Trust Me: Speaking to Values Does Not Deliver Value

Trust in business has declined in the last decade for two reasons: the perception that customers are getting less for their money than they did a decade ago and that businesses will do almost anything to preserve their advantage.

This behavior was illuminated by the well publicized scandals of the 90s - Enron et al - which raised awareness about executive compensation and established the anti-business meme. This was then reinforced by the financial crisis and subsequent recession. More recent inflationary pressures, especially with regard to food, TV and cell phone price increases - and the more inflammatory airline and banking fees - have reinforced those popular beliefs.

Businesses have attempted to respond in ways they hope will communicate that they care. Almost every Global 1000 company now has an ethics code. Most have instituted some sort of training or awareness. Most publish supplements to their annual reports touting their support for the environment, fair labor standards and corporate citizenship.

But the real problem is more complicated and controversial. It is that in most US and European companies, business has failed to deliver performance that improves either investor return or customer experience.

Companies are speaking to values but failing to deliver value. That is why executive compensation is an issue. Historically, people did not pay too much attention to what executives or bankers made as long as they believed they were receiving relatively reasonable returns themselves. If one looks at the accompanying chart, the decline in trust in business started with the dotcom collapse, which was also the period in which radical deregulation of financial services began. That is the point at which the significant divergence between middle class affluence and extreme affluence became apparent. It is also apparent that business in countries with growing economies like China and Brazil enjoys much greater levels of trust than does the US or Europe, due in no small part, to their role in raising the level of the local economy. It is harder to move the needle in a more established economy, but the connection between mutual benefit and trust, however tenuous, is clear.

So companies can talk about sustainability or corporate social responsibility or print ethics codes until the world runs out of ink. But until they deliver more profitable growth and share the results with shareholders, employees and customers, they will remain untrusted. JL

Robert Hurley reports in the Wall Street Journal:

Infamous frauds and financial crises have wrecked the public's faith in business in recent years, leading many companies to try to repair the damage by emphasizing codes of ethics. But we do not have a crisis of ethics in business today. We have a crisis of trust.

Just because customers or employees think you are ethical (moral, honest and fair) does not mean they will or should trust you
Trust comes from delivering every day on what you promise—as a manager, an employee and a company. It involves constant teamwork, communication and collaboration.

Research shows that the most-trusted companies have lower employee turnover, higher revenue, profitability and shareholder returns. It only makes sense. What employee, customer or investor would choose to do business with a low-trust partner when a high-trust option is right around the corner?

If trust is crucial to restarting our economy, perhaps it is time we started helping leaders understand what trust is, how to build it and how to sustain it. Trust is usually given to those who demonstrate trustworthiness. What follows are five principles leaders can adopt to demonstrate trustworthiness and embed it in their companies.

Show that your interests are the same
Before we trust somebody, we typically ask ourselves: How likely is this person to serve my interests? When interests are well-aligned, trust comes more easily. We tend to question the competence of our surgeon, not his motives. This is because we realize that he also benefits when we survive the operation. High-trust leaders try to accomplish their goals by serving the interests of all stakeholders, not by serving some while giving short shrift to, or manipulating, others. Leaders must clarify and align stakeholder interests, and prove they will promote those interests in a fair manner.

2. Demonstrate concern for others
People trust those who care about the welfare of others and distrust those who seem concerned only about themselves. To earn trust, leaders must demonstrate to others that they will do the right thing for them even if it puts themselves at risk. One chief executive chose to tell a vice president of marketing that he was being laid off just when the company marketing plan needed to be developed. The CEO knew it might be a setback for the company's planning, but he told the vice president right away rather than wait until after the plan was finished.

The manner in which this CEO executed a difficult decision became a well-known symbol of the importance of benevolence in the company.

3. Deliver on your promises
We are only trustworthy if we can deliver on our commitments. Good intentions, benevolence and even ethical conduct don't warrant trust if the person is incompetent. Data suggest this is the primary reason so few people trust the U.S. government today. They see the government as wasteful and dysfunctional and therefore not trustworthy. If leaders want to earn trust, they must prove they can reliably deliver on their commitments.

This is sometimes the downfall of visionary leaders. I am reminded of the leader of a consulting firm who was enamored of his brilliant vision but failed to realize that vision without execution often looks like delusion. People liked him, but they didn't trust him because he didn't execute on his lofty ideas. High-trust leaders make sure that there is a reasonable probability and capability to deliver before they make promises.

4. Be consistent and honest
High-trust leaders tend to feature consistency and integrity in their behavior. High-trust managers always try to honor their word and, if they fail to do so, they apologize and make sure it does not become a habit. When Warren Buffett was embarrassed by revelations that his right-hand man, David Sokol, had an undisclosed conflict of interest ($10 million in stock he held personally) in a major deal, he did not hide behind lawyers or say "no comment." He admitted the mistake and put measures in place to ensure that it would not happen again. Most people know that perfection can only be an aspiration. Trust comes from always striving always to honor one's word.

5. Communicate frequently, clearly and openly
Because trust is largely about relationships, communication is critical. Communication is also the vehicle through which the other four elements of trustworthiness are delivered. The ability to align interests, demonstrate benevolence, accurately communicate one's capabilities and practice what you preach all require effective communication skills.

Spirals of distrust often begin with miscommunication, leading to perceived betrayal, causing further impoverishment of communication, and ending in a state of chronic distrust. Clear and transparent communication encourages the same from others and leads to confidence in a relationship.

Restoring trust will require more than ethics training. It will require leaders and organizations that earn trust by striving to manifest trustworthiness in word and deed