Trust Is Dead. Long Live Trust.
In the midst of economic uncertainty and ongoing threats to our financial system, every company’s executives and stakeholders must contend [...]
June 22 2009 by Michael W. Kempner
In the midst of economic uncertainty and ongoing threats to our financial system, every company’s executives and stakeholders must contend with an unfortunate side effect of the meltdown: Trust is dead. This is evident from Wall Street to Main Street. We see it in the performance of the stock market, the decline of consumer confidence and in the fear and uncertainty that affects employee performance and decisions. Trust is the currency between any company and its various stakeholders, and arguably the most critical bond. Without it, no business relationship can endure, let alone succeed. Clearly, the actions of a few major institutions have shaken the confidence of business leaders, investors, customers
and influencers to the very core.
Stories abound of ethical breaches and financial malfeasance. Take the supermarket CEO who used an online pseudonym to bash a competitor his company later acquired. It backfired when the Federal Trade Commission filed an antitrust suit to block the takeover. Or the financial executive who declared his company healthy and above reproach, and announced its demise the next day. It is no surprise that trust is dead, yet businesses can’t operate in today’s “Trust Economy” without it.
The MWW Group and Chief Executive magazine recently surveyed CEOs on the pivotal questions of trust, reputation, integrity and performance. The results were striking-and quite surprising. On matters of trust, three in four executives acknowledged that financial mismanagement contributes greatly to the loss of investor confidence. But fewer than half (47 percent) say CEO behavior is the most important reason stakeholders lose trust in a company, and 73 percent rank a CEO who maintains a low profile just behind a leader with a track record of business success in terms of C-suite desirability. In this atmosphere of public skepticism, CEOs must genuinely believe their business behavior matters and now, more than ever, be out front, championing the company, its brand and its values.
How can trust and corporate reputation be restored at a time of such market tumult and dissatisfaction? First, through deliverables-the quality and integrity of products or services, company vision and innovation, and financial performance. Second, through corporate social responsibility, citizenship and philanthropy. Third, and perhaps most importantly, by focusing on the intangibles: integrity, leadership, transparency, credibility and communication.
Numbers are an effective barometer of economic health, but they alone can’t build trust. While quarterly financial reports frequently are mistaken for the only bellwether of public confidence, such thinking is one reason we’re in this fix. Investors and customers simply don’t have faith in the numbers anymore.
Going forward, trust must be built upon sustainable performance. That view is supported by a majority of CEOs (65 percent), who agree that steady and predictable performance are key determinants of a company’s trustworthiness. But the nonfinancial values are equally important, and those survey results cover the spectrum. Transparency is nonnegotiable.
Yet, two-thirds in our survey don’t believe that contributing to important community or charitable causes affects company reputation. And only 37 percent believe being environmentally friendly plays a role. For senior executives seeking to regain the good graces of their customers and clients, as well as current and future investors, corporate social responsibility and being environmentally conscious are imperatives for building and sustaining trust. But it must be authentic in order to provide real benefit and not risk being tagged as “green washing.”
Perhaps most surprising is the fact that many executives seem to not have changed their perspective as a result of recent events. That said, we have an extraordinary opportunity to turn the current state of mistrust into opportunity. Tough questions need to be asked. Does your organization have the true conviction to enact processes and leadership qualities required to help restore confidence in American business? Do you have what it takes to survive in a trust economy?
As leaders, it’s a natural temptation for us to retreat to the bunker until the crisis passes. Communication feels risky. What happens in this environment, where seismic shifts can occur in hours or days, if we share the full truth or just a piece of it?
CEOs need to hold management and employees to the highest professional standards. They should demonstrate confidence in their stakeholders by providing access to information that will help them make the right decisions. All of the system’s stakeholders demand our courage, communication and commitment. They want straight talk and strong leadership. A new survey of federal workers by the nonpartisan Partnership for Public Service found that more of the respondents would rather have an honest, ethical workplace and direct communication from their supervisors than pay raises.
Without squarely facing these reputational issues and taking concrete steps to meet these myriad challenges head on, public trust in American business will remain an elusive ideal-or worse, a nostalgic memory of an increasingly distant economic time.
Michel W. Kempner is the founder, president and CEO of MWW Group, a New York-based communications and advisory firm.