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	Trusted Leadership By Kathy Bloomgarden

It wasn't long ago that the vast majority of corporate leaders were heroes. Lionized in the press, on television, and in boardrooms; even leaders of unprofitable companies were looked to as sources of wisdom and enlightenment. No longer. In the wake of the indictments and convictions of former top executives at AIG WorldCom, Adelphia, Tyco, Enron, and elsewhere, even the best news from the corporate arena is subjected to intense scrutiny.

Corporate decisions are questioned everywhere, from the halls of Congress and city councils to annual meetings to the blogs. Shareholders, whom you might expect would want companies to do everything possible to make high profits, are increasingly reading between the numbers and questioning the reality behind them. The corporate scandals of the recent past have taught them that they too can be fooled.

The misdeeds of a handful of top executives have done serious damage to the institution of the CEO and have exacerbated the pressures on all executives. Lack of trust has eroded the goodwill and respect they previously counted on in doing their jobs. All companies have suffered from this bad behavior. According to a 2004 Gallup poll, only about 20 percent of the American public rated business executives as "high" or "very high" in honesty. Only lawyers and car salesmen ranked lower.

Corporations are perceived equally poorly. According to the international survey firm Globescan Inc., only 38 percent of people around the world trust that global companies will operate in the best interests of society, compared with 68 percent who feel this way about NGOs, also known as nonprofit organizations. Clearly, business leaders are perceived to be operating without a strong set of values.

Losing Credibility

Leaders who find themselves frustrated by their inability to get people to cooperate with them on the tasks vital to the success of their companies can probably trace this failure to a lack of trust that has developed among one or more important stakeholder group. A leader doesn't have to break promises on the level that executives at Enron and AIG did to breed mistrust.

One obvious example is when a CEO promises Wall Street a certain result and fails to deliver. But a disingenuous advertising campaign is equally damaging. A corporate image program that proclaims "Employees are our most important asset" at the same time that the company is laying off great numbers of people is not going to resonate with the employees who remain behind. As a result, the next time the CEO asks for sacrifice and team effort, he is less likely to get it.

Trust is harder than ever to cultivate, primarily due to a few well-publicized examples of executives who have been lax in carrying out their responsibilities to their stakeholders. Globally, this failure of trust and focus on shortsighted, greedy, or unethical behavior has greatly affected the ability of leaders to do their jobs.

Job Insecurity

As a result of these new attitudes toward corporate leaders, the premature departure of a CEO is no longer the exception; it is the rule. CEOs worldwide can now expect to spend only three years in their current positions, and 40 percent of all new CEOs will lose their jobs within eighteen months.

According to a recent study by the human resource consultant Drake, Beam & Morin, a CEO appointed after 1985 was three times more likely to be fired than CEOs appointed prior to that date. Only one in four companies worldwide kept the same CEO during the 1990; half (51 percent) of all CEOs hold their positions for less than three years, and 72 percent have been in office for less than five. Only 12 percent have been in their positions for a decade or more. And at the start of 2006, eight of the thirty companies in the Dow Jones Industrial Average began the year with a different CEO than they had twelve months earlier.

The Wall Street Journal likened the year 2005 to that of 1989, comparing the symbolic, powerful imagery of the fall of the Berlin Wall to the "fall of a string of powerful chief executives." Arthur Levitt, former chairman of the Securities and Exchange Commission, calls the transformation that's been occurring at the top executive level a "vast cultural change." He places the blame squarely at the top, arguing "the common catalyst for this unprecedented spurt of board action and for many of the more than 100 CEO changes last month (April 2005) is nothing less than hubris."

CEO Survival

How does a CEO survive in this unsettled environment? The easy answer is to maintain shareholder value, largely measured by a company's stock price. Booz Allen Hamilton's 2004 CEO Succession report found that underperformance — not ethics, not illegality, not power struggles — is the primary reason CEOs get fired.

At first glance, this seems self-evident. A CEO's reputation will always be grounded in his or her ability to deliver sound financial performance. That's why CEOs have traditionally been, first and foremost, financial managers, and why indicators like profit, competitiveness, and costs loom so large in the thinking of so many leaders. The pressure to make the numbers Wall Street expects reinforces those tendencies. The market looks favorably on companies that meet quarter-toquarter targets and punishes those who do not.

We've all seen Wall Street's harsh reaction when earnings deviate even slightly from forecasts and expectations. This trend has become even more pronounced as hedge funds have assumed control of a higher percentage of traded assets. It's no wonder that corporate leaders sometimes take short-term measures to temporarily boost performance, like a onetime sale of an asset, or booking a large order prematurely.

But there is a fatal flaw in this strategy. For CEOs, indeed for anyone responsible for a profit center, the most obvious way to keep their jobs may be to make certain your company or division meets short-term targets. The problem is that no company's stock price rises in an endless line. Every company goes through business cycles with varying levels of performance.

Fortunately for some, unfortunately for others, we have entered a new era in which financial performance is no longer the only predictor of CEO longevity. In this new environment, financials are important, but only insofar as they are a measure of leadership success.

Simply getting your stock to soar or posting spectacular yearly results is no longer enough. Today's more sophisticated stakeholders consider those only partial measurements of performance. Over the long term a leader can only survive the inevitable financial ups and downs by convincing a company's various stakeholders that he or she is the person with the drive and vision to keep the company on its best course. A mark of success is the ability to inspire trust in others.

A Matter of Values

Corporate social responsibility has become so frequently discussed that it has attained its own acronym: CSR. Yet too many leaders still believe that CSR is no more than window dressing — something nice to do, but not nearly as important as short-term results. Those are the leaders who tend to cut these programs when the economy softens or their results falter.

But such inconsistency undermines trust, even among shareholders who used to look only at financial performance. Not only do stakeholders want to believe a company's leadership has a firm set of values, but there is also emerging evidence of a correlation between financial performance and measures of corporate social performance.

"The real goal of corporations these days is high performance with high integrity," explains Ben Heineman, GE's senior vice president for law and public affairs during the prosperous Jack Welch years. "The critical secret sauce is how you interrelate these two elements into your systems and processes. And then how do you create a culture so that people are complying with both the law and with the ethical standards your company has adopted, not just because if you don't you'll be punished, but because you want to? Ethical behavior must be internalized so that it's not something people do because they're afraid of getting caught, but because it's something they believe is right."

Values and Profit

There are plenty of examples of companies that have flourished while pursuing a valuebased corporate strategy. Daniel Vasella, Chairman and CEO of the pharmaceutical company Novartis, believes that Novartis' strong financial results are "the consequence of good work." Vasella is a strong advocate for making corporate social responsibility a part of a company's business plan. He believes his company's core value should be to "develop innovative medicines to ease suffering and cure disease," and its corporate purpose not to develop me-too, saleable products of limited market need.

Vasella has shown that eschewing a philosophy of maximizing profit no matter what does not have to yield poor financial results. In fact, putting this personal value system into practice as a corporate goal has further fueled the company's financial performance, which stands out among its competitors. "It may sound trite," says Vasella, "but I truly believe your ability to keep your shareholders' faith in the company in the end depends not on whether you 'make the quarter,' but on who you are, what your guiding principles in life are, and your behavior."

A Strong Set of Values Will Disarm Your Critics

Most critics really care about the actions taken by your company. They probably have very specific objections, and because communications now go worldwide in a nanosecond, they have the ability to spread negative information rapidly to employees, customers, Wall Street, and your other stakeholders. But they can also spread positive information just as quickly. Smart leaders don't resist or avoid their critics. Instead, they make room at the table and engage them in two-way communication. The goal is to open a frank dialogue and make warranted changes so that significant critics feel you are listening to their concerns. Once that happens they will, amazingly enough, grow quieter. They may even begin helping you to communicate some of your positive messages.

Approaching critics in the right way begins by opening a dialogue with the most powerful people, who have the longest reach, among your most important stakeholders. Remember that your critics can come from any of the other stakeholder groups — investors, employees, customers, or NGOs. Often they come from all these groups simultaneously. There is an interconnectivity among these populations that never existed prior to their ability to so easily communicate with each other.

You can learn a lot by investigating what is being said about your company in blogs. Send representatives to significant NGO meetings and ask for personal meetings with major critics. And when you get there, avoid defensiveness. Don't try to justify your actions; just listen for a while. Do your best to understand their objections, and objectives. Sometimes you may have assumptions about their goals that are far from the truth. Your aim should be to find any common ground and leverage it to achieve common goals. But even if you can't, be sure to get the conversation to the point (perhaps not in your first meeting) where you can agree to disagree. Then maintain communications about what you are doing to deal with their concerns. You never know when an action you take will change minds.

Adopting a Genuine Leadership Brand

True leadership goes well beyond the concept — popular in my field — of "reputation management." Most companies have entire armies of wizards behind their curtains trying to create an image acceptable to the market. But becoming a trusted CEO is about creating substance upon which to base an image or reputation. Even wizards can't be successful with an image that is divorced from reality.

The thinking of the leaders and the reputation they seek cannot be in total disconnect. CEOs are subject to greater scrutiny than ever, so they have to be consistent from moment to moment and genuine in their external statements. An army of critics and activists are watching, so public, and private, comments must reflect the reality of your leadership and the current status of your company — or someone is going to call you on it. The values projected by Vasella at Novartis and Lord Browne, chief executive of BP, for example, are respected by their stakeholder groups because both men truly believe in the course they have set for themselves and their companies.

Great leaders create trust in the minds of stakeholders. The leaders of successful companies respond quickly and openly to challenges; they are trusted to do the right thing. These are the hardy companies, the envy of their peers, which seem to win the competitive game more often than not. And they are the companies whose leaders tend to have the longest tenures in the top job.

The drivers of trust include successful financial performance, but also transparency, ethical performance, and a willingness to listen to critics. Listen at least twice as much as you speak. Yes, you've heard it all your corporate life, but how often do you really practice it? Investors, employees, customers, and critics all know something that would be profitable for you to learn. Your job is to make these bottomup communications function well. If you aren't receiving honest, comprehensive feedback, look at your past reactions to "bad news."

Perhaps you have convinced your stakeholders, especially your employees, that it's dangerous to be the bearer of negative news. Or perhaps the systems you have in place to collect information are not gathering the right information or not transmitting it to the people who can use it most effectively. Find out where these communications bottlenecks are so that you can begin to resolve them.

The particular ways in which a leader develops and uses the power of trust can create a powerful identity for both a company and its CEO. Perhaps the most important characteristic of trusted leaders is the adoption of a leadership style that genuinely fits their personality and passion.

The media tends to personalize a company's successes and failures, focusing stories around the individual who leads it. The personality of the CEO and what he stands for are essential elements in building confidence in corporate leadership. People respond to and develop opinions about individuals much more easily than about organizations. The leadership brand, therefore, takes on added importance and needs to be proactively managed.

Leadership brand is the identity each corporate leader adopts as his or her outer garment. Brand, when it comes to leaders no less than products, allows each leader to be summed up in a few words: "bold and innovative," "friendly and comforting," "ruthless and profit- minded." CEOs are routinely advised to put on the appropriate corporate face in order to build a reputation. But a leadership brand must be based on genuine leadership values. It must come from inside out, not the other way around. It can't be imposed on someone. For long-term success as a leader, it must be based on that individual's own core values.

Organizations are a web of relationships (both internal and external) that can allow leaders to move fast, change course when needed, and land on their feet when trouble hits. But those relationships will not work if there is just an empty "image" at the top. They work when your leadership conforms to the reality of what you believe. Only then can a company hope to gain, or regain, the trust of its key stakeholders.

It's not so much what you stand for, but that you stand for something real, and that you communicate that conviction openly and honestly. Even within the same industry, a leader can establish very different but equally effective brands. Look inside yourself to create an awareness of your own attributes, and take proactive steps to create a brand that is a natural outgrowth of your own personality and expertise, your company's business mix, and the strategies you are pursing.

Defining a personal leadership brand requires intense introspection about how your personality and beliefs can be better expressed in the context of your corporation. It may help to think about what you would do given free rein to express yourself. Don't try to mimic the leader who preceded you, even if he or she was successful and had a high profile. Jeff Immelt of GE is not going to be successful by being Jack Welch lite. He has defined his own personality in order to create his own CEO brand.

Some observers note a shift from the former charismatic CEO to the quieter, more restrained leader. But I would argue that either personality type could succeed because genuineness is the only common denominator that inspires trust. That doesn't mean being nice to everyone. Sometimes trust can be generated by being tough on your critics, particularly if it means you are simultaneously showing support for other stakeholders.

Sometimes corporate boards purposely look for a different personality when searching for a new person to lead their company. After Hewlett Packard's board of directors rather unceremoniously threw out one of the most visible and charismatic corporate leaders, Carly Fiorina, they turned to a lower-key leader in Mark Hurd, who did not welcome public visibility. On the other hand, Apple Computer limped along until it asked Steve Jobs, its former CEO and founder and one of the most dynamic business leaders in the United States, to return to the company. It is not personality type that dictates success or failure. It is the combination of the CEO's leadership values with their implementation of that vision across their portfolio of responsibilities.

Once you have developed a leadership brand that incorporates your personality and personal beliefs, the next task is to instill these leadership patterns into your organization. Cascading values and tenets of behavior into an organization is a dynamic, constant process. You can never consider that you have finished the task. By communicating your values to every stakeholder group, and by your behavior, you are continually projecting onto your organization a way of doing business.

A Web of Interlocking Bits of Information

The behaviors powerful enough to inspire trust are different for each group of stakeholders, yet they all have one thing in common: a desire to enhance connectivity. Rather than thinking of communications as a one-way process that goes from an organization to its stakeholders, think of it as a web of interlocking bits of information. Communicate outwardly through corporate messages and symbolism, as well as through your leadership brand behaviors.

Because of the revolutionary power of the Internet, these interlocking parts are in constant communication every hour of every day. To enhance trust in this new environment, you should be intensely focused on capturing messages from each stakeholder. Corporations that do an exceptional job of producing loyalty in stakeholders also facilitate communications among those stakeholders. That may mean anything from helping employees contribute to their communities to inspiring customers or NGOs to help gain the cooperation of regulators.

Common Characteristics

In addition to establishing a genuine leadership brand, successful leaders use a number of other critical behaviors to generate trust among their stakeholders. These are the common characteristics which I have observed to be present in leaders whose companies seem to thrive (or at least survive) no matter what the world throws at them. They flow from their constant awareness of the pitfalls that can derail anyone who aspires to be a leader, and they allow successful leaders to do their jobs effectively in both good times and bad. These leaders are by no means without ego, but they are able to put their ego aside when it matters. They recognize that sometimes they are going to look bad or have to make sacrifices for the good of their company. Opportunities to be second-guessed are amplified in this era of instantaneous communication and activist Wall Street analysts, but aware leaders are prepared for that. They find ways to constantly communicate the idea that success is an incremental process that takes time and effort. To them, even small movements in a positive direction, on a wide variety of measures, reflect progress to be valued and celebrated.

Since the enactment of Sarbanes-Oxley, a CEO's failure to follow a strict set of corporate governance standards will not only get him in trouble with the law, it will tarnish his reputation and undermine his position. But just following the law in today's new environment is not enough. Given the weaknesses of human behavior, personal and corporate codes of conduct must be embraced fully by corporations and their top management. Trusted leaders will make certain their efforts extend beyond the legal requirements, to instilling a strong code within the company, personally endorsing it, and showing a genuine dedication to following strict tenets of corporate behavior.

Be Honest

Successful CEOs don't hide when something goes wrong. They don't assign blame, and they don't allow mistakes to compound themselves. Instead, they respond like competent, caring human beings, the same way they would if they had no financial or political stake in the matter. They don't blunt their responses to save embarrassment to the company because they realize that the embarrassment will come, if not now, then later, after all the sordid details are dragged out, as they inevitably will be. And they don't listen to the lawyers exclusively. Taking a visible, strong position when a problem is discovered will almost always minimize its impact. A failure to apply these principles will always end badly.

It is not fear of discovery that motivates successful leaders to be transparent. It is, rather, a deeply ingrained sense that truthfulness will minimize, as much as possible, the consequences of bad news. Why not choose the time and manner of disclosure yourself? Admit to mistakes as soon as they occur and as fully as possible. It is never easy to dash expectations and deliver the news that weaknesses are greater than previously thought. But not telling the truth in troubled times will ultimately destroy trust in your leadership.

In an era when rumor or fact can spread globally in 24 hours or less, leaders had better be certain they have good relationships with and ready access to their most important stakeholders. In communicating with these groups, don't over promise. Instead, show strong leadership by sharing all of the news, good and bad. Above all, don't lie. Don't lie to journalists, don't lie to shareholders, don't lie to employees, and don't lie to special interest groups that oppose you. A "no comment" is the appropriate response to questions you would rather not answer. And most importantly, don't lie to yourself.

Have Courage

It takes courage to be personally accountable and publicly take responsibility. You and your company are going to make mistakes. If blame must be assigned, the best leaders learn to accept it willingly and take steps to correct the problems underlying those complaints. Accepting blame and making changes is the only real way to get past shortcomings quickly and effectively. Unfortunately, that's not the way it works in many organizations. Those who deliver bad news are much more likely to get fired or sued (or both) than praised or even paid attention to. Such people should, instead, be your best friends. Treat these insiders as the most dedicated and loyal employees you have. After all, they are often risking everything for the good of your business, and they're showing you where improvements need to be made.

Have the courage to strike a new path by walking away from a broken business model, even if it means risking stakeholder anger. It is difficult to know when to cut losses and sharply change the course of a company. A bold move will raise skepticism among internal and external audiences, but a strong vision and clarity about values and goals can sustain the company. It can also be the motivation needed on the long road to success.

Advance the Agenda

Most people want to live lives that are meaningful, and leaders of successful corporations have more opportunity than most to do that. Leaders who tap into core beliefs and communicate their commitment to them earn the trust of their key stakeholders. They use the power of trust to help motivate each stakeholder group to support actions that will prove to be of long-term benefit to their company. They advance the agenda by changing behaviors before pressures from third parties or policy makers impose the changes from outside. If you set the agenda, you operate from a position of strength and avoid having someone else tell your story.

Successful leaders stay focused on what is important to long-term success, rather than being stampeded into actions they may later regret. They can be identified fairly easily by the values that they and their employees project to the world. They are inspired by an adherence to principles that form, for each of them, a platform of rock-solid values that they will not violate. Know them by the trust they engender across stakeholder groups, the admiration they garner in the marketplace, and their performance.

This article is an excerpt from Kathy Bloomgarden's book Trust: The Secret Weapon of Effective Business Leaders that will be published by St. Martin's Press in February 2007.