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Is Leadership in Crisis?

By Melissa J. Anderson

According to Edelman’s 13th annual Trust Barometer study, the past five years have ushered in a new dynamic for how people receive information, and grow to believe what they hear.

At the same time, trust in business leaders and government officials has plummeted. The survey polled 31,000 people in 25 countries around the world, and it seems as though people have a lot more trust in the institution of business than they do in business leaders themselves. Only 18 percent said they trusted CEOs to tell the truth, yet 50 percent said they trust business as an institution.

Richard Edelman, president and CEO of Edelman, commented, “We’re clearly experiencing a crisis in leadership.”

He continued, “Business and governmental leaders must change their management approach and become more inclusive by seeking the input of employees, consumers, activists and experts such as academics, and adapting to their feedback. They must also pass the test of radical transparency.”

This should give leaders a reason to reflect on the changing nature of leadership and communication.

Changing Priorities

The study found that the factors that contribute to trust in a company have evolved over the years. In 2008, companies merely had to perform well to be trusted. But today, the study showed, a whole host of issues contribute to a company’s image as trustworthy.

At the top of that list was “treating employees well,” consumer satisfaction, and having “ethical business practices.” The operational factors – issues like having a well-regarded management team or producing good returns for investors – are now simply an expected standard for every company, rather than just those most trusted companies. Edelman explains:

“Business must embrace a new mantra: move beyond earning the License to Operate – the minimum required standard – toward earning a License to Lead – in which business serves the needs of shareholders and broader stakeholders by being profitable and acting as a positive force in society.”

In this new paradigm, leading means acknowledging a broader range of responsibilities and a broader field of participants in dialogue of leadership.

Democratizing Leadership

The report indicates that an increase in global skepticism has changed who the public wants to learn things from. In the past, a CEO was a great person to deliver information on a whole host of company topics. But today that’s different. Edelman writes:

“The research confirms the democratizing trend of recent years – the redistribution of influence from traditional authority figures such as CEOs and prime ministers toward employees, peers and people with credentials, including academics and technical experts. A professor or person like yourself is now trusted nearly twice as much as a chief executive or government official. The hierarchies of old are being replaced by more trusted peer-to-peer, horizontal networks of trust.”

Academics and experts topped the list of trusted sources at 69 percent, followed by a technical expert in the company (67 percent), a “person like yourself” (61 percent), financial / industry analyst (51 percent), NGO representative (51 percent), regular employee (50 percent), CEO, (43 percent), and finally, government official / regulator (36 percent).

The democritization of leadership may have to do with the increasing prevalence of social networks like Facebook, Twitter, or LinkedIn by which people share information. But it also has to do with the economic meltdown and resulting high profile corporate scandals over the past few years, the report suggests. What’s more, “The internal and external actions of a company and executive behavior are now linked with immediate impact on the trust and credibility of a business.”

The report suggests that companies diversify the ways in which they deliver information – rather than funneling news and announcements through a CEO or PR spokesperson, companies should rely on a multitude of voices. Edelman calls that “inclusive management.” The report says:

  • “Establish a vision and transparently share reasoning, purpose and results.
  • Enlist a broader range of advocates, including employees, action consumers, social activists, academics and think tanks, seeking their input and reaction.
  • Embrace all channels of communications, actively listening to new voices of influence, and adapting.
  • Shift from vision to implementation with transparent measures guided by continual engagement.”

The nature of leadership has changed in the post economic crisis landscape. If CEOs want to display true leadership today, they will have to adapt to changing norms around trust and communication.

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