February 11, 2013, Churchill Club Forum, Mountain View, CA—A panel discussed the many facets of trust. Peter Burrows from Bloomberg Business Week moderated the panel. Panelists were Eric Channing Brown from Skype, Mary Dent from Silicon Valley Bank, Richard Edelman from Edelman Public Relations, and Jeffery Pfeffer from Stanford.
Trust barometer changes?
Edelman produced some of the findings from their annual trust survey. They have been studying general populations around the for 13 years and segment the people into two main groups; general and informed. The informed group is college-educated, have household income in the top quartile for their age in their country, follow pubic policy issues in the news, and read or watch business/news media at least several times a week.
Trust is a very fragile concept. After the quake and tsunami in Fukushima, trust in officials and businesses in Japan dropped dramatically. In the US, they did a post election review and found that government and business trust levels were at the lowest points in their survey history, 30 percent for government, and 40 percent for business. The election seems to have increased the generation gap in trust.
Technology is the most trusted industry through the world and financial services are the worst. Two thirds of all people think that the banks are corrupt, and the news stories of more malfeasance and excessive bonuses reinforce the perception. Other industries are not doing well either, as companies struggle to satisfy both shareholders and the general society.
Leadership is in crisis, and overall , leaders are not viewed as trustworthy. CEOs and government officials are not performing as expected, and are not considered to be doing a good job, or in the case of Congress, not doing any job. In general, people have no belief in leaders, but prefer activists, peers, and others. The alternate groups like employees, peers, and teachers have twice the trust as corporate leaders.
Companies are now ranked by more qualitative measures, and how well they treat their employees. The recent hard financial times have lead to many bankruptcies and general disregard for workers, but the good employers are valued much more than those who didn't care for the people in the hard times. Many people consider the shared context of financial strain as an indicator of the underlying core values and prefer good companies 2:1 over the typical ones.
The many examples of poor behavior in many sectors hurts all the participants in that sector. About 65 percent of all those surveyed had heard of scandals in financial news. Business is generally good, but the leaders are considered liars. While small and medium businesses are the engines of growth, the big companies set the standards for benefits and salaries. The big companies generate greater feelings of security that the small and medium companies cannot match.
Dent added that all of this is part of the whole trust equation. The classifications of different industries set a context for comparisons, and bad headlines affect all in that industry. Demonizing people prevents the discussions needed to solve the problems, so changes in policies are not possible in a charged environment.
Trust is part of the issue, there is an argument for policy changes. SOX provided little heading in changes?
Pfeffer suggested that first spokespeople need to tell the truth. Some examples of people lying are: when Larry Ellison speaks about products, it is not a lie, but a problem with tenses. High technology invented the terms " vapor-ware" and "reality distortion machines" to describe their products. There are many examples of company spokespeople and politicians using highly distorted "fact" to make a point, only to justify the exaggerations as just an example. Instead, companies need to create a culture of telling the truth. Even some omissions can distort the truth, so it is incumbent upon the managers to stay off of the slippery slope of "soft" ethics.
Edelman offered that the world is now looking for changes in business philosophies from a license to operate to a license to lead. In many cases, the companies are becoming too legalistic, leaving no area for mistakes. Now companies have to operate in an environment of radical transparency. Otherwise, all institutions will suffer, so everyone has to change and behave to re-earn the trust of the public.
Brown suggested that communications people have a different voice than the financial or legal counsels, but it is probably better to be in a $1 M lawsuit and lose than to lose your reputation. Communications people have a market and customer advocacy task. A reputation is not a part of risk management, and the reputation needs a voice.
Dent observed that conversations like this one never come up in their company meetings, but Silicon Valley Bank has and holds high standards. The reputation of trust can help over time to keep business. Many companies are solving the wrong thing. For example, a "good" company will not lay off people during a downturn, but will keep them for the return of the good times. It is a mistake in management to use difficult conditions as an excuse for abandoning brand, loyalty, and ethics. People all need to be responsible and talk about issues.
The bank is different from most of the industry, but is painted with the same brush strokes as the rest of the financial community. This guilt by association when people in the industry act badly and damage not only their own reputation, but the whole industry. In addition, the financial industry allows some to violate trust, and then applies no sanctions that matter. As a result, all the businesses suffer.
Trust in stock prices?
Dent stated that people have much more choice, so when a company does the right thing, is can recognize huge values. There is a myth that investors don\'t know anything, but the availability of vast amounts of information negates that. By using the public markets, companies can do the right things and benefit stockholders and society.
Edelman commented that some think that trust is like money in a piggy bank. In actuality, the drop in trust in closer to a geometric drop and established expectations drop twice as fast as other reputations. Positional leadership is no longer good. Companies need to be open, candid, and show proof through examples.
Tactics, development process to improve reputation, CEO function?
Brown offered it depends upon the audience. CEOs do well on Wall Street and appealing to the developer community. For consumer brands, the company needs an evangelist or advocate to navigate the social media and other changing requirements. Companies need to determine who is the audience and how to engage with them. The CEO is the usually the worst person for consumer contact.
Dent related that communications have to be in relationship with the business. Start with the context and assign the proper people to bring relevance to the topic, and use people where they are most effective.
Edelman stated that this is the ultimate PR function. Lack of control is OK if it is compared with the potential loss of reputation. Companies have to be open to changes in publicity.
Pfeffer demurred the quality of the CEO sets the culture. the important traits have to rise to the occasion. Usually companies use the wrong selection parameters that are artifacts of the corporate culture. the most important role is to be a role model and enforce the standards. Unfortunately, most people in leadership positions cannot handle bad news, even if it is the truth.
Employees, getting and keeping people? Now, employees have three main expectations; a higher bar for information, identify company problems, and tell the truth. Trust requires a lot of work.
Edelman considered that CEOs think that information trickles down into the ranks. Instead, people access information everywhere, tapping into social media to flow internal information to employees. There are demand-side, supply-side, media, and business model pressures. Media outlets are shrinking, so everything has to come directly from the company. The companies need their own voices, so their have to become media companies and start social conversations.
Dent offered that the leaders have to carefully distinguish between intentions and actions. They have to explain acts and motivations or they will not get unity. This requires a change in behavior, to take the time and energy to communicate and build trust. The command and control structure does not work well.
Effective ways to become your own media, channels?
Brown replied that self-owned media, some outward outreach, and control channels can be implemented for zero cost for the outlets. People under 25 are already on social media, but the company news needs a curator and a good reputation.
Edelman added that subject specific information is best put out as company information.
Image ads?
Edelman disagreed.
Pfeffer noted that companies paid about $133k per second for Superbowl ads. In addition, companies have to understand the importance of the Web. A disgruntled person is bad for the organization, and there is not enough emphasis on ex-employees.
Brown stated that there are so many impressions to create a voice. Ads, social, traditions, digital, in-home, TV, and all need to share the same theme.
Company is the voice of the workforce?
Edelman said that if there is an existing baseline, then it is good to show progress. Ads are something to put at the end as an exclamation point and a proof of concept. For example Meg Whitman is doing a god job with HP, to show strategies on the challenges and track proof points. The HP employees are starting to follow.
Brown observed that consumer brands have to do this all the time. National chains like Target show a social ethos and get involved in local and national campaigns.
Dent added that initiative matters. What disruptive trends matter and all of them move too fast. Leaders have to think and allow empowerment, while reducing limits. A lack of delegation and poor communications really hurts the company. The major change is to develop fast, have integrity, clearly identify intentions, get to results, and trust native abilities. All of these take a lot of work and require the leader to understand what the other person needs, rely on that person, and support the messenger even if she has bad news.
Measurements?
Pfeffer postulated that in a crisis, to get out ahead of the story. Don't deny and come out at the beginning. For example, Wal-Mart publicly emphasized worker safety after the fires at their China vendor. Standard and Poor tried to hide the e-mails about malfeasance, but you cannot claim ignorance because the data will eventually get out. You cannot spin the truth. Companies have to work to maintain their image and reputation. One issue is that the penalties for lying are not about the actual infraction, Al Capone was tried for tax evasion, not the murders he had committed.
A counter is Apple, which always seems to hunker down and fight. Many other companies are following this example?
Brown agreed that there is a difference between media coverage and a company's response. Public people are treated more harshly than executives who back off and admit wrongdoing. The media don't cover all the other aspects of a problem. The narratives are not equal, and are scary to the executives.
Edelman demurred that Apple is a special case. Stonewalling is always worse than giving good news. No other company has Steve Jobs to be the spokesperson. Carol Bartz had a bad reputation at the start, her persona was already established.
Pfeffer agreed that Apple is an exception, it keeps people from talking and saying anything negative. If you cannot control the people, data will leak.
Forbes notes that Jeff Immelt is a Teflon person. GE reputation and trust?
Edelman concurred that GE does a good job of reputation management. GE works. They are increasing domestic manufacturing which is an advantage for the corporate reputation.
Trust people like themselves? How to get CEOs to listen down?
Brown responded that sometimes it takes a real catastrophe to get real change from top to the bottom. The definition of a catastrophe is being diminished when compared to a glitch due to the hyperbole in releases. Companies don't get credit for averting a problem. Checks and balances are working in business.
Government paradox, openness leads to reduced trust?
Edelman responded with an example, Penn State moved to get a remedy in place. They got the Freh report, responded, and set goals. Now they will be judged by their accomplishments. The underlying technology is critical. There is a very big difference between the informed elite populations and the general population and this gap may affect the future of communications. One in four people out of high school do not read any media, and this trend is cycling down. These people feel that the government failed them and they are being screwed by all. This is a volcano in politics and there is a lot of blame for the situation.
Brown presented another facet. The government has a charter but governments are now doing 20 small things rather than the big things that matter. The mayor of New York got a restriction on big cups of soda, but everyone wonders what is he not doing while bullying the fast food industry.
Pfeffer chimed in, and yet people re-elect these people to office. Politicians are all liars. An Arizona senator wanted to de-fund Planned Parenthood, because he claimed that they spent over 90 percent of their budget for abortions. When told that the actual amount is about 3 percent, his office responded that his statements were never intended to be factual.
Dent cited an interesting work. people are more isolated and don't share facts and perceptions of reality as happened in the past. Now the situation is such that we cannot bridge the divide. Our capacity to talk is decreased, there is no political or sound bite that is universal.
Impact of acquisitions on trust?
Brown noted an expectation gap. Startups have a higher level of tolerance, but people cut no slack for Microsoft. In general they are working hard to keep up their performance, and not only for their reputation. Microsoft offered them a chance to grow, and the company does have a ethos and care for the world.
Balkanization of ideas? Specialization is up and commonality is down.
Dent offered that this area needs a lot of effort. Increasingly specialized tools make it hard to join the other group. In general, we don't work at understanding other parts of the country. If is hard to find people who disagree and find how others work, and we need to find ways to be in other places.
Silicon valley versus the rest of the US, and the rest of the world?
Edelman showed that there is a different picture in the developed countries versus the emerging ones. Some countries like China have a high trust in government and business, but don't trust their leaders to tell the truth in a difficult situation. In China, social is equated with the truth compared to the mainstream media, banks have the highest trust and food producers the lowest. In general, underdeveloped countries are similar to the US before '08.
Where are we going?
Edelman forecast a long cycle of negativity in government and finance. Technology is still strong. Leaders and organizations have to be defensive.
Dent added the federal government is still dropping. Government and elected officials are not doing anything but re-run for office. There is no apparent effort to change. Our youth are looking for change, engagement, and accountability, but people get what they deserve.
Pfeffer noted that politicians have significant costs to run. $200M is not enough for a national office, so the politicians spend all of their time dialing for dollars. Corporate money is the worst for the US, as it allows any amount of corruption.
Dent disagreed. We have the system that we want. There are many well intentioned people in congress.
Reduce fear and increase trust erode profit? Best practices are leading to self-destruction with high turnover.
Edelman cited Alan Mulally of Ford as a transformative leader. He said that he was going to visit the factory floor, and was told that executives don't go to the floor. He went, and said that you can only learn from the people on the floor. This is like the HP way, and is more important now. Leaders have to get out and talk to people.