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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