Archive for category: Environmental

Trust in the age of transparency

A phrase coined by many marketeers is, “that’s how we get you” is the result of anyone falling for a businesses blandishments. Free overnight stay if you’ll listen to a time-share pitch? Hang on to your wallet. Loyalty rewards? What’s the catch? Bread with a meal, at no extra charge? That’s how they get you, and how my colleagues say, “it’s smokes and mirrors.”

If you’re running a business, this is what you contend with “the rampant assumption that your primary objective is to part fools with their money.”

A recent spate in books advising companies on how to gain people’s trust would indicate that the suspicion has only worsened. Is that business’s fault? Most assume yes. Listen to Don Peppers and Martha Rogers in, “Extreme Trust: Honesty as a Competitive Advantage“, they write: “Untrustable business models thrive in our economic system today largely because being unstrustable can be highly profitable – in the short term anyway – and many businesses are managed almost entirely for the short-term results.”

Rohit Bhargava, in Likeonomics, tell us: “The first and most basic reason for distrust is because there are so many companies and people who to choose to lie to us either by making misleading claims or simply by hiding the truth.” And these are from the authors who want to help business (as opposed to, say, David Cay Johnston, whose forthcoming book is titled The Fine Print: How Big Companies Use “Plain English” and Other Tricks to Rob You Blind).

The books offer a variety of solutions. Peppers and Rogers say that to overcome customers’ suspicions that you’re a scam artist, you must go to extremes to show you’re on their side. Beyond trustworthiness, you must achieve “trustability.” It’s a more proactive stance that has you not just keeping up your end of the bargain but ensuring that the bargain is the best one from the customers’ point of view – and even saving customers from their own mistakes. Bhargava thinks the key to being more trusted is, as in personal relationships, to be better liked.

Against the chorus of business blamers and fixers, the Yale economist Robert J Shiller strikes a different note. In Finance and the Good Society, he agrees that trust in business has shaken (and cites, as they all do, the EdelmanTrust Barometer as evidence), but Shiller doesn’t think it’s because business has in fact become more devious, rather, he argues that a “great illusion” has taken hold in the public, whereby corporations and wealthy individuals are thought to “have an interest in ‘conquest’ just as states were once thought to have.” Shiller points out how that defies logic. Only companies that serve their customers well remain in business. True enough: There is no management best seller called Bilk to Last. Shiller is probably right that business is not getting less trustworthy. It is not even clear that business is less trusted. (Despite what people tell opinion surveys, their buying behaviour shows them placing more trust in businesses every year.) The real problem might be that, as time goes on, consumers are increasingly being placed in situations where they are forced to trust – and they resent that. One driver of this is the large scale shift from a product-to a service-based economy. If what you’re buying is a chair or wrist watch, quality checking and price finding are straight forward. No particular leap of faith is required. But if you’re hiring a pest-control company to so save your house from termites, or a security service to fend off identity thieves, or a college to educate your children, you have no option but to trust. For much of what we buy today, consumers can’t even tell whether the prices are right.

This is why transparency is so intwined with trust. It’s interesting. Nearly everyone who writes about the latter makes a point of talking about the former, but the logic is not always clear. Certain books tend to equate transparency with “sunshine” and to treat the threat of exposure as something that nefarious companies are subjected to by whistle-blowers and watchdogs. When Peppers and Rogers bring up “the simple fact of transparency,” they define it this way: “From Wikileaks and the Arab Spring to a cable TV repairman asleep on your couch or an airline’s luggage handlers mistreating bags, people will find things out.” The greater the transparency, they are saying, the harder it is for companies to be trusted.

The truth is that transparency is something that a company mostly controls and that mostly reassures its customers. By giving people a window into its workings, a company can show it has a sound process that it’s adhering to. It can avoid asking customers to have faith in a black box. The great the transparency, in other words, the greater the trust.

It seems obvious then: If you’re in business, especially if it’s a service business, take your customers to school on your process. Teach them how you get the job done right and how you measure your performance, and let them see it happening.
Here’s the problem, though: When a company makes its operations transparent, it reveals them not only to its customers but also to its competitors. And since very few companies have cornered the market for raw materials or talent, making process transparent means making business easy to copy. That is why so many businesses stop short of revealing everything customers might like to know. And it’s why the idea like trustability, likeonomics, and face-to-face are needed to keep potential buyers from bolting.
Truth be told, customers won’t really trust you unless you’re transparent. But if you become transparent, your competitive advantage proves transient. Margins plummet, and you’re forced innovate. That’s how they get you!

Julia Kirby is an editor at large for the Harvard Business Review and a coauthor of Standing on the Sun: How the Explosion of Capitalism Abroad Will Change Business Everywhere.