One of the retired founders of the Ritz-Carlton hotel chain was a great example of a trust-building leader. Horst Schulze provided every employee with orientation and extensive training, and each was given a $2,000 discretionary fund he or she could use to solve a customer problem without checking with anyone first. One story is told of an employee who flew to Hawaii with a customer’s laptop he’d forgotten that was critically needed for a presentation he was making. Yup, it might have been tempting to stay on a little vacation, but the employee took the next flight back home after delivering the customer’s laptop. Why didn’t the employee just overnight the laptop? Because she didn’t want to take a chance that the customer would not get his much-needed laptop! That’s the type of trusting culture a leader should be creating!70

Trust, or lack of trust, is an increasingly important issue in today’s organizations.71 In today’s uncertain environment, leaders need to build, or even rebuild, trust and credibility. Before we can discuss ways leaders can do that, we have to know what trust and credibility are and why they’re so important.

The main component of credibility is honesty. Surveys show that honesty is consistently singled out as the number one characteristic of admired leaders. “Honesty is absolutely essential to leadership. If people are going to follow someone willingly, whether it be into battle or into the boardroom, they first want to assure themselves that the person is worthy of their trust.”72 In addition to being honest, credible leaders are competent and inspiring. They are personally able to effectively communicate their confidence and enthusiasm. Thus, followers judge a leader’s credibility in terms of his or her honesty, competence, and ability to inspire.

Trust is closely entwined with the concept of credibility, and, in fact, the terms are often used interchangeably. Trust is defined as the belief in the integrity, character, and ability of a leader. Followers who trust a leader are willing to be vulnerable to the leader’s actions because they are confident that their rights and interests will not be abused.73 Research has identified five dimensions that make up the concept of trust:

• Integrity: honesty and truthfulness

• Competence: technical and interpersonal knowledge and skills

• Consistency: reliability, predictability, and good judgment in handling situations

• Loyalty: willingness to protect a person, physically and emotionally

• Openness: willingness to share ideas and information freely74

Of these five dimensions, integrity seems to be the most critical when someone assesses another’s trustworthiness.75 Both integrity and competence were seen in our earlier discussion of leadership traits found to be consistently associated with leadership.

Workplace changes have reinforced why such leadership qualities are important. For instance, trends of employee empowerment and self-managed work teams have reduced many of the traditional control mechanisms used to monitor employees. If a work team is free to schedule its own work, evaluate its own performance, and even make its own hiring decisions, trust becomes critical. Employees have to trust managers to treat them fairly, and managers have to trust employees to conscientiously fulfill their responsibilities.

Also, leaders have to increasingly lead others who may not be in their immediate work group or even may be physically separated—members of cross-functional or virtual teams, individuals who work for suppliers or customers, and perhaps even people who represent other organizations through strategic alliances. These situations don’t allow leaders the luxury of falling back on their formal positions for influence. Many of these relationships, in fact, are fluid and fleeting. So the ability to quickly develop trust and sustain that trust is crucial to the success of the relationship.

Research has shown that trust in leadership is significantly related to positive job outcomes including job performance, organizational citizenship behavior, job satisfaction, and organizational commitment.76 Given the importance of trust to effective leadership, leaders need to build trust with their followers. Some suggestions are shown in Exhibit 13–7.

Now, more than ever, managerial and leadership effectiveness depends on the ability to gain the trust of followers.77 Downsizing, corporate financial misrepresentations, and the increased use of temporary employees have undermined employees’ trust in their leaders and shaken the confidence of investors, suppliers, and customers. Today’s leaders are faced with the challenge of rebuilding and restoring trust with employees and with other important organizational stakeholders.