Trust in business is at an all-time low and cynicism is at an all-time high. At every turn there is an apparent breach of trust by business which confirms the worst in the minds of the general public. This is true around the world, and particularly so in Australia.
The breaches of trust vary, data leaks through poor security, misuse of personal information, underpayment of staff, overcharging of customers and the list goes on. At the core, though, the individual incidents all lead the public to challenge the social license of organisations they once respected. This is despite the vast majority of people, working in the vast majority of businesses doing the right thing the vast majority of the time.
The largest players in the economy need to take the lead to reverse the deterioration in public relations. This state of affairs isn’t good for the economy or society. Businesses need to understand the root causes and fix them, in turn creating a reason for the public to trust again.
Although most businesses are doing many great things, simply creating more advertising to make people aware of the positive aspects of their operations isn’t enough. Cynical audiences are largely closed to positive messages.
To properly establish a new relationship between the general public and business, three things are needed: transparency, simplification and mutual understanding.
I’ve written before about the important role of transparency in business (see Behind the scenes). Transparency is important in everything from financial results to operational decisions that are made and, most importantly, the data that is used. There is a sense in the general public and media that business decision making is opaque. Hence public inquiries of various forms are launched, which always seem to uncover egregious decision making which further reinforces the breakdown of social licenses.
However, simply creating transparency in today’s business environment isn’t going to be enough. There have been thousands of words written about why good people make bad, and sometimes even unethical, business decisions. What is lost in all this, though, is that it is more than simply the profit motive, it is also the complexity of the business environment that we’ve created.
It takes every executive many months or even years to understand the sophisticated business context in which they work. No wonder then that simply putting transparent “wrappers” around complex organisations is not enough, we have to simplify the workings of the business itself, so outsiders can comprehend what they are seeing.
In today’s organisation, there are an almost infinite number of ways that things can go wrong. One “bad apple” is now multiplied in impact many times over thanks to the exponential effect of the technology that powers business today. Simplification combined with transparency makes it easier for managers and the broader leadership team to spot these issues before the harm becomes systemic.
The transparent organisation is willing to expose the data that highlights issues as quickly as they are willing to admit to the issues themselves. Such openness encourages customers and other stakeholders to engage directly in the good governance of business, making them take a sense of personal ownership. This can come in terms of transparent pricing, balancing of risk and fair payment.
This greater understanding needs to be two-way. As much as organisations hope the public will invest in understanding their business practices, they must be willing to invest in understanding the community. In creating this new mutual relationship, open data is the friend of all parties. It enables many eyes to navigate the organisation, encourages alternative commercial arrangements and makes sure relationships are based on mutual and ongoing value rather than either party relying on the inertia of the other.
A surprising trend associated with openness and mutual understanding is the link to social impact. Some businesses in fields as diverse as insurance, travel and retail have made a big deal of social causes with a direct link to their workforce and other stakeholders. Such a strategy directly associates the business with a purpose and helps strengthen their social license.
Taking a position on social matters demonstrates an understanding of what is important to both the staff and customers in the community that they work with. Doing so isn’t without controversy, but in this the transparency of decision making on the corporate position is particularly important and self-reinforcing.
Similarly, donating a percentage of earnings and, even better, giving customers a choice on where it goes, makes good business sense. Simply understanding how a donation can be made goes some of the way to explaining the financial structure of the business.
These trends help explain why simpler business models, such as single product providers in energy and telecommunications and online providers of insurance are becoming more popular. Some of these providers have combined their simplicity with social causes demonstrating a particular affinity with the communities they service.
There is no reason, however, why the wider business community can’t achieve the same goals. Opening-up organisations through open data, culture change and genuine community engagement, combined with transforming for simplicity can only make business more effective, sustainable and help reverse the cynicism of business that permeates our society today.