Don't Bankrupt Your Leadership!

“We need to keep some confidence in the system.What the Fed is doing … is taking every step possible to keep confidence in the financial system” (CNN)
AIG chairman and CEO Edward Liddy said this Monday, after the insurance giant had received a pledge of $30 billion in bailout money. This was in addition to the $150 billion it had already received.

And in spite of those large sums pouring into it, that very same day, AIG posted a 4^th-quarter loss of $62 billion.

I’m sure with his words Liddy was trying to persuade the public that AIG would make good on the investment.

He even went on to say, “In the United States of America when you owe people money, you pay them back” (CNN Money)

So how reassured did Americans feel?

Well, the Dow plunged to record lows, closing below 7,000 points.

Why? Why weren’t Liddy’s words of reassurance enough? Because in past months, the financial industry had lost credibility and thus people’s trust.

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It’s hard for a financial institution to perform without credibility. It’s equally difficult for a leader to do so. Why? Because credibility is a leader’s currency. With it, leaders are solvent. Without it, they’re bankrupt.

I think leaders in Liddy’s situation – trying to establish or re-establish credibility – need to remember:

1. Establishing credibility takes time.

When leaders are just starting out, this might not be obvious at first. That’s because for about the first six months of a leader’s tenure, followers put more stock in communication than in credibility. After all, they haven’t had time to judge leaders’ actions, so they listen to their words.

But after six months, followers have seen enough of the leaders’ actions to start deciding whether they’re trustworthy or not. At this point, words begin to matter less and less. And the effectiveness of the communication will depend more on the character of the messenger than on the content of the message.

For credible leaders, the longer they lead beyond this point, the better it gets. But if leaders are not credible, then the longer they lead, the worse it gets.

2. Established credibility equals trust.

And trust carries huge rewards. It means confidence. It erases worry and frees you to get on with other matters.

Stephen R. Covey, in his book, The Speed of Trust, said,

Low trust is an unseen cost in life and business because it creates hidden agendas and guarded communication, thereby slowing decision-making. A lack of trust stymies innovation and productivity. Trust, on the other hand, produces speed because it feeds collaboration, loyalty and ultimately, results.

Good leaders know that if their followers don’t trust them, they’ll stop following them. Credibility is truly your currency as a leader. People believe that you’ll do what you say when you do what you say.

Consistently live what you communicate, and over time you’ll establish solid credibility.  With that, your followers will feel free to trust you. And they’ll be willing to partner with you in achieving great things for your organization.

And that’s especially important in times like these when people are wondering what – and who – they can trust.