Honesty and Candor are Differentiators for Successful Leaders and Their Organizations. The Numbers Back it Up.

A prospective client recently approached me about working with “Ted,” an operations leader at one of the company’s facilities. For years, Ted had been the target of a consistent stream of complaints from his team and their efforts to remove him. We discovered that the problem was that Ted would frequently give directives on how to approach and complete projects, but when something related to the assignment went sideways, he’d deny having played any role in the outcome. While management valued Ted’s operational know-how and his can-do attitude, his team didn’t respect or trust him.

Especially in an era marked by socioeconomic inequities, organizations are learning that long-taken-for granted power to control narratives and keep secrets is gone. Companies and their leaders have been made painfully aware that attempts to conceal or ignore problems or challenges can give them—and the truth—a starring role in an easily distributed smart phone video or audio recording.

As if that isn’t enough for leaders to grapple with, the different values and expectations held by Millennials and Gen Zers continue to roil workplace culture. And increasingly, consumers look to organizations and brands that align with their values, and foster trust in their products and services through transparency, candor and responsible business practices.

“Employees and customers are looking to leadership for guidance as the workplace and business commerce have evolved into something nearly unrecognizable compared to just months ago,” according to the 2021 Trust Outlook: Executive Edition, an annual compilation of quantitative and qualitative data collected by the Trust Edge Leadership Institute.

Why Credibility and Trust are So Important

It seems like a no-brainer: all organizations want credibility and trust in the workplaces. But why? What’s the benefit?

At their most basic levels, credibility and trust are the foundation of predictability. For all the bravado around disruption and bucking the status quo, predictability is essential to a well-functioning organization. To do their best work, employees need to be able to rely on leadership to create—and then respect—a plan to achieve the goals at hand, especially during uncertain times. “Trust is when I feel I can count on you to do what you led me to expect you to do,” Amanda Setili, president of Setili & Associates, an Atlanta-based strategy consulting company, told HR Magazine. “If we don’t believe that the other person is going to do what they led us to expect them to do, then we’re not going to put ourselves at risk. And if we don’t put ourselves at risk, then we’re not going to be successful.”

When leaders don’t have credibility, the strategic direction of the organization grows murkier because employees spend more cognitive energy deciphering mixed messages and unclear signals. When the Trust Edge Leadership Institute surveyed employees, they ranked leaders’ ownership and willingness to fix their mistakes as the most important factor in establishing trust with company executives. Tied for third was, “They do what they say they’re going to do.”

And credibility and candor have quantifiable financial implications for companies. A study by the Corporate Executive Board found that companies that encouraged honest feedback among their employees, and that were rated highly for “open communication,” delivered a 10-year total shareholder return nearly four-fold larger than other companies’.

Paul J. Zak, founding director of the Center for Neuroeconomics Studies, and a professor of economics, psychology, and management at Claremont Graduate University, was one of the first academicians to integrate neuroscience and economics into a new discipline: neuroeconomics. In a series of experiments and surveys he detailed in the Harvard Business Review, Zak found that, compared with employees at low-trust companies, people at high-trust organizations reported 74% less stress, 106% more energy at work, 50% greater productivity, 76% more engagement and 40% less burnout. They even took 13% fewer sick days.

Through his research, Zak identified several management behaviors that foster trust, and as a result, improve productivity and performance. Among those? Sharing information broadly, including communicating organizational “flight plans” with employees to reduce uncertainty, and showing vulnerability, the truest sign of a secure leader, he learned. “I found that being very open about the things I did not know actually had the opposite effect than I would have thought: It helped me build credibility,” Jim Whitehurst, president of IBM and chairman of open-source software maker Red Hat, told Zak.

This extends to acknowledging mistakes. “Admitting that you’ve goofed not only disarms your critics, but also makes your employees more apt to own up to their own failings,” James O’Toole, professor of business ethics at the University of Denver’s Daniels College of Business, and Warren Bennis, professor of management at the University of Southern California, wrote in a Harvard Business Review article on how to build an organizational culture of candor.

In these uncertain times, in which the credibility of organizations has been battered on many fronts, that’s good advice not only for Ted, but for leaders everywhere.

Written by Stephanie Nora White.