The current issue of Harvard Management Update arrived in my inbox today, and the lead piece was an interview with well-known business guru Ram Charan, whose new book, Leadership in the Era of Economic Uncertainty, was released in December 2008. Interviewer Christina Bielaszka-DuVernay, editor of Harvard Business.org editor, asked him this first question: "What's most important for leaders—not just CEOs and senior executives but leaders throughout the ranks—to fous on right now?
Charan's response: "In these times more than other times, first and foremost is demonstrating personal integrity and maintaining your personal credibility. They are so important in tough times, yet many leaders lose their integrity and destroy their credibility by giving into the temptation to cut corners when they have to do unpleasant tasks like downsizing." This should come as no surprise to anyone who has read our books, The Leadership Challenge and Credibility: How Leaders Gain and Lose It, Why People Demand It. Barry and I have written about this for over 25 years. Our research continues to demonstrate that credibility is the foundation of leadership. If people don’t believe in the messenger, they won't believe the message. It's one of the enduring leadership truths, in good times and in bad times.
And Ram Charan is absolutely correct in saying that in tough times credibility and integrity are crucial. When you have to act quickly and decisively under very adverse circumstances, and at the same time maintain the highest levels of commitment, you had better have lots of credit stored up with your constituents. The dilemma is that if leaders don't earn it over the years, then why all of a sudden should someone want to believe them when times are tough? Credibility isn't something leaders can turn on and turn off. It's got to be on 24/7/365.
The tragedy now is that there are so many egregious examples of excess and greed in business that it's tough for even the most saintly leaders to be seen as having high integrity. The Maddoffs, Stanfords, and AIGs of the world have caused a torrent of outrage, and they're just making it exceedingly tough for the rest of us to lead.
But there is some reason to be optimistic that things can change. Confidence in major institutions was at a ten-year low in 2008, but surprisingly, according to the Harris Poll the overall confidence rating of major institutions actually went up 10% in February 2009 compared to a year ago, with confidence in the White House surging 21%! Other organizations that gained significant ground are educational institutions (up 8%), the military (up 7%), medicine and television (up 6%), and organized religion and organized labor (up 5%).
However, the very institutions in which we need greater confidence saw their numbers decline. Only 11% of the public express a great deal of confidence in major corporations (down 3%) and a minuscule 4% express a great confidence in Wall Street (down 7%). A similar pattern can be seen among the honesty ratings of bankers as measured by Gallup. The positive honesty ratings of bankers fell from 35% to 23%, making it a record low since Gallup has been gathering the data. Thirty-five percent is not exactly anything to brag about, but at 23% they've got serious credibility problems. It's no wonder that people are fumingly furious about bonuses and bailouts.
It's time for leaders in major corporations, especially financial institutions, to do a little soul searching. Having worked with many leaders in these firms, I know they aren't evil people out to steal from their customers or the American people. Still, they can't just huddle amongst themselves telling themselves that they really are decent folks. These issues have to be addressed out in the open, in the full light of the day if these leaders ever want to see faith and confidence restored.
Credibility takes a lot of time to build, but it can be lost in an instant. In order to regain it, leaders in these organizations are going to have to address the issues directly. They need to begin an internal dialog, as well as a national conversation, about how we got into this mess in the first place, and how we can prevent it from happening again. It's time to tell the truth, and that begins by first being honest with ourselves.
Posted by Jim Kouzes