By Steve Del Vecchio, Chris Thompson, and George Galindo
“Trust but verify” was a slogan used during the Cold War to describe the basis for transparency in political relationships. Today, the term can be used to describe a strategy for narrowing the “trust gap” not between nations, but between companies and stakeholders.
No matter what kind of organization you manage, trust is an integral component of your brand. Yet, in a globalized, hyper-networked world where information—good or bad, true or untrue—can go viral in a matter of minutes, trust is under siege. Reputations that took years to build can be lost in seconds. Consider the plights of companies caught up in a rash of trust-eroding situations: financial services companies that underestimated their exposure to subprime securities, Internet companies accused of mishandling private information, manufacturers struggling to explain the causes of poor product quality and serious mishaps at their facilities.
Such events were once exceptions. However, with emerging technologies and business practices such as digital distribution, cloud computing, and longer supply chains, they are increasingly becoming the norm and are causing a significant shift to greater transparency. (See Figure 1.)
How should companies respond? How can they protect their brands? How can they effectively address these issues and tell their stories with credibility?
Whether you are trying to prevent a trust-eroding event or repair the damage after one has occurred, transparency is key. No longer a luxury limited to forward-thinking, market-leading organizations, transparency has become a marketplace imperative that is being demanded of all companies by regulators, board members, shareholders, customers, and business partners— in short, all stakeholders.
Clearly, in an increasingly competitive environment, good governance demands that organizations address transparency issues in order to be able to establish and maintain credibility. Indeed, transparency can be a company’s salvation and a powerful differentiator. But is transparency enough?
While transparency is an all-important first step in building trust, it is not the entire solution. Without credibility, transparency remains an unverified promise. Fortunately, companies are not powerless in this regard. Organizations can achieve the transparency and credibility that lead to trust in the marketplace in two ways: (1) by taking steps to do so internally and (2) by enlisting the help of an independent third party.
The steps that companies can take internally to achieve transparency and build trust include communicating frequently and consistently, establishing priorities, focusing on customer service, and leveraging social media.
Lurking in the back of every CEO’s mind is the fear that any day could bring a trust-eroding event that threatens the very life of their business. Consider the pharmaceutical company whose marquee drug turns out to be more harmful than healthful, the toy company whose best sellers contain life-threatening chemicals, or the automotive manufacturer plagued by an unrelenting stream of product defects. Such an event affects not only the company directly, but also its customers, suppliers, and vendors.
There was a time when a company caught up in a trust-eroding event such as a product failure or a financial scandal might take a defensive, even a confrontational posture with customers and investors. Those days are gone. In today’s business landscape, frequent and consistent communications are critical to establishing and maintaining trust and credibility among stakeholders. The accepted wisdom among those who deal with corporate crises is that once an event has occurred, communicating the problem honestly to stakeholders, accepting responsibility, and positing a workable solution beat stonewalling any day and are most important to defusing a volatile situation. In fact, with regard to trust, it has been our experience that the communication around an event ultimately trumps the event itself. Even in the absence of a problem, frequent and consistent communication can be critical to building and sustaining stakeholder confidence and loyalty.
Certain industries are more prone to publicized trust-eroding activities, and companies subject to such events are wise to have communication plans in place. A company’s plan might include analyzing regulations and the company’s own policies, procedures, and agreements to determine compliance and its manufacturing processes to uncover any risks—financial reporting, operational, product safety, and so on—that, if left unmitigated, could result in a negative event. A public statement regarding such an assessment might be appropriate and could provide a level of comfort to company stakeholders.