How Leaders Create High-Trust Organizations
Our guest on episode 84 of our podcast is Bob Hurley, Professor Leading People and Organizations at Gabelli School of Business at Fordham University (New York), who talks about his theory of organizational capacity for trustworthiness, highlighting Unilever’s approach to genetically modified foods, Bob Moore’s employee ownership plan at Bob’s Red Mill and how external pressures shape organizational adaptations, using examples like the global financial crisis and Mattel’s product safety issues. He reviews BAE Systems’ response to a bribery scandal and Salesforce’s stakeholder engagement, emphasizing the importance of robust governance and competence in building trust. His comprehensive analysis offers insights into business ethics, leadership, the importance of governance, and organizational behavior, focusing on the core aspects of trust in today’s business environment. Hurley stresses the balance between short-term responses and long-term trust-building strategies, emphasizing the role of competent leadership in fostering a trustworthy organizational environment. This comprehensive discussion offers valuable insights into the evolution and management of trust in complex corporate settings.
Stakeholder trust, trustworthiness
So let’s define trust and stakeholders trust. I define trust and this includes stakeholder trust, as confident reliance on an organization when there is uncertainty and risk. Now the whole notion of stakeholder trust is stakeholders read signals in a relationship. When they see that the behavior of the other party, whether it’s a company or a person, meets or exceeds their basic expectations, it’s trust inducing. On the other hand, when they see signals that a company is violating certain basic expectations of fairness and honesty and competence versus negligence, when they see a company violating those expectations, it decreases their trust. Now, it’s important to make a distinction between trust and trustworthiness. Trustworthiness are the signs that I want to see to determine whether I trust you. And the research shows that there’s three basic categories of things we want to see expectations, ability, benevolence, and integrity.
Organizational Capacity for Trustworthiness
So I created this theory around an organizational capacity for trustworthiness. And it’s an evolutionary theory, meaning just like I described the evolution of the universal banks, what I’m looking at is how do companies evolve over time to create bundles of routines that can enable them to be trustworthy or not? So it’s really more an evolutionary theory of the firm. If you go back to Nelson and Winter and Cyert and March, Cyert and March in 1963 wrote a hugely influential book called “The Behavioral Theory of the Firm”. (…). They basically said, hey, organizations are bundles of routines that are built up by coalitions of people arguing, bargaining and fighting, and they achieve some state of the system that enables them to do certain things. And that’s what this organizational capacity of trustworthiness argues, is that organizations evolve to be more or less trustworthy.
Unilever: an example
A bunch of companies that have begun to figure out how to manage this complex landscape, and Unilever was an early one. They’ve been big on sustainability, but just let’s just take an example of what they did with genetically modified foods. They realized very early on this was a huge issue. Not only was it a huge issue, but it involved lots of stakeholders, it involved consumers who were going to put these foods into their bodies. It involved farmers who were going to produce those foods. It involves scientists who were doing research about these foods. It involved regulators. So instead of politically manipulating and managing these stakeholders and then doing what was in their interests profit-wise, they said, let’s engage with these different stakeholders and let’s have a robust dialogue, let’s learn from them. And now this process took years. You can imagine how complicated this is. You got a task force that’s going to the scientific community, to that conference and then to regulators, and then you’re bringing them together and all the while you’re trying to say, how do we create a way forward that respects all these different stakeholders?
Publication
The title of the podcast is drawn from the book: “The Decision to Trust: How Leaders Creat High-Trust Organisations. In the podcast interview he follows what he already wrote in his book, where he emphasizes the crucial role of trust in effectively managing organizations. He points out that top-performing, world-class companies typically foster high levels of trust. In contrast, a lack of trust can hinder an organization’s ability to attract and retain the best talent. Recent years have seen a diminishing trust in government, big businesses, and large institutions, leading to widespread cynicism.
This trend poses significant challenges for organizations, including charities. Hurley introduces the Decision to Trust Model, which outlines ten key factors such as risk tolerance, situational security, predictability, and communication. These elements help managers understand the dynamics of trust within their teams, identifying whether trust levels are high or low and pinpointing areas needing improvement. For managers, the journey to building trust starts with being trustworthy themselves and expecting the same from their team members. Questions to reflect upon include: Are you honest in your communication? Do you show genuine concern for others? Do your team members believe you will act rightly? Establishing trust begins with the individual – get this foundation right, and the rest will naturally follow.
