For instance, I remember being in one circumstance in which the division I managed had to depend on another division to get materials produced and products shipped. This other division didn’t have a good reputation—their inventory system was bad and their execution was poor. Our division knew that customers wouldn’t stay with us if we didn’t serve them well, so we took the easy but expensive way out and did it ourselves. We stockpiled materials in our closets. We created our own distribution and shipping processes to make sure things got out on time. In effect, we created our own redundant systems, and the whole organization was taxed for it in terms of the time and effort we had to put into something that should have been done by somebody else.
On the most micro level, every individual has his or her own brand or reputation, and that reputation affects trust, speed, and cost. It comes across in your résumé and in the comments of your references when you’re applying for a job. It translates into the way people interact with you at work or in social situations. It affects whether someone will go out with you, how seriously your child listens to you, how much influence you have in any situation.
Your personal brand also determines whether or not you are given the benefit of the doubt. In the chapter on the 4 Cores of Credibility, I gave the example of how Warren Buffett’s personal brand was so strong that it gave him the benefit of the doubt from the very outset in the governmental investigation of the AIG Insurance transaction with General Re. Anne Mulcahy, former chairman and CEO of Xerox, had this to say about Buffett at the time: “I respect him and believe his integrity is unmatched. This is a man whose values permeate every decision he makes, every interaction with people and every piece of counsel he shares.” That kind of reputation pays enormous dividends.
The importance of personal brand was brought home clearly to me one time when I needed to evaluate and run numbers on some sensitive financial data involved in a significant business opportunity. The financial officer at the time was clearly capable, but he had earned a reputation of not being able to keep confidences. As a result, I bypassed him completely and went to someone I trusted instead.
Even a child’s reputation is important. If you’re a parent, you probably find it a lot easier (as I do) to extend privileges to a child who has earned the reputation of being responsible than to one who has not. With one child, you may not even think twice about saying, “Sure!”; with another, it might be, “Did you get your homework done? Did you finish your piano practice? What time will you be back? Who can I call to verify this?”
On every level, in every relationship, your brand, your reputation makes a difference. That difference is quantifiable—and it is directly related to trust, speed, and cost.
THE COMPELLING EVIDENCE
As we take a look at some of the compelling evidence in the area of Market Trust, I again urge you to look through the glasses of your own actionably defined “organization,” be it a company, school district, government agency, team or division within a larger organization, or a family. Remember that Market Trust deals with external stakeholders. While those might well include suppliers, distributors, and investors as well as customers, it would probably be simpler at this point for you to look at them all as your “customers.” As you go through the following material, notice the direct connection between reputation and trust.
Fortune magazine’s annual list of the World’s Most Admired Companies is what Fortune calls “the definitive report card on corporate reputations,” drawing an obvious correlation between reputation and esteem.
In research conducted by Korn Ferry, some 3,900 executives, directors, and securities analysts in 29 countries ranked 680 companies in 52 industries with regard to reputation. The companies were measured globally against nine attributes or “areas of leadership” that make up reputation, including social responsibility (Integrity), ability to attract and retain talented people (Intent), innovativeness (Capabilities), and financial soundness and long-term investment value (Results). In 2018, for the eleventh year in a row, Apple was recognized as the World’s Most Admired Company. Amazon was second on the list, with Alphabet (Google), Berkshire Hathaway, and Starbucks rounding out the top five.
Why do these things matter? Because another term for “reputation” is “brand,” and another term for “brand” is “trust with the marketplace.” And trust affects people’s behavior. According to a Golin/Harris poll:
• 39 percent of individuals say they would start or increase their business with a company specifically because of the trust or trustworthiness of that company.
• 53 percent say they would stop, reduce, or switch their business to a competitor because they have concerns about a company’s trust or trustworthiness.
• 83 percent say they are more likely to give a company they trust the benefit of the doubt and listen to their side of the story before making a judgment about corporate behavior.
In addition, the annual Edelman Trust Barometer has highlighted that “trust is more than a bonus; it is a tangible asset that must be created, sustained, and built upon . . . . Just as trust benefits companies, mistrust or lost trust has costs. At least 64 percent of opinion leaders in every country surveyed said they had refused to buy the products or services of a company they did not trust.” Most also criticized the distrusted companies to others (bad word of mouth), refused to do business with them, and refused to invest in them.
[W]e’ve got a business principle that says, “Our assets are our people, our capital and our reputation.” And if any of those are diminished, the last one is the hardest one to regain.
—HANK PAULSON, FORMER CHAIRMAN AND CEO, GOLDMAN SACHS
THE COUNTRY TAX AND THE INDUSTRY TAX
One interesting dimension of today’s global marketplace is that many brands are sometimes being taxed (or receiving dividends) based on people’s perception of and trust in the country of origin of the brand. For example, whether a company is based in China, Russia, India, or the U.S. can often affect people’s perception of whether the company can be trusted to do what is right. A variety of factors can create perceptions of trust for companies headquartered in a given country, including that country’s history, culture, geography, and current governmental policies and leaders. But regardless of the reasons, the country tax or dividend can be very real.
In today’s global market, this tax has frequently hit United States–based brands hard. U.S. brands that receive dividends within the U.S. may be getting taxed heavily in other parts of the world. The Edelman Trust Barometer, which highlights these trust taxes and dividends, notes that in a survey of 33,000 people (including 6,200 opinion leaders) in 28 countries, companies that were headquartered in Mexico, India, Brazil and China were paying a tax while companies that were based in Canada, Switzerland, Sweden and Australia were receiving a dividend.
Similarly, the Edelman Trust Barometer identifies what I refer to as an “industry tax or dividend,” in which the overall industry influences the perception of whether or not a company can be trusted. For exam- ple, in most countries today, the financial services and media industries are generally taxed. In contrast, the technology and education sectors typically receive dividends. For companies operating in industries that are taxed, it’s important to create an individual reputation that outpaces the industry reputation—much like Johnson & Johnson has done in the pharmaceutical industry, an industry that is significantly taxed in the U.S.
THE SPEED OF TRUST IN BUILDING (OR DESTROYING) REPUTATION
Another interesting dimension of the new global marketplace is evident in the Annual Reputation Quotient (RQ) 2018 study conducted by the Harris Poll. This study ranks the 100 most visible companies in America based on their reputation with U.S. consumers. In 2018, number one (for the third straight year) was Amazon. This high-tech, new economy company has built its brand relatively quickly on an extraordinary track record of innovation and invention, and on earning the trust of its customers through living its first Leadership Princ
iple of “customer obsession.”
Most fascinating to me, however, is the fact that number two on the list is Wegmans—which has been around in the so called low-tech grocery store business since 1916. Wegmans is also number two on Fortune’s 100 Best Companies to Work For list, which is a proxy for internal organizational trust, while the RQ list is a proxy for external market trust. If there ever were an example of trust being built—and sustained—from the inside out, Wegmans is it!
Going back to the RQ study, guess who was at the very bottom of the list? Weinstein Company (whose namesake—Harvey Weinstein—was seriously tarnished by horrific harassment scandals) and Takata (who had a massive airbag scandal and recall). Obviously, even though it’s possible to build trust fast (as Amazon, Tesla, eBay and Netflix have shown), it’s much easier to destroy it even faster. Remember what Warren Buffett said: “It takes twenty years to build a reputation and five minutes to ruin it.” As I’ve pointed out, in our new big tech economy, it doesn’t necessarily take 20 years to build a reputation. But Buffett’s point remains the same—you can destroy a reputation almost instantaneously.
Smart companies will amass trust assets that can be called upon to protect the brand in tough times. Without these deposits in its Trust Bank, a single breach of trust can devastate a company because you have no track record of trust enhancing behavior to call upon.
—ELLEN RYAN MARDIKS, VICE CHAIR, GOLIN
HOW TO BUILD YOUR BRAND
So how do you build your brand? And how do you avoid destroying it? By now, I’m sure you won’t be surprised by my answer: “The 4 Cores and the 13 Behaviors,” applied at the organizational and marketplace levels.
But you may be surprised by this: I strongly contend that if your organization (however you define it) strengthens its 4 Cores and demonstrates the 13 Behaviors with its stakeholders, you will be able to measurably increase the value of your organization’s brand. These cores and behaviors are the keys to building credibility and trust in the marketplace.
Put on your trust glasses again, and this time, look through the lens of your own “organization” in terms of Market Trust. Consider the perspective of your “customers.” Ask yourself:
• Does my brand have Integrity? Do we have a reputation for honesty? Do we have values people believe in and can trust? Do we have a reputation in the market for courageously addressing tough issues quickly and for honestly admitting and repairing mistakes?
• Does my brand demonstrate good Intent? Are we perceived as simply “out to make a profit,” or do people feel that we genuinely care, that we want to help others win?
• Does my brand demonstrate Capabilities? Do people associate our name with quality, excellence, continuous improvement, and the ability to change to maintain relevance in a global economy age? Are we recognized as having the ability to accomplish our objectives in ways that build trust?
• Is my brand associated with Results? Do people feel we deliver what we promise? Is a good track record associated with our name? Are people willing to answer “yes!” to what Bain consultant Frederick Reichheld calls the ultimate question: Would you recommend this business to a friend?
If you don’t have the brand or reputation you desire, the 4 Cores provide a great diagnostic tool to help you pinpoint the reason why and the area where investment will bring the greatest returns. Once you determine whether the problem is one of character (Integrity or Intent) or competence (Capabilities or Results), you can zero in on the area where improvement will have the greatest positive effect.
A brand for a company is like a reputation for a person. You earn reputation by trying to do hard things well.
—JEFF BEZOS, FOUNDER AND CEO, AMAZON.COM
You can maximize your efforts even further by analyzing your organization’s performance with regard to the 13 Behaviors. Just as applying these behaviors builds trust at the relationship level, applying them in interactions with external stakeholders—customers, suppliers, distributors, investors, communities—builds trust at the marketplace level.
Consider Domino’s Pizza. A pioneer in the make-to-order pizza industry, Domino’s had developed a good reputation for speed, but a poor reputation for pizza. In late 2008, their stock price hit an all-time low of $2.61, and they knew it was time to Confront Reality.
In an effort to Get Better, they put together focus groups and sought outside input. They were told their crust tasted like cardboard and their pizza was no good. So they completely redesigned their product and their process. Then CEO Patrick Doyle went on national television to Talk Straight. He acknowledged that the company had been offering a substandard product and was transparent with the feedback they’d received. He shared what Domino’s had done to fix the problem, and he asked the public to give them a second chance. Observers were stunned by such an open and authentic ad campaign, but most responded overwhelmingly to the honesty, and same-store sales soared a remarkable 14.3% during the following quarter.
As people soon came to recognize, Domino’s transparency wasn’t simply a gimmick or marketing campaign aimed at a short-term gain. Their ongoing commitment to Deliver Results flowed out of a clear intent to better serve their customers and dedication to improving their capabilities—which created a long-lasting trust dividend. A year after the campaign began, Domino’s stock price had increased to almost $30 per share and has continued to climb, reaching over $293 per share by June of 2018.
Domino’s is a great example of the power of a company applying a number of the 13 Behaviors simultaneously. But consider the results of applying even one.
• • •
Extend Trust. It requires a great deal of trust for companies to share their product inventory levels with their suppliers—and yet that is exactly what many companies do, using a software solution called Vendor Managed Inventory. VMI simplifies the demand/supply system on both ends. Instead of waiting for companies to notice their inventory of suppliers’ products needs to be replenished, the suppliers monitor inventory levels and automatically ship and restock so companies don’t run out.
What’s required for VMI to work? While the software is important, it only really works if the parties trust each other. The company trusts that the supplier will keep the inventory levels where they need to be and that the supplier will not take advantage of the company. The supplier trusts that the company is providing accurate information. This extension of trust creates significant benefits for both in terms of money, time, and customer satisfaction.
• • •
Deliver Results. St. Jude Children’s Research Hospital has contributed enormously to the war against childhood cancers. In the year it opened in 1962, less than 20% of children survived the deadly diagnosis of cancer. That number has increased to over 80% today. While this kind of success has emerged from the contributions of many, St. Jude has inarguably been among the top few leading contributors in achieving those results.
What motivates them to produce these tremendous results? Founder Danny Thomas put it this way: “No child should die in the dawn of life.” In addition to welcoming children with cancer, the hospital also welcomes their families, who are not charged for travel, treatment, housing, or food. St. Jude believes that “all [families] should worry about is helping their child live.”
St. Jude’s success is personal to me. I have a good friend whose child was diagnosed with cancer and taken there for treatment. There was no charge, and today, more than 15 years later, their child remains cancer-free. Consistently delivering those kinds of results is why St. Jude is routinely rated among the top and most trusted charitable organizations and brands in the world.
The experience of organizations such as Domino’s and St. Jude and of a partnering solution such as VMI provide powerful examples of the value of the 13 Behaviors in increasing Market Trust and receiving the abundant dividends that flow from it.
Without customers’ trust, the rest doesn’t matter.
—RAM CHARAN, BUSINESS AUTHOR<
br />
WALKING TAX OR WALKING DIVIDEND?
As I’ve said, it’s at this Fourth Wave—Marketplace Trust—that most people already see the connection between trust and reputation to bottom-line economics. That’s because most understand the value of a brand.
What most don’t see as clearly, however, is that the same principle that produces dividends to a trusted company at the level of Market Trust also operates at the Self Trust, Relationship Trust, and Organizational Trust levels.
So in addition to whatever trust issues we might address with regard to our companies, schools, not-for-profits, families, or other organizations we represent, we need to ask, first and foremost, what is my reputation? What is my brand? Am I a walking tax or a walking dividend?
Employees with integrity are the ones who build a company’s reputation.
—ROBERTO GOIZUETA, FORMER CEO, COCA-COLA
Keep in mind: Whatever trust we are able to create in our organizations and in the marketplace is a result of the credibility we first create in ourselves.
THE FIFTH WAVE—SOCIETAL TRUST
THE PRINCIPLE OF CONTRIBUTION
Executives tempted to take shortcuts should remember the dictum of Confucius that good government needs weapons, food and trust. If the ruler cannot hold onto all three, he should give up weapons first and food next. Trust should be guarded to the end, because “without trust, we cannot stand.”
—FINANCIAL TIMES EDITORIAL
In late April of 1992, the Rodney King trial sparked riots that resulted in the burning and looting of entire city blocks in Los Angeles, California. The devastation was immense; the loss to businesses was in the billions.
The SPEED of Trust: The One Thing that Changes Everything Page 33