Gallup on Banking: Squandering Trust for 32 Years

When a child is untrustworthy, parenting is needed. When an adult is untrustworthy, counseling can help. When a company is untrustworthy, markets exact discipline.

But what if an entire industry has lost trust? What kind of a problem is that? And how can it be solved?

The Banking Industry

A recent Gallup survey makes the banking industry a timely poster child for low trust.  Banking is not the only low-trust industry these days; pharma could give it a good run, for example (and both are more trusted than Congress). But the trust issues raised by the poll are not just industry-specific.

First, the facts. In Rebuilding Trust in Banks, Gallup presents 32 years of survey data. That’s quite a lot of years.

In 1979, 60% of respondents said they had “a great deal” or “quite a lot” of trust in banks. By 2011 that number was down to 23% (actually up from 18% in 2010).

That is a 70% decline from peak (60) to trough (18).  Put another way–the industry squandered 70% of its trust. That’s quite a lot of squander.

The obvious two questions are: How does that happen? And what can be done about it?

How Can an Entire Industry Squander Trust?

I haven’t seen a single answer, partly because there is no One Answer. But I also haven’t seen a good list. So let’s break it down.

1. It’s tempting to blame a general decline in trust across all business. But there are three problems with this view:

a. Trust in business actually seems to be volatile, not steadily dropping;

b. The statistics usually conflate two issues. Saying “trust in business has dropped” fails to distinguish a decline in customers’ propensity to trust from a decline in banks’ trustworthiness;

c. There are notable exceptions. Nurses and pharmacists have topped the “most trusted professions” surveys for years–how do they beat the odds? (Particularly pharmacists–since pharmaceuticals as an industry ranks so low).

2. A decline in the inclination of people to trust. Dr. Eric Uslaner suggests that people’s propensity to trust in government is cyclical (it varies with the economy), but that trust in people has steadily declined since the 1970s.

3. A decline in general trustworthiness of banks. It’s not easy to isolate banking trustworthiness from customers’ propensity to trust–definitions are difficult. Two very different but powerful approaches to corporate trustworthiness measurement can be found in Trust Across America and in Laura Rittenhouse’s Rittenhouse Rankings of corporate candor.

4. An anti-trust ideology of business. We have inculcated a couple of generations of businesspeople with beliefs that drive down both propensity to trust and corporate trustworthiness.

Here are five ideologies in vogue since the 1970s:

a. Economists’ celebration of the virtues of markets–think Milton Friedman;

b. Strategists’ celebration of competition–think Michael Porter;

c. Pop philosophers’ celebration of laissez-faire systems–think Ayn Rand;

d. Financial theorists’ celebration of shareholder value–think Michael Jensen;

e. Government officials who embraced all the above ideologies–think Alan Greenspan.

If you doubt the power of beliefs to change society over a generation, consider this passage from Michael Lewis’s Vanity Fair article describing a German banker who was [recently] completely snookered by lying US investment bankers.  Why was he taken? Lewis writes:

He mists up a bit when he tells stories about the Americans he did business with back then [in the early 80s]: in one story an American investment banker who had inadvertently shut him out of a deal hunts him down and hands him an envelope with 75 grand in it, because he hadn’t meant for the German bank to get stiffed.

“You have to understand,” he says emphatically, “this is where I get my view of Americans.”

In the past few years, he adds, that view has changed.

What does this add up to? It means:

  • Low trust in business is not pre-ordained—we reap what we sow;
  • Low trustworthiness drives low propensity to trust more than the other way around;
  • Beliefs drive behaviors;
  • Leaders’ belief systems exert big influence over trust in business.

What to Do?

If you’re with me on the diagnostic, there’s a simple prescription:

Leaders, Straighten Up and Think Right.

In other words: start with leaders and thoughts.

Here’s what Gallup has to say about how to build trust:

The effort to rebuild trust must begin with bank leadership, then flow through a bank’s employees to customers, the public, lawmakers, and regulators. Every interaction matters. If bank leaders and employees do not demonstrate that they trust their own bank, other stakeholders never will.

Because the process of rebuilding trust with the public starts with the bank, Gallup recommends that bank leaders make rebuilding employees’ trust in banks their No. 1 priority.

Yes, there’s more. Uslaner has a lot to say about economic inequality and education, and it’s very valuable. But you yourself—yes, you, the reader—may not have a lot of direct control over inequality.  You do, however, control your own thoughts, and you probably influence and lead other people.

Start thinking trust-creation. When it comes to trust, thoughts have power.

 

10 replies
  1. John
    John says:

    Amen

    The decline in Trust is not per-ordained in any business. We earn it. Your comments on shared value v. stockholder value (and the others in list) are right on the mark. 

    What is interesting to me is how Americans have built this myth about “trickle down” and “whats good for the company is good for Americans” in spite of the evidence. It does not have to be either or. In fact when corporate governance and stakeholder values are aligned overall value seems to improve.

    Thanks for adding your well reasoned and articulate voice to the conversation.

    Reply
  2. Barbara Kimmel
    Barbara Kimmel says:

    Thanks for writing this great post. So how does the banking industry rebuild trust? This article from Business Insider suggests some good starting points, beginning with this quote:

    The effort to rebuild trust must begin with bank leadership, then flow through a bank’s employees to customers, the public, lawmakers, and regulators. Every interaction matters. If bank leaders and employees do not demonstrate that they trust their own bank, other stakeholders never will.
    http://www.businessinsider.com/americans-confidence-banks-historic-low-gallup2011-8?page=2

    There are other measures that banks can take to restore trust with their various stakeholders. Our research/data at Trust Across America provides some interesting perspective on the industry.

    For example, the major banks (as a group) are weak on corporate governance and accounting controls (no big surprise there), but strong on sustainability,  while at the smaller regional banks we see just the opposite.

    But as we see across all industries, “industry is not destiny” and not all banks are “untrustworthy.”

    Reply
  3. peter vajda
    peter vajda says:

    A terrific post Charlie, and thanks.A couple of thoughts:John writes, “…What is interesting to me is how Americans have built this myth about “trickle down” and “what’s good for the company is good for Americans” in spite of the evidence…”Personally, I would parse this a little bit and ask the question, “Who are those Americans who have bought into the ‘trickle-down’ theory?” My own experience and travels lead me to believe it’s the “haves” more than the “have-not” folks who subscribe to this theory.

    And, I’m just foolish enough to create the nexus between the “haves” and many in the banking industry, and, by the way, the politicians the banking industry supports (e.g.,  the bankers and Wall Street are the greatest supporters of the members the new “super-committee” which is supposed to deal with the debt ceiling issue, dare I say, with transparency, honesty and integrity).And Barbara writes, “…But as we see across all industries, “industry is not destiny” and not all banks are “untrustworthy.”  I suppose it’s a question of “guilt by association.” Hit a lot of home runs, and you’re probably taking steroids, or at least that’s the perception – one of many examples of the dynamic. 

    So, yes, not all banks are untrustworthy but the industry has dug itself into such a deep “untrustworthy” hole, it’ll take a lot of trustworthy do-ing, and be-ing to extricate itself from its self-inflicted wounding.

    Reply
  4. Susan
    Susan says:

    I know a few people who’ve switched from major banks to small ones, and that’s primarily because smaller banks tend to develop relationships with their clients, and their actions seem to be geared more toward actually serving people. Unfortunately, it often seems like they’re the exception to the typical perception of banks these days.

    Reply
  5. Chris Downing
    Chris Downing says:

    Tom Peters is often quoted for saying that you can’t change a company culture – you’re better off closing the company and relaunching a new one.  

    Robert Heller, the prolific business writer –  not the Catch 22 guy – told me that change is all about rewarding the behaviour you want and punishing what you don’t.  Trouble with most large, publically quoted organisations is those who might wish to punish, don’t have the power to do it, and those who reward seem to be to best mates with those being rewarded.  When we’ve already arrived at a situation where I was astonished to hear that three top bankers facing a UK Goverment enquiry hadn’t a single banking qualification between them – so much for the best talent rising to the top.

    Like Airlines – banking seems to have arrived at that point where there’s no perceived benefit to management to build relationships with customers.  I recently had a pointless conversation with my bank about why after 30 years they had added a monthly overdraft change on top of their 19% rate.  The conversation constantly came back to – it’s policy – and – everybody has to pay – even me, said the clerk.  (Duh?!)  A pointless discussion which reminded me that it’s a waste of time trying to teach pigs to sing – I’ll find it frustrating and unfulfilling, and the pigs will just get annoyed.

    Better to stay away from toxic environments – there are more deserving clients out their.

    Reply
  6. Carson
    Carson says:

    Great article. The idea of top down leadership makes a lot of sense. Addtionally, at this time of exec board shakeups, re-hiring as the economy stablizes, the implementation of more effective leadership and principles may be easier. 

    Reply

Trackbacks & Pingbacks

  1. […] a lot of political plus points from the people, which you all know that you need. The general trust in banks is quite low to say the least, for good reasons, and I think you might be risking a deep, global crisis in trust […]

  2. […] Charles Green: "In 1979, 60% of respondents said they had “a great deal” or “quite a lot” of trust in banks. By 2011 that number was down to 23%."  (TrustedAdvisor) […]

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