Trust in Leadership: 3 Lessons in Empowering Your Team

Employing more trust in leadership led to soaring sales for Oreos in the international market.

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Contributor / Sanjay Khosla

Senior Fellow, Kellogg Markets and Customers Initiative (KMCI), Kellogg School of Management
Senior Advisor, Boston Consulting Group
Kellogg School of Management / Consumer Products

Giving leaders a blank check to pursue big goals is a powerful display of trust. It shows that you believe they will do the right thing, take ownership, and be accountable for the results. Such intelligent risk taking can lead to a remarkable return on investment. For example, sales of Oreos outside the U.S. increased from $200 million to more than a billion dollars in six years as a result of a blank check. But not all experiments will succeed. In fact, failure is often part of the process that ultimately leads to success.

Transcript

Blank checks is all about trust: trusting leaders to do the right thing, to take ownership, and yet be accountable for results.

How do these blank checks really work? There are three guidelines. The first is, you select the leaders whom you really trust (and the teams) and give them a really big target, let them dream big. And these targets have to be achieved in a very short period of time.

The second is, the leader and the team puts together a short business proposal, asking for the resources that would be needed along with clear deliverables and milestones.

And the third guideline is to nurture these teams, make sure that they have an environment where they can succeed, and then monitor progress against milestones.

BUMPER: Case Study: Oreo

Let’s take an example; let’s take the case of Oreo. Now, Oreo is the number one biscuit in the world by far. Oreo is over 100 years old. But for 95 years, Oreo was spectacularly unsuccessful outside the U.S. — and certainly not for a lack of trying.

So, we called the Oreo team, and we said, “We know currently it’s not doing well in countries like China and Indonesia and various other parts of the world — it’s not doing well. Just figure out what do you want to do, what resources do you want to use, take a blank check, and go.”

And then they realized, why is it that it’s not selling so well in various countries around the world, like China? And they found that, very often, the American Oreo was too sweet, too big, the price points were too different.

And they started experimenting, then, with a number of different products, like Green Tea Oreo, wafers. Half these products failed.

And that was okay. That was really okay because the whole idea here was to give them freedom within the framework of keeping the Oreo essence core around the world but then getting local products, which delight local consumers.

As a result of that blank check, Oreo went from a revenue of about 200 million dollars outside the U.S. to over a billion dollars in revenue in six years. More importantly, gross margins outside the U.S. were very healthy.

BUMPER: Three Lessons from Blank Checks


So, what are the lessons that one can learn from giving blank checks? And again, this is equally applicable to small companies and large companies.

The first is, you get people, you trust people, to do the right thing, and you make them act as owners. The second is that this signal of trust goes all over the organization, of empowerment, but yet they are accountable for results.

And the third is not all blank checks succeed; very often, they fail because if everything is going well, something’s horribly wrong. The important part there is, if a blank check experiment fails, not to penalize the leader or the teams, provided they’ve learned the lessons from the project.

That, again, is a signal of trust — trusting people always to do the right thing and making sure, then, you celebrate not only successes but also celebrate and learning from failures.

Over years of experimenting with blank checks, we found that, in companies, you have a choice: you can either be cozy, or you can trust people and get them to fly.

Keep up with the latest insights on trust

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Change is inevitable. Having a picture of where you've been helps manage change as it occurs.

Building Team Trust to Manage Change at Work

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Contributor / Grover Wray
Grover Wray Human Resources Human Resources,Mergers and Acquisitions,Reputation Management,Social Psychology As a Chief Human Resource Officer, trust is fundamental to being able to ensure that employees are engaged, they are motivated by what they do and they can contribute a degree of value back to the organization, and in return the organization gives them a degree of value. And when that equation of value that the person gives to the organization is equal to the value that the organization is giving to them, then you have trust. That’s what trust is built on. And so as a Chief Human Resource Officer it’s absolutely critical to ensure that you are effectively building mental maps for all of your team members starting with those who come into the organization on day one.

Essentially a mental map is an ability for somebody to be able to anticipate and to expect what might happen. An example, a simple example would be driving to and from work. If we drive to and from work every day the same way, very soon we have a route. We don’t think about what we’re doing; we just start to drive and the next thing you know you’ve arrived at your destination and you find that you arrived without even giving a thought to how you got there.

BUMPER: Understanding Trust through Mental Maps


When I was first introduced to this idea of mental maps it was through the work that I was doing with Arthur Anderson. I got a phone call one day from a partner who said, “We are thinking about outsourcing this accounting function and I was visiting with the CEO of this company and he said you’ve put a lot of effort and time into making sure that the technical transition of this work goes smoothly. But if you’re going to be in this business full-time you better put as much attention to how you manage the people as you do the technical transition.”

I ended up visiting with the CEO and ended up visiting with all of the team members and that’s when the light bulb went on for me. It was the CEO who understood the dynamic of what was happening to his team members who had an expectation, a trust, and this trust was a very significant trust because it was in a small town. It was a few team members.

And it was at that moment that I realized that these employees could not go through a transition like this without understanding the expectations of what a new company was going to provide to them. And it was then that I realized the power of that mental map and applied that in every situation that we encountered after that, and in every situation almost to a T that process or principle worked very well, because you were addressing exactly what the issues were and the uncertainty that gets created when a mental map gets destroyed.

BUMPER: 5 Steps to Building Trust During Mergers

I realized that principle of a mental map was exactly what was needed inside a merger and acquisition or significant change situation. An employee was in an uncertain moment when all of a sudden the mental map that they had built about themselves and from the company was now gone. The trust that the organization had placed in them and they had placed in the organization was now gone. And without replacing that trust with a new map that would build new trust you would never gain the emotional commitment of the team members.

As a leader, the first thing you have to understand is the very first question that somebody has to have answered for them before you can provide any more information to them is: Do I have a job?

The next layer of that foundation is: What are my salary and benefits?

If that question is answered then the third question in that layer of questions becomes: Who is my manager?

And then the fourth question in that layer is: What is my team or who is my team? Who will I be interacting with?

And then the fifth layer, which is the most important layer, but it’s the last layer – (which is somewhat counterintuitive) is the culture. What is the culture of the organization like? What are the values of the organization? If you start with culture, which sometimes we might tend to do because we want that to be seen as a very positive thing, that’s good but I still don’t know whether I have a job. And so it’s not going to resonate with me until you answer those other foundational questions.

Follow that pattern through, and each of those pieces of the pattern put another piece into the mental map until you have sufficiently formed a mental map for that individual as they move into a new environment.
Without trust and transparancy in business, consumers fall at risk of getting ripped off whenever they shop.

If You’re Getting Ripped Off, It’s Not Surprising

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Contributor / Niko Matouschek
Niko Matouschek Economics Building Brands,Leadership,Long Term Focus,Sharing Economy,Vulnerability I think it’s an underappreciated fact that successful market economies, like the U.S., exhibit a lot of trust — trust between market participants who are both anonymous (they don’t know each other well) and who are self-interested.

If you look at the sharing economy, for instance — to a large extent, their success depends on their ability to create trust between third parties, trust between somebody who wants to rent out their apartment and trust between somebody who wants to rent that apartment.

Or if you think about yourself — every day, you trust people who you don’t know and you trust them to do things that are actually not in their self-interest. And more often than not, you don’t get disappointed.

If I told my wife that the U.S. economy exhibits a lot of trust, she would be very skeptical — rightly so because the history of corporate misdeeds is a long and distinguished one to which we’ve had many colorful, recent, new entries.

But the fact that people get ripped off is not really surprising. What’s surprising is that they’re not getting ripped off more often. What’s surprising is that I can go into essentially any store anywhere in the United States and be reasonably sure that I won’t be sold a lemon. That’s what’s surprising.

BUMPER: Is It Naïve to Invest in Trust?

Firms do so in two ways, both of which involve making it costly for themselves to break their promises in the future. The first is that they hire people and are run by people who don’t just care about profits but also care about being trustworthy.

There’s essentially people, if you want, who incur a psychic cost if they break their own promise.

Now, in an age in which many emphasize the cutthroat nature of business, this may sound naïve and quaint, but it’s not, because, in a market in which trust is important, being trustworthy gives you competitive advantage.

A historical example of this are the Quakers in the 18th century, who played a very important role in the British economy at the time, even though there’s only a relatively small number of them.

And it’s often argued that one of the reasons for why they had such an important role in the economy was precisely because they were known to be trustworthy; they were known to follow through with their promises, even if it was not in their immediate economic interest to do so.

And that’s what gave them a competitive advantage; that’s why people seek them out to trade with them.

We see the same thing today with firms like Keller Williams and the like, trying to hire people who are not just skillful but also what they call “ethical.”

I don’t think that that’s just a cheap PR stunt; I think firms try to hire trustworthy employees not just because it’s a moral value that they might care about but because it’s an economic asset in which they can earn a return.

The second is that firms commit themselves to a long-term strategy that emphasizes and importance of repeat in future business — because if I’m not just a pop-up store but I also care about future business, then there’s a cost to me of breaking my promise to you today, which is that there’s going to be less business for me in the future.

So, repeat transactions can serve as a commitment device. For this to work, though, two things have to be true: First, not only me but also my employees have to care about the future enough.

And so, it’s important that I’m providing them with the right kind of incentives — with long-term incentives and not just short-term incentives.

And the other issue is that transparency is important. It’s important that customers are able to observe how I’ve treated other customers in the past.

So, that’s why things like feedback mechanisms in the electronic marketplaces are really useful because, there, if I cheat you, you’re going to go online and write a review, and that’s going to be costly to me. And because I know that, I’m less likely to cheat you in the first place.

BUMPER: When It’s Unwise to Trust

I think it’s rational to trust firms that care about the future, and it’s foolish to trust firms that don’t care about the future.

For instance, it’s foolish to trust a pop-up store. A pop-up store is not going to be around tomorrow, so they have no incentive to keep any promises they are making to you.

Maybe less obviously, firms that are close to bankruptcy — those are run by managers who care much more about today’s profits than about future profits because if they don’t increase today’s profits, they’re going to be out of business in the first place.

Another example would be firms in which employees are being rewarded very strongly for short-term performance — for quarterly earnings or quarterly performance — because, again, decisions are then made by employees who care a lot about the present profits, and they care much less about future profits.

So, again, these are the kind of firms in which I’d be suspicious about whether or not they’re going to keep their promises.
Healthcare providers must recognize the importance of trust and communication in building stable relationships with patients.

Trusting Healthcare Providers and Institutions: Key Findings

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Contributor / Kelly Michelson
Kelly Michelson Pediatrics Communication,Distrust,Healthcare,Measurement Research about trust in the healthcare setting has generally taken two approaches: the first is to look at it in a qualitative fashion, so to hear personal anecdotes and learn what we can from that; and the other is to look at it in a more quantitative fashion, using scales and measures to see how trust relates with specific outcomes or specific variables.

From the qualitative research, we know that things like developing partnerships, developing relationships, demonstrating competence are all very important components of establishing trust in the relationship.

Most of the quantitative data related to trust in a healthcare setting use trust scales to compare a measure of trust to a particular variable — looking at things like, do women tend to be more trusting than men of their healthcare provider? Are there racial differences related to trust? Are there differences in providers’ and healthcare settings’ relationship to trust?

And these concepts help us to think about how we act — in a clinical setting, for example — and what we teach trainees about how to build trusting relationships with their patients or with others in the healthcare team.

BUMPER: Trust and Communication

Much of what we know about trust in the pediatric intensive care unit comes from literature that looks at communication and how communication unfolds in this particular setting.

We know from some qualitative work, from Carnevale et al., that trust is a really important part of communication in the pediatric intensive care unit.

These authors interviewed physicians, nurses, and parents about communication, identified three different components of communication. And of note, one of them was relational communication. And one key factor in developing relational communication that they identified was fostering trust.

And in another work by Ames et al., we find that trust is not only an important component for healthcare providers to focus on but also for parents.

In this work, the authors interviewed parents of children who were in the pediatric intensive care unit and asked them about their roles. And one of the three roles that they identify was actually that the parents should be trying to establish a trusting relationship with the healthcare providers in the PICU.

In another study done by Vivian et al., we learned about the importance of communication among staff members in the pediatric intensive care unit.

In that study, staff members were interviewed, and we found that poor communication among caregivers within in the intensive care unit can impact trust and therefore impact how they care for patients.

So, again, we’re seeing the importance of trust between providers and patients (or, in my case, parents) but also among providers.

BUMPER: Trust in Critical Decision-Making


In terms of decision-making in the intensive care unit, much of the literature has focused on issues related to pretty challenging decisions for children who are very sick, things like withdrawing or withholding life-sustaining efforts if a child was seriously ill — some pretty serious decisions.

Some of the research I’ve done, for example, has looked at what kind of influencers contribute to a parent’s deciding whether or not to withhold or withdraw life-sustaining therapies if their child was so sick that that became something to consider.

And what I found was that distrust was one of nine important factors that parents are weighing in terms of making that kind of decision.

In another study, Meert et al. interviewed parents of children who had died in the pediatric intensive care unit to find out more about their experiences. And they found that parents who felt that clinicians were withholding information also had a sense of betrayal or distrust towards those physicians.

BUMPER: Enhancing Trust in the Intensive Care Unit

But it’s really important not just to know what happens in the intensive care unit and where trust fits into communication and decision-making; now that we have all that information, we really want to try to impact trust and to enhance better trust and better communication and hence better decision-making in the intensive care unit.

For example, Curtis et al. looked at an intervention where he tried to change multiple components of what was going on in the intensive care unit, including identifying champions for this work, providing feedback to clinicians.

Interestingly, he didn’t find that that intervention changed his primary outcome.

In another effort done by Lautrette et al., they actually educated clinicians about how to conduct a family conference.

And they came up with this mnemonic called VALUE, and each of the letters stand for something different — specifically that you should value and appreciate what the family is saying during a meeting, acknowledge their feelings and emotions, that you should listen to what they say, that you should try to understand their situation and their values, and that you should elicit questions from them.

So, they actually taught clinicians a little bit about how to focus their communication during family conferences in the intensive care unit. And they actually did find a difference.

They found that for families who had family conferences with clinicians who were trained in this manner, those surrogates to the patients in adult ICUs had less anxiety and depression after their loved one had died and less symptoms of post-traumatic stress.

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Pages in The Trust Project at Northwestern University