The Great Recession of 2008-9 had profound consequences for business and government alike. Long-established companies such as GM and AIG were forced into bankruptcy. Euro-zone nations were compelled to bail out member states including Greece and Portugal. But the longest lasting effect of the near-catastrophe may well be the erosion of trust in institutions.
Over the past fifteen years, the Edelman Trust Barometer has measured trust levels in 27 nations, both among opinion elites and the general population. Among the important trends we observe are the dispersion of authority, skepticism of information without repetition, and the emergence of a new set of values that build trust.
The most trusted institution in most nations is now the non-governmental organization. This is recognition of the importance of environment and proper treatment of employees. But it also signifies a protest against failure by business and government. The most stunning rise of civil society is in China, where NGOs now rank ahead of government in trust, up from 30 percent in 2006 to 84 percent today.
Business is second in trust, followed by media, then government trailing badly. The collapse of trust in government occurred in the last three years, due to stalemate on policy, corruption, and perceived ineffectiveness. In the U.S., for instance, the gap between business and government trust is 20 points or more—a record chasm. But business should take little comfort; by a three-to-one margin, respondents ask for more government regulation in fast-evolving industries such as energy, financial services, and food.
The re-ordering of authority is best described by a loss of trust in traditional leaders, including heads of government and chief executive officers, who respectively rank ninth and tenth as sources of credible information. In fact, only twenty percent of respondents believe these leaders will tell the truth in a difficult or complex situation. Instead, there is confidence in experts such as academics or engineers, plus a reliance on a friend or similarly minded people.
The information flow has been transformed, with search emerging as the first stop, followed by mainstream media for older respondents and social media for younger ones. The average informed person now has eight daily sources of information, from blogs to television to social networks, and must see a story three to five times before believing it.
The failure of the establishment in the Great Recession has also caused a shift in the trust equation, from value to values. Specifically, respondents now place low importance on excellent financial results, outstanding CEOs, and top ranking within industry sectors. Instead, they trust companies that treat employees well, place customers ahead of profit, and communicate frequently and honestly.
Given this context, it is vital for business to establish a new compact with its stakeholders based on:
- Open advocacy of business interests—Offer a strategy that begins with the context of how a proposed change will improve the lives of customers, as well as the bottom line. Go on tour, engage in debate with critics, and talk with media of all stripes. And foster a culture that encourages employees to become your biggest advocates, speaking out, amplifying the engagement, and creating mass movement.
- Willingness to modify policy after consultation—Seek input from a wide range of stakeholders and partner with NGOs in the drafting of goals, which offer both a business case and a pro-society rationale. Get out and speak with all affected communities to address emotional concerns while creating personal relationships with local leaders. Include employees in these discussions to ensure organizational alignment around goals and values.
- Clear metrics to measure progress on promises—Report frequently on progress against metrics. Acknowledge where delivery is under expectation and have a path to improved performance. Amend your strategy and goals while remaining authentic.
License to operate within a legal framework is obsolete; the new objective is license to lead, to achieve financial returns, and societal benefit.