Why trust matters

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(MoneyWatch) COMMENTARY In the aftermath of the banking crisis, trust is hard to find. Regulators don't trust banking leaders. Leaders don't trust regulators or auditors. Employers don't trust their bosses who, in any event, wonder what half the workforce is up to. Meanwhile, customers don't trust their banks, their financial advisors or the motley array of salesmen who have sold them debt in the form of houses, loans and credit cards.

There is nothing good for business in this state of distrust, which may be one reason why it feels as though the economy is paralyzed. Without trust, all change is defensive and true innovation non-existent.

I've heard people argue that that is all fine: After all, if everyone emerges from the crisis more skeptical and wary, isn't that a good thing? Not really. Trust fundamentally oils the gears of commerce and without it, everyone under-aspires and under-delivers.

This is nowhere better understood than in the U.K. which, notwithstanding the success of the Olympics, has seen its reputation for business integrity all but collapse over the last few months. The Barclays LIBOR scandal, HSBC's and Standard Chartered's money laundering, News Corporation's phone hacking, GlaxoSmithKline's off-label marketing combined with BP's ongoing wrangle over Deepwater Horizon have all combined to give British business a pretty sordid reputation. Rebuilding trust isn't just a matter of a little PR polish; you could say the country's economy depends on it.

In that context, the Chartered Institute of Personnel and Development's research report, "Where has all the trust gone?" is a pertinent and profound read. Unlike much of the bluster that has emerged from the City of London, this is a deeply thoughtful document that goes to imaginative lengths to analyze where trust comes from, why it matters and how to build the long route that leads back to public confidence. It's also unusual, in my experience, in being written by academics, led by Veronica Hope-Hailey, who seem to have a firm grasp of how these issues play out in the real world.

In bold letters on the front page is the core concept: Trust does matter. It is the basis for civil society. It is a necessary condition for employee engagement. It is essential to any individual, group or organization willing to embrace the risk that innovation necessarily requires.

This is why cheating of any kind is so harmful. Whether it is bankers manipulating interest rates, salesmen peddling sub-prime mortgages, drug reps mis-selling medicines, politicians lying or journalists making up quotes, every incursion into public trust reinforces cynicism, validates apathy and justifies inertia. What's most striking of all, in the report, are the case histories demonstrating that, even when management understands the problem and does a great deal to restore trust, they make little headway. When rebuilding trust is so hard, the best thing to do is not lose it in the first place. Read the report. It will change the way you work. I hope...

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  • Margaret Heffernan On Twitter»

    Margaret Heffernan has been CEO of five businesses in the United States and United Kingdom. A speaker and writer, her most recent book Willful Blindness was shortlisted for the Financial Times Best Business Book 2011. Visit her on www.MHeffernan.com.

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