Trust Issues

At a time when public confidence in organizations is at an all-time low, the challenges facing a trustworthy organization in a multistakeholder world are complex. There is hope however.

By Michael J. O’Brien • Illustrations by Tim Bower

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Question:

What do data and trust have in common?

Essentially, two things: Both can be difficult to retrieve after they’ve been lost. And the public places a lot of both in a company like Google.

Earlier this year, the tech giant—a mainstay on annual most-trustworthy company lists but conspicuously absent from any most-diverse-employer lists—faced an issue that revolved around the two topics: Activists demanded that Google release its workforce demographics to the public.

“Technology is supposed to be about inclusion, but sadly, patterns of exclusion remain the order of the day,” wrote Rev. Jesse Jackson in a widely publicized letter to Google, Apple and other Silicon Valley powerhouses released during the annual shareholders’ meeting season this past spring.

Google’s employment records would paint an unflattering portrait of the otherwise progressive company, as well as potentially unleash some serious financial repercussions that would likely unsettle its various stakeholders.

In terms of data and trust, could Google release one without losing the other?

On May 28, 2014, Google’s senior vice president of people operations, Laszlo Bock, posted workforce demographics on the company’s public blog, which showed that 70 percent of Google’s employees are men; 61 percent of its total workforce is white; and only 35 percent are Asian, Hispanic or African American.

When asked in a PBS NewsHour interview why Google hadn’t publicized the numbers until then, Bock said, “Quite frankly, because we knew we would not look good. And we were worried about litigation.”

Google’s senior leadership came to realize, he added, that “the right thing to do would be to share this information, because we have an issue. Our industry has an issue. And the only way to have an honest conversation about this is to start by actually sharing the facts.”

Just like everything else the company does, its turn toward transparency sent ripples far beyond the company’s Mountain View, California, campus, says Prasad Setty WG99, Google’s vice president of people analytics and compensation. Setty oversees a team that enables all people decisions at Google to be data-driven and generates insights on keeping Googlers happy and productive, a position he’s held since January 2011.TrustworthyQuote1

“Since we have made that information transparent,” Setty says, “at least 15 peer companies in the tech industry have said, ‘Oh, by the way, here are our numbers,’ and acknowledged the same issues.

“And now we are starting an industrywide dialogue about what should we do collectively, because no one company can solve this problem on its own,” he continues, noting that Google intended to release the data even before the activists demanded it. “Here’s something we care about deeply and are committed to fixing this in the future for however long it takes.”

Although, data suggest that such efforts might take awhile—in 2012, just 12 percent of computer science undergraduate degrees at major research universities went to women; in 1985, that number was 37 percent, according to the National Center for Women & Information Technology. For its part, Google has been pouring money and resources into literally growing the next crop of diverse tech workers—for instance, through groundlevel programs such as female-focused middle-school science programs.

“This is going to take a long time to fix,” Setty says, “but we are determined.”

Google’s move to transparency and its subsequent long-range plans to address its diversity problem are emblematic of how an organization can garner trust in an increasingly cynical world, says Michael Useem, Wharton’s William and Jacalyn Egan Professor of Management and director of the Center for Leadership and Change Management.

“Trust is one of the most uniquely and completely earned capacities,” he says. “You can want to be trusted, you can say, ‘Trust me,’ but it’s like telling the equity market to give you a high valuation of your stock. It doesn’t just happen; you have to earn it.”

So whom, or what, can you trust these days?

 

Trust and Crisis

“Public surveys,” Useem says, “reveal that majorities report some or little confidence in many American institutions, including big business, though public confidence is far stronger in the military and small business.”

Indeed, data from a 2014 Edelman report finds that only 43 percent of people believe what CEOs say, says Robert Hurley WG83, a management professor and executive director for the Consortium of Trustworthy Organizations at Fordham University.

Such a grim outlook should send a clear message to those in power, Useem says. Leaders of major institutions—religious groups, universities, community organizations, foundations, hospitals and business firms—should all strive to restore public confidence in their missions and operations.

TrustworthyQuote2Hurley agrees. While skepticism seems to be the order of the day in mass culture, he says, a long-term loss of trust can have deeply corrosive effects.

“If you think about it, countries that lose the trust of their citizens have revolutions,” Hurley says.

What’s more, executive decision-making has become ever more complicated as organizational stakeholders proliferate in the 21st century—in large part to the new focus on a triple bottom line of “people, profit and planet.”

“Look at all the stakeholders. Look at regulators. Look at customers, investors, employees,” Hurley says. “These circles don’t have necessarily completely overlapping interests. In fact, in some ways, their interests may be in conflict.

“So how do I as a leader encapsulate these interests, manage these trade-offs and move forward while maintaining the trust of this disparate group of stakeholders?”

Hurley has written extensively on the topic of trust, including the 2011 book The Decision to Trust: How Leaders Create High-Trust Organizations, with the aim of “demystifying trust,” as he puts it.

Soon after the book’s warm reception, he created Fordham’s consortium, whose mission is to expand the number of organizations that can legitimately be called trustworthy by helping them demonstrate the values, practices and processes that warrant stakeholder trust.

“Our mission,” he says, “is to help companies, one at a time, to understand what trust is and how to embed that pretty deeply into the architecture of their companies. If we do that, then over time they send lots of signals of trustworthiness.”

The consortium has also developed tools to measure trustworthiness and has used them with a variety of companies and executive programs for large global banks.

“We’re very active in going beyond theory to try and see if we can make a difference,” he says.

 

How to Develop Trusting Employees

An essential part of building a trustworthy organization is having trustworthy employees of course—as well as trusting employees. Learn firsthand how one organization has done so in our interview with Victoria B. Mars WG84, chairman and longtime ombudsman at Mars Inc., one of the largest private U.S. companies. Read “Hungry for a Sweeter Workplace?

 

 

Trust and Risk

Providing such guidance on the topic of trust has proven vital because whenever the public’s faith is shaken in a a publicly traded company—or in an entire country’s political or economic environment—it can usher in some very unwelcome risk possibilities, says investment professional Anand Iyer WG83, adjunct professor of finance and investments at Sacred Heart University, former managing director at Morgan Stanley, and a Wharton classmate of Hurley’s and an active member of the consortium.

Risk, Iyer says, shows up in two market measures: credit spreads and volatility, which tend to show whether a company or a country will be negatively impacted by a question of trust or a scandal.

“[A widening credit spread] means that, for a company or country in question, investors are demanding a higher spread on its debt because they either lack trust in its numbers or in its strategy,” Iyer says.

Higher volatility, meanwhile, shows up in the stock price of a company and, in the case of a country, in its currency. Iyer cites an ongoing saga playing out in the headlines to illustrate: the currency and credit spread volatility associated with the Russian ruble and debt. As a corporate example, he offers, ”I don’t know whether Herbalife is doing everything by the book or not,” he says. “But the fact that it is being questioned by one set of activist forces against another, it has made the stock a lot more volatile. I’m not saying they are doing something right or wrong; this is just how it reflects on the valuation of the company.”

At its worst, the risk of untrustworthiness is existential for a company. While malfeasance can occur in any part of an organization, it only takes a few of the right people making the wrong choices collectively to bring down a company of thousands, Iyer says.

“If you look at almost all of the trust violations that have occurred,” he says, pointing to Enron and Tyco as classic imbroglios, “it takes three distinct individuals: the CEO, the CFO, and the head of sales or production. When you have that club of three acting in [collusion] in some form of misbehavior, then you are asking for trouble.”

The inverse is then true. To ensure that an organization is trustworthy and flourishing, boards must insist that the leaders within the organization align their interest with its stakeholders.

“There’s a saying in German: ‘The fish stinks from the head first,’” says Konstantin Mettenheimer WG83, chairman for all Edmond de Rothschild businesses in Germany and Austria and former chairman of Freshfields, stressing the importance of the tone at the top.

“I have learned that if the senior guys do as they say and really lead by the right example, a lot of people follow and happily do so. Such is mankind that we do like to follow the leader and what the leader does,” he adds.

Pointing to his former employer, Freshfields, Mettenheimer recalls partners who considered themselves obliged to those contemporaneous with them but also to those partners before and after them. A person’s word was as good as a signed contract. At the time of one merger, he remembers, a cutoff date was agreed for billing to determine whether money would go to the legacy firms/partnerships or to the new entity. When one bill was, by oversight, sent after the cutoff date but was meant for before the cutoff date, the predecessor firm’s senior partner insisted that the money would go the new firm.

Mettenheimer’s perspective is filtered not only through the lens of his time at Freshfields, but also through his service in both the German army and the U.S. National Guard.

“In the Army,” he says, “the question of trust is a matter of life or death, so they take it damn serious. And if you don’t communicate well, people will get killed.”

 

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Trust and Values

Ultimately, the amount of trust an organization can garner from its various stakeholders is a function of what’s expected of them, says Maurice Schweitzer, Wharton’s Cecilia Yen Koo Professor of Operations and Information Management, whose research focuses on emotions, ethical decision-making and negotiation processes.

While a formal contract—such as an employment agreement or marriage vows—clearly spells out the terms of any agreement, “it doesn’t cover everything,” he says. “It can’t possibly cover everything.”

And that is where psychological contracts—or agreements that aren’t written down but nonetheless point to “what we think we’re expecting” from an interaction with an organization—come into play, he says.

“Google doesn’t owe us a diverse workplace,” Schweitzer says. “I’m not searching on Google [because of] the diversity of their workforce. … And Google doesn’t have to disclose the diversity of their workforce. That’s not part of the formal contract, but it might be part of the psychological contract.”

Customers want to feel good about the companies they engage with. If customers expect a commitment to diversity, part of Google’s psychological contract with them will be to be forthcoming about that issue, Schweitzer explains. To become more trustworthy, senior leaders need to “not just deliver what’s contractually required, but to take someone else’s perspective and understand and anticipate what else people are looking to get out of that experience,” he says.

Schweitzer says he believes Google may indeed fulfill its promise to diversify its workforce one day. Perhaps more importantly, he says, the company’s transparency is a good first step on the road toward regaining a skeptical public’s trust.

“You want a company that has diversity,” he says. “You want a lot of things, but nobody’s perfect. What you want is [an organization that] is learning from their mistakes and getting better.”

 

—Michael J. O’Brien is a writer living in Keswick Village, Pa. He holds a degree in economics from Boston College.

 

The Six Qualities of Trustworthiness

The tone coming down from the top of an organization isn’t always what creates a trustworthy organization, says Robert Hurley WG83, executive director of Fordham University’s Consortium for Trustworthy Organizations.

“It’s behavior in the middle and organizational systems that enable and reinforce an active and conscious search for doing what is right for all legitimate stakeholders,” he explains.

A company must have a critical mass of leaders who take maintaining the company’s reputation personally and have the knowledge and skills to engineer six aspects of trustworthiness into the DNA of the tribes they lead. Those qualities are:

  • Communication
  • Benevolence
  • Alignment of Interests
  • Similarities of Values
  • Integrity
  • Capability to Deliver

“All companies are made up of people, and people are corruptible,” Hurley says. “Every major religion has suggested as much since the beginning of time. We drift based on desires or pressures—greed, fear, profit, status—that go against our stated values.”

For people and companies to maintain integrity, he says, “the only way” is to be honest about the difference between what one says and what one does.

“People and companies need processes of discernment and learning that force us to catch and correct drift,” Hurley says. “Great leaders do that for themselves and they do it for their organizations using various tools.”

—Michael J. O’Brien

 

 

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