Lost trust and the challenge for reputations

We live in an age defined by a decided lack of trust in institutions, corporations, media and governments. So how can companies maintain or regain trust?
Workers paint the exterior of an unfinished residential building in Hubei province, China./ Credits: Reuters
The whole thing started with an embarrassed and rude answer by ENRON CEO Jeff Skilling to an innocent question by an analyst. Why would the company not be able to produce something as simple as a cash-flow statement? “Well, uh...thank you very much. We appreciate it. A****le!” answered Skilling.

The detection of the ENRON scandal in 2001, the year that had already seen the dot-com bubble burst, was the beginning of a new era: the loss of trust. The virus first infected auditors who had failed to detect the frauds at ENRON and WorldCom; it was then transmitted to rating agencies and investment banks whose analysts didn’t raise their red flags in time. To whom could investors and savers turn for trust? Certainly not the media, which missed the writing on the wall, as did regulators and elected politicians.

A couple of years later, another crisis hit the world economy; the explosion of the real-estate bubble in the United States and other countries. This was quickly followed by the debt crisis in Europe. The result of all of this is that trust in institutions, corporations, media and governments has fallen to an historic low. What is now emerging is the trust of last resort: the average person, the normal employee of a company, the dedicated individual working as a nurse, firefighter, police officer or doctor.
Emilio Galli-Zugaro has been head of Group Communications at Allianz SE since 1992, and a visiting professor at the Ludwig Maximilian University, Munich, since 1996. About the author: Emilio Galli-Zugaro has been head of Group Communications at Allianz SE since 1992, and a visiting professor at the Ludwig Maximilian University, Munich, since 1996. the 2006 TIME magazine "Person of the Year" captured this change. It was neither a president, such as JFK in 1961, nor a businessman, such as Ted Turner in 1991. Instead, the cover of this most prominent US weekly was a computer screen mirroring the reader. The headline was “You,” and it depicted the average citizen connected to the larger community via the Internet. Stories of individuals toppling politicians with a simple blog illustrated a historical shift: the rise of social media. The ability of individuals to create spontaneous alliances with others and build powerful armies of consumers, voters and protesters is threatening the existence of gatekeepers who were in charge of molding opinions throughout the last century.

TIME again underlined this shift in 2011 when the Person of the Year was the “Protester.” The magazine highlighted the way protest movements like the Arab Spring, the “Indignants” in Spain and Greece, the Tea Party, Occupy Wall Street, and others are challenging the “failure of traditional leadership and the fecklessness of institutions” with both national and global impact.

Traditional media and their well-educated professionals, the journalists, now face a survival threat. Together with their counterparts in governments and corporations – spokespeople, spin doctors and corporate communications experts – they are finding the very rationale for their existence being challenged.

The Wikileaks and Anonymouses of this world have crashed the fences. The gatekeepers now guard gates where no traffic passes. The crowds, equipped simply with a computer and access to the Internet, cross the borders wherever they like.

Statements made by an employer in a recruitment interview can be immediately verified on a smartphone. Promises from a salesman about the competi- tiveness of a product can be checked with a couple of clicks. Hotels and restaurants are no longer predominantly chosen according to expensive guides, but also via the vote of customers. Instant comparisons between suppliers of goods and services empower customers, and every apparently smart effort to influence this process can be detected. Invariably, the result is what contemporary poets call a “s***storm” that can destroy the franchise of a business in nanoseconds. The era of transparency is getting closer.

The only effective way to manage the reputation of a company in this era is to make sure that the business is run according to the highest ethical standards in every corner of the organization. Every e-mail with a derogatory comment can go public through the Web and become the scandal of tomorrow. Every sales process can be recorded and shown on YouTube.

And if an airline breaks a guitar and refuses to settle the claim, they can quickly become the subject of a song, as in “United Breaks Guitars,” a recording that has generated over 11 million views on YouTube. No gatekeeper can fix that. The case is years old and United may even have learned from this experience, but the video can still be seen online – a very public display of one customer’s dissatisfaction.
Reputation is determined by behavior over a longer period. Bad behavior translates into a bad reputation and very quickly into a failing enterprise. What can corporations do to re-establish lost trust?

They have to invest heavily in recruiting people with certain values. Internal communication has to increase to inform staff and get their buy-in to the corporate strategy. Compliance must be strictly enforced and employee motivation boosted wherever possible.

Finally, every employee must act as a spokesperson for their company. This is exemplified by my colleague Saadia Zain, in charge of the reception desk at Allianz Re in Singapore. She gave herself a new job title that says it all: Director of First Impressions.

We have to learn that every gesture, every deed, every phone call answered pays into the profit or loss account of a business enterprise. And the jury that passes a verdict on performance is made up of millions of consumers who can vote with their feet, or – more likely in the digital age – press the button that cancels an order. Some 85% of people will not buy your goods if they do not trust the corporation.

But how can an institution earn back trust? Can you simply put on a friendly smile and plaster billboards with the desperate appeal to “Please, trust me?” Can anyone really hope that people are dumb enough to simply trust without asking for constant and sustainable proof and evidence? There is no alternative to keeping promises if you want to gain the support of the average citizen and have them recommend you to friends and family members.

If one were to identify a golden rule, applicable to employees from all religions, backgrounds and countries, then it would be to treat others as you yourself would like to be treated. This applies if you are on the phone, writing e-mails, in a sales pitch, leading people, fairly distributing earnings to the taxman, shareholders and employees, or providing the customers with the goods they seek.

Ultimately, it’s as simple – and as difficult – as that. It’s the victory of common sense. It’s about the average person who will recommend a business to his or her best friend and turn credibility and trust into the new engine of the market economy after the disappointments of the last decade. It’s an opportunity to gain the acceptance of the general public for business and regain the trust lost during this rocky first decade of the new millennium.

Read more on trust and business risks at PROJECT M online.

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