Professor Sim Sitkin explains why leaders need to explain difficult decisions and acknowledge conflicting expectations to build trust

You expect a company to deliver consistent service, but you also want it to adapt when your needs change. You want a company to listen to your opinions, but you also expect it to rely on experts when making decisions. These competing expectations can erode trust even when an institution has done nothing intentionally wrong.

In this episode, Professor Sim Sitkin of Duke University’s Fuqua School of Business discusses why institutions lose trust and how leaders can address the contradictions behind that erosion. A professor of management and faculty director of Fuqua’s Coach K Center on Leadership and Ethics, Sitkin explains how trust makes everyday life more functional and enables collaboration. Trust is “a willingness to be vulnerable under conditions of uncertainty,” he said. When people trust an institution, they can rely on it without constantly questioning whether their interests will be protected.

Sitkin identifies five inherent contradictions institutions face: stability versus adaptability, inclusion versus exclusivity, standardization versus customization, expertise and authority versus participation, and protection of sensitive information versus transparency. Meeting one expectation can violate another. For example, customers may expect quick, standardized service while also wanting special treatment for their individual needs.

To address these tensions, Sitkin outlines four actions: explore people’s concerns, explain the contradictions and the institution’s responses, experiment with different approaches, and execute decisions well. Leaders should understand what makes people feel vulnerable and explain why difficult choices are necessary. His leadership research shows that leaders do not explain enough, and those with more power explain less. “I need to explain if I want to get trust,” he said. When a department must absorb budget cuts for the organization to survive, leaders should explain the alternatives considered and provide support to those affected.

For business leaders, building trust requires ongoing interaction, acknowledging mistakes and being willing to adjust as circumstances change. Sitkin points to distrust in science and universities as examples of why explaining experimentation matters: new findings can improve today’s best answer. For MBA students, he recommends learning from classmates who disagree with them and choosing courses and projects that stretch their abilities. Trying unfamiliar approaches, including those that fail, can create opportunities to learn.

Duke Fuqua Insights features digestible conversations with our faculty about the most impactful research from their careers, including studies they teach in Fuqua classes. New episodes every other week in season.

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Professor Xu Jiang explains how disclosure rules shape companies’ decisions, competition and the way investors process information.

Corporate disclosures include more than financial statements. Companies also share information about environmental, social and governance activities, product development and other issues that matter to investors, employees, customers and suppliers.

But deciding how much to disclose can be difficult: information that excites investors may also help competitors piece together a company’s strategy.

In this episode, Professor Xu Jiang of Duke University’s Fuqua School of Business discusses how mandatory and voluntary disclosure affect companies and their stakeholders. Regulators establish minimum requirements, but companies retain discretion over what they consider “material” and how much detail to provide. Pharmaceutical companies, for example, may use press releases to share progress on a drug before they can recognize related revenue in their financial statements.

The frequency of disclosure can also influence managerial decisions. If companies report earnings every quarter, managers may face pressure to meet analysts’ forecasts by cutting promising research and development projects. Reporting less frequently may reduce that pressure, but more frequent reporting can also help investors monitor managers and discourage them from using company resources for projects that do not benefit shareholders. “The important trade-offs are how would the disclosure affect the firm's real investment decisions, and how would that affect competitors' investments — which may in turn further affect the firms’ decisions,” Jiang said.

The way information is presented matters, too. Detailed disclosures may benefit institutional investors with the resources to analyze them, while making it harder for individual investors to find important information. In some cases, less detailed disclosures such as summaries may reduce this gap.

For MBA students and business leaders, Jiang emphasizes the importance of considering managers’ incentives and the long-term effects of disclosure rules. “Do not get easily fooled by the manager,” he said. Sometimes, improved earnings may reflect cost-cutting “that sacrifices the firm’s long-term future.”

Duke Fuqua Insights features digestible conversations with our faculty about the most impactful research from their careers, including studies they teach in Fuqua classes. New episodes every other week in season.

For more from Duke Fuqua, visit us on LinkedIn, Instagram, Facebook, Bluesky, and the Duke Fuqua Insights newsletter.

Professor Rick Larrick explains how to focus on high-impact climate decisions and communicate them effectively.

Climate change can leave people feeling that they must do everything or that nothing they do matters. The scale of the problem, other people’s inaction, and alarming media coverage can all make people feel overwhelmed and lead them to avoid thinking about climate altogether.

In this episode, Professor Rick Larrick discusses a more practical approach: focusing on environmental decisions that have the greatest impact. Larrick, whose research examines judgment, decision making, social psychology, organizational behavior, and environmental decisions, also describes his forthcoming course in Duke’s Master in Business, Climate and Sustainability.

Larrick identifies transportation, food, and home heating as three large categories of personal carbon emissions. For transportation, he points to driving less when possible and considering the next car purchase; for food, he highlights eating less beef and moving toward more plant-based protein. For homes, he describes opportunities such as heat pumps, insulation, and smaller homes that require less heating.

The goal is not an all-or-nothing approach. “The perfect can be the enemy of the good,” Larrick says. He contrasts high-impact choices with actions with little impact on carbon emissions, such as recycling and turning off lights. He cites “single-action bias”: when people choose one visible environmental action, they may feel they have done enough while in fact they are leaving more substantive sources of emissions untouched.

Larrick’s research on the “miles-per-gallon illusion” shows why the metric can lead consumers to overlook the largest fuel savings. Replacing a 10-mpg vehicle with a 20-mpg one saves five gallons per 100 miles, while replacing a 20-mpg vehicle with a 50-mpg only saves three. The biggest gains, he says, come from moving vehicles out of the teens and into the 20-to-30-mpg range. To make those savings clearer, updated vehicle labels show five-year fuel use, cost, and how a vehicle compares with the average.

In Duke’s Master in Business, Climate and Sustainability program, Larrick will focus on how people with environmental knowledge can influence organizations, even when they are not the ones making the final decisions. The course will examine how to communicate environmental issues so that others understand their value and why they should care, helping students shape better decisions with good information.

Duke Fuqua Insights features digestible conversations with our faculty about the most impactful research from their careers, including studies they teach in Fuqua classes. New episodes every other week in season.

For more from Duke Fuqua, visit us on LinkedIn, Instagram, Facebook, Bluesky, and the Duke Fuqua Insights newsletter.