Building trust from the top down

Trust is a fundamental issue for organisations of all sizes and a loss of trust can be fatal for a company. Ryan McCarthy, Board Leadership Centre Lead tells us that, far from being a marketing badge, true trust starts at board level and should flow through all areas of an organisation.

As Audit Partner at KPMG Ireland and head of its Board Leadership Centre, Ryan McCarthy sees an obvious starting point for talking about trust, particularly from a corporate perspective. “We have seen trust, in major institutions, being eroded pretty steadily, probably since the start of the financial crisis in 2007/2008,” says Ryan.

“I think it’s a big challenge facing business since then. Most good organisations will say they value trust very highly, but I would challenge everyone in the business community as to whether there is enough premium put on trust.”

It’s hard to argue. In an Irish context, it can feel like corporate behaviours that should have been consigned to history, still, on occasion, rear their heads. Internationally, tech companies in particular, have put an emphasis on moving fast, often at the expense of stakeholders such as employees, customers and even shareholders.

“There is a Silicon Valley-led thinking that if you want to get anything done at pace or at scale, you’re going to have to break things and have a bit of collateral damage,” says Ryan. “I would say that philosophy has gone too far. The onus is on business – and on boards – to pull the pendulum back.”

Ryan McCarthy

Managing Partner

KPMG in Ireland

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There is absolutely an imperative for business to step up on the trust agenda.

Ryan McCarthy

Board Leadership Centre

Trust as a three-legged stool

There are plenty of examples in recent years, of corporate crises where the outcome could have been avoided with a greater fundamental focus on trust, says Ryan, citing Boeing as an example. “I think there is absolutely an imperative for business to step up on the trust agenda,” he says.

Ryan refers to the work of Frances X Frei, a Harvard Business School professor. Frei is co-author of Move Fast and Fix Things: The Trusted Leader’s Guide to Solving Hard Problems, and was brought into Uber as Senior Vice President of Leadership and Strategy, as the US company struggled with culture problems during its hyper-growth.

Frei describes three component parts of trust: authenticity; empathy; and having rigour in your logic. In any environment, when all three components are working, there is great trust. If one or more of the three components is faulty, however, trust is seriously threatened.

Ryan applies Frei’s framework to boards and board effectiveness, substituting corporate strategy for individual logic. As he points out, once a board understands the components underpinning trust, it can be ready to act if one of the legs of the three-legged trust stool begins to wobble.

Begin with authentic engagement

The work to establish authenticity at board level begins with the board make-up, particularly if members have multiple other commitments. “How can you be an authentic board member if you’re on ten boards?” Ryan asks. “Can you really, be properly engaged with the company?”

As a board member, even an established one, the role is not just about turning up. It is vital to be properly engaged with the company and comfortable bringing your whole self to the boardroom discussion.

“It comes down to having care in what you’re doing,” says Ryan. “Do you prepare properly, do you do your research, do you contribute fulsomely when you’re there?

In the best-performing boardrooms, the conditions exist that make it safe and welcome for everyone in the room to be authentic and contribute honestly. When that happens, Ryan has no doubt that the authenticity infused across the board, leads to better quality discussion and decisions.

“People are fully present. They are leaving their egos at the door, they are leaving their past careers at the door, they are coming in to discuss and decide things in the context of what is best for the company.”

Empathy from the top down

In the boardroom, empathy is tied up with authenticity. Ryan poses a compelling question to all board members: “Do you care? Fundamentally, do you care about this company?”

Boards and board members that are disinterested or disengaged are doing a disservice to their companies. In practical terms, board members who are on their phones in meetings or not fully contributing, are red flags. “If the board is arriving in, box-ticking, not supporting management, not challenging management, how does that work?” Ryan asks.

All viewpoints should be heard, even – or especially – ones that may be in a minority. As Frances Frei notes, it is much easier to reward people who say something you were going to say, as opposed to people whose opinion is entirely different from yours.

That matters because “empathy comes top-down”, says Ryan. “If you’ve got a board that lacks empathy in terms of how they engage with each other and with the management team, then that flows down through the organisation.”

Ultimately, it can flow on to how customers are treated and how other stakeholders perceive the company. There are many examples of those factors having a direct impact on the bottom line and a company’s share price. That’s a spiral that can be difficult to reverse.

If you’ve got a board that lacks empathy...then that flows down through the organisation.

Ryan McCarthy

Board Leadership Centre

Strategy that stacks up

In the board context, strategy substitutes neatly for what Frei describes as logic. “Are you credible? Does what you want to do stack up? From a board point of view, this equates to strategy,” says Ryan.

Within that, there are two elements: the quality of your strategy and your ability to communicate the strategy. “If you’re a chief executive coming to the board with your strategy, and the board is punching holes in that strategy, you can’t move forward,” Ryan notes.

Put simply, from a board point of view, if shareholders or management team don’t trust the board, then how can you get anything done? On the other hand, if everyone – board and management – are in agreement about the company’s objectives from a strategic point of view, you get full alignment.

When all the components are in place, trust is “layered up”, says Ryan. “If your teams trust in you – trust that what you’re doing is right, that you’ve got a well-resourced plan and a sensible timetable – they will all deliver. But if they don’t trust you, that’s where the wheels come off.”

Trust by design, not by accident

Given the importance of the three components of trust, organisations should not expect them to look after themselves, says Ryan. From a board effectiveness point of view, authenticity, empathy, and strategy should be regularly held up to the light.

“In particular, I think empathy is a proxy for being respectful and interested in the human interactions i.e., the actual meeting,” says Ryan. “One thing I hear board members complain about is the length of board meetings. But the higher the empathy level at meetings, the shorter the meeting will be because everyone is tuned in, focused on the human interaction, with no distractions.”

He cautions, however, that trust cannot be skin-deep. “You hear CEOs talking publicly about wanting to be the most trusted company, but you shouldn’t start by outwardly selling it as a marketing tool. If you deal with the inward components of it – which are absolutely board-led – it becomes part of culture. That’s far more powerful.”

Like many of the most important elements of board performance, trust can be hard to measure. “It is intangible, but you know when you’ve got it right,” Ryan concludes. “And your stakeholders certainly know when you’ve got it wrong.”