Featured Author: Matt Kelly, CEO, Radical Compliance
Trust is plummeting around the world. Presumably that means you don’t believe me, so let’s consider some data.
in 13 of 28 countries surveyed, trust in business tumbled below 50 percent, into “distrusted” territory.
One source for this observation is the Edelman Trust Barometer, an annual survey that measures people’s trust in various types of organizations. The 2017 report was published in January, and the news was not good. Trust in governments, businesses, media and non-governmental organizations dropped across the board, around the world.
Trust in business fell from 53 percent one year ago to 52 percent today. So overall, businesses still qualify as trustworthy—but barely. And in 13 of 28 countries surveyed, trust in business tumbled below 50 percent, into “distrusted” territory.
Declining levels of trust have sweeping implications for ethics and compliance professionals. For example, as the public trusts businesses less, it consequently wants to see businesses regulated more. Eighty-two percent of respondents in the Edelman survey say the pharmaceutical industry needs more regulation; 72 percent agreed with the statement, “The government should protect our jobs and industries, even if it means that our economy grows more slowly.”
Declining trust can also corrode the operations of a business from the inside. Sixty percent of Edelman respondents said they fear losing their jobs due to lack of skills or training—so if the company doesn’t provide enough training, distrustful employees may bolt for other employers that do. Distrust can cause higher levels of employee fraud. (“They don’t care about me, why should I care about them?”)
And on a prosaic level: the more distrustful a workforce is, the more time an ethics and compliance officer will spend on compliance (monitoring transactions and investigating behavior) rather than ethics (encouraging good conduct).
That is an expensive, tedious, time-consuming way to spend your day. Every compliance officer I know wants that balance to be the other way around.
The Business Case for Trust
Another valuable voice on trust is the annual PwC CEO Survey, also published in January. This year’s report devoted a section to the notion of organizational trust, and the idea that companies able to generate organizational trust will be better-positioned in our highly polarized, yet highly inter-dependent, business landscape.
PwC’s survey draws a connection between our increasingly digitized world and the challenge of maintaining organizational trust. That is, as more stakeholders can see more of what a company does, those parties (employees, customers, business partners, the public) can form conclusions about a company’s conduct more quickly—regardless of how accurate or unwelcome those conclusions might be.
Chief executives do appreciate that risk. Little surprise, then, at these statistics from the PwC survey:
- 92 percent agree that having a strong corporate purpose, reflected in corporate culture and behaviors, is becoming more important
- 85 percent agree that it’s more important to run their business in a way that accounts for wider stakeholder expectations
- 68 percent say it’s harder for business to gain and keep trust
Those statistics bookend the findings of the Edelman Trust Barometer perfectly. If employees, customers, and others can perceive a company’s actions more easily, and then decide that those actions are something they dislike, trust falls. If the company’s actions are something they do like, trust grows.
Read More: Judged by the Company You Keep
A company’s trustworthiness, then, is its ability to demonstrate that its actions are reliable and something that a stakeholder group will agree with.
The PwC report says trustworthiness is crucial to preserving your company’s business advantage. The Edelman report says companies are losing trustworthiness rather than creating it.
Now add those two points together. To counteract the risks outlined in the Edelman report, and achieve the competitive advantage outlined in the PwC report—companies must do a better job of demonstrating that their actions and values are reliable, and bring benefit to all the stakeholder groups that companies have.
That is a job tailor-made for the corporate ethics & compliance officer.
Where to Begin
Stronger trust helps businesses communicate, decide, and act more quickly.
Organizational trust is a huge subject. We can, and will, explore it in more detail in future posts. Even at this high level, compliance officers can articulate a few points with your CEOs and boards as you help them try to address this phenomenon more effectively.
Reputation risk and organizational trust are inversely proportionate. The more you have of one, the less you have of the other. So when board directors talk about reputation risk or “building a strong culture,” help them by framing the issue this way. Trust is glue that bonds employees and other stakeholders into a strong, unified culture.
Inability to respond is a killer. Businesses aren’t defeated by stronger opponents; they are defeated by faster opponents that leave you unable to respond. Stronger trust helps businesses communicate, decide, and act more quickly. You have less second-guessing within an organization, and fewer silos. A culture that fosters trust allows people to respond to changing conditions more quickly.
This cannot be ignored. Uncertainty will not recede any time soon. The world will not un-digitize itself. Skilled labor will not magically appear—nor will skilled labor do its job brilliantly, but ignore values or decisions they might disagree with. The need to nurture trust will only grow.