The Trust Tax
By: David Freund, Chief Leadership Officer
Have you ever stopped to think about the effect trust has on our lives? As leaders, we either pay a tax related to trust, or we gain a reward related to trust, and the actual amount of tax or reward can be staggering. Let me explain what I mean by that statement. When we don’t trust our team, we spend large amounts of energy and time checking up on them. They in turn worry about proving that they worked rather than being innovative and improving our organization. A 2005 Harris poll revealed that only 22% of Americans trust the media, 8% trust political parties, 27% trust the government, and only 12% trust large corporations. According to Stephen M.R. Covey’s book, The Speed of Trust, 51% of employees have trust or confidence in senior management, only 36% believe their leaders act with honesty and integrity, and 76% of employees say they have observed illegal or unethical conduct on the job. What has happened to us and what is this costing us?
In 2002, the United States Congress passed the Sarbanes – Oxley Act to protect investors from fraudulent accounting practices. The act was in response to scandals such as Enron where fraudulent accounting practices resulted in billions in losses for investors and job losses totaling 90,000. Yes, we did find a way to safeguard investors, but the costs to implement just one section of the Act was $35 billion. According to Covey, this was 28 times the estimate given when the law was passed.
Contrast this expense to another example Covey gave, namely Berkshire Hathaway’s purchase of McLane Distribution. In 2004 Warren Buffett completed the $23 billion acquisition from Wal-Mart with one two-hour meeting and a handshake. Based on his track record as one of the most trusted and thorough business leaders, and with his trust in Wal-Mart, Buffett was able to complete the acquisition with the single meeting. Because of the high level of trust, they saved months of due diligence and millions of dollars in lawyer and accounting fees.
Lack of trust requires that we pay a tax while high levels of trust allow us to speed things up, save money, and get on with running our business. On a more personal level, think about how much time and emotions are wasted because we don’t trust our boss or co-workers. How many employees have we lost because of a lack of trust? The costs of this tax alone could be far more than we would ever imagine.
Each day we must evaluate if we are building trust or losing trust. The good news is we can become intentional about building trust in our business, our homes, and our communities. Next week we will discuss actions each one of us can take on a daily basis.
Join Marisa and me on The Next Page podcast as we take a deeper dive into this critical topic. If you have a question you’d like addressed on the podcast, be sure to send them to Marisa at [email protected]