Transparency is overrated: secrets to building corporate trust

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Forget conventional wisdom when it comes to managing corporate reputation. In fact, transparency matters the least in building stakeholder trust (employees, customers, suppliers, investors) and can actually erode trust, according to a fascinating new study by Harvard University’s Michael Pirson and Deepak Malhotra, published in the summer issue of MIT Sloan Management Review. (“Unconventional Insights for Managing Stakeholder Trust.”)

The authors studied four different organizations to find out what matters and to whom. Highlights:

  • Transparency is over-rated. In fact, transparency can diminish trust depending on what is disclosed. Also, it has little relevance in terms of building trust.
  • Integrity is important, but. Stakeholders close to a company (employees and customers) need to feel that the company genuinely cares for their personal well-being. Integrity alone doesn’t cut it if people feel the company is being fair but “callous.”
  • Trust is built on different types of competencies. Employees and investors look for management competency. Customers and suppliers more concerned about technical and quality competency.
  • Shared values is hugely important to all stakeholders: All stakeholders want to associate with organizations with values they identify with.

“We have found that that although value congruence matters most to employees, it is also an important factor for every other stakeholder group we studies. In other words, stakeholders of all types are interested in associated with organizations with whom they can identify — and with whom they perceive a match in values.”

This study has interesting implications for marketers and corporate communications professionals.

  • Trust means different things to different stakeholders.
  • Marketing needs to focus more on two key trust-building factors: the company’s genuine interest in their customers’ success and well being, and the company’s technical ability to deliver quality products and services.
  • What beliefs? It’s essential to clearly articulate the company’s values and beliefs. (Maybe even help uncover them. ) In my experience few organizations — especially marketers — focus on these beliefs, or even know what they are. But as this study shows they are critically important to building affinity and trust with customers.

New study: what builds customer trust not what companies think

Customers buy based on trust, but there’s a gap in what companies think builds trust vs. what customers say builds trust, according to a new study of 366 financial advisers and 500 customers, published by State Street Global Advisors and Knowledge@Wharton. The study found that many financial advisers overestimate clients’ trust, or erode that trust over time.

“Nearly three quarters of both groups cited trust as the most important characteristic of a financial adviser, but the big discrepancies were in performance and cost-per-service. Just 4% of the advisers thought performance was the most important selection criteria, compared with 10% of the clients; only 5% of the advisers voted for cost, versus 12% for clients,” reports Forbes’ reporter Brett Nelson in an article, “Do Your Customers Trust You?”

Especially interesting was the differences between what customers and companies thinks is important in a business relationship, assumptions I see in sales organizations across industries.

  • Just 26% of advisers surveyed felt that “knowledge” was the most important element of customer service, compared with 47% of clients.
  • 38% of advisers thought “personal factors” took the day, only 14% of clients agreed.

To build trust with customers, constantly share knowledge and advice they can benefit from. Starting in the sales process. And look for sales people who are truly consultative. As this study indicates, the soft “let’s play some golf” personal factors matter far less than most companies think.

TRUST ALERT: Shhh…don't tell;they're actors pretending to be customers

There’s a good reason people don’t trust companies, and I recently witnessed an incident that left me dumbfounded. I was asked to speak at a global company’s annual marketing planning meeting about my views on how marketing is changing, based on my new book. (Which is all about trust, transparency, meaning making and conversational marketing.)

One of the company’s marketing execs told me that some customers would be speaking before me to give the marketing team a sense of what the real customer is all about. Wow, I thought, what a great way to open the conference. Hear the real views of real customers in their own words. Fantastic.

But unknown to most of the marketing staff — these “customers” were actually actors hired by the advertising agency. As I was sitting in the green room with them, the actors let it slip to me what was really going on. (I remarked to one of the actors that she looked familiar, and turns out she’s a recent graduate of the Trinity Rep Theater- Brown University MFA program – and I’m a board member of the organization. So then the cat was out of the bag….)

It was bad enough knowing that actors had been hired to pose as customers, winning the gig based on their performances at a big casting call the ad agency organized. But then two people from the ad agency came in to the green room to “rehearse” the actors, reminding them who they were suppose to be, and what messages they needed to hit on in their little speeches to the marketing group. I especially winced when the ad agency people reminded the actors, “Remember to say you still get a lot of your information from traditional advertising.”

Following the “customer talks,” there was a Q&A, where the marketing people thought they were asking real customers about their views about the product category. I cringed not knowing if the answers were real or rehearsed.

I’m crushed, angry and incredulous.

  • If a company lies to its own employees, what might they be saying to customers?
  • Why was the big Madison Ave. ad agency so nervous about having real customers talk? Why did they have to rehearse these actors? To validate research or a recommendation they had already presented to the client?
  • Why would the head marketer allow this? Because trained actors might be more interesting and articulate than real people? Make the meeting more engaging, perhaps? That would be a pretty lame rationale.
  • Why would you invite me to speak — because I’m all about genuine conversations and honest communications — if you’re setting up your people to have conversations with fake customers. Nothing genuine about that.

I can’t tell you who the company is because I always keep my promise not to reveal confidential information from client engagements. And I promised told the actors I wouldn’t tell. I may have gone too far even writing this cloaked post. But if this gets just one company to think and reverse course before trying to pull a fast one on employees or customers, it will have been worth the risk.

And what a pity that the real voices of real customers are being filtered. Imagine what companies could learn if they actually had meaningful conversations with customers – and not actors.