Why Corporate Directors Need to Focus on Trust
For board directors, the absence or presence of trust within an organization and its ecosystem has taken on new urgency.
In the wake of COVID-19 and its subsequent economic shocks, trust is emerging as a crucial issue for board directors. In the initial stages of the pandemic, levels of trust suddenly made a stark difference: Work policies impacted whether employees stayed healthy or fell ill, and continuity plans held together or fell apart with broader layers of damage than anyone had initially expected. In my experience as a director, and in conversations with many members of the Extraordinary Women on Boards group representing more than 300 public and private boards, the absence or presence of trust within an organization and across its ecosystem has taken on new urgency for assessing potential risk.
For directors, this creates a new lens for evaluating management—and for considering our own effectiveness together in the boardroom. Beyond the implications of the moment, an important lesson from this crisis is that trust can no longer be assumed; boards must now interrogate it.
During the financial crisis, when I managed the brand of a major Wall Street firm, the interconnectivity of systems and securities revealed surprising butterfly-effect relationships across global markets. Today’s crisis has magnified that effect. We are now agonizingly aware that every person is connected, and that we are dependent on one another’s actions, choices and behavior. We are reminded that a business is a series of touchpoints of trust, and each of those touchpoints is the hub of a set of relationships. The quality of and investment we make in these relationships determine our shared vulnerability and strengths, and our opportunities.
The relentlessness of this crisis leaves little space for boards and management to reflect. But we should press pause and take stock of the real-time lessons we’ve learned to date about risk. The Trust Touchpoints framework and five scenarios provide actionable examples of where touchpoints of trust matter most and why, and how to measure and monitor that trust to manage risk. The crisis also provides a crucial reset moment for directors, corporate officers and senior leaders to revisit foundational questions about the dynamics within the boardroom:
- How do we perform together as an extended, complex team?
- What have we learned about our strengths and weaknesses, especially under stress?
- Are there skills in the boardroom and/or management that we lack?
- Do we have enough trust in our relationships with each other?
We are living through new and unexpected scenarios, creating opportunities to observe, gather data and analyze. Here are some of the emerging questions about trust that boards are asking and that senior management should be aware of and perhaps asking as well.
ASSESSMENT OF THESE 5 TRUST TOUCHPOINTS CAN HELP BOARDS AND MANAGEMENT BETTER ANTICIPATE AND ADDRESS RISK
The Board and Management Relationship
- Are we discovering that we weren’t well-informed? If so, why?
- Are there unexpected vulnerabilities that management and directors should have monitored more closely?
- Are gaps emerging between what management said it was doing and what was happening?
- What has this crisis taught us about the leadership skills our organization requires?
- Does the leadership team perform well or poorly under stress? Do they trust each other? Is this relationship functioning as well as we thought it would?
- Has recent experience strengthened our trust in leadership or made us question it?
The Leader’s Relationship with Employees
- What signs are we seeing that our leader has invested in culture and values?
- Is management facing this crisis from a foundation of employee trust or starting from a deficit?
- What level of care, compassion and perspective are informing decisions about people?
- How does the leader communicate decisions to employees?
The Organization’s Relationship with the Leader
- Is there enough trust in the organization to surface unwelcome or unfavorable questions, insights and alternative views from diverse sources, including those who work directly with customers and suppliers?
- Are incentives and processes in place to encourage this? Who owns these, how are they communicated and are they working?
- Is there a practice, including within the leadership team itself, to question and test assumptions?
- Is there an organizational curiosity that is celebrated and role-modeled by leadership?
The Relationship Between the Company and Its Customers
- Does management assess and monitor the trust in its customer relationships?
- Does the company differentiate among levels of trust among its customers?
- Is the board asking about customer levels of trust? Has there been discussion about strong versus weak customer relationships? Was the board ever misled about the strength of relationships?
The Company’s Relationship with Its Ecosystem
- What is the company’s reputation with its suppliers and partners? Are there any issues? Who is responsible for and monitoring this?
- Has the company treated its suppliers and partners well? Does the company pay on time or regularly stretch out payments, creating pressure and vulnerabilities for the suppliers?
- Are the suppliers able and willing to be there for the company? Do suppliers deliver on their commitments? Are these trusted partnerships, with an understanding of “I’ll be there for you,” or are they weak ties with no loyalty or reciprocity?
- Did partners make promises they weren’t able to keep during the crisis, or did they take advantage of loopholes?
The Future Is Boards Challenging Themselves and Management
- Are our board meetings typically robust discussions, or have they been more passive, check-the-box exercises?
- Does our board culture include encouraging questions and input from all, or are our discussions dominated by a few?
- If any individual directors are losing trust in management, how does the board collectively and responsibly discuss that issue in the midst of a crisis?
- Are we the right team of individuals to come up with the best questions? And do so under stress?
- Are we diverse enough to see a wide variety of issues, or do we think alike and have blind spots?
- Do we have the right mix of skills as a team, and alchemy of thinking styles, to bring expert questions and guidance to this company’s strategy?
- Is our board, under stress, a worse board?
- As board directors, do we have enough trust in each other?
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