Companies need the trust of their stakeholders. Knowing how to develop this trust, and repair it when necessary, is an essential management skill

The philosopher Annette Baier once wrote that trust is like clean air: “We notice it only when it is scarce or polluted.”

If this is true, then the huge attention currently being given to the challenge of repairing trust suggests something is seriously wrong. Trust is preoccupying people in businesses, governments and public sector organisations alike.

We see major failures – whether a scandal or a fatal accident – as a crucible for the competing demands on an organisation, and for the resilience of its ethics. As commercial and operational imperatives pitch employees into ever more difficult dilemmas at work, deciding how best to meet competing priorities without compromising performance, while staying true to their organisation’s ethical values, is the trust challenge of our age.

The links between trust and business ethics are readily apparent. The two concepts share several common themes, including the centrality of values such as integrity, fairness, actions matching words, aspiring to excellence, and showing genuine concern for others. To be ethical is to be trustworthy. A corporate reputation for trustworthiness is founded on a robust ethical culture, supported by leaders, and guided by systems and policies that are designed to nurture strong internal trust relationships.

Understanding how to sustain trust, and how to recover it after a crisis, is essential. The first requirement is to understand precisely what trust is. There is some truth in the notion that while trust is difficult to put into words, you know it when you experience it – or its flipside, distrust. Yet trust has been studied for decades.

Most definitions contain the following essentials (see figure 1):

  • To trust is to be prepared to take a risk in your dealings with another party, by relying on them to do something or collaborating closely with them.
  • If we take this risk based on trust, rather than from blind faith or hope, we do so on the basis of a judgment call on their trustworthiness.
  • Trustworthiness is a compilation of attributes, centring on ability (the other party’s skills, knowledge and capacity to what we want them to do), benevolence (their concern for us and our interests), and integrity (their adherence to principles of honesty and fairness).
  • If the evidence for these three attributes is high enough, this prompts our willingness to take the risk involved in trusting them. If any or all are too low for us to feel confident, we tend towards distrust.
  • Our experience of trusting – whether it is vindicated or broken – feeds back fresh evidence of the other party’s trustworthiness. Thus, every encounter has the potential to nurture or undermine trust.

An organisation can demonstrate its trustworthiness through the technical competence of its operations, products and services (ability), its positive motives and concern for its multiple stakeholders (benevolence), and its honesty and fairness in dealings with others (integrity). A deficiency or abuse of any of these attributes, in the form of a scandal or failure, can see corporate trust evaporate in an instant.

Two recent Institute of Business Ethics (IBE) reports provide a set of best-practice interventions for how organisations can build, nurture and protect their reputations for trustworthiness.

The signals on an organisation’s trustworthiness come from six elements of its set-up: the role-modelling and decisions and priorities of its senior leadership and line management; the priorities implied, and perhaps incentivised, by its strategy; the enduring and enforced values and norms of conduct reinforced by its culture, and the values and norms of conduct, as well as the controls and rewards, dictated by its policies, procedures and systems.

But organisations do not operate with a free hand; they must act within an external governance regime formed of the rule of law (in each of the territories in which they operate), and by the regulation of their sector and its professional communities. Corporate trustworthiness is also shaped by an organisation’s external public reputation, seen in its brand image and accreditations. 

Trust repair

Trust can be rebuilt after a failure. The UK utility firm Severn Trent suffered a deception scandal in 2005-7 that led to it being prosecuted and fined. The UK regulator Ofwat fined the company £35.8m, and the UK's Serious Fraud Office £2m. Yet within two years the company had recovered its reputation to win Utility of the Year, as voted by its peers. When Mattel faced a series of global recalls for some of its biggest-selling items in 2007, the near-exemplary response of chief executive Bob Eckert and his team ensured that, if anything, the toy giant’s reputation was enhanced.

There are some core principles for recovering organisational trustworthiness.

First, two processes must be undertaken simultaneously.

Distrust regulation” involves taking proactive preventative measures against known or suspected causes, and imposing conditions and controls on employees’ conduct, to ensure there is no recurrence of the failure. Interventions include new compliance procedures, revised incentives, and the firm but fair removal of guilty or complicit parties.

But this is the minimum expected, and is not sufficient for trust repair. The second essential mechanism for effective trust repair is “trustworthiness demonstration” – statements and actions that provide compelling new evidence of the organisation’s ability, benevolence and integrity, over and above the “distrust regulation” reforms.

Effective interventions here include sincere and credible apologies, transparency in reporting what happened (including a willingness to share learning), offering penance, and substantial investments in promoting ethical practice.

The two work in tandem, and actions undertaken in four stages can deliver effective trust repair (see figure 2).

1) The immediate response (the first 24-72 hours) – here we advocate any obvious immediate preventative measures, and communicating them as such, alongside public statements indicating sincere concern, and perhaps regret, for the failure. The proactive announcement of a full investigation is also a vital step toward learning, and re-establishing trustworthiness. Contrite apologies upfront can be received favourably, but can also be premature, while denials – unless the organisation is certain of its innocence – can be a hostage to fortune from future revelations. Deceitful denials are an integrity double-whammy, compounding the original incident. 

2) A timely, transparent and thorough diagnosis of the failure – here we advocate managing expectations on the timetable for full disclosure, since too much haste or delay can heighten cynicism and mistrust. Interim reports can be helpful stop-gaps, but premature conclusions can be misleading and can backfire. An investigation that inspires genuine trust would examine not only the direct causes of the failure, but also contributing factors, such as deviant cultural norms, and the corrupting effects of performance targets and rewards. This may mean confronting painful truths, but thoroughness and transparency both indicate concern and competence, and help to avoid cynicism. Plus, both aid real organisational learning, to prevent reoccurrence.

3) A comprehensive and targeted series of reforming interventions – here we advocate system-wide changes to the firm’s way of working, as identified in the investigation, while being careful not to over-burden operations with excessive procedural controls. What these look like will depend on the failure, of course, but in our research we have found that quick-fix modifications to procedure and policies are inadequate; a recovery in trustworthiness that can endure will need significant cultural reprogramming and, possibly, an overhaul of the senior leadership. Accompanying this diligent and careful response should be a sincere public apology, and some form of substantial penance. We have found that despite – or perhaps even because of – the almost inevitable litigation reprisals that apologies invite, to offer such a public declaration of remorse and integrity is often widely admired, and speeds the recovery.

4) Regular evaluations in internal and external trust levels – here we advocate regular temperature checks on the levels of trust felt by different stakeholders, using surveys and focus groups, to keep track of progress, and rebuild confidence.

The two IBE reports show how this has been done to varying degrees of success at Siemens, Toyota, BAE Systems, Mattel Toys and the BBC. Other organisations have suffered for their ignorance of, or contempt for, these principles.

Notable here are News International (persistent denials of systematic illegal phone-hacking in the face of overwhelming evidence, followed – belatedly and reluctantly – with cynical damage-limitation), Trafigura (unsuccessfully seeking a super-injunction against all reporting of its illegal dumping of toxic waste in the Ivory Coast) and Goldman Sachs (a series of high-profile fines and damning reports into its allegedly duplicitous approach to client relations met with contempt). None of these tactics suggest senior leaders reflecting seriously on their firm’s reputation for trustworthiness.

Reputation builds trust

We have identified a number of useful takeaway insights from our research. First is the value of having a very good reputation in the first place (eg Mattel and the BBC). Trust failures take years to resolve, and can be debilitating and costly. It pays to invest proactively in designing an organisational system that encourages and supports trustworthy conduct. Taking ethics seriously, and investing time and effort, in embedding trustworthy conduct culturally and procedurally, can inoculate organisations against failures happening, as well as buy organisations time and goodwill in their response to any crisis that does occur. Clear and established ethical principles can make the repair response easier to design, too.

Second, trustworthiness can be damaged by persistent ethical misconduct, or by a one-off catastrophe, or by the lack of ability, benevolence and integrity shown in the immediate response to a trust crisis. Organisations can protect themselves, to a degree, against this threat by conducting regular reviews of the “trust pressures”. Different departments – compliance, legal, HR, operations – should remain vigilant and proactive in reviewing and, if necessary, modifying any problematic elements. Does our culture prize or undermine trustworthiness? Do our targets and rewards incentivise corrupt or devious behaviour? Does our leaders’ messaging encourage ethical conduct? These are the questions to ask.

Third, we found in some cases that companies largely avoid sustained damage to trust, by embarking on an explicitly trustworthy repair effort underpinned by principles of benevolence and integrity, as well as openness and competence. A truly effective response system does not focus on structures, procedures and rules alone, but also considers the cultural values and norms that guide managers’ and employees’ behaviour and decision making on a daily basis. In most cases, we found that trust repair required a deep overhaul of organisational culture, which had proved resistant to the perceived threat coming not only from the failure but from the trust repair response, as well.

The objective must be to embed ethical values into everyday operations and prevent future failures. BAE Systems, Siemens, and Severn Trent will all attest that a trust failure can be a catalyst to strengthening an organisation’s reputation beyond its pre-failure state. A crisis focuses and motivates the organisation, providing a strong and necessary impetus for radical change, and unleashing resources and new ways of thinking that are often difficult to leverage under normal circumstances. This is the silver lining of trust failures.

This brings us to the final positive message: organisational trust can be repaired. But trust needs to be understood first.

Dr Graham Dietz is a senior lecturer at Durham University.Dr Nicole Gillespie is a senior lecturer at the University of Queensland. Dr Nicole Dando is head of projects at the Institute of Business Ethics. Dietz and Gillespie are the authors of the recent IBE reports Building and Restoring Organisational Trust (2011) and The Recovery of Trust: Six case studies of organisational failures and successful trust repair (2012) 

Figure 1:

Figure 2:



Related Reads

comments powered by Disqus