Transparency has become an over-used buzzword in many business, financial, legal and governmental arenas, to the point where many leaders don’t embrace its value or what it takes to achieve it. The reason you should care is that transparency is one of the keys to building trust – with consumers, employees, stakeholders and audiences of all kinds -- and trust is a key asset for high performing teams and highly profitable companies.
Beginning with the end in mind
Trust is a vital component to business success. With it, work gets done faster and more efficiently, costs are lower, standards of performance are higher, and so are satisfaction levels (employee, investor and public). According to William G. Parrett, Senior Partner at Deloitte & Touche USA LLP, “In an age of heightened business regulation and oversight, it is important to focus on fundamentals. And trust is the intangible asset that can help assure the long-term sustainability of any organization or enterprise.”
Recent studies on trust indicators show that “only 36 percent of Americans queried said they felt that corporations were ‘a source of hope,’ compared to an impressive 84 percent of the population surveyed in China, whose economy is still developing.” View article. In the United States, crowd-sourcing has become a more popular fountain of trust than corporate knowledge or assembled, vetted information like that from top media sources. Social media has made it easy to rely more on reviews and comments from strangers instead of audited test results or consumer report surveys. The old adage about “truth in advertising” has become shadowed behind trending opinions and like-minded echoes, even if they’re going in a false direction.
In his book, The Speed of Trust, Stephen M.R. Covey recommends the goal of achieving “Smart Trust” with and within an organization, which results from an informed relationship where information flows freely and participants make informed decisions/judgements.
Smart Trust is the pinnacle of the trust curve, where the benefits of a trusted organization are maximized and the underlying risks are minimized. To get there, you have to emerge from either a neutral or distrusted position, or recover from a once-trusted position, and neither is an easy climb.
The first step is clear
Pardon the pun in the section header, but trust starts with transparency, just as distrust starts with concealment. There are countless public examples of trust failures due to lack of transparency, when information was not openly shared or purposefully hidden, and both small businesses and global conglomerates are being held publicly accountable for any lack of transparency, as that is the early seed of much larger troubles.
Take Wells Fargo for example, where the enormous financial institution was playing fast and loose with customer account information and it bit them, hard. Similar to tech giants and other pervasive retail companies who have hidden privacy breaches from their customers, hesitation cost the company dearly and they’re now in recovery mode. And one of the key behaviors they’re employing to try and right the ship with their customers is using transparency to openly discuss why things went wrong and exactly what the organization is doing to fix the situation. They’ve even created a mea culpa web page to explain the “series of steps to address improper sales practices” that they’ve taken as they make “critical changes to rebuild the trust of customers, team members, community partners, and shareholders.” https://stories.wf.com/wells-fargos-progress-making-things-right-rebuilding-trust/
Covey’s book covers transparency as one of 13 listed behaviors that build trust, observing that “from the standpoint of speed and cost, transparency makes enormous sense. You don’t have to worry about hidden agendas. You don’t have to second-guess. You don’t have to waste time and energy trying to maintain an appearance or keep up with which approach you took with which person.” (page 155) That’s more about personal transparency and trust, but the same tenants hold true for organizations.
Covey goes on to say that “More and more in our global economy, transparency is gaining recognition as a critical value in high-trust organizations. According to PriceWaterHouseCoopers, the ‘spirit of transparency’ is the first key to restoring public trust.” (page 154) The degree of transparency can be an issue of debate, and it can vary from company to company. In 2002, Sarbanes-Oxley (also known as the “Public Company Accounting Reform and Investor Protection Act” or the “Corporate and Auditing Accountability, Responsibility, and Transparency Act”) was enacted to ensure that publicly traded companies disclosed the same information to all audiences. This “full disclosure” law specifically targeted the inequity of information that was given to investors versus more public audiences like the media. Under SOX compliance, the same information is disclosed to everyone, so one audience isn’t given preferential access over another.
While SOX is one example of federally-mandated transparency, many company's have chosen their own levels and means of transparency that fit their businesses. It can be as straightforward as giving a public look at one key decision or a single new product development process, or as comprehensive as an “Open Book Management” platform where the companies financial records, operations and management processes are truly open for scrutiny from anyone who is interested.
The reason why some companies are so welcoming of open door policies and actions is that transparency pays off.
Both employees and consumers respond positively to actions of transparency, as it indicates that a company has nothing to hide, and that the information that is being offered is factual and solid. With transparent communications, consumers feel that they can make better decisions, and employees feel like their livelihoods are in better hands. Satisfaction and confidence goes up across the board, and the company is more profitable as a result.
Taking the leap
The current crisis of trust is real, and the gap is not easily closed. In 2017, the Edelman Trust Barometer found that just 37% of respondents found CEOs to be credible spokespeople, down 12% compared to 2016. Public trust in employees is also down to 48% of respondents versus 52% in 2016. For the first time in the study’s history, the majority of respondents worldwide said that they “no longer trust ‘the system’ – government, media, business and institutions – to work for them.”
However, there’s hope on the horizon for the business leaders who care to try and bridge the trust gap. Covey offers this: “Contrary to what most people believe, trust is not some soft, illusive quality that you either have or you don’t; rather, trust is a pragmatic, tangible, actionable asset that you can create – much faster than you probably think possible.”
It’s a multi-step process, and it takes dedicated effort to accomplish, but trust can be built or re-built for your business to come out on top.
Business leaders in Madison who are interested in exploring trust and the critical role it plays in business today, and how to build it in their own organization, should consider attending the upcoming CEO Learning Session: Building Trust on October 2, 2018 at the Fluno Center. In response to the flooding in Madison and Dane County, for every registrant attending the CEO Learning Session on October 2, a matching $150 will be donated to local flood relief efforts to aid affected businesses.
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