The leader who does not establish trust will have no followers. Trust is the primary attribute associated with leadership, and trust that is broken can have an adverse effect on a group’s performance. People are unlikely to follow someone they think is dishonest, or someone they think will take advantage of them. Conversely, when followers trust a leader, they’re willing to be vulnerable to the leader’s actions.

What Is Trust?

What is trust? Trust is a positive expectation that another individual will not act opportunistically at another’s expense. Trust is dependent on history, based on relevant but limited samples of experience. Trust involves five key dimensions:

• Integrity: the honesty and integrity of the individual.
• Competence: the knowledge and ability of the individual.
• Consistency: the reliability of the individual.
• Loyalty: the willingness of the individual to protect the interests of another.
• Openness: the individual’s willingness to be forthcoming with others.

In today’s world of business, there are plenty of reasons for trust to be deteriorating. Wells Fargo took advantage of sales teams and, with them, their own customers, and their predatory behavior was called onto the carpet in front of Congress. Volkswagen’s faked emissions testing cost their business customers and international relations. Facebook has been taken to task for lax security measures around users’ personal information, and the lack of checks and balances in their advertising policies may have influenced our country’s presidential election.

Whether trust is lost between a leader and a follower, or a customer and a company, it costs the organization money.

Types of Trust

There are three types of trust in organizational relationships.

• Deterrence-based trust. Perhaps the most fragile of all the types of trust, deterrence-based trust is based on the fear of reprisal if trust is violated. A new employee might extend deterrence-based trust to his or her new manager, understanding that there is limited experience on which to base any other trust. The potentially harmed party must be willing to introduce harm in return if the trust is violated. “I am willing to speak poorly of you if you do the same to me,” is an example of that.
• Knowledge-based trust. This trust is the most common, and it’s based on the behavioral predictability that comes from a history of interaction. Even when an individual can predict that another individual will be unpredictable or untrustworthy, knowledge-based trust can still exist. “I know enough to know he won’t show up on time and he won’t bring the pizza,” is what one might say in a knowledge-based trust situation.
• Identification-based trust. This is the highest level of trust achieved between two individuals, because it’s an emotional connection between them. This trust is based on a mutual understanding of each other’s intentions and appreciation of the other’s wants and desires. A happily married couple exercises identification-based trust, as well as two people in an organization who have worked together for a long period of time.

Principles of Trust

Where an organization is concerned, there are some basic trust principles that leaders should keep in mind:

• Growth can mask mistrust. In a time of organizational growth, leaders enjoy rapid promotions and increased power and responsibility. Leaders who don’t plan to be with an organization for very long can take shortcuts and leave issues of mistrust for their successors to handle.
• Decline tests the highest levels of trust. There’s nothing like a string of layoffs or an episode of corporate downsizing to erode even strong levels of trust.
• Trust increases cohesion. Group members who display trust in each other will work together and exert high levels of effort to achieve goals. Mistrusting groups should expect the exact opposite.
• Mistrust generally reduces productivity. While trust doesn’t necessarily increase productivity, mistrust almost always decreases it. Mistrust forces group members to focus on individual differences, which makes it hard to visualize any common goals.

In a 2016 survey done by Price Waterhouse Cooper, they reported that 55% of CEOs think a lack of trust is the biggest threat to their business. Certainly , companies whose employees consider them “high trust” are experiencing a lot of advantages: their employees report 74% less stress, 106% more energy at work, 50% higher productivity, 13% fewer sick days, 76% more engagement, 29% more satisfaction with their lives, 40% less burnout.^[1]

Be trustworthy.