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A lack of trust is at the foundation of the current financial crisis and will have an impact far beyond financial and governmental institutions. Both research and recent economic events demonstrate that distrust has enormous human and financial costs. It is a myth that we can’t do anything to earn the confidence of employees and the public—everything we do influences trust. It’s directly linked to organizational excellence and measurable outcomes.
In 2000, we began research that supported a model of organizational trust with five key drivers:
- Concern for employees/stakeholders
- Openness and honesty
- Identification with the organization
- Reliability in all we do
- Competence
These five drivers are strong predictors of organizational trust across cultures, languages, industries and types of organizations. Of particular importance was the finding that perceptions of organizational trust were strongly predictive of perceived organizational effectiveness.
Lack of trust and the financial crisis
This insight into the key drivers of trust can help us in understanding the fear associated with the financial crisis and provide guidance for those who need to communicate with stakeholders during times of great turbulence and uncertainty. Though trust is important in all relationships, it is at the core of complex financial relationships. The bond between creditor and borrower is built on believing in one another.
At the Southern Colorado Economic Forum in October 2008, Jim Paulsen, chief investment strategist for Wells Capital Management and nationally recognized commentator on financial issues, remarked that “Fear itself, more than fundamental problems, is causing the [financial] crisis. Fear comes from the absence of trust…. We are running people out of business by fear.” He went on to assert that in his opinion, financial markets are not trading on fundamentals but on emotion and fear. Paulsen described the need for U.S. political leadership to sell the US$700 billion relief package to the public. But to do this, U.S. leaders had to generate more fear in order to pass the package, resulting in the worst crisis of confidence since the Depression.
At the global Society for Intercultural Education Training and Research (SIETAR) congress in Spain in October 2008, discussions of the financial crisis were front and center. Nigel Ewington, founding director of both TCO International Diversity Management and WorldWork Ltd., predicted a “downward spiral of trust in business leadership because of the present global situation.” Another WorldWork director, Richard Lowe, was even more specific. Lowe claimed that “the current global financial crisis is destroying trust. Rebuilding trust will become a major priority.” He went on to contend that there will be less transparency during the downturn and noted that senior leaders often keep to themselves when planning for an uncertain future.
A Weber Shandwick/KRC Research survey released 20 November 2008 in USA Today supported these concerns. When asked if company leaders communicated with employees about how the current economy might affect their organization, 70 percent of respondents said no, 1 percent did not know, and only 29 percent said yes.
What to do now
Monitoring and actively building trust will not solve the global financial crisis. However, some basic trust-building and crisis communication practices are important and should be considered by communicators in all types of organizations and institutions. In an interview in November 2008, Ray Gomez, a senior consultant specializing in risk and crisis communication for many large U.S. corporations, said that “An insidious process of bad governance in many organizations over at least the last 15 years resulted ultimately in the current financial crisis. The lending industry, insurance companies, and the real estate industry have allowed bad practices to become accepted practices. To rebuild trust in a crisis like this, organizations need to start at the top and set the tone that they have learned their lessons. Business practices must become more transparent, ethical and sound.” Right now, both the general public and investors have diminished trust in national leaders, corporations and many other types of organizations.
In order to work on rebuilding trust, organizational leaders and communicators need to examine their practices and messages according to the drivers of organizational trust—concern for employees/stakeholders, openness and honesty, identification with the organization, reliability in all we do, and competence. It is important to understand that any organization may be moving into a time of distrust, based on the enormity of the financial crisis. All organizations must monitor the level of trust—particularly the perceptions of top leadership and the positioning of the organization in its broader environment. To demonstrate concern for employees, leaders need to be as transparent as possible about organizational changes necessitated by the faltering economy. Open and honest leaders should communicate more, not less, during times of uncertainty.
One executive at Philips described a communication strategy known as “three deep.” In “three deep” communication, the same message is transmitted to three contiguous levels in an organization to ensure that the message delivered is consistent. This reduces rumors and innuendo, particularly in times of crisis. While we may not have all of the details about the future, an information vacuum inevitably generates fear and distrust. Communicators need to craft unambiguous messages that tell stakeholders what the organization’s leaders know and what is still unknown.
It is also important to communicate what the organization and its leaders are doing to survive the crisis, and involve others in understanding what they can do. Some organizations may benefit from soliciting regular feedback from stakeholders to determine how they perceive the organization’s actions. Others will need to stimulate trust-building by making visible changes in leadership, company practices, policies and messages.
To maintain a sense of reliability, organizational leaders will have to follow through on commitments to customers, partners and employees. Senior leaders will need to be careful to maintain perceptions of competence. Blunders can be disastrous, as when Rick Wagoner, the CEO of General Motors, flew to Washington, D.C. on his personal corporate jet to ask for a taxpayer bailout. The day after this trust crash, GM stock was selling at Depression-era prices.
In today’s economy, the stakes are high. Leaders and professional communicators in all industries will have to be proactive in order not to fall victim to the ever-growing crisis of trust.
Authors Pamela Shockley-Zalabak, Sherwyn Morreale and Michael Z. Hackman began their efforts to understand trust in a 2000 research project sponsored by a grant from IABC. In the middle of writing their new book, tentatively titled Building the High-Trust Organization, the global financial crisis of 2008 produced a sweeping and almost unprecedented “trust crash.”
Pamela Shockley-Zalabak is chancellor and professor of communication at the University of Colorado at Colorado Springs and has been an active organizational consultant for over 25 years.
Sherwyn Morreale is director of graduate studies in communication at the University of Colorado at Colorado Springs and worked as the associate director of the National Communication Association from 1997 to 2005.
Michael Z. Hackman is a professor of communication at the University of Colorado at Colorado Springs. He has developed and delivered training, guided organizational development initiatives, and provided executive coaching services for more than 100 organizations around the world. |
