Features

Published May 2008

Trust Is a Competency

Stephen M. R. Covey

“The voyage of discovery is not in seeking new landscapes, but in having new eyes.”
– Marcel Proust, French novelist

One of the most significant things today’s leaders and organizations can do to achieve and sustain superior performance is to look at “trust” through new eyes.

Typically, trust is assumed, taken for granted, misunderstood and severely underestimated. As the French proverb says, “Fish discover water last.” In other words, fish are so immersed in the presence of water that they are unaware of its existence — until the water gets too low or becomes polluted. In the same way, people discover trust last. We become so immersed in the presence of trust that we take its existence for granted — until the trust gets dangerously low or polluted. Then we become painfully aware of the effects of its poor quality or absence.

Increasingly, more leaders are rediscovering trust as they begin to see it with new eyes. Looking beyond the common view of trust as some soft, intangible and illusive social virtue, they’re learning to see it as a critical, highly relevant and tangible asset. They’re discovering that trust affects everything within an organization, every dimension, activity, decision and relationship. They’re also beginning to recognize that trust is quite possibly the single most powerful and influential lever for leaders and organizations today.

In this light, it is important to look at trust through “new eyes” and see it differently in at least three ways:

1. As an economic driver.
2. As the currency of the new economy.
3. As a competency.

First, let’s examine trust as an economic driver. While few would argue with the notion that trust is desirable, many leaders don’t believe that internal organizational trust is directly connected to their companies’ bottom line. They see trust as merely a nice-to-have social virtue.

But the reality is that trust is a hard-edged economic driver. Why? Because trust always affects two measurable outcomes: speed and cost. The economics of trust are simple: When trust goes down, speed goes down and cost goes up. This creates a trust tax. When trust goes up, speed goes up and cost goes down. This creates a trust dividend. It’s that simple, that predictable.

Once we understand the hard, measurable economics of trust, we can see quantifiable impact everywhere. If we have a low-trust organization, we can rest assured we’re paying a tax. While these taxes may not show up on the income statement as “trust taxes,” they’re still there, disguised as other problems such as redundancy, bureaucracy, politics, disengagement, turnover, churn and fraud. And the economic impact of a low-trust tax on the organization can range from minimal to crippling to fatal.

In 2004, one estimate put the cost of complying with federal rules and regulations alone in the United States — put in place essentially due to lack of trust — at $1.1 trillion, which is more than 10 percent of the gross domestic product. A 2004 study conducted by the Association of Certified Fraud Examiners estimated that the average American company lost 6 percent of its annual revenue to some sort of fraudulent activity. In Enron’s case, of course, the fraud tax was ultimately 100 percent, which sank the company. Research shows similar effects for the other disguised low-trust taxes as well.

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