Trust in business is eroding.
and people think of deception, greed and scandal.
As various corporate fiascoes have unfolded over the past few years and wreaked havoc on the U.S. economy, they also have damaged the public's trust in businesses, creating a crisis for Corporate America.
So what does this erosion of trust mean for business? For a corporation's bottom line, does trust really matter? If so, is it possible to regain it once it's been shattered?
The Advantage of Trust
While many businesses and industries have been bloodied and bruised by the bankruptcies, bailouts, scandals and recession, there are many others that operate with the highest ethical standards and have prospered accordingly.
released a list from Audit Integrity called
100 Most Trustworthy companies
. Among the names on the list were
Bed Bath & Beyond
Ben Heineman, a senior fellow at Harvard University and author of the book
High Performance with High Integrity
, recently advised that "corporate boards and executives must seek high performance with high integrity, balancing risk taking with risk management and adopting the best practices of transparency and accountability." For each of the 100 Most Trustworthy, Mr. Heineman's advice is already in practice. Each exemplifies transparency and consistency in its business practices and accounting procedures and shows accuracy in its financial reporting. Companies that operate with high standards of trust and integrity often experience increased profitability, as well.
Great Products Are not Enough
According to the 2010 Trust Barometer, an annual trust and credibility survey from a public relations firm Edelman, "trust and transparency are as important to corporate reputation as the quality of products and services ... and far outrank financial returns."
Just four years ago, financial performance ranked third among 10 attributes important to shaping trust. Edelman now emphasizes, "We're seeing a vastly different set of factors driving reputation than we did 10 years ago. Trust is now an essential line of business to be developed and delivered."
Business leaders who want to continue leading profitable and successful organizations need quickly to embrace this shift. To effectively advance the bottom line and realize long-term success, they must be able to
build trust and inspire others to do the same
. To gain trust and keep it with both customers and employees, remember to keep it simple!
- Demonstrate uncompromising integrity
- Make and meet commitments
- Be direct, forthright and sincere
- Remain accessible and approachable
Johnson & Johnson
are just a few of the companies that have built corporate cultures and brands focused on trust. Trust is vital in increasing profitability; the absence of trust is often devastating.
Can a company recover? The simple answer: yes! Although the battle to recapture public trust is long and often costly, companies can rebound. After seven people died in 1982 after eating cyanide-laced Tylenol capsules, Johnson & Johnson quickly acknowledging the problem as well as its own role in the problem.
similarly dealt with tire quality-control blunders. In both cases, the cost to the companies was extremely high. However, the brands, especially in the case of Tylenol/Johnson & Johnson, quickly recaptured consumer trust.
In our current information age where social media outlets have an increasing impact, companies must be proactive in their response to "bad press." Toyota, although slow in taking the offensive, seems to be making strides toward regaining customer confidence and trust. Michael Brunner, CEO of Pittsburgh ad agency Brunner, comments, "Honesty and sincerity are good tactics to winning back trust. The last thing any company should do is hide information from consumers or appear insincere."
In the wake of the financial and auto industry debacles, executive pay became a target of public trust and perception. According to the 2010 Edelman Trust Barometer, "More than 90% of those polled say that actions such as firing nonperforming managers, repaying bailout money, or reducing the pay gap between senior executives and rank and file workers would restore their trust in the company."
The PricewaterhouseCoopers' 13th Annual Global CEO Survey also revealed that "44% of U.S. CEOs who experienced a decline in trust said they were changing pay practices." Not surprisingly, banks and capital markets companies topped that list.
The fates of GM, Toyota or Goldman Sachs are tenuous. Our trust is fragile. Lloyd Blankfein, Goldman Sachs CEO, reiterates the importance of trust in business when he made his statement to Congress that "If our clients believe that we don't deserve their trust, we cannot survive." We'll soon find out if Mr. Blankfein is right.
Companies need to revamp their notions of "business as usual" and prove to the American people that they are worthy of our trust. Unfortunately some companies such as General Motors don't agree. GM's current ad campaign claims the company repaid its $6.7 billion U.S. government loan with interest five years ahead of schedule.
However, according to lawmakers and the inspector general for the bailout fund, General Motors only repaid the bailout money by dipping into a separate pot of bailout money. They say the company did not actually use its own earnings to make the early payment and are questioning why executives are making such a big deal out of it. The Federal Trade Commission needs to step in and hold GM accountable by enforcing truth-in-advertising laws.
"At the beginning of the day, it's all about possibilities. At the end of the day, it's all about results." -- Bob Prosen
-- Written by Bob Prosen in Dallas
Prosen is president and CEO of The Prosen Center for Business Advancement, where he shows current and future leaders how to rapidly increase performance, productivity and profit. The Prosen Center delivers the nation's only leadership and mangement training focused exclusively on business execution. that enable them to convert plans into results. Along with being a frequent guest on MSNBC and FOX News, Prosen is the bestselling author of Kiss Theory Good Bye, which gives leaders the tools and step-by-step directions to achieve extraordinary operating and financial results. Prosen earned his B.S. from Texas Tech University, an M.B.A. from Georgia State University and holds postgraduate certifications from MIT, Duke University and The Wharton School.