9 SMB Management Mistakes

“Trust Me, I’m a Leader”: Why Building a Culture of Trust Will Boost SMB Employee Performance—
and Maybe Even Save Your SMB 

If your employees don’t trust leaders, they won’t feel safe—and when they don’t feel safe, they spend all their creative energy covering their butts. (Hint: This is terrible for business!) John Hamm, author of the new book Unusually Excellent, offers some tips on how to build your smb employee “trust fund”…starting now.

          San Francisco, CA (May 2011)—Do your employees trust you? The brutal truth is probably not. It may not be fair, and you may not want to hear it, but chances are that previous leaders have poisoned the ground on which you’re trying to grow a successful business. Make no mistake: Unless you and all the leaders in your organization can gain the trust of your employees, performance will suffer. And considering how tough it is to survive in today’s business environment, that’s very bad news for your company.

          Why is trust so pivotal? According to John Hamm, it’s a matter of human nature: When employees don’t trust their leaders, they don’t feel safe. And when they don’t feel safe, they don’t take risks—and where there is no risk taken, there is less innovation, less “going the extra mile,” and therefore, very little unexpected upside.

          “Feeling safe is a primal human need,” says Hamm, author of Unusually Excellent: The Necessary Nine Skills Required for the Practice of Great Leadership.  “When that need isn’t met, our natural response is to focus energy toward a showdown with the perceived threat.

          “Our attention on whatever scares us increases until we either fight or run in the other direction, or until the threat diminishes on its own,” he adds. “Without trust, people respond with distraction, fear, and, at the extreme, paralysis. And that response is hidden inside ‘business’ behaviors—sandbagging quotas, hedging on stretch goals, and avoiding accountability or commitment.”

          Hamm calls trustworthiness “the most noble and powerful of all the attributes of leadership.” He says leaders become trustworthy by building a track record of honesty, fairness, and integrity. For Hamm, cultivating this trust isn’t just a moral issue; it’s a practical one.

          “Trust is the currency you will need when the time comes for you to make unreasonable performance demands on your teams,” he explains. “And when you’re in that tight spot, it’s quite possible that the level of willingness your employees have to meet those demands could make or break your smb.”

          Hamm has spent his career studying the practitioners of great leadership via his work as a CEO, venture capitalist, board member, high-level consultant, and professor of leadership at the Leavey School of Business at Santa Clara University. In his new book, he shares what he has learned and brings those lessons to life with real-world stories.

          Unusually Excellent is a powerful back-to-basics reference book that offers both seasoned and aspiring leaders a framework for understanding and a guide for applying the battle-tested fundamentals of leadership at every stage of their careers.

          In his book Hamm explains that most employees have been hurt or disappointed, at some point in their careers, by the hand of power in an organization. That’s why nine times out of ten leaders are in “negative trust territory” before they make their first request of an employee to do something. Before a team can reach its full potential, leaders must act in ways that transcend employees’ fears of organizational power.

          The first step starts with you, Hamm notes. As a leader, you must “go first”—and model trustworthiness for everyone else. Being trustworthy creates trust, yes. But beyond that, there are very specific things you can do to provide Unusually Excellent, trust-building leadership at your organization:

First, realize that being trustworthy doesn’t mean you have to be a Boy Scout. You don’t even have to be a warm or kind person, says Hamm. On the contrary, history teaches us that some of the most trustworthy people can be harsh, tough, or socially awkward—but their promises must be inviolate and their decisions fair.

“As anachronistic as it may sound in the twenty-first century, men and women whose word is their honor, and who can be absolutely trusted to be fair, honest, and forthright, are more likely to command the respect of others than, say, the nicest guy in the room,” says Hamm. “You can be tough. You can be demanding. You can be authentically whoever you really are. But as long as you are fair, as long as you do what you say consistently, you will still be trusted.”

Look for chances to reveal some vulnerability. We trust people we believe are real and also human (imperfect and flawed)—just like us. And that usually means allowing others to get a glimpse of our personal vulnerability—some authentic (not fabricated) weakness or fear or raw emotion that allows others to see us as like them, and therefore relate to us at the human level.

Hamm offers Carl, a self-made success and CEO of a venture-backed software smb, as a great example. Carl had a Ph.D. and held senior management positions at several large IT companies. But he came from a family with humble roots. In fact, he was the first kid in his family to go to college. The stories Carl used when leading his team came from his own rural upbringing. He told them from the heart and with great humility. He would emphasize a point not by reference to some academic theory, but rather with a story about working in the corn fields. His team not only trusted him more because he wasn’t afraid to show that side of himself, but they loved him for it.

“Carl knew that if he was authentic, it would be much easier for him to earn his team’s trust,” says Hamm. “The best leaders consciously present themselves as accessible and open and vulnerable—that is, they talk about their fears, challenges, and failures with humility, candor, and at times even some humor—so as to break down the barriers with those whom they wish to know. They know this does not threaten their power, but, rather, increases their influence.”

No matter how tempted you are, don’t bullsh*t your employees. Tell the truth, match your actions with your words, and match those words with the truth we all see in the world: no spin, no BS, no fancy justifications or revisionist history—just tell the truth.

“Telling the truth when it is not convenient or popular, or when it will make you look bad, can be tough,” admits Hamm. “Yet, it’s essential to your reputation. Your task as a leader is to be as forthright and transparent as is realistically possible. Strive to disclose the maximum amount of information appropriate to the situation. When you feel yourself starting to bend what you know is the truth or withhold the bare facts, find a way to stop, reformat your communication, and tell the truth.”

Never, ever make the “adulterer’s guarantee.” This happens when you say to an employee, in effect, “I just lied to (someone else), but you can trust me because I’d never lie to you.” When an employee sees you committing any act of dishonesty or two-facedness, they’ll assume that you’ll do the same to them. They’ll start thinking back through all of their conversations with you, wondering what was real and what was disingenuous.

In his book, Hamm describes an incident that took place at a famous, fast-growing technology smb. A young, inexperienced, but talented associate had what he thought was a plan for a powerful new marketing initiative. So he asked the CMO to broker a meeting with the CEO to make a presentation on the subject. The CMO agreed, and the meeting took place.

During the presentation the CEO was polite, if noncommittal. He gave the presenter a sort of passive accepting feedback—“Nice point,” “Interesting,” and so on—and wrapped up the meeting quickly, thanking the presenter for his initiative. But the CMO could sense a duplicity in the CEO’s behavior and attitude as the parties all headed back to their respective offices. Then, ten minutes after the meeting, the CEO called the CMO into his office and said, in essence, “That presentation was absolutely terrible. That guy’s an idiot. I want you to fire him, today.”

“The story of this harsh and unjust firing spread (as it always does) throughout the smb, morale slipped, and the CMO never completely trusted his boss again,” writes Hamm. “The CEO’s reputation for trustworthiness had been wounded forever. The wreckage from one seemingly small act of dishonesty was strewn all over the smb and could never be completely cleaned up.”

Don’t punish “good failures.” This is one of the stupidest things an organization can do—yet it happens all the time. A “good failure” is a term used in Silicon Valley to describe a new smb start-up or mature company initiative that, by most measures, is well planned, well run, and well organized—yet for reasons beyond its control (an unexpected competitive product, a change in the market or economy) it fails. In other words, “good failures” occur when you play well, but still lose. When they’re punished, you instill a fear of risk-taking in your employees, and with that you stifle creativity and innovation. Instead, says Hamm, you should strive to create a “digital camera” culture.

“There is no expense associated with an imperfect digital photograph—financial or otherwise,” he explains. “You just hit the ‘delete’ button, and it disappears. No wasted film, slides, or prints. And we are aware of this relationship between mistakes and the consequences when we pick up the camera—so we click away, taking many more photos digitally than we would have in a world of costly film. Because we know failure is free, we take chances, and in that effort we often get that one amazing picture that we wouldn’t have if we were paying a price for all the mistakes.”

Don’t squelch the flow of “bad” news. Do you (or others under you) shoot the messenger when she brings you bad news? If so, you can be certain that the messenger’s priority is not bringing you the information you need: It’s protecting her own hide. That’s why in most organizations good news zooms to the top of the organization, while bad news—data that reveals goals missed, problems lurking, or feedback that challenges or defeats your strategy—flows uphill like molasses in January.

“We must install a confidence and a trust that leaders in the organization value the facts, the truth, and the speed of delivery, not the judgments or interpretations of ‘good’ or ‘bad,’ and that messengers are valued, not shot,” says Hamm. “Make it crystal clear to your employees that you expect the truth and nothing but the truth from them. And always, always hold up your end of that deal. Don’t ever shoot the messenger and don’t ever dole out some irrational consequence.

“Unusually excellent leaders build a primary and insatiable demand for the unvarnished facts, the raw data, the actual measurements, the honest feedback, the real information,” he adds. “Very few efforts will yield the payback associated with improving the speed and accuracy of the information you need most to make difficult or complex decisions.”

Constantly tap into your “fairness conscience.” Precise agreements about what is fair are hard to negotiate, because each of us has our own sense of fairness. But at the level of general principle, there is seldom any confusion about what fair looks like. Just ask yourself: Would most people see this as fair or unfair? You’ll know the answer (indeed, as a leader, you’re paid to know it).

“If you treat your followers fairly, and do so consistently, you will set a pattern of behavior for the entire organization,” says Hamm. “This sense of fairness, critical to the creation of a safe environment, can be reinforced not only by complimenting fair practices but also by privately speaking to—or if necessary, censuring—subordinates who behave unfairly to others in the organization.”

Don’t take shortcuts. Every organization wants to succeed. That’s why, inevitably, there is a constant pressure to let the end justify the means. This pressure becomes especially acute when either victory or failure is in immediate sight. That’s when the usual ethical and moral constraints are sometimes abandoned—always for good reasons, and always “just this once”—in the name of expediency.

“Sometimes this strategy even works,” says Hamm. “But it sets the precedent for repeatedly using these tactics at critical moments—not to mention a kind of ‘mission creep’ by which corner-cutting begins to invade operations even when they aren’t at a critical crossroads.”

Plus, when employees see you breaking the “code” of organizational honor and integrity to which your company is supposed to adhere, they lose trust in you.

“Betray your organization’s stated values when you’re feeling desperate—by lying to clients or ‘spinning’ the numbers to get out of trouble with your boss—and you devalue the importance of trust and honesty in their eyes,” adds Hamm. “They see you breaking your own rules and suddenly they see you as less trustworthy. After all, if the client or the company’s executive suite can’t trust you, why should they?”

Separate the bad apples from the apples who just need a little direction. The cost of untruths to an organization can be huge in terms of time, money, trust, and reputation. As a leader, you have to recognize that you are not going to be able to “fix” a thief, a pathological liar, or a professional con artist—all of these must go, immediately.

“In my coaching practice, there are three failure modes that I will decline to coach: integrity, commitment, and chronic selfishness, that is, manipulating outcomes for individual gain at the expense of the larger opportunity,” says Hamm. “These are character traits, not matters of skill, practice, knowledge, or experience.

“That said, one huge mistake leaders make is to doubt or distrust someone because their work or performance disappoints us,” he adds. “Performance problems should be managed fairly and with little judgment of the person’s underlying character, unless that is the issue at the root of the trouble. Ultimately, unlike my failure modes, improving performance is often merely a matter of feedback, course correction, and some coaching.”

          “Trustworthiness is never entirely pure,” says Hamm. “Everyone fails to achieve perfection. So the goal for a leader is to make those wrong choices as rarely as possible; admit them quickly, completely, and with humility; fix them as quickly as you can; and make full recompense when you cannot. Trust is the most powerful, and most fragile, asset in an organization, and it is almost exclusively created, or hampered, by the actions of the senior leader on the team.

          “A working environment of trust is a place where teams stay focused, give their utmost effort, and in the end do their best work,” he concludes. “It’s a place where we can trust ourselves, trust others, trust our surroundings, or—best of all—trust all three.”

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About the Author:
John Hamm is one of the top leadership experts in Silicon Valley. He was named one of the country’s Top 100 venture capitalists in 2009 by AlwaysOn and has led investments in many successful high-growth companies as a partner at several Bay Area VC firms. Hamm has also been a CEO, a board member at over thirty companies, and a CEO adviser and executive coach to senior leaders at companies such as Documentum, Cisco, Hewlett-Packard, TaylorMade-adidas Golf and McAfee. John teaches leadership at the Leavey School of Business at Santa Clara University.

About the Book:
Unusually Excellent: The Necessary Nine Skills Required for the Practice of Great Leadership (Jossey-Bass/A Wiley Imprint, February 2011, ISBN: 978-0-47092843-1, $24.95, www.unusuallyexcellent.com) is available at bookstores nationwide and from major online booksellers.