February 25, 2020 • Sam Grabel
In January, esteemed PR agency Edelman published the 2020 Edelman Trust Barometer, a report that has become a bellwether for trust and how we view institutions such as the government, media, NGOs and business. Johannes Steffens has outlined the history of the report, and this year’s findings. So let’s look at some ways that companies can use their heritage to earn trust with customers and other external stakeholders.
You cannot win the public’s trust overnight. It takes consistency over time. This is called building a reputation—distinctly different than building an image.
As History Factory CEO Bruce Weindruch notes in his book, Start with the Future and Work Back, “People tend to think [image and reputation] are the same thing, but in reality they’re not. Image is created in the present. Reputation is created over time.”
This distinction is important. It’s also important to understand that stumbling can set you back. As much as a good reputation can help build trust, a bad image can tear it away.
Take, for instance, AIG, which prided itself on its nearly 100-year reputation of helping insure American businesses and expatriates overseas. All of that nearly went out the window when the financial services and insurance provider found itself mired in the global financial crisis.
Throughout the 1990s, a small division based in London began issuing credit default swaps, which lumped together various types of debt—including those with subprime mortgages and other corporate debts. This strategy linked AIG’s financial health to the health of many other financial institutions. When the housing market collapsed, AIG had to pay out, which resulted in tens of billions of dollars in losses for the company. It was clear that AIG would become insolvent. As a result, the federal government stepped in with a $182 billion loan using taxpayer money.
Further eroding AIG’s reputation and image were subsequent bonuses, $165 million total, paid to the company’s leaders immediately after the bailout. Activists protested the bonuses, and employees were encouraged to hide their employee badges while they were outside the office to avoid drawing unwanted attention.
The organization took corrective actions, including selling off subsidiaries, and began buying back stock from the federal government. By 2013, the company had paid the government back in full.
The damage had been done. However, AIG’s subsequent actions and speedy repayment went a long way to help repair its reputation.
This one seems like a no-brainer. The more honest you are, the more people will trust you. Today, transparency is a buzzword. Businesses issue sustainability reports as a way to demonstrate openness about their business decisions and how they affect the world. In most cases, these sustainability reports are a direct response to consumers who demand transparency.
What if a company lies to regulators and the general public? In 2015, news broke that Volkswagen had installed “defeat devices” to get around emissions standards testing for some of its vehicles. The scandal affected sales, and as a whole, German car sales dropped. The carmakers could no longer point to the precision and quality of German engineering. Volkswagen undermined an entire country’s reputation for quality products. Despite this setback, the company apologized, restructured and took steps to right its wrongs. By January 2018, the company was more profitable than before the crisis, and had a renewed focus on sustainability and electric cars.
Transparency about your organization’s less-than-desirable chapters is incredibly important. Some U.S. cities and states have laws that require disclosure of profits made from slavery. History Factory has been engaged to assist clients who want to use their archives to better understand and communicate about their historical ties to slavery.
It’s imperative that you listen to your detractors. Don’t just bury your head in the sand and wait for people to forget what they were screaming about—they won’t. Listen to what your customers are saying and respond swiftly and appropriately.
Chick-fil-A had drawn ire from LGBTQ groups over its position on gay marriage and donations to groups with anti-LGBTQ politics. It even closed several stores in response to protests. As Popeyes’ market share of chicken sandwich lovers increased, Chick-fil-A tried to earn some goodwill with consumers by publicizing the end of its donations to such anti-LGBTQ groups.
Is it too little too late? Activists say that they’d like to see more action from Chick-fil-A. A critical component of listening to audiences is the speed of response. Historically, Chick-fil-A has been slow to respond to detractors. However, as with all companies, Chick-fil-A has its ups and downs, and its story isn’t over yet.
This one goes hand in hand with listening to your stakeholders and customers. Increasingly, consumers prefer brands that take a stand on important issues. Moreover, in the 2020 Edelman report, 74 percent of respondents stated that CEOs should take the lead on change rather than waiting for the government to impose it. The top-ranking issues included training for the jobs of the future, ethical use of tech, income inequality, diversity, climate change and immigration.
In his annual letter, “Profit and Purpose,” BlackRock CEO Larry Fink echoes the Edelman report in his call to action to CEOs. Company leaders must take the lead to address social and economic issues, he says, which are exacerbated by weakened trust in institutions and “political dysfunction.” In other words, distill a purpose—as Fink defines it, “a company’s fundamental reason for being”—and stick with it.
It is important to speak up when it makes sense. People aren’t clamoring for oil companies to take a stance on health care. They are, however, calling for action to help reverse climate change. Respond to your audiences and stakeholders with appropriate action, and you’ll earn their trust.
People are loyal to a brand that provides a consistent experience—that’s why people go to McDonald’s or drink Coca-Cola. If a brand isn’t consistent—because it cut corners or changed its policies—perhaps it’s time to return to its roots.
After Howard Schultz stepped down as CEO of Starbucks in 2000, the company’s sales and stock prices plummeted. The brand had grown quickly and its new leadership took the company in a different direction. Schultz returned to Starbucks in 2008 and immediately closed all stores for a day to hold companywide customer service training. He also instituted barista training programs to ensure uniform beverages across 15,000-plus stores. Schultz wanted to return to what made the brand popular in the first place: the experience.
These and other lessons from companies that have been there offer important insights on building and maintaining the public’s trust.
As noted, earning trust takes time. People will see through a one-time gesture, but a long-term commitment will inspire respect. Showcase your company’s commitment by using stories from its past to establish a track record it can stake its reputation on. How can History Factory help your organization to earn—and keep—people’s trust?
Alpha is just the beginning of the alternative investment story.
There is more…Read More
Why does trust matter? Who and what creates trust? How is trust won and lost?… Read More