By Joel Peterson
How Directors Can Build Organizational Trust
Trust is a leader's most important currency. It is also foundational to the value of a brand. At its core, a great brand is a reliable promise — one people can trust to deliver results whether a service, a product or an experience.
Trusted brands extend not only to customers, but to suppliers, investors, employees, communities and government regulators. And, over time, high-trust organizations tend to outperform low-trust organizations by the predictable delivery of what constituencies have come to trust.
But can boards have any impact on organizational trust levels? If so, how can directors possibly increase the levels of organizational trust when they are not there day to day, nor can they (or should they) design and deliver products or services, or meddle in operational issues?
There are four main ways directors can contribute materially to the levels of trust — and thus performance — of a company.
CEO Selection
The most important contribution a board can make to a culture of trust is to ensure that the CEO is a person of integrity. This doesn't mean that he or she is above reproach — honest, straightforward, of high character, these are all important attributes. Rather, it means that there's little daylight between utterance and action, between priorities and deliverables, between private and public life.
For example, at JetBlue, our first value is safety. Our CEO sits on our safety committee. The committee meets every time the board meets and gives a report at every board meeting. And we have an important budget line item to address safety issues and to ensure redundancies. If a CEO didn't behave consistently with this most important value, s/he wouldn't have integrity around a core value — and no one would trust him/her.
Related to ensuring that the CEO has this not-always-appreciated version of integrity is the selection process itself. Having onboarded a number of CEOs during a long career (that has included service on some three dozen boards), I've learned to address the issue of succession in my very first meeting with any new CEO. While this surprises some, it makes several points: the selection process against high-trust criteria is important and is something we'll continue to discuss; the CEO role is so important that the board must always have candidates who can step in — whether for emergency reasons or ones of marketplace or organizational fit; and the board takes seriously the issue of trust. One implication of this is spending time outside of normal board meetings (at offsites) in reviewing CEO candidates before there's a need.
Related to the issue of ensuring the company is led by a great CEO, is that the board hold regular executive sessions at the end of every board meeting. For these to work most effectively, I've learned to ask for feedback about the meeting as well as the CEO and his/her direct reports and to gather suggestions. Because these sessions can produce stress for high-performance CEOs, I learned to stay after and summarize the feedback, never allowing any time to go by for worry to develop and never leaving out any of the feedback to ensure lines of communication are always open.
Budget Integrity
The second most important thing a board can do to nurture a culture of trust has to do with the budget. While many consider budgets the mundane nuts and bolts of running the business, they are, in many ways, a company's most important statement of values — the way we know if we can trust its priorities. There's no point in saying, “We put our people first,” and then budgeting nothing for training, outplacement or recognition.
Trust flows from priorities that reflect values. And since values are where we spend our time, our money and our mindshare, no document more persuasively captures the values people can trust than does the budget. It is the quintessential corporate summary of priorities. Thus, a board has the ultimate say on whether the budget reflects the priorities that constituencies can trust. In addition to CEO selection, budget approval is an expression of trust-building.
Behavior under stress
The third most important thing a board can do to increase trust levels has to do with how directors behave under stress, when things aren't going well, when earnings are down, when market share is declining, key people leave or profit margins come under pressure. Emergency-room behavior can bring out the worst in people. Under these circumstances, directors, most of them having already “seen the movie,” can tap into their experience to give confidence to the team and make sure that challenges face are building trust and esprit de corps. Indeed, the best teams I've worked with over the past half-century are those tested by reversals.
When Alan Mulally was brought from Boeing to Ford, the automaker was – like all U.S. automakers — under stress. With his midwestern engineering background as an aeronautical engineer, he brought predictability and rhythm to Ford that was lacking in his competitors. Indeed, he brought the same predictable managerial approaches he'd used at Boeing — and that Boeing may, again, need today to reverse its recent stumbles.
Turnarounds — even their less stressful cousins — are moments for trust building. Indeed, unless suppliers, lenders and investors trust management and the board, they may not go along with necessarily tough actions. Above all, moments of stress are when the trust of the core team comes under the most pressure. As those with the most options decide to stay, it will often be because of how the board and senior management behave at these moments.
And, finally, this contribution to trust building breaks down into how individual Directors behave when under stress. On most boards on which I serve, one or two directors create as much work for the management team as all of the others combined. Making sure no demanding divas are allowed to drive the agenda is a final way directors can manage stress to increase, not decrease, trust levels.
Communications
Organizations communicate whether or not they want to. And people pay attention to boards and their priorities and communications. I've always felt that the most powerful form of communication is to actively listen, to ask good questions and to follow up by having paid attention. The job of the director is not to pontificate, to recount past successes or even what s/he believes to be relevant experience. It is to understand, to anticipate competitive responses, to predict likely outcomes, to evaluate people after having understood their objectives.
Individual directors may feel they have little influence, but boards are quite powerful and can set the tone — particularly in these four categories of influence — to establish a culture of high trust and, thus, impact the long-term performance of any organization.
Joel Peterson is the Chairman of JetBlue and the Hoover Institution and author of The 10 Laws of Trust: Building the Bonds That Make a Business Great.