Trust and Reputation: the Virtuous Link
I awoke at home on a sunny (!) morning in London last week to the dulcet tones of Bill Clinton’s erstwhile Labor Secretary, Robert Reich, talking about BP on the BBC:
“To start with, it actually helped that they were British. We listen to the accent and think that they are just more intelligent than us! But their reputation has badly suffered. They have lost a great deal of public trust. After all, this is not the first time that BP has had serious safety and environmental problems in North America.”
As a Brit who loves America, I recognize the piece about Americans going all mushy (you would say ‘gaga,’ yes?) about the old British accent! But this is not to diminish the seriousness of the situation in the Gulf of Mexico and the horrific consequences for the environment, the livelihood of many thousands of people, and the future of the oil industry. The thick clouds of the Gulf disaster will need to carry a very strong silver lining in terms of improved environmental consciousness to mitigate such negative consequences. And no doubt the British accent is now beginning to grate.
The Labor Secretary struck a chord in linking the notions of trust and reputation. I’ve seen both arising in recent discussions with organisations, and it raises a Big Question:
Are trust and reputation the same things? Does one drive the other? And if not, just what is the relationship between the two?
Trust and Reputation
We know that reputations are hard won. They are valuable assets for organisations and individuals. Good will is a major component of corporate balance sheets. And reputations are built for certain characteristics: Helen Mirren for brilliant acting (and a classy British accent!);Tesco for execution; 3M for innovation; Obama for rhetoric, and so forth.
Sometimes those reputations are for being trustworthy, but they are generally for a whole range of characteristics other than trust. We would argue that the role of trust is in the nurturing and sustaining of a strong reputation; this nurturance is essentially a trust-building process.
Observe when reputations suffer and are lost, a painful process caught by Shakespeare in the words of Othello:
“The purest treasure mortal times afford is spotless reputation; that away, men are gilded roam or potted clay.”
As reputations wane, so does trust. As Robert Reich stated above, a loss of public trust in BP comes with their tarnished reputation for safety and environmental protection. The UK has recently seen reduced trust in politicians as their reputation for probity has suffered in the recent expenses scandal. Candidates for the leadership of the UK Labour Party are now saying that the Iraq decision led to an unraveling of trust as the Labour Party’s reputation for principled decision-making suffered.
(We could even go back to the writings of Edmund Burke who, in the early 1770’s, argued that the growing abuse of power in the American colonies by King George and his ministers was leading to a collapse of trust!)
In other words: organisations and individuals earn and retain our trust in their reputations. Without this trust, those reputations fall away. As child is father to the man, trust begets reputation; and the loss of trust drags the latter down with it as well.
A Principled Approach to Trust and Reputation
For me, it is to the Four Trust Principles that we should turn to guide the process for building and sustaining trust in a reputation:
1. Focus first on the customer.
Last winter, I had problems in a cold snap with my car brakes. I booked the car into a local garage and set out on a snowy, icy morning, only to slither to a helpless halt on the first corner. Most other drivers ignored me. Some hooted, others shouted out unintelligible advice, while I sat there immobile.
A large van stopped. A group of young men who spoke no English and an older guy who spoke some all jumped out, took a look, and dove under the car with hammers to free up my frozen brakes. In minutes, the car was fixed.
I looked on incredulous. “We used to see this every winter morning in Poland,” the man said. I asked where they were working and went to have a chat with them later in the day. I found they were builders. I inquired about them; all reports were of outstanding care and attention, so it was easy for me to put them on the tender list recently for some big building work at our house. They won the competition hands down, and we are delighted with the service they are giving us.
Every single encounter we have with them—beginning with the first, when they had no idea we might be possible customers–reinforces our trust and confidence in their reputation for outstanding domestic building work. They sold by doing, demonstrating both reliability and a focus on the customer as a principled part of their behavior.
When working for a large consultancy a few years ago, we hit a critical moment in negotiating the potential terms for a significant deal for a global client. This would involve a very different pricing model for us. Very radically for us, we opened our books to the client (this took quite some persuasion of our leadership team!) and established a shared understanding that led to a mutually beneficial deal.
Our striking transparency strengthened our growing reputation for straight talking, client-centered consulting.
3. Long term perspective.
A colleague of mine has been working for a global organisation for some time. A couple of years ago he was asked to do something that he could have done but not quite to the quality his client was used to. He also knew others who could do the job better than he. So he introduced them in his place. He has since carried out a number of other assignments for the same client.
By taking a long-term perspective, his client trusted even more his hard won reputation for doing, above all, what was in the right interests of the client. By taking what appeared to be a short-term risk, he actually reduced risk by focusing on the longer term.
One conclusion about the recent financial services crisis is that some of the banks became too focused on the interests of a narrow group of stakeholders in their pursuit of profit, losing sight of their previous client-based model of which collaboration with a wide range of stakeholders was a key ingredient. They thereby lost our trust in their espoused reputation for looking after the interests of all their customers, many of whom will suffer for a number of years from Governments’ fiscal adjustments.
This need for intense collaboration – with regulators, customers, suppliers, politicians, environmentalists, shareholders and local people – also defines the trust-building process that BP need to mount now to salvage their reputation. As Peter Firestein elegantly argues, it is aggressive, proactive engagement that is needed after a reputational slip.
“There is a short list of companies who have come out of disasters with stronger reputations than they had before. In all cases, they did so because they were able to identify with those who were angry with them. They actively participated in the aftermath to the disaster.”
Reputation and Trust: The Linkage
Reputation and trust are close relatives–but are not one and the same. Organisations and individuals have reputations for a whole range of characteristics other than trust.
The role of trust lies in the process by which organisations and individuals build and sustain confidence in those reputations. By focusing on the Four Trust Principles of putting the customer first, transparency, a long-term perspective and collaboration, reputation-building becomes a practicable endeavor.
With all good wishes for your reputation enhancing work!
The best distinction I have come across is by Luis M. B. Cabral of New York University and CEPR, in his paper "The Economics of Trust and Reputation: A Primer":
I would also add that you can have trust without a reputation. However a reputation helps to develop trust. Sometimes a reputation is a sufficient condition for trust in a given context, but when higher levels of trust are required it is generally insufficient.
Believe reputation and trust as you state goes hand in hand. However, in today’s world, brand is often a manufactured attempt at reputation in the marketplace. I wonder if some have modified your steps into an “Unprincipled” Approach to Trust and Reputation as follows