Raman Kumar, vice-chairman and chief executive officer of an Indian healthcare business process outsourcing (BPO) business called CBaySystem, wrote this about entrepreneurs:

“Dictionary definitions are rather clinical at best. No soft side to them, no deep meaning, just the facts. Take the definition of the word ‘entrepreneur. Its essence is in its simplicity.

“en·tre·pre·neur – one who organizes, manages, and assumes the risks of a business or enterprise. The entrepreneur is commonly seen as a business leader and innovator of new ideas and business processes.

“When you break the definition down into its key elements, what you get are three operatives.

“Innovator: The one with the big idea that may change how we see things and how people live or maybe simply challenge convention to create a new more efficient way of addressing a common issue.

“Organizer and Manager: The person who takes charge of setting the idea up as a business.

“Risk Taker: This is probably one of the most critical aspects of creating and running a business. Many businesses are begun on start-up funding from family, friends and savings. This can put personal relationships and even one’s own future at risk.

“It is these basic elements that make a good business a great one. However those are precisely the factors that will stunt growth if they’re not checked on from time to time and kept relevant in the context of future growth.” [“Equity Dilution and Your Business,” Wall Street Journal, 19 August 2010].

Although I agree with Kumar as far as he goes, a good entrepreneur is also a builder of trust. You simply can’t do all of the other things an entrepreneur is supposed to do if you can’t get others to trust you. Trust begins with credibility. Aniisu K. Verghese, head of internal communications for India at Sapient Corp., offers some advice about how entrepreneurs can gain credibility [“Building Leadership Credibility,” Wall Street Journal, 14 September 2010]. He writes:

“It isn’t easy these days being a leader. With trust, confidence levels and credibility dropping rapidly among employees leaders face an uphill task in rallying staff, conveying messages and moving forward toward the organization’s goals. The usual grouse is that leaders don’t show up, are not putting value on communication, aren’t straightforward, don’t listen, and don’t take feedback seriously.”

Although Verghese focuses on internal aspects of leading a company, establishing credibility is just as important when dealing with individuals and organizations external to the company. He notes that in a recent survey about leadership, Asia-Pacific leaders didn’t fare well on questions dealing with ethics and a willingness to admit mistakes. Although it’s true that a lack of ethics and an unwillingness to admit mistakes can adversely affect internal company operations, they can also be devastating when an entrepreneur goes looking for capital. Verghese laments the fact that surveys continue to report “that trust among CEOs and leaders is eroding. People tend to believe experts and people like them (peers) instead of leaders.” He continues:

“It is not enough anymore for leaders to take decisions among themselves. Employees are seeking inclusion and transparent methods of decision making. They aren’t convinced if leaders are only visionaries and strategists. They expect them to gain their trust and walk the talk. Building leadership credibility is also about being available, wearing multiple hats for the varied scenarios that exist within an organization and from the expectations of the role. To substantiate that point, the 2010 Great Place to Work Survey indicates that two-way communication, managers’ competence, and the integrity and reliability of management are keys to employees’ viewing the organization as trustworthy.”

Since good communication skills are absolutely essential to increasing credibility, Verghese offers his recommendations on how those skills can be improved. He writes:

“Make communication your mantra: Often communication is the last resort when it comes to reviving flagging morale or addressing a crisis. Employees are not only expecting to get clarity on a host of topics such as revenue and growth but they also want to know what leaders are doing about attrition, engagement and social responsibility. Their interest is about the honest, transparent practices within the organization, how we treat our people, how leaders listen and engage with stakeholders.”

I reiterate that what’s good for internal communications is also good for external communications. Stakeholders obviously include board members and investors as well as employees.

“Be available: In a recent conference on great workplaces, most representatives shared how their leaders were approachable via chat shows, e-mail and face to face sessions. It seemed like a privilege for employees to meet with their leaders. It shouldn’t be. Rather than hear, ‘the leader only shows up in a crisis’ or ‘never seen the leader around,’ all leaders must be available when your employees want them to be.”

Although Verghese makes a good point about being available, entrepreneurs know that during the early years of a company they are more likely to be found on the road drumming up business or raising capital than in the office schmoozing with employees. That doesn’t mean that the leader can’t be available. After all, we live in the information age. I’ve held plenty of staff meetings where I had to call in from the road. The secret is staying in touch and letting employees know that you are approachable.

“Have your voice: Employees appreciate hierarchy but are open to seeing it as a structure for better governance rather than a platform for manipulating people. As a leader, you are expected to communicate to those you find yourself in front of, be focused on the future, and articulate personal opinions and vision. By focusing on the future, you are also setting an expectation for your employees to look ahead at the upside rather than at any current downsides. Cultivate your personal voice so it is valued through periodic internal communication, be it a monthly report, a weekly blog or a daily tweet.”

Periodic internal communication, although important in a start-up company, becomes even more important once a company begins to grow. To learn more about the challenges associated with growth, read my blog entitled Beyond Being a Start-Up.

“Align your managers: Research points to your middle managers as key to the success of any initiative or organizational goal. Getting managers to walk the floors is the most effective way to engage and gain trust. Be it a change in policy or a crisis scenario, it is important for leaders to be present to address concerns. In reality everyone is a leader and your employees must see their immediate supervisors as leaders. However, you must set expectations on what they can approach you with and what they must deal with up front themselves. Every level of the organization needs to add value to the information you are sharing. Hold managers accountable for the communication they do or don’t do.”

Once again this is seldom a problem during the start-up phase of a company. Once a company gets so large that you require name tags at corporate functions, alignment is probably something you should have already addressed.

“Check in on your organization’s health periodically: While the annual engagement survey will give you a sense of how the morale of your organization is, it helps to keep a regular tab via direct feedback mechanisms and by face to face connections.”

It also helps to have a trusted advisor who can help gauge the company’s health. Often leaders are isolated from the truth because people worry that their jobs will be at risk if they raise problems they see. If you can’t get straight and honest answers from your employees, your value as a leader is greatly diminished.

“Solve problems directly: Your employees expect to see you taking action on bottlenecks or concerns that impact their lives daily. Hosting a page with all the feedback and the actions you are taking goes a long way in building transparency and trust. Acknowledge if there is a gap, show intent and talk of the risk of failure. Then address the issue with your honest opinion. Discuss the pros and cons of the issue, air the solution and seek an amicable resolution.”

Being a “hands-on” leader is seldom a challenge for an early stage entrepreneur. It becomes a much greater challenge as the business grows. In the blog mentioned above, I discuss the fact that entrepreneurs often find it wise to turn day-to-day operations over to a professional management team once the company gains traction and begins growing. If that happens, it is the leader of the professional management team who needs to be seen as the problem solver. This could create culture shock among plank owner (i.e., original) employees since they are accustomed to the founder being the problem solver. As an entrepreneur, you need to help make the transition go smoothly by empowering the new management team at every opportunity.

“Tap experts and personalities: Do you have personalities within your organization who are experts and respected? Leverage their support as communication champions and change agents. Work through these personalities to reinforce messages and empower them with information they can use.”

I’ve seen past studies about organizational change that conclude middle manager support is essential if desired changes are going to successful. It was probably a middle manager who said, “I am learning that criticism is not nearly as effective as sabotage.”

“Be prepared to be scrutinized and treated as equals: With information freely available and the speed at which it travels, organizations need to understand that leaders can no longer be exempt from public scrutiny. What they do at work and outside will always be questioned and monitored even if it has no direct relevance to the company’s business. Be it in their neighborhoods, the supermarkets they frequent, the clubs they visit and the schools their children attend.”

It has been pointed out that the Internet has become the great equalizer. The opinion of a middle school student can carry just as much weight as a college professor in some circles. If I were to categorize Verghese’s final two recommendations, I would place them under the heading of “beware of social media.”

“Manage personal image and morals: … I foresee leaders leveraging the services of internal image consultants to reinvent themselves, not just to understand themselves but to better define their images. Personal image audits will come of age. Tiger Woods and his escapades were splashed across the world’s media and are a reminder of how corporate leaders need to manage their images, too.”

Reputations are much more easily destroyed than created. That is why today’s leaders need to understand the power of social networks.

“Leaders and social media usage: With the growing importance and power of social media, leaders will have no choice but to embrace this new media or flounder. Today, leaders’ adeptness in understanding what employees discuss beyond the work firewall will be a measure of success. Leaders who are yet to get into the social media world will need to quickly upgrade their skills or be lost in the chatter.”

Although Verghese is focused on leadership, it is good to remember that corporations also have reputations that can be enhanced or destroyed on social media sites. It is much more difficult today for a company to control what is said about it. Rajiv Dingra, founder and CEO of the social media agency WATConsult, believes that an entrepreneur should deliberately develop an aura of confidence to help foster trust and credibility [“How to Generate Confidence, Quietly,” Wall Street Journal, 24 August 2010]. He writes:

“One of the key roles of entrepreneurs is to inspire and motivate people so that they work as passionately for the company as the founders do. This takes some doing. Not all entrepreneurs are great at everything. … The challenge in being an entrepreneur is that your limitations, mistakes and bloopers may seem magnified to the people in your company. Often as an early entrepreneur you are pushing the boundaries of what’s possible and failing more often than succeeding. As an innovative entrepreneur you will go through this no matter what stage of the company’s growth you are in. Failure is part and parcel of entrepreneurship. But the challenge in this process is that if you fail in front of your employees and seem vulnerable and disturbed, which is a natural reaction to failure, it can affect your team. This impact is further magnified when the team is small and during those early days when the vision of the company is still not clearly defined.”

Unlike Verghese, who focuses on building credibility in mature companies, Dingra specifically focuses on entrepreneurial leadership in the early stages. He continues:

“Before someone reads this and feels that I am against transparency, I must clarify that I am not. All I am suggesting is a delay of sharing of thoughts and ideas until they are well defined inside the entrepreneur’s head. I’m suggesting that an entrepreneur should listen more than speak. I’m also suggesting that entrepreneurs try to create auras around themselves that makes their teams look up to them. This can be done by having two or three people as a layer of management through which the entrepreneur communicates with the rest of the company. In an early-stage company, even one person is enough. This aura should be created by the entrepreneur’s expertise. Each entrepreneur has some area of expertise, be it knowledge, negotiation, sales or something else. This should be clearly illustrated through his or her daily work. If you stick to what you are best at doing and let others work on the rest, people within your team will appreciate your efficiency, performance and delivery. It will not strike them that you are just doing what you love. Aura creation for entrepreneurs ensures that their people are inspired and motivated.”

Frankly, I’m not sure that creating an “aura” is as important as demonstrating competence. I agree with Dingra on that point. No one internally or externally is going to trust someone they perceive as incompetent. That doesn’t mean you can’t make mistakes — as Dingra point outs, entrepreneurs make plenty of them — but you must deal quickly and competently with those mistakes. Dingra concludes that creating an “aura” is “about being self-assured in a way that instills calmness and stability about the future of the company in employees’ minds.” I believe that is exactly what demonstrating competence does.

Summing up the discussion, no start-up company can survive if its leadership fails to foster credibility and trust in stakeholders — which include employees, board members, and investors. Credibility and trust are generated through good communications, ethical behavior, and demonstrated competence. Concentrate on developing those traits and, as Spock would say, you can “live long and prosper.”