By Daniel Han Ming Chng, Tae-Yeol Kim, Brad Gilbreath and Lynne Andersson
Leadership is the relationship between people who aspire to lead and those who choose whether or not to follow. And it hinges on the leader’s credibility, which is difficult to build and easy to lose. In recent years, numerous corporate executives — including the CEOs of BP, Wells Fargo, and Volkswagen — have learned that tough lesson through high-profile scandals that swiftly damaged their reputations.
But what’s at the heart of credibility? Two critical elements: perceived competence (people’s faith in the leader’s knowledge, skills, and ability to do the job) and trustworthiness (their belief in his or her values and dependability). Such views are formed through direct and indirect observation of the leader’s work and performance. And these perceptions are extremely important in a digital age, when vast amounts of information about people can be captured and scrutinized through technologies like smart sensors and artificial intelligence systems. Employees also seek assurance that those who are managing them and assessing their performance are competent and trustworthy.
Researchers have identified several broadly defined behaviors that influence whether leaders are perceived that way. These behaviors include knowing oneself, appreciating one’s constituents, affirming shared values, developing new capabilities, serving a purpose, and sustaining hope. However, not much has been written about concrete actions that enhance or harm a leader’s credibility. Indeed, it’s widely assumed that behaviors that don’t increase credibility naturally decrease it. Research has begun to challenge this assumption, but we had many unanswered questions, so we set out to learn more.
In several field studies, we explored the specific behaviors that affect how people assess their leaders’ competence and trustworthiness and, in turn, their credibility. From this work, we have gleaned the following insights into what causes leaders to gain or lose credibility with their employees and what leaders who have lost credibility can do to regain it.
How Leaders Build Credibility
Based on input from employees we surveyed from a range of organizations, we found that leaders are perceived as competent when they place an emphasis on the future, on organizational outcomes, and on employees, as well as when they take action and launch initiatives, communicate effectively, and gain knowledge and experiences. At the same time, we identified several behaviors that point to trustworthiness. They include communicating and acting consistently, protecting the organization and employees, embodying the organization’s vision and values, consulting with and listening to key stakeholders, communicating openly with others, valuing employees, and offering support to employees and stakeholders. Although scholars have already described many of these behaviors as signs of exemplary leadership and credibility in general, deeper analysis reveals specific actions that leaders can take to enhance their credibility.
Behaviors that project competence.
In the context of senior management, what are the best ways to emphasize the future and organizational outcomes and to take action and launch initiatives? One is to create clear plans for future success. This is different from simply stating a strategic vision or setting performance targets. It involves mapping out, in detail, how the organization will achieve its goals. Another way is to demonstrate sophisticated knowledge of industry trends and clear ideas about how the organization should respond to them. Still another approach involves actively predicting and preparing for upcoming changes by, say, making strategic investments in new technologies or markets. More than 80% of our respondents identified these behaviors as strong indicators of a leader’s competence.
A sense of competence is enhanced when leaders work consistently to improve organizational structures and processes and maintain fiscally sound operations. These actions might include eliminating unnecessary reporting structures and spending, establishing new roles, or investing in technology that improves operational efficiency or business effectiveness.
It’s often noted that true leaders are willing to take on big problems that others are reluctant to tackle. This sentiment was reinforced by more than 60% of our respondents, who told us that they saw leaders as competent when they were action-oriented and aggressive, when they took on issues or projects that needed to be addressed, and when they weren’t afraid to make tough decisions.
Behaviors that project trustworthiness.
Consistent with previous research, we found that leaders are perceived as trustworthy when they communicate and behave in a consistent manner. To begin with, this means making decisions that aren’t contradictory. But it also means behaving in a way that aligns with promises (both explicit and unspoken) that the company makes to employees and other stakeholders. By preemptively looking out for stakeholders’ needs, executives can prevent stakeholder conflicts and organizational crises, as well as gain the trust of key stakeholder groups.
Another core behavior that can establish and enhance a leader’s trustworthiness is to embody the organization’s mission, both professionally and personally. Yvon Chouinard, the founder and former CEO of outdoor apparel company Patagonia, provides a good example. An avid outdoorsman and adventurer, Chouinard founded Patagonia with a specific mission: “Build the best product, cause no unnecessary harm, use business to inspire, and implement solutions to the environmental crisis.”
About the Research
We conducted several field studies over three years, using both quantitative and qualitative methods, to understand what affects leaders’ credibility and how their credibility influences employee behaviors and organizational outcomes. The studies included both blue- and white-collar employees from different parts of the United States and with varying levels of formal education. We developed a comprehensive model of top managers’ credibility through a field study involving 146 respondents: employees in a transportation company and evening MBA students employed in a variety of organizations. Analyzing the answers provided by our respondents, we identified leadership behaviors that generate perceptions of competence and incompetence, trustworthiness and untrustworthiness — factors that either underpin or undermine leader credibility.
To cross-validate and refine the set of behaviors, we conducted a second field study with 145 respondents: employees in a service-industry organization and a second set of evening MBA students. The respondents assessed the extent to which the behaviors identified in the first study indicated a leader’s competence or incompetence and trustworthiness or untrustworthiness.
Throughout the company’s 45-year history, Chouinard has lived and celebrated this mission. Employees are expected to use the company’s products (some of which they can get for free) so that they are well-informed about what they sell, and they are encouraged to participate in outdoor adventures to stay connected to the natural environment. And on a personal level, Chouinard makes time for mountain climbing, skiing, and other outdoor activities with friends and family.
How Leaders Erode Credibility
While prior research was less focused on factors that cause leaders to lose their credibility, employees in our field studies identified a number of red flags in both the competence and trustworthiness categories. (See “Actions That Build or Destroy Credibility.”) Many leaders are unaware that they are acting in these ways or that such behaviors are damaging their credibility, so we will describe them here.
Behaviors that suggest incompetence.
More than 80% of our respondents told us they view their top managers as incompetent when they display a lack of relevant job knowledge. Although people often assume that leaders are selected because of their knowledge, skills, and abilities, this isn’t always the case. Leaders risk losing credibility quickly when they struggle to handle key tasks that are part of their job, have difficulty answering questions about the organization, or make decisions that don’t align with the organization or its broader environment. An extreme example of this is Tony Hayward, BP’s CEO during the 2010 Deepwater Horizon oil spill, who during the crisis repeatedly showed a lack of understanding of the accident’s causes and severity and its devastating social and environmental consequences.
As we have noted, an important characteristic of competent leaders is that they take on big problems. So it makes sense that more than 70% of our respondents told us that they seriously question the competency of leaders who fail to take action or ignore problems. Commenting on the 2016 Wells Fargo scandal, in which bank employees opened 2 million accounts without customers’ permission, Warren Buffett said that then-CEO John Stumpf’s biggest mistake was his failure in the preceding years to address the underlying policies that triggered the scandal. In essence, Stumpf showed the sort of laissez-faire approach to leadership that people often equate with incompetence.
One of the surest ways leaders raise questions about their competence, employees noted, is to create confusion among employees and other stakeholders. A particular example that more than 70% of our respondents cited is distributing incorrect information. Sometimes leaders do this without realizing it; sometimes they misrepresent the facts by trying to put a positive spin on difficult situations. Either way, people end up confused at best — and suspicious at worst. This is a high-stakes problem in today’s business environment, where leaders are expected to handle information from numerous sources with great care and discretion.
Another behavior that undermines a sense of competence is giving contradictory information. The contradictions might come from different people on the leadership team or even from the same person. For example, Hayward was severely criticized for providing incorrect and inconsistent information during the Deepwater Horizon oil spill. He was quoted as stating that “the overall environmental impact of this will be very, very modest” in spite of clearly contradictory information.
Finally, leaders can damage their reputations for competence when they ask for information and reports that don’t seem relevant or worthwhile. Such seemingly extraneous requests can cause confusion as to what the organization’s priorities are, and employees may feel resentful about what they see as a waste of their time.
Behaviors that suggest untrustworthiness.
Since trust is so fundamental to the relationship between leaders and their constituents, behaviors that suggest untrustworthiness quickly undermine credibility. We identified several behaviors that one might think leaders would realize are detrimental and avoid doing. They include promoting an unethical climate within the organization by misappropriating resources (as Tyco International CEO Dennis Kozlowski did when he used company money to throw a birthday party for his wife in Sardinia); manipulating or even falsifying data to make things look better and engaging in sexual harassment of, or illicit relationships with, employees. In fact, our respondents mentioned these behaviors frequently, with more than 80% indicating that the behaviors were very suggestive of an untrustworthy leader. Even if leaders don’t act unethically themselves, they can suffer a serious loss of trust if they permit colleagues to act unethically. Leaders must uphold high ethical values to protect their organization and its people, or their followers and key stakeholders will lose faith in them.
Dishonest communication is another seemingly obvious way leaders hurt their trustworthiness. This goes beyond trying to paint something in the most favorable light possible. Leaders who relay false or inaccurate information or keep lots of secrets jeopardize their credibility, as do those who make promises without making any effort to fulfill them, for example, by saying “I’ll get back to you,” but never doing so.
Our research also revealed that self-serving behaviors can undermine employees’ trust in their leaders. These include bending the rules to privilege themselves or close associates, making decisions based on their own self-interest rather than what’s best for the organization, urging employees to make material sacrifices while wasting the organization’s resources on perks for themselves, and taking credit for the achievements of others.
Leaders who openly ignore the opinions of employees and key stakeholders are also perceived as untrustworthy. Specific examples given by our respondents include making unilateral decisions and casually rejecting others’ requests without due consideration. More than 60% of our respondents identified these behaviors as strong indicators of a leader’s untrustworthiness.
Although it’s clear that leaders lose credibility when they display incompetence or untrustworthiness, scholars have found that employees are much more tolerant and forgiving of an incompetent leader than they are of an untrustworthy leader. They believe that incompetent leaders can at least try to become more competent, whereas untrustworthy leaders can’t easily become more trustworthy.
Insights for Leaders
So far, we’ve described behaviors that build or erode credibility so that leaders can more accurately assess how they’re comporting themselves and how others see them. Next, we will share a few insights from our analysis so that leaders will better understand how to avoid losing credibility or, if they’ve already lost it, how to get it back.
1. The behaviors that help you gain or lose credibility aren’t always mirror images of each other.
Some behavioral indicators for competence versus incompetence or trustworthiness versus untrustworthiness are mirror images; for example, taking action can suggest competence, while failure to do so can suggest incompetence. More often, though, behaviors that cause employees to perceive senior managers as competent or trustworthy aren’t inversely related to those that convey incompetence or untrustworthiness. While emphasizing the future can indicate competence, for instance, it’s not as though emphasizing the past is a sign of incompetence.
Because many of the perceived behaviors of competence and trustworthiness are asymmetric, avoiding behaviors that make leaders lose credibility doesn’t automatically help them gain credibility. Indeed, even when they engage in behaviors that enhance credibility, leaders might still lose credibility by engaging in behaviors that indicate incompetence and untrustworthiness. So it’s important to consider the full range of indicators when trying to gauge how others see you as a leader.
2. Sometimes positive information carries more weight than negative information — and vice versa.
Scholars who study trust have found that people tend to weigh positive information more heavily than negative information with regard to competence. However, people weigh negative information more heavily than positive information when it comes to trustworthiness. A single competent act may be seen as a reliable signal of competence, but a single incompetent act is more likely to be dismissed as an outlier. On the other hand, people tend to attach more significance to a single untrustworthy act than to a single trustworthy act. This suggests that leaders can gain credibility by performing one action that projects competence, such as creating a clear vision for the organization’s future. But they can easily lose credibility by engaging in an untrustworthy action, such as manipulating data to mislead others.
3. Overcoming the loss of credibility is difficult — but possible.
Any behavior that causes employees to attribute incompetence and untrustworthiness to top management, either alone or in combination with other behaviors, can have negative repercussions that are tough to recover from. As noted earlier, employees are less tolerant of untrustworthy behaviors than of incompetent behaviors. Partly for that reason, it’s more difficult to regain credibility once it’s lost than to build credibility in the first place. But it can be done.
In the wake of the financial crisis in the late 2000s, for example, some of the questionable practices of major U.S. financial services companies were exposed in the media and scrutinized by the public. Many companies responded by making relatively modest changes to executive compensation or governance practices. However, James Gorman, CEO of Morgan Stanley, took the opportunity to thoroughly review the company’s practices regarding compensation, compliance, and risk management. He refocused the company’s culture on sustainable long-term performance goals, ethical management of resources, and a renewed emphasis on the interests of clients, and earned praise and trust from employees and other stakeholders. But many leaders don’t have that experience when trying to regain credibility after their (or their organization’s) trustworthiness has been questioned. Such turnarounds often require companies to install new leadership, as in the wake of the Wells Fargo customer account scandal, which forced CEO Stumpf to resign.
To regain lost credibility, leaders must reestablish positive expectations, which means they must repeatedly engage in trustworthy acts, since a single act won’t mean much. They also need to overcome negative expectations that stem from their incompetent and untrustworthy behaviors by emphasizing the specific behaviors that project competence and trustworthiness.
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This content was originally published by MIT Sloan Management Review. Original publishers retain all rights. It appears here for a limited time before automated archiving. By MIT Sloan Management Review