Over the last two blogposts, I have been exploring what gives a leader credibility; what gives a Chief Compliance Officer (CCO) credibility; what gives middle manager credibility and finally why would employees follow any persons in these positions? I found several keys in a recent MIT Sloan Management Review article, entitled “Why People Believe in Their Leaders – or Not. In this piece, the authors set out to explore how leaders’ lead effectively and why employees choose to follow them – or not. It is all about credibility. This is a critical discussion because as difficult as it is to gain credibility; once it is lost, it becomes extraordinarily difficult to regain. Yesterday, I considered how leaders can garner credibility with a workforce and other stakeholders. Today I will provide insights for the business leaders and CCOs going forward on how to avoid losing credibility and if you do, how can you work to gain it back.

The authors start with the proposition that the behaviors which can lead to loss of credibility are not  simply the converse of those behaviors which demonstrate competence and trustworthiness. They note that “many of the perceived behaviors of competence and untrustworthiness are asymmetric. This means that by simply avoiding behaviors which might lead to the loss of credibility, it does not mean you will automatically gain credibility. Simply by pointing to the future, does not mean that as a leader you are credible. Conversely but looking the past, in a back to the future way, does not mean lead to a loss of credibility. The key is “consider the full range of indicators when trying to gauge how others see you as a leader.”

If you are going to point to a future initiative, you must either be well-versed in this plan or allow those who are well-versed to move forward without interference. You must also listen to those advising you and appreciate those who work for you. Further if you do not listen, this indicia of lack of competence could move to something involving a lack of trustworthiness.

Not surprisingly, most people believe trustworthiness is more important than competence. Follower are more willing to allow an act viewed as incompetence as one to be overlooked or even forgiven. However an untrustworthy act can have much more significance for a leader’s credibility. This means if you talk about long-term growth and strategy do not paint the pick with false data. It can also mean that you must not take actions in contravention of your competence. If you say how important long-term strategy is; do not penalize people for not hitting their next quarters numbers, for this will be viewed as communicating dishonestly and lead others to simply not believe the next series of initiatives.

The authors tackle the always difficult issue of overcoming a loss of credibility, writing that “Any behavior that causes employees to attribute incompetence and untrustworthiness to top management, either alone or in combination with other behaviors, can have negative repercussions that are tough to recover from. As noted earlier, employees are less tolerant of untrustworthy behaviors than of incompetent behaviors.” Yet they note it can be done.

This can have significant implications beyond leadership, going directly to not only how but even if a company can regain the marketplace’s trust. Here you only need to think of Wells Fargo which had its reputation decimated by its fraudulent accounts scandal. It is in a massive campaign to regain the trust in the marketplace. It is still an open question if it will work. One might say the same for any other major corporate scandal over the past few years.

Yet as an example of one company which did make a successful move to regain credibility, the authors pointed to Morgan Stanley under the leadership of James Gorman after the 2008 financial crisis. The authors noted that he took “the opportunity to thoroughly review the company’s practices regarding compensation, compliance, and risk management.” This review lead to a refocusing on “the company’s culture on sustainable long-term performance goals, ethical management of resources, and a renewed emphasis on the interests of clients, and earned praise and trust from employees and other stakeholders.” In the Foreign Corrupt Practices Act (FCPA) world there are multiple cases of companies using a FCPA enforcement action to revamp their corporate culture around business ethics. So it can be done.

I found this article and its insight a key learning guide literally for anyone who works with others. While basic human decency and respect will always be critical, the authors list out specific strategies and tactics to not only gain credibility but point out ways it can be lost. Any CCO, anyone who desires to sit in the CCO chair or any business leader would do well to consider them.

Credibility is a key leadership indicia. How to garner it and keep it may well lead to your success as a CCO.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2018