Why trust matters in business

After years of little if any economic growth, there is evidence that things are slowly picking up. Good news? Yes, but recent opinion polls suggest consumers don’t believe it.

They look around and see that unemployment and income inequality remain stubbornly high. They see an increasingly insecure world, with rising political, economic and cultural tensions and change. As a result, they don’t trust the optimistic forecasts.

This lack of public trust runs deep and it extends to both individual leaders and institutions. Perhaps more worrying, the trend looks set to continue, if the opinions of the next generation are anything to go by. According to Harvard’s annual study on trust, only 14% of young Americans between 18 and 29 trust that Congress is doing the right thing “most of the time”. The media fared even worse than politicians, with only 11% of respondents saying they trusted them to do the right thing. Attitudes towards big business were almost as negative.

The issue of trust is something I’ll explore at this year’s Annual Meeting on the “Case for Corporate Trust” panel, moderated by Richard Edelman. The annual trust survey his company produces shows that while trust in CEOs has slightly improved since 2009, trust in other sectors, particularly financial services, remains at an all-time low.

This lack of trust is something we should all be worried about, because trust matters. For many companies, particularly professional services firms like the one where I work, trust is at the centre of the business model.

In business, trust is the glue that binds employees to employers, customers to companies – and companies to their suppliers, regulators, Government and partners. Yet several years on from the financial crisis and ensuing recession, efforts to rebuild trust are still ongoing.

Most companies appreciate that high trust levels lead to a stronger reputation, sustainable revenues, greater customer advocacy and increased employee retention. It is also likely that companies with higher levels of trust will bounce back from future crises far quicker than others.

Trust is an asset that companies need to understand, but also manage and nurture in order to succeed, particularly in this highly interconnected and global world where news – especially bad news – travels fast. So how do we go about doing this?

To start with, companies must do more than just comply with rules and regulations. They must also be seen to be doing the right thing. Second, we must focus on building trust in the rule of law. For both businesses and economies to thrive, we need clear rules, a high level of certainty about the legal parameters of decision-making, and clear consequences for unlawful behaviour. This certainty is especially needed when entering a new market or in other unfamiliar situations, such as when dealing with new business models or using new technologies. All these developments will need new laws, new ways of ensuring all parties can look each other in the eye and know they will get a fair reward for a fair transaction. In short, that they can trust each other.

Most importantly, to really win back trust, companies must show their dedication to a broader purpose. They need to prove they are not just driven by quick profits, but also by values. This is the new order in the wake of the turbulent global times of the past five years.

Author: Eduardo Leite, Chairman of the Executive Committee, Baker & McKenzie, USA

Image: British Prime Minister Tony Blair (L) shakes hands with German Chancellor Gerhard Schroeder at the Gleneagles Hotel for the G8 summit in Gleneagles, Scotland July 7, 2005. UNICS REUTERS/Jim Young