Unconventional Insights for Managing Stakeholder Trust
Many companies invest considerable time and energy trying to build trust with customers, employees, suppliers and investors. Why are some of those efforts doomed to fail?
Initiatives to build and maintain trust with various stakeholders — customers, employees, suppliers and investors — have risen to the top of the executive agenda at many organizations. We continually hear about “transparency” initiatives, open-door policies and 360-degree evaluations, customer-retention programs, voluntary product recalls, initiatives for corporate social responsibility, rethinking of “customers as partners” and other trust-building moves. But the problem is that most companies don’t really understand how to manage stakeholder trust effectively. In fact, our research suggests that many of the trust-building initiatives and approaches that organizations invest in may be of questionable value. Others might actually destroy trust.
One of the reasons managing stakeholder trust is difficult is because there are many different stakeholder groups, each with its own particular needs and perspective. That is, trust is multidimensional, and it’s not obvious which dimension executives need to focus on when dealing with any particular constituency. Consider the following: An employee might trust his supervisor because he believes that she expresses genuine concern for his well-being, or because she is a very competent manager, or for both reasons. In turn, the supervisor might trust the employee because she perceives that his values are congruent with hers, or because she can rely on him to get work done efficiently, or for both reasons. In a different context, the investment community might trust a company because top executives are perceived as having integrity, or because they possess superior management skills, or because they have taken steps to increase transparency, or because of some other reason entirely. And so on.
So which dimension of trust should companies target? Specifically, what’s more important for building trust: a reputation for kind-hearted benevolence or for fair-minded integrity? Which is more critical: managerial proficiency or technical competence? When does value congruence matter? And are initiatives aimed at increasing transparency worth the effort?
To investigate such issues, we conducted a study of stakeholder trust in four different organizations. (See “About the Research.”) The research analyzed the relevance (if any) of various factors (benevolence, integrity, managerial competence, technical competence, transparency and value congruence) to different stakeholders (customers, suppliers, employees and investors). In essence, we asked what matters — and to whom. Some of the results were unsurprising. Customers, for instance, stated that a company’s level of technical competence strongly influences the degree to which they trust the company.
References (35)
1. J. Weber, “Commentary: Give ‘Fair Disclosure’ Time to Work,” Business Week, Jan. 8, 2001.
2. See, for example, A. Brandenburger and B. Polak, “When Managers Cover Their Posteriors: Making the Decisions the Market Wants to See,” RAND Journal of Economics 27, no. 3 (autumn 1996): 523–541.
