Trust or Consequences

Al GOLIN

• Publisher: AMACOM
• Year: 2003
• ISBN:
  9780814427453
• Topic: Commerce
• Subtopic: Relations publiques

This book shows what makes such strategies work, and reveals the eye-opening results of a survey of over 700 business professionals.

The recent rash of corporate scandals?and the ensuing financial ruin of companies and their stockholders -- proves that even the bluest of blue chip businesses cannot bank on the blind faith of consumers and investors. More than ever, corporations must rebuild, restore, and strengthen bonds of trust.

Al Golin has helped create trust strategies for global business leaders including The Walt Disney Company, Hewlett-Packard, McDonald's, Toyota, Owens-Corning, and many others. In Trust or Consequences, he reveals how to:

• create an effective trust strategy
• determine the impact of trust issues on stakeholders
• assess trust-building performance and calculate the difficulty of restoring trust
• create a "trust bank" for saving deposits of good will to draw on as needed

This invaluable resource offers tools for identifying trust opportunities, as well as numerous inside accounts of trust-building successes and failures by high-profile organizations and leaders. Filled with provocative ideas about why many companies overlook trust issues, Trust or Consequences brings the subject to center stage -- where it must remain if companies are to regain stakeholder loyalty and competitive advantage.

CHAPTER 1

Trust Trends: A Transparent Age, Online Relationships, and a Breakdown in Corporate Values

We are inclined to believe those we do not know because they have never deceived us.

—SAMUEL JOHNSON

“Back in the good old days, people and companies had integrity and real ethics. Not like today.”

I hear variations on this refrain constantly, especially after Enron, WorldCom, Tyco, or some other company makes headlines because of alleged misconduct. People talk about how organizations used to stand for something, how CEOs were pillars of the community, how employees were loyal to companies because they embodied values such as fairness and honesty, how organizations treated customers and other stakeholders with consideration and respect.

Nonsense! Business is no less ethical today than it was twenty, fifty, or one hundred years ago. If you doubt this statement, recall the robber barons at the turn of the century, the monopolists like John D. Rockefeller, the virulent anti-Semitism of Henry Ford, the junk bond fiascos of the 1970s, and the Savings and Loan crises of the 1980s. Consider, too, the cavalier manner in which corporate giants polluted the air and water, the many companies that discriminated against women and minorities through their hiring and promotion practices, the lawsuits charging tobacco and automobile companies with covering up health and safety problems involving their products. The list of unethical practices goes on and on.

This crisis of trust we’re currently facing, therefore, isn’t because business leaders have suddenly become amoral or immoral. Instead, it’s the result of various trends and events. We’re going to look at the major ones so that we can understand why trust has become such a significant issue for all types of organizations. First, though, I’d like to give you an overview of how organizational distrust manifests itself.

More Than Just an Isolated Problem

The results of the Golin/Harris Trust Survey described in the introduction surprised me. Even though I had been working for years helping companies develop trust strategies, I didn’t realize how deep-rooted and widespread distrust of business had become. Nor did I realize that this distrust had infected all types of corporate relationships, from the media to customers to vendors to external partners.

Typically, when we think of corporate distrust we think of financial scandals: A company manipulates its financial data for its own ends and investors suffer. It turns out, however, that distrust can arise from many different sources and affect many different stakeholders. Here’s a list of possibilities:

• Employees distrust management because it promised not to cut staff for the next two years and then three months later implemented a massive downsizing.
• Customers distrust a company when the company’s representatives mislead and manipulate them.
• The public distrusts an industry when companies in that industry are found to have been guilty of unethical or scandalous behavior.
• A community distrusts a company that has been found guilty of polluting the environment.
• Vendors distrust a company when they make certain concessions to be the company’s partner but the company doesn’t treat them like a partner.
• The media distrusts a CEO who lies to them in order to further his own agenda.

Although organizations do things that create distrust among their various constituencies, distrust can emerge from many sources. Because of the economy or other financial problems, they may have no choice but to downsize. Because of a product defect that they were unaware of, they may receive customer complaints. Because of the unethical actions of one person in their organization, everyone in the company may be viewed with suspicion.

For this reason, building trust is everyone’s business. It’s not just for companies that have committed some public breach of ethics and want to repair the damage. It’s not just for companies in a particular industry that the public views with suspicion. In an unpredictable, volatile world, every organization is vulnerable. Without a formal, continuous effort to build internal and external trust, this vulnerability is increased tenfold.

More than one organization that took pride in its great relationships with its employees and its squeaky-clean public image has been blindsided by a trust-deflating event. Crises are becoming routine occurrences for many companies, and the cause of these crises may be a vendor that fails to deliver on its promises, or sudden, unpredictable economic or technological changes that render a company’s strategy obsolete. As a result of these events, people start asking questions of companies like:

• How come you didn’t anticipate the new technological innovation from your competitor; your last annual report focused on how you were the most technologically advanced company in the industry and pledged to keep the lead no matter what the cost; why did you lie to us?
• Why are you reducing health care benefits at a time when company profits are at an all-time high; how can you justify reducing these and other benefits when I just read that our top executives are among the highest paid in our industry?

Any company can be on the receiving end of these accusations, so companies need to take steps to build trust before a crisis hits. Although trust can be rebuilt at any time, it’s much easier to rebuild it when a company has been pursuing a trust strategy from the beginning. This is where a “trust bank” can prove invaluable. Though I’ll explain this concept in greater detail later, I want to introduce it here because the philosophy behind it underpins much of my work. As the name implies, a trust bank involves making deposits in an account over time that can be drawn upon when needed. By saying and doing the right things for months or years, a company builds up a certain amount of goodwill that can stand it in good stead when problems develop.

For instance, during the Rodney King riots in Los Angeles, just about every quick-service chain restaurant in Watts was trashed or burned, just about every one except McDonald’s. Not a single one of its restaurants was touched. That’s because McDonald’s had done many things to build strong relationships with the people and institutions in its restaurants’ communities. Although hiring the people in these communities to work there was part of this effort, it also created programs designed to help these communities economically, educationally, and in other ways. This goodwill protected McDonald’s during this crisis.

More than ever before, companies need this protection. In a transparent age, organizations cannot expect any blemish to go unnoticed.

The Spotlight Is Always On

Trust is a cutting-edge issue because organizations are under intense, constant scrutiny. Not so many years ago, CEOs of even the largest companies were generally unknown to anyone outside of a given industry. Business leaders didn’t have best-selling books, corporate scandals were rare, and the public was largely uninterested in the gossip about organizations and their leaders. Nonetheless, there was plenty to gossip about back then, and CEOs and other leaders sometimes got away with murder.

Today our transparent society ensures that companies don’t get away with murder. In fact, it sometimes means that companies are convicted of wrongdoing before they receive a fair trial. Let’s look at some of the ways this transparency creates corporate distrust.

The Media Microscope

Not only are there more national and local publications covering the business world than ever before, but broadcast media has devoted significantly more airtime to the subject. Cable, especially, has a number of in-depth business programs, and even National Public Radio has developed sophisticated business programming. More significantly, this coverage is far more aggressive than in the past. Witness the many stories pointing the finger at rising CEO compensation in the face of declining company revenues. Or the articles that have focused on rubber stamp boards of directors. Or the ones that have covered CEOs as if they were celebrities, revealing affairs, extravagant lifestyles, and financial wheeling and dealing.

As a result, every misstep of every CEO is magnified. If you were to read only the business headlines, you might think that most companies are run by unethical, greedy, power-mad CEOs. Although some leaders may fit this description, the media’s focus on scandal gives the impression that this is the norm. At the very least, it creates a wariness about corporations that touches everyone from employees to customers to the general public.

Certainly the media should expose corporate wrongdoing. But the competitive nature of the news business often causes them to seek sensation over substance. The overwhelming coverage of CEO misdeeds predisposes people to distrust organizations.

Internet News and Gossip

Before scandals and other negative business stories hit the mainstream media, they appear on various Web sites. From Matt Drudge to the May Report (a free-swinging site that reports on technology companies in the Chicago area), the Web often has the worst news first. Rumors of layoffs, mergers, and even wage freezes can be found on these sites. Some top executives have learned about their terminations from online sources before they heard it directly from their bosses. Investors scan numerous sites for every rumor—positive and negative—that might impact their investing strategy.

The Internet often tells us things that mainstream media can’t or won’t communicate. Many sites don’t operate under the same journalistic code as national magazines or television stations, and they are more willing to spread unsubstantiated rumors or take personal potshots at leaders. Sometimes, we fall for the negative gossip about organizations and CEOs, increasing our distrust.

The Internet also makes it incredibly easy to find out anything about anyone. Certainly this can be a good thing, but too much knowledge can prejudice us against an individual or an organization. Every CEO—and every organization—is flawed. When we learn that a CEO was thrown out of Harvard years ago for cheating on a test or that a company discriminated against women in the 1970s, our trust diminishes. Perhaps it should. Perhaps, though, our trust would diminish in anyone once we knew every peccadillo he or she had committed.

A Need to Know

As a society, we’re as eager as voyeurs to look through the metaphorical window. Transparency is as much a result of our hunger for the naked truth as it is the media’s willingness to show it to us. We have an insatiable thirst for gossip about the rich and the famous. We seem to take particular delight in the downfall of powerful companies like Enron and personalities like Martha Stewart. Jack Welch, perhaps the most deified CEO of all time, was the subject of negative story after negative story because of his alleged affair with a journalist. We expect to hear all the dirty details, to be informed about how the mighty have fallen. Perhaps this is only human and a reflex that has always existed, but it seems that we’re more hungry for this news today than we were in the past. We used to be willing to allow people some privacy. We used to be proud of highly successful companies like Microsoft rather than eagerly scanning the paper for the latest evidence of their alleged monopolistic moves.

All this is to say that we, with the help of the insatiable media, are more distrustful of organizations in part because we have demanded to know everything about them and their leaders.

The Lack of Real Relationships

I know of an organization that had everything going for it: great products, great service, great people. This technology company, let’s call it ABC Tech, was a first-mover in its industry and quickly established itself as the market leader for a few years. Then, as often happens, larger companies knocked off its product and began competing with lower-priced products. ABC tried to match their prices, but still its share of the market eroded.

ABC’s three top executives lived in different parts of the country. They had touted their ability to run the company by using sophisticated technology to communicate. They encouraged flex time and telecommuting policies, and it was not usual for managers not to see members of their teams for days on end. Nonetheless, the company had functioned well when it was a market leader, and a number of business magazine stories had praised the company for its progressive, worker-friendly, time-saving policies.

ABC’s market eroded in part because of shaky customer relationships. During the company’s early years, though, these relationships didn’t seem shaky. ABC’s salespeople boasted about information systems they made available to customers and how customers could simply plug into ABC’s systems to get the data they needed. The problem, of course, was that these systems reduced the amount of personal contact between ABC salespeople and their customers. As a result, when competitors came into the market with lower-priced products, many of these customers felt little loyalty to ABC. The personal relationships that might have convinced customers to give ABC a chance just weren’t there. Although ABC’s salespeople made a lot of promises about improved services and more innovative products in the pipeline, a number of key customers left.

For this same reason, many employees started looking for other jobs when ABC started losing customers. Though management used the company’s Intranet site to convey its confidence in a turnaround, it wasn’t a particularly compelling argument or delivered with much commitment. Again, the lack of strong relationships prevented employees from giving management the benefit of the doubt. Although some good people stayed, they struggled because of the “cold” emotional environment. As executives met (they actually gathered in the same conference room!) and tried to create a turnaround strategy, they were stymied by animosity and accusations. One executive accused another of wanting to pursue a particular course because it had been successful for a company he admired. Another executive refused to believe one of the company’s founders was sincere in his desire to turn the company around because he had made a lot of money and was more interested in spending time in his beautiful new country home.

ABC eventually declared bankruptcy. With a trust strategy in place, it would probably have avoided this fate. Customers and employees would have hung in longer to see if the ship could be righted. Management would have worked more ...