Trust or Bust Leadership

Culture is King, Leadership is execution excellence

The amazing work of S covey brings the real stuff to light.. Discover how Trust always affects 2 core  measurable business outcomes important to effective leadership.

– speed and cost.  These statistics below show evidence of this fact in every facet of an organization. Are you ready to become a high performance organisation?



Key Statistics about Trust

  • A 2002 study by Watson Wyatt showed that total return to shareholders in high-trust organizations is almost three times higher than the return in low-trust organizations.
  • According to a 2005 study by Russell Investment Group, Fortune magazine’s “100 Best Companies to Work for in America” (in which trust constitutes 60% of the criteria) earned over four times the returns of the broader market over the previous seven years. As Fortune declared, “Employees treasure the freedom to do their job as they think best, and great employers trust them.”
  • An education study by Stanford Professor Tony Bryk showed that schools with high trust have more than a three times higher chance of improving test scores than schools with low trust.
  • According to Warwick Business School in the UK, outsourcing contracts that are managed based on trust rather than on stringent Service Level Agreements and penalties are more likely to lead to Trust Dividends for both parties—as much as 40% of the total value of a contract.
  • Only 51% of employees have trust and confidence in senior management.
  • Trust in “a person like me” has tripled, from 20% to 68% from 2004 to 2006. A person like them is still the most trusted source for information about a company and, therefore, products (Edelman Trust Barometer, November 2007).
  • Over the past 12 months, 76% of employees have observed illegal or unethical conduct on the job.
  • Only 36% of employees believe their leaders act with honesty and integrity.
  • With regard to trust, Gallup’s research shows that 96% of engaged employees, but only 46% of disengaged employees, trust management. As the age-old question goes, “Which came first—the chicken (distrust) or the egg (disengagement)?” It’s a self-perpetuating cycle that gradually grinds the organization to a crippled pace, or even to a halt.
  • According to a survey conducted by the John F. Kennedy School of Government at Harvard University in late 2007, 77% of Americans lack confidence in their leaders.
  • In some circumstances, rework and redesign might also be considered costs of redundancy that are triggered by low-trust behavior. In software development, as much as 30% to 50% of expenditures can be on rework. In manufacturing, rework costs can often exceed the original cost of producing the product.
  • The costs of bureaucracy in all types of organizations—including government, healthcare, education, nonprofits, and business—are extraordinary. In 2004, one estimate put the cost of complying with federal rules and regulations alone at $1.1 trillion in the U.S., which is more than 10% of the gross domestic product.
  • In Germany, Chancellor Angela Merkel stated that 4% to 6% of sales revenues for mid-size businesses is spent on bureaucratic compliance.
  • In 2003, the cost of healthcare bureaucracy in the U.S. was $399 billion—far more than it would cost to provide healthcare to all of the uninsured! Low trust breeds bureaucracy, and bureaucracy breeds low trust. In low-trust organizations, bureaucracy is everywhere.
  • Office politics generate behaviors such as withholding information, infighting, trying to “read the tea leaves,” operating with hidden agendas, interdepartmental rivalries, backbiting, and meetings after meetings. These behaviors result in all kinds of wasted time, talent, energy, and money. In addition, they poison company cultures, derail strategies, and sabotage initiatives, relationships, and careers. The indirect costs related to office politics are estimated at $100 billion per year; some observers put them substantially higher.
  • Unwanted turnover is expensive. On average, it costs companies one and a half to two times the annual salary to replacean exiting worker.
  • Employees tend to treat customers the way they’re treated by management. That’s why Southwest Airlines President and COO Colleen Barrett says, “We approach customer service exactly the same way—whether it’s internal or external. We place the same degree of importance on the word ‘trust’ when talking about employees or passengers.” Studies of customer defection indicate the financial impact of having to acquire a new customer versus keeping an existing one is significant; some say by as much as 500%!
  • In a 2004 study done by the Association of Certified Fraud Examiners, it was estimated that the average American company lost 6% of its annual revenue to some sort of fraudulent activity. In Enron’s case, the fraud tax was ultimately 100%, which sank the company. The Association of Certified Fraud Examiners also states that, on average, insider fraud is equal to 7% of revenues, and U.S. employers will lose about $994 billion to fraud this year.
  • Voted the number-one enduring idea by Strategy+Business magazine readers, execution is appropriately a huge focus in organizations today, and execution is significantly enhanced by trust. FranklinCovey’s Execution Quotient® Tool (xQ) has consistently shown a strong correlation between higher levels of organizational execution and higher levels of trust. In a 2006 retail study, top-executing stores had significantly higher trust levels than lower-executing stores in every dimension measured.
  • According to a Golin/Harris poll in 2003: 39% of individuals say they would start or increase their business with a company based solely on the trust or trustworthiness of that company.  53% say they would stop, reduce, or switch their business to a competitor because they have concerns about a company’s trust. 83% say they are more likely to give a company they trust the benefit of a doubt and listen to their side of the story before reaching a judgment about corporate behavior.
  • The 2006 Annual Edelman Trust Barometer pointed out that “trust is more than a bonus; it is a tangible asset that must be created, sustained, and built upon….Just as trust benefits companies, mistrust or lost trust has costs. At least 64% of opinion leaders in every country surveyed said they had refused to buy the products or services of a company they did not trust.” Most also criticized them to others (negative word of mouth), refused to do business with them, and refused to invest in them. About half refused to be employed by them.
  • A Personnel Today study noted the importance of gaining the trust of employees as the key to high engagement.
  • The Towers Perrin Report stated that the #1 driver of engagement is senior management’s interest in their employees’ well-being (Intent, Demonstrate Respect). Managers’ behavior also has significant impact on employee engagement, with “acting with honesty and integrity” being the #2 driver of engagement.
  • The Hewitt Study that came out this year indicated a direct correlation between high employee engagement and their list of the top 50 employers. Best-in-class employers showed employee engagement at 78% compared to the norm of 57%.
  • The top 50 employers attract the best people at the rate of 85% versus the norm of 68%.
  • 66% of highly engaged employees have no plans to leave their current employer, versus 12% of disengaged employees have no plans to leave their company.
  • Companies with low employee engagement have a 4% higher cost of goods sold compared to the industry-sector average. Companies with high employee engagement have costs 2% lower than industry-sector averages. Basically, organizations with high employee engagement outperform industry benchmarks in turnover, sales, revenue, growth, cost of goods sold, attracting talent, etc.