By Mark Berven, President and Chief Operating Officer, Property & Casualty

Being honest and transparent with your team — especially when the news isn’t good — helps a leader build trust over the long term. In business, failure is often something people want to hide or explain away, when it’s actually the single best way to learn and grow.

There’s a quote attributed to businessman and investor Ziad K. Abdelnour that says, “Life is like photography. You need the negatives to develop.” And it’s true. We don’t learn as much from success as we do failure, and leaders need to embrace that. Letting their teams know when something isn’t working gives the team the opportunity to fix it.

It reminds me of a story about the culture at the Ford Motor Co. when CEO Alan Mulally took over in 2006 facing a $17 billion loss. As the story goes, the new leader implemented a color-coding system for weekly reports: green was good, new issues were yellow and problems without solutions were red. At the first meeting with his leaders, he was surprised when all the charts were green. The company was losing billions of dollars and there were no problems?

The next week, after challenging the team with the facts, one of Mulally’s leaders (who would later become his successor at Ford) showed a new problem with an assembly line for the Ford Focus that caused the leader to stop production. The issue appeared on his weekly report in yellow. Mulally’s reaction?

He applauded.

Within a few weeks, more color — green, yellow and red — began appearing on the weekly reports. "At that moment, we all knew that we were going to trust each other," Mulally said. "We were going to share everything about the plan, and we were going to help each other to turn the reds to yellows to greens."

Because he gave his leaders permission — even encouragement — to share their failures, Mulally created a culture where failure was simply an opportunity to get something right. And it worked. Ford was the only American auto maker that didn’t need government assistance in the wake of the great recession and, by the time he retired in 2014, Ford had returned to profitability.

This story is a great reminder of how authentic leaders can build trust with their teams by being transparent and consistently providing honest feedback. Of course, failure is never the goal. But, by creating an expectation that failure can be embraced as an opportunity for success, leaders can ensure their teams are focused and trust each other.