible, ivory-tower calls that missed the mood.”

Table 1 details the actions taken by these C-suite members during the crisis to try to maintain their trustworthiness with different stakeholders in their respective ecosystems by demonstrating their ability, benevolence, integrity and predictability.

Ability and benevolence were important for maintaining trustworthiness through the first stage. It is not enough to be concerned to do the right thing for employees and customers. A senior leader also needs to lead the business in a financially sustainable and functional fashion. This requires them to continually seek trade-offs between different sets of stakeholders. 

Stage 2: Health Crisis to Economic Crisis

Like the tests of Hercules, COVID-19 now sends us further challenges. The health crisis has become an economic crisis and a social crisis. The research we conducted detailed what high-trust organizations did to maintain levels of trustworthiness in the midst of restructuring, divestment and redundancy programs:
  • Ability: They empowered employees and local managers.
  • Benevolence: They demonstrated care and support for employees both emotionally and practically.
  • Integrity: They communicated how they would navigate the crisis in a timely, open and respectful manner. They sought to demonstrate the sense of fairness that underpinned their difficult decisions.
  • Predictability: They built a bridge to the future in the minds of the workforces by showing employees that in the midst of disruption there was a continuity of values or purpose, sometimes calling upon their historical roots to show how they informed the future vision.4,5,6
As Table 1 illustrates, we have seen much of this learning implemented in Stage 1 of the COVID-19 crisis. However, COVID-19 has very different features from the global financial crisis of 2008. These bring new challenges to perceptions of trustworthiness within senior teams.

For Stage 2 of COVID-19, many senior leaders will have to accept the exploratory nature of this journey. How can one prove oneself to be an able leader when you cannot show them an end goal?

It’s going to require an ambidexterity within senior teams that combines an ability to make cuts in a way that does not disable the business from responding to the volatility with new business models and innovation. 

In Stage 1 many C-suite members had trusted and empowered their local managers to make more decisions. These decisions ranged from opening local bank branches or food retailers to deciding who could be allowed to work from home. At the time of the interviews, this “trusting downwards” was working well. Productivity levels were maintained alongside faster decision-making. As one C-suite member said, “It was clear that people can be trusted to do the right things. They don’t need to fill in timesheets. People do the right thing if you do the right thing by them.” 

But will this decentralization be sustained or will central control be reasserted to implement cuts and restructures? Evidence from the research from the global financial crisis showed trusting downwards to be a new important capability for top team members. 

One of the most significant findings from the research was the breadth and reach of the ecosystem within the larger businesses. Businesses like Microsoft, BAE Systems and Nationwide Building Society are broad and complex. One global infrastructure company, for example, worked hard to support their customers, national governments who were procuring defense systems, but equally local supply chains who were providing services into this British multinational. At the same time, they needed to negotiate with their shareholders over a deferred dividend payment and assure the government of their continuing commitment to the next generation of graduate recruits and apprenticeships. Said one executive, “We’re all taught in business school that the prime objective is to deliver for the shareholders but I think that when you get into practice, this company really epitomises that it is a broad spectrum of responsibility.” Many businesses like Nationwide were also providing more support for not-for-profit providers in their communities. 

Finally, continued uncertainty in this next stage of COVID-19 will require senior leaders to engage with what David Nabarro from the World Health Organization calls “learning while working.”7 When navigating the unknown in a fog, leaders will need to work with diverse sources of intelligence and expertise. New members of the team may be needed. Learning needs to be iterative and garnered from diverse and unusual sources. 

Is COVID-19 a Test of Benevolence and Integrity?

There will be significant tests of ability in this second stage of COVID-19 but there will be moral hazards too. 

Technology has enabled more contact between different levels of employees. This has made leaders appear more accessible, humane and empathetic. Suddenly lower levels of the workforces and C-suite members have shared with each other the personal features of their homes and their lives. Having broken down the barriers of formality, how then do both parties deal with uncomfortable conversations about redundancies? How will that exposure of fragility of home lives play out for people with decision-making on job cuts? Will the much lauded “mutuality of sacrifice” be sustained into this next stage? 

Said one Chief Marketing Officer, “Because you’ve sort of broken down some of the traditional hierarchies, because a [video meeting] screen is very democratic, and they’re in your home. But when you’re then having that conversation around redundancies or all of those sorts of things, how does that play through, when you’ve sort of crossed a Rubicon in a traditional relationship?”

Third, most of the C-suite members we interviewed were expecting health issues to increase. The challenge of keeping workplaces safe for those who must return to the factory, hospital, supermarket or lab persists. Some employers have traumatized workforces because of them being on the frontline for too long in high-risk contexts such as in health care or not-for-profits delivering care to the elderly or homeless. Some workforces are both physically and mentally exhausted, including the C-suite members themselves. As hybrid working continues, the rallying cry of “we are all in this together” may wear thin as some are still required to take more risk than others. And becoming champions of physical and mental health for their hybrid workforces may not have been on the list of core leadership competencies for many leaders. 

New cultures will emerge out of different ways of working. Like any cultural change there will need to be reinvestment in making these work for all and rebuilding different bases of trust and benevolence going forwards. One C-suite member remarked, “there is only so long you can ride on goodwill.” Continue to invest in new forms of engagement and trust building.

There is an additional challenge for benevolence. Earlier we acknowledged the breadth of relationships within the ecosystem of any business, but particularly for larger enterprises. Many are the economic provider for single-industry towns, the funder of educational opportunities for the next generation, the insurer of cash flow for multiple small- to medium-sized local enterprises in their supply chains. It is a big test for the benevolence of business from funding opera or art galleries to accepting their role as a force for economic and social change in a community. As the Microsoft HR director of Western Europe said, “The inequalities that we’re going to face in society, and as an employer, and managing, just helping equal access to discussions, to decisions, to information, to resources, when the world is working in… Our experiences of all of this are going to be so different.”8

The business leaders we spoke to tried to provide predictability by emphasizing their core values and purpose.

In addition, they emphasized the consistency of the senior team and increased their communication activities to reinforce their presence and consistency throughout the first stage. This will need to be continued as they enter Stage 2 of the crisis.

New Attributes a Trustworthy Leader Needs

How can leaders maintain trustworthiness when leading in a fog? In summary, ability and competence will be judged not only by past experience of senior teams but also by their ability to create new sustainable worlds for their businesses. Judgment and vision will become key. Learning to constantly take in new information, learning while working, will also be a key competence, as will establishing and negotiating with the broad ecosystem in which the business is placed. Championing and role modelling the importance of good physical and mental health will also become a key activity. 

Addressing social inequalities by understanding the world from the perspective of those who are excluded will also be a distinguishing attribute for future leaders. Adjusting recruitment, selection, development and reward structures will need to follow. Not shying away from tough conversations and not over-promising will help maintain the integrity of the senor team in the eyes of their stakeholders—do people want uncomfortable truths or comfortable lies? Enrolling the follower in the new leadership relationship is also important. Be explicit about the obligations of followers. 

In high-trust organizations everyone has a responsibility in maintaining that trust. Lastly it will be a consistency around purpose, values and senior leadership behaviors that give some certainty in this very uncertain world. Table 2 summarizes the new attributes for leaders.  

Veronica Hope Hailey, Ph.D., FAcSS, is Emeritus Professor at the University of Bath in the United Kingdom. She can be reached at vhh20@bath.ac.uk.

​Table 1: Stage 1 Actions by Senior Leaders That Demonstrated Trustworthiness

ABILITY
Smart C-suite leaders recognized fast that the lack of data for navigating the crisis required more judgment calls, rather than waiting for the right answer.Leadership became about the senior team trusting each other and working with the rest of their ecosystem—no place for sole operators or the lone hero or heroine. Key was to learn from each other.
​Ensuring rapid and frequent two-way communication—for C-suite team to access intelligence from lower levels and to communicate to ensure whole organization was as informed as possible.
The most able senior teams quickly accepted they needed to let go of control and trust downward.
​The most able had tough conversations and took tough decisions fast to ensure financial sustainability in the short term.
BENEVOLENCE
​Reaching out to ensure the safety and sustainability of the whole ecosystem from employees and customers to suppliers, education and government.
Those with resilient strong pre-existing, high-trust relationships across the whole ecosystem responded better. They had goodwill in the bank that they could immediately and rapidly draw from in the storm.
​Switch to a personal, humane, concerned and empathetic leadership that was amplified and brought into the spotlight by the democratizing and barrier-busting nature of video technology. Finance directors talking about people not numbers, marketing directors talking science.
​Trying to balance levels of sacrifice to deliver some “mutuality of sacrifice”—pay cuts of senior teams, frozen bonuses, suppliers paid early, shareholders dividends deferred, hero bonuses on frontline, sick pay extended.

INTEGRITY
​Those with an established approach to responsible business had a “north star” by which they could both guide and explain their decision-making to the whole ecosystem.
Senior leaders redirecting business into society to show they can be a force for good—creating personal protective equipment/ventilators and providing other resources for health services, education, food producers and retailers.
​High-integrity senior leaders did not trivialize serious social injustice such as the gravity of Black Lives Matter with instant responses but, instead, sought to understand, to listen and to reflect before taking action.
​The most able had tough conversations and took tough decisions fast to ensure financial sustainability in the short term. 
PREDICTABILITY
​Providing a consistent use of a responsible business approach meant that while it was not possible to predict what was going to happen, workforces and customers were assured by a consistency in how the leaders would respond.

​The quality, mindset and cohesion of the existing senior team going into the crisis made for reliability and consistency.

Increased communication and access to senior team gave sense of continuity to rest of workforce.


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​Table 2: Stage 2 Leadership Competencies

ABILITY
​Good judgment informed by purpose, values and choice. Ambidexterity of exploring and imagining a new future while simultaneously implementing cuts.​Learning to embrace and promote decentralized structures where possible—trusting downward and encouraging upward communication.
​Ensuring rapid and frequent two-way communication—for C-suite team to access intelligence from lower levels and to communicate to ensure whole organization was as informed as possible.
​Establishing or deepening high-trust relationships and obligations within the ecosystem.
​Learning while working from diverse sources (e.g. those used to operating during prolonged crises).
BENEVOLENCE
​Maintaining the personal and the empathetic, responding to anxieties, even when it becomes too difficult to maintain amidst recessionary decision-making. Invest in practical and emotional support for workforces.
​Adjust reward and recognition schemes to maintain some sense of mutual sacrifice in the longer term.
​Understand the world from the perspective of those on the periphery and to start to address social inequalities. Those who are included should not presume to understand the experience of those who are excluded. 
​Accept that championing physical and mental health of the workforce is a key part of a leader’s job.
INTEGRITY
​No exploitation of those who have been identified as fragile or vulnerable in Stage 1 of the crisis. Gather data to show this has not happened.
​However uncomfortable, seize the opportunities to have honest conversations with workforces and other stakeholders as equals. Use data where possible to justify tough but fair decisions. Acknowledge mistakes and apologize. 
​Do not trivialize or delegate social issues to others—take time to understand, reflect and take action. Do not spend time on window-dressing actions but aim for systemic change.
​Talk honestly and openly about the leadership’s expectations of followers. What are their obligations in this crisis? Talk about trust being a dynamic between a trustee and a trustor.
PREDICTABILITY
​Persisting with north stars of purpose and ethics. Explain that constancy. Said one C-suite leader, “We know that you don’t have cultures just for COVID-19. …You either live something or you don’t.”
​While senior management teams cannot control what will happen, illustrate how there will be a connection between the past and the future of the organization. What will be constant? Helping followers to understand the unpredictability of the journey will give reassurance.
​Invest in the resilience and consistency of the senior team by allowing some respite sabbaticals and extended leave to address the problem of burnout.
​Maintain increased access to C-suite to emphasize their consistency of purpose and values to the rest of the workforce and ecosystem.

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References
1 Mayer, R., Davis, J. and Schoorman, F.D. (1995). An integrative model of organisational trust. Academy of Management Review. July. pp. 709–34.
2 Dietz, G. and den Hartog, D.N. (2006). Measuring trust inside organisations. Personnel Review. Vol 35, No 5. pp. 557–88.
3 I worked in collaboration with the UK-based Chartered Institute of Personnel and Development (CIPD) with Katie Jacobs and Mel Green assisting. The main report is at https://www.cipd.co.uk/knowledge/strategy/corporate-responsibility/responsible-business-through-crisis. I draw upon my earlier research also conducted with CIPD with a research team, Graham Dietz and Ros Searle, on maintaining and repairing trust following the global financial crisis. (CIPD Where has all the trust gone? 2012; CIPD Cultivating Trustworthy Leaders, 2014a; CIPD Experiencing Trustworthy Leaders, 2014b).
4 Gillespie, N., Gustafsson, S., Hope Hailey, V. and Searle, R. (2020). Preserving employee trust during crisis. Behavioural Science and Policy Association.
5 Hope Hailey, V., Searle, R. and Dietz, G. (2012). Where has all the trust gone? London: Chartered Institute of Personnel and Development.
6 Hope Hailey, V. and Abbey, G. (2014). Cultivating trustworthy leaders. London: Chartered Institute of Personnel and Development.
7 Dreier, L., Nabarro, D. and Nelson, J. (2019). Systems leadership for sustainable development: taking action on complex challenges through the power of networks. Boston: Harvard Kennedy School Corporate Responsibility Initiative.