Leadership and Credibility

Thomas Fox
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What gives a leader credibility? What makes a Chief Compliance Officer (CCO) credibility? What gives a middle manager credibility? In a MIT Sloan Management Review article, entitled “Why People Believe in Their Leaders – or Not, the authors set out to explore how leaders’ lead effectively and why employees choose to follow them – or not. This is a critical discussion because as difficult as it is to gain credibility, once it is lost, it becomes extraordinarily difficult to regain. Over the next couple of blog posts I will be considering how to gain or conversely how to lose credibility. Tomorrow I will provide insights for the CCO going forward.

The authors posit there are two elements at the center of credibility. The first is perceived competence, which they define as “people’s faith in the leader’s knowledge, skills, and ability to do the job.” The second is trustworthiness, which they define as “belief in his or her values and dependability. These views are formed through direct and indirect observation of the leader’s work and performance.” Moreover, “these perceptions are extremely important in a digital age, when vast amounts of information about people can be captured and scrutinized through technologies like smart sensors and artificial intelligence systems. Employees also seek assurance that those who are managing them and assessing their performance are competent and trustworthy.” The authors then lay out a mechanism to build credibility and point how leaders can erode that hard-earned credibility.

Building Credibility

The authors found “leaders are perceived as competent when they place an emphasis on the future, on organizational outcomes, and on employees, as well as when they take action and launch initiatives, communicate effectively, and gain knowledge and experiences”. This comes through the creation of plans for future success. The authors caution this is more than simply laying out a strategic vision or creation of performance topics to meet. It is laying out in detail how you will move forward. It can also include “strategic investments in new technologies or markets.” Finally, competence can be enhanced when leaders work to improve not only the organization’s structures but processes too.

Trustworthiness is garnered through such actions as “communicating and acting consistently, protecting the organization and employees, embodying the organization’s vision and values, consulting with and listening to key stakeholders, communicating openly with others, valuing employees, and offering support to employees and stakeholders.” Trustworthiness comes through two key traits. The first is consistency. It is consistency in word and deed. A leader should both ‘walk-the-walk’ and also ‘talk-the-talk’. But it also means consistency in other forms such as consistency to company values, and not just when its convenient to do so. Further, this is a part of organization justice in that a leader’s behavior “aligns with promises (both explicit and unspoken) that the company makes to employees and other stakeholders.” The second behavior to project trustworthiness is “to embody the organization’s mission, both professionally and personally.”

Losing Credibility

Unfortunately leaders can lose credibility quite quickly. The first way is to lead in a manner that suggests incompetence. This comes when they display a lack of “relevant job knowledge.” The authors went on to explain, “Leaders risk losing credibility quickly when they struggle to handle key tasks that are part of their job, have difficulty answering questions about the organization, or make decisions that don’t align with the organization or its broader environment.” Here the authors point to former BP chief Tony Hayward and his abysmal performance after the Deepwater Horizon oil spill.

Another way to lose credibility is to fail to take on the hard problems. Leaders are there to lead and if they do not do so when the going gets tough, they will lose credibility. Here the authors point to former Wells Fargo chief John Stumpf who was aware of the structural defects in the organization which not only allowed the fraudulent accounts scandal to initially occur but to fester and grow into the multi-billion dollar cost it has been for the bank.

Another way to lose credibility is to send out opposing signals in what you say versus how you act. If the persons who are promoted are simply the top business producers, who are not necessarily ethical, after years of leadership preaching do business ethically in the right way, employees will get the message and the leader will lose credibility. In addition to putting out contradictory statements and actions, if a leader puts out incorrect information, they will lose credibility.

Leaders can equally and as quickly lose their employees and other stakeholders trust if they engage in activities such as promoting an unethical business environment, manipulating or falsifying data or the leaders themselves are unethical. Think of this last point in the era of #MeToo when leaders behavior on harassment has become a much bigger and higher profile matter. Another mechanism to lose trustworthiness is in communications. First it can come through leaders relying on false or inaccurate information. However, it can also come from the lack of communications when a leader says they will respond but never in fact get back to you.

From my perspective, one of the fastest ways for a leader to lose trustworthiness is around institutional justice. If a leader is seen to play favorites in “bending the rules to privilege themselves or close associates, making decisions based on their own self-interest rather than what’s best for the organization, urging employees to make material sacrifices while wasting the organization’s resources on perks for themselves, and taking credit for the achievements of others.” But beyond this straightforward example are more sophisticated ways to lose trustworthiness through such issues as not listening to stakeholders or making unilateral decisions without due consideration of others, thereby demonstrating a leader does not value their input.

The authors end this section by noting it is much hard to make a comeback if one is not competent as opposed to not trustworthy, writing “incompetent leaders can at least try to become more competent, whereas untrustworthy leaders can’t easily become more trustworthy.”

Tomorrow I consider the insights on these issues of credibility for a CCO. Stay tuned.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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