How can businesses restore trust?
Businesses and their activities are under increasing public scrutiny, and digital communications mean that perceived transgressions can be broadcast throughout the world within seconds. A recent round table hosted by the Chartered Institute of Management Accountants (CIMA) examined the state of public trust in business today and outlined the steps leaders must take to meet these challenges.
In his keynote speech, author Robert Phillips, who has spent the past decade researching and writing about the concept of trust, argued that it had been “used and abused to the point of exhaustion” by the corporate world in recent years.
Research conducted for the event found that in 2014, the annual reports of FTSE 100 companies mentioned trust 317 times. In contrast, in the 2005 editions, it appeared just 38 times. Phillips thinks that trust often spoken is trust rarely earned.
Furthermore, the traditional methods companies have relied on to control their message, such as public relations and corporate social responsibility (CSR) initiatives, are no longer effective. “No one is in control any longer,” Phillips said. “Anyone who thinks they are – and that they can impose, rather than negotiate, trusted relationships – is living in the wrong century.”
In the era of social networks and the culture of activism they engender, everyone knows everything and can connect with anyone, Phillips said. This explains why many old institutions struggle to be as trusted as they once were, he added.
This lack of trust in business in general poses a challenge to many organisations’ long-term viability.
Samantha Peters, chief executive and registrar of the General Optical Council, regulator of optometrists and opticians in the UK, told the audience that if the younger generation doesn’t trust your organisation, technology provides them the opportunity to “replace you: they can walk around you and set up an alternative means of doing what you do using the online space.
“Any traditional hierarchy or institution can be replaced.”
How to build greater trust
Phillips proposes the following steps organisations can take to foster greater trust:
- Find responsible ways to create shareholder value. Businesses can no longer rely on CSR policies to cloak wider responsibility.
- Target profit optimisation, not profit maximisation. Profit optimisation speaks to the long-term interests of citizens and society, whereas the excesses of the financial services sector in the run-up to the 2008 crisis were conducted in the pursuit of profit maximisation.
- Think and act in terms of public value. Phillips advocates a new model of public leadership, which is activist, co-produced, citizen-centric, and society-first, replacing profit with purpose at the heart of organisations. A focus on public value thinking determines better frameworks for ethical and trusted decision-making. Better judgement is also based on a combination of competence, honesty, and reliability, Phillips said. Many of the recent scandals that damaged public trust in corporations have demonstrated a failure to make the right judgement or do the right thing.
- Celebrate collaboration, not competition. Samantha Peters echoed this, predicting that their ability to collaborate will be one way organisations compete in the new paradigm.
- Develop new models of accountability. Rather than obsessing over measurements and league tables, organisations should focus on accountability. The public leadership model is measured through the public value generated. Developing the organisation’s mission with the participation of employees, customers, and stakeholders ensures its accountability to a broader spectrum of people. Organisations that aspire to be trusted also create safe spaces in which dissenting voices are welcomed and challenging conversations can flourish. “Organisations can’t learn if they don’t listen,” Phillips said
- Issue a sincere apology when it is called for. Saying sorry remains one of the fundamentals of trustworthiness between colleagues and customers, just as it is between friends. A more radical approach to honesty and transparency is also required.
- Above all, trust is built through actions, not words. There are substantial benefits to be gained by those organisations that adopt these characteristics to become more open, empathetic, and relational. Organisations that embrace these traits and beliefs will be more resilient, adaptive, and creative. They will also be able to attract, and retain, the most talented employees, Phillips said.
—Samantha White (firstname.lastname@example.org) is a CGMA Magazine senior editor.