Quanta Corporate Citizenship Making it safe to trust 22/07/2010
Our news headlines are frequently scattered with stories of clients, investors, consumers and employees being taken for a ride. Individuals who either implicitly or consciously weighed up the opportunity in front of them and decided to place their trust in another person or organisation, only to be disappointed. From illegal schemes of some mega 'investors' to daily business partnerships, people are often misled. And even when we dress it with technical instruments, people are still overly optimistic. McKinsey Quarterly, for instance, has recently published a survey showing that financial analysts over the last 25 years have consistently overestimated potential equity growth-earnings by no less than 100%!
If we see the consequences of these poor judgments on such a regular basis, it’s a wonder we venture out of the house at all, but as Roderick Kramer pointed out in his article in Harvard Business Review, ‘Rethinking Trust’, it is human to trust. Indeed, it is intrinsically what has secured the survival of the human race, but why on an individual and organisational basis do we sometimes get it so wrong?
One reason, as Kramer points out, is that we are pre-disposed to a ‘confirmation bias’, meaning we see what we want to see in others and our decisions are swayed heavily by our expectations and the biases in our heads. It’s why we often comfortably agree to trust someone based on a recommendation.
For CSR, there in lies one of the dangers of kite marking and industry rankings. In a bid to broadcast the moral intent of an organisation, it is tempting to rely on stamps of approval that come from an external body. As individuals lying in wait ready to hand out our trust, this means that we allow our trust to be transitive, transferring it from one body to another. For Kramer, this is one of the foremost reasons we find our trust being compromised, because we don’t find the time to research and investigate for ourselves.
Furthermore, we are not as prudent as we think when it comes to spotting a ‘faker’ or in estimating how well trusted we are. In experiments, for instance, he found that not only were business students only as competent as a coin toss in spotting a faker at a negotiating table, but that both managers and subordinates overestimated how much they were trusted, principally because they made assumptions and underinvested in communicating their trustworthiness to others.
The lesson, as companies try to rebuild trust in business across the globe, is that, as painful as it is, there are no shortcuts in building and maintaining trust. We can gain external approval of our CSR in the same way that a company can receive a ‘buy’ recommendation from a financial analyst, but unless we are taking the time to communicate it openly and transparently to our stakeholders and building it into the core of our business culture, there will be no basis for trust. Seals of approval are little more than pieces of paper if, internally, a company is not culturally committed to delivering on its own promises and standards. At the end of the day, an external accreditation body is only that: an external body. The amount of information they have – often their business model – is built around providing the stamp of approval based on superficial information. Having this level of external reassurance is positive, but real trust is only born when internal commitment is born, and if this fails, CSR becomes a castle of cards waiting for the next corporate scandal.
If we see the consequences of these poor judgments on such a regular basis, it’s a wonder we venture out of the house at all, but as Roderick Kramer pointed out in his article in Harvard Business Review, ‘Rethinking Trust’, it is human to trust. Indeed, it is intrinsically what has secured the survival of the human race, but why on an individual and organisational basis do we sometimes get it so wrong?
One reason, as Kramer points out, is that we are pre-disposed to a ‘confirmation bias’, meaning we see what we want to see in others and our decisions are swayed heavily by our expectations and the biases in our heads. It’s why we often comfortably agree to trust someone based on a recommendation.
For CSR, there in lies one of the dangers of kite marking and industry rankings. In a bid to broadcast the moral intent of an organisation, it is tempting to rely on stamps of approval that come from an external body. As individuals lying in wait ready to hand out our trust, this means that we allow our trust to be transitive, transferring it from one body to another. For Kramer, this is one of the foremost reasons we find our trust being compromised, because we don’t find the time to research and investigate for ourselves.
Furthermore, we are not as prudent as we think when it comes to spotting a ‘faker’ or in estimating how well trusted we are. In experiments, for instance, he found that not only were business students only as competent as a coin toss in spotting a faker at a negotiating table, but that both managers and subordinates overestimated how much they were trusted, principally because they made assumptions and underinvested in communicating their trustworthiness to others.
The lesson, as companies try to rebuild trust in business across the globe, is that, as painful as it is, there are no shortcuts in building and maintaining trust. We can gain external approval of our CSR in the same way that a company can receive a ‘buy’ recommendation from a financial analyst, but unless we are taking the time to communicate it openly and transparently to our stakeholders and building it into the core of our business culture, there will be no basis for trust. Seals of approval are little more than pieces of paper if, internally, a company is not culturally committed to delivering on its own promises and standards. At the end of the day, an external accreditation body is only that: an external body. The amount of information they have – often their business model – is built around providing the stamp of approval based on superficial information. Having this level of external reassurance is positive, but real trust is only born when internal commitment is born, and if this fails, CSR becomes a castle of cards waiting for the next corporate scandal.
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Who do you trust? 22/04/2010
Have you ever heard stories of someone who wouldn’t leave their job even when offered a significantly higher salary? Or people who would switch jobs for much lower packages? Have you ever heard about friends considering leaving the corporate sector to work for charities? Have you ever wonder why?
A purpose in life certainly plays a big role on it, but have you ever considered what ‘purpose in life’ really means? The methodology we developed at Quanta divides it in 3-dimensions: an utilitarian one (‘what makes me happy?’), an ideological one (‘what the world needs?’) and a pragmatic one (‘what can I do about it?’).
A recent research called Trust and Well-being, by professors John Helliwell and Shun Wang, from the University of British Columbia, in Canada, have revealed some very interesting facts about the first dimension. They were able to establish strong statistical links between trust and human well-being.
Accordingly to their findings, individuals living in what they believe to be a trustworthy environment have much higher levels of subjective well-being. For instance, worldwide data shows that living in a society where you believe a stranger will return your wallet if you lose it represents “the same increase in subjective well-being that would be associated with an increase of household income of about two-thirds”. Let me repeat it again: living in a place where you trust strangers represents in terms of your overall well-being the same as almost doubling your whole family income.
If this is not a striking enough fact, this one certainly is: using Canadian data, they found out that “having high trust in co-workers, which we find to be the largest of all the specific directional trust measures, is associated with 7.6% higher life satisfaction. This is followed by trust in neighbours (5%), confidence in police (3%), and a belief that a stranger would return your lost wallet (2.5%)”. In other words, trusting those you work with represents an increment on well-being more than 3 times larger than trusting that your wallet will be returned by a stranger.
That means that working with people you trust could generate, in terms of wellbeing, the same positive impact as an increase of 200% on your whole household income. Now, imagine two companies: one paying an average salary of US$100k per year and another one paying an average salary of $300k per year, both generating exactly the same well-being to their employees. Or, as they put it, “these effects are all very large when measured in terms of the income changes that would produce the same consequences for life satisfaction.”
And how you build trust? In the words of Helliwell and Wang, “trust is built on a base of shared positive experience, and is nurtured by continued connections”. Improvements on education, membership to social groups, personal background, time working for the organisation and how easy it is to meet and interact with peers in a friendly way are all paramount to building the sense of belonging, which is directly correlated and a trigger for trust. Or as they put it “more attention [should] be paid to creating the time and spaces for social connections to flower. Since more and more people are living in large urban areas with mobile and sometimes rootless populations, it is ever more important to design and manage urban areas in ways that foster levels of engagement that support mutual trust and hence well-being”.
We can easily apply their recommendations to the corporate reality, where companies are becoming larger and more multi-cultural, and where employee tenure is reducing drastically, and physical fragmentation hinders daily contacts.
We often hear that CSR is an add-on, a ‘fluffy’ subject, a PR exercise. Except if an organisation is prepared to live with payrolls that are three times larger than their competitors to generate the same level of employee engagement, it is not. And trust is just another jigsaw piece in a very large CSR puzzle. The numbers above show very clearly how simple aspects of social responsibility can completely change the competitive advantage of an organisation.
- Gus
A purpose in life certainly plays a big role on it, but have you ever considered what ‘purpose in life’ really means? The methodology we developed at Quanta divides it in 3-dimensions: an utilitarian one (‘what makes me happy?’), an ideological one (‘what the world needs?’) and a pragmatic one (‘what can I do about it?’).
A recent research called Trust and Well-being, by professors John Helliwell and Shun Wang, from the University of British Columbia, in Canada, have revealed some very interesting facts about the first dimension. They were able to establish strong statistical links between trust and human well-being.
Accordingly to their findings, individuals living in what they believe to be a trustworthy environment have much higher levels of subjective well-being. For instance, worldwide data shows that living in a society where you believe a stranger will return your wallet if you lose it represents “the same increase in subjective well-being that would be associated with an increase of household income of about two-thirds”. Let me repeat it again: living in a place where you trust strangers represents in terms of your overall well-being the same as almost doubling your whole family income.
If this is not a striking enough fact, this one certainly is: using Canadian data, they found out that “having high trust in co-workers, which we find to be the largest of all the specific directional trust measures, is associated with 7.6% higher life satisfaction. This is followed by trust in neighbours (5%), confidence in police (3%), and a belief that a stranger would return your lost wallet (2.5%)”. In other words, trusting those you work with represents an increment on well-being more than 3 times larger than trusting that your wallet will be returned by a stranger.
That means that working with people you trust could generate, in terms of wellbeing, the same positive impact as an increase of 200% on your whole household income. Now, imagine two companies: one paying an average salary of US$100k per year and another one paying an average salary of $300k per year, both generating exactly the same well-being to their employees. Or, as they put it, “these effects are all very large when measured in terms of the income changes that would produce the same consequences for life satisfaction.”
And how you build trust? In the words of Helliwell and Wang, “trust is built on a base of shared positive experience, and is nurtured by continued connections”. Improvements on education, membership to social groups, personal background, time working for the organisation and how easy it is to meet and interact with peers in a friendly way are all paramount to building the sense of belonging, which is directly correlated and a trigger for trust. Or as they put it “more attention [should] be paid to creating the time and spaces for social connections to flower. Since more and more people are living in large urban areas with mobile and sometimes rootless populations, it is ever more important to design and manage urban areas in ways that foster levels of engagement that support mutual trust and hence well-being”.
We can easily apply their recommendations to the corporate reality, where companies are becoming larger and more multi-cultural, and where employee tenure is reducing drastically, and physical fragmentation hinders daily contacts.
We often hear that CSR is an add-on, a ‘fluffy’ subject, a PR exercise. Except if an organisation is prepared to live with payrolls that are three times larger than their competitors to generate the same level of employee engagement, it is not. And trust is just another jigsaw piece in a very large CSR puzzle. The numbers above show very clearly how simple aspects of social responsibility can completely change the competitive advantage of an organisation.
- Gus
