Wednesday, February 3, 2010

It's about trust, stupid

During his state of the union address, President Barack Obama may not have mentioned the terms “war” or “security” often enough to please former New York mayor Rudy Giuliani, but he got it right about trust.

In his remarks, President Obama spoke of “a deficit of trust”, noted that “citizens have lost faith in our biggest institutions” and pointed out that “restoring public trust demands more” than trimming some spending.

When the President was referring to “institutions”, he was referring not only to our government, but also to American business. In the same speech, speaking about revitalizing the economy, he specifically mentioned cross-border commerce. Here’s what he had to say:

“ . . . we need to export more of our goods. Because the more products we make and sell to other countries, the more jobs we support right here in America. So tonight, we set a new goal: We will double our exports over the next five years, an increase that will support two million jobs in America. To help meet this goal, we're launching a National Export Initiative that will help farmers and small businesses increase their exports, and reform export controls consistent with national security.”
What does this goal have to do with a loss of trust? Everything.

Every commercial transaction requires a level of trust between buyer and seller, and trust is much easier to establish and maintain when the two halves of the equation live and work in the same neighborhood. The larger the neighborhood (city, state/province, country, region) , the harder it is for buyer and seller to get to know one another, to trust enough to place that critical first order and to maintain trust over time.

The global public relations firm, Edelman, conducts and publishes an annual Trust Barometer. The 2010 report is now available; for American businesses, the results are mixed.

On the positive side, the global Barometer finds that overall trust in business has risen slightly over the results reflected in the 2009 report. More specifically, when asked, “How much do you trust business to do what’s right?”, the Edelman survey responses show that trust in U.S. business has risen fairly dramatically, increasing 18 points (from 36% to 54%). And there’s more positive news. When asked “How much do you trust global companies headquartered in the U.S. to do what’s right?”, the overall results increased 10 points over 2009 (from 51% to 61%).

However, a closer looks at the results is cause for far less optimism. First, as noted, trust in U.S. businesses now stands at 54%; however, trust in business in many of the other key global economies exceeds that of the U.S. (China, India and Brazil stand at over 60%; Italy and Japan are at 59% and 57%, respectively). Second, Edelman notes that the rise in trust is tenuous. When asked, “When the recession is over, do you expect business and financial companies to return to ‘business as usual’?”, more than 50% of “informed publics” in nine out of the top 10 countries (ranked by GDP) answered “yes” (70% of respondents overall). Some other key Edelman findings that should be of interest (and real concern) to business are these:
  • Throughout most of the western world, “non-governmental organizations” (not business or government) remain the most trusted institutions;
  • From the 2007 through the 2010 reports, overall trust in the technology industry remains high, while trust in the financial sector has crumbled (down 39 points over the three years – from 68% to 29% in the U.S.)
To return to an earlier point, trust is a cornerstone of any commercial transaction, but trust is essential for companies, industries or national economies trying to expand their markets beyond national borders.

So, paradoxically, the Obama administration and American businesses – from the largest to the smallest – ought to share a common interest when it comes to the President’s expressed desire to create new American jobs by increasing exports into the global market. Certainly, there are things the administration can do to facilitate this goal (the President specifically mentioned a few in his remarks). Ultimately, however, this goal can only be met if those markets into which we hope to sell American made goods and services trust the practices and leadership of the individual companies and industries.

In the 2006 report, when Edelman asked “What shapes your trust in a company?”, the top three global responses were: 1) Quality products and services (53%); 2) Attentiveness to customer needs (47%); and, 3) Strong financial performance (42%). In the 2010 report, in response to a slightly different variation of the same underlying question (“How important are these factors to corporate reputation?”), the top three (out of ten) global responses were: 1) Transparent and honest practices (83%); 2) Company I can trust (83%); and 3) High quality products or services (79%). A company’s “strong financial performance” moved to the bottom of the 2010 list (although it’s percentage actually increased from 42% to 45%).

Speaking to this issue of trust in business, Richard Edelman – the company’s CEO – says:
“. . . Trust has emerged as a new line of business – one to be developed and delivered. Companies that embrace the new reality, where the interests of all stakeholders must be considered equally, will see their credibility rise accordingly. Now is the time for companies and CEOs to deliver performance, communicate frequently and honestly, and consider the role of business in society. Now is the time for business to prove its commitment to profit and purpose.”
There’s an important message for American business and American government in his words.