America’s Corporate Distrust Problem

Let’s be honest: the term “Corporate America” doesn’t illicit warm and fuzzy feelings. Scandals like Enron and Bernie Madoff—not to mention the Wall Street crisis—have led many to lose their trust in corporations. To be more specific, there is a general distrust in the leaders who run those corporations. In the 2012 Edelman Trust Barometer, trust is now an essential line of business to be developed and delivered. 

It’s important to understand that trust and distrust are actually two distinct concepts with distinct causes. Roy Lewicki of Ohio State University explains: “Whereas trust is seen as the trustor’s confident positive expectations regarding the trustee’s conduct, distrust is defined as the trustor’s confident negative expectations regarding the trustee’s conduct . . . trust evokes a feeling of hope and a demonstrated willingness to become vulnerable to the trustee. Distrust, on the other hand, evokes fear and actions to buffer oneself from the harmful conduct of the other party.”

In short, trust is motivated by hope and distrust by fear. Furthermore, a lessened sense of hope is not the same as a heightened sense of fear. Today, we see corporations struggling against both decreased hope and increased fear. What lessons can we learn from companies who have battled the dark and stormy waters of trust and distrust?

Case: Distrust at Hewlett-Packard

Recently, I partnered with UC Davis MBA alumna and HP executive Amy Stroud to study trust and employee morale at Hewlett-Packard. Every year, HP conducts a survey that asks: If you had an opportunity to take a similar job at another company for the same pay, how likely would you be to take it? In the early 90’s, the number of people who responded in the affirmative was very small, but over the years, that amount increased dramatically—in some recent surveys it was over 50%! Amy suggested we take a closer look.

We saw that while the level of trust was decreasing, the level of distrust was increasing. Employee distrust built up over time as a result of actions, statements, and behaviors from Hewlett-Packard leaders.

What we surmised from the data is that leaders communicated a set of perceptions about employees through their actions and language. There was evidence of disrespect and blame towards employees, like reneging on promises, and dismantling practices that were long established and expected by employees.

There was also the perception that leaders were dissatisfied with employees. Instead of showing a sense of pride in the workforce, there was a sense of shame and blame, which was largely related to the kind of language used. Carly Fiorina in particular would make comments such as: “things need to be changed,” or “we need to fix things,” or “we need to reinvent and create a new HP.” For employees, the statements were interpreted as referencing them and that they needed to be fixed. It was as if Fiorina was pointing the finger at employees and identifying them as HP’s problems.

What’s more, HP stopped recruiting from inside the company. In the past, the company almost exclusively put people into leadership positions from the rank and file. With Carly at the helm, HP started hiring people from the outside to fill open leadership positions further cementing the notion that internal candidates were not up to the job and could not be trusted.

The Bottom Line

Although the study wasn’t able to link the increase of distrust to a financial outcome, I believe this kind of trend has strong effects on a company’s bottom line. It’s clear that when there is distrust, there are financial consequences. When you have a large percentage of employees wanting to leave, there will be more voluntary turnover, which means more recruiting and training. Turnover combined with disruption in work can be very expensive. For the people remaining, reduction in morale affects the quality of work.

Action Steps to Build Trust

Integrity, fairness, and respect are deeply important to employees and lead to a solid culture of trust. The notion that employees are valued goes beyond respect, because it suggests an evaluation of employee performance. To be specific, not only should the company treat employees with respect, but they should actively indicate that employees are doing a good job and that the company is proud to have them on board.

  1. Screen language for negative signals. Leaders have to be careful to not only send positive signals, but to be certain they’re not sending subtle negative signals. Again, negative signals manifest in language, not necessarily through overt action.
  2. Be extremely clear. During times of change or crisis, be careful about sending signals of dissatisfaction. If you’re about to enter a period of change, make the case of why change is necessary, and explain how the previous strategy was wrong. If you’re not clear about the reason for change, employees could feel that they’re being saddled with the blame for past mistakes. You don’t want employees to feel that changes are a result of bad performance if the cause is really a change in the market or environment.
  3. Indicate value. Showing employees that they’re valued at work is critical. If you find that you’re using neutral language, go back and make sure that you’re showing the proper respect towards the people who support you. If there are openings for leadership positions, recruit from within the organization to show mutual trust.
  4. Pull together in times of crisis. If the organization is not doing well because of external factors, build a sense that “we’re in this together,” rather than pointing fingers. This will go a long way in eliminating an “us vs. them” feeling between employees and leadership.


Competency-based Trust

I co-wrote a study with Dean Steven Currall to be published this year: “Understanding Threats to Leader Trustworthiness.” We found that when it comes to trust, it’s better to be considered incompetent than immoral. There are two different kinds of trust:

  1. Morality-based trust, when the trustor has trust towards a person or group based on their ability to do the right thing.
  2. Competency-based trust, when the trustor develops trust towards a person or group based on their ability to perform in a certain way.

It’s extremely difficult for a person or group to recover from morality-based distrust, because the trustor perceives that actions taken were made without regard for morality (case in point, Bernie Madoff and Enron). With competency-based distrust, the trustor reacts because they perceive mistakes were made out of incompetence.

The Lesson Learned

If your company finds itself in the middle of a trust crisis, take a close look at what kind of trust or distrust you’re dealing with. Try to understand the reactions of your audience and put yourself in their shoes. Are they outraged because of fear or disappointment?

  1. Transparency is key. If there’s a lack of understanding as to the motivations behind the crisis, make it your number one priority to educate your audience as to what happened. Excuses rarely work, and attempts to pass the buck will only diminish your credibility further.
  2. Be prepared to own the crisis. Don’t underestimate the power of a heartfelt apology or sincere acknowledgement of owning the problem. Everyone has had to make difficult apologies at one point or another or had to take ownership of a bad situation in their lives. People can relate to how tough it is to stand up and admit what went wrong. Ultimately, it will make you seem more human and will go a long way towards healing.


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