Trust is an asset more powerful than money. Without it, nothing gets done easily or well, which means we all need to be very careful about losing it. Two months ago, after a long and bitter negotiation, Kraft bought the British chocolate manufacturer Cadbury. In the process, Kraft promised not to close a manufacturing site employing 400 people. But once the deal was done, they reneged on their promise. What was the management thinking? Kraft now has its prize, but it has also created a mess for itself. Cadbury employees are dressing in gorilla suits to protest against their untrustworthy management. Britain's Takeover Panel has been convened to see if Kraft broke any of the rules designed to prevent companies from making misleading statements during bid battles. Special hearings have been called in parliament to investigate the deal. The fact that two months after the deal closed CEO Irene Rosenfeld has still not seen fit to visit England has merely stoked local ire.
At hearings in parliament, Rosenfeld sent a message saying she had great respect for the British government but was busy with a board meeting. Instead, she sent her forsaken deputy, Marc Firestone, who said he was sorry the company had disappointed people, sorry that they had created so much uncertainty and sorry that so many people would now be unemployed. Apparently the company reneged on their promise because they found out Cadbury had more production in Poland than Kraft had known about. Why, Firestone was asked, hadn't they just done a Google search? Firestone left his grilling visibly shaken -- but what did he expect? When you mislead and insult people, they rarely thank you. Out of this whole sad fiasco, the only person to emerge well is Warren Buffett, who opposed the deal in the first place.
It's astounding to watch a company pursue such a risky acquisition and then shoot itself in the foot. Depending on whose research you believe, mergers and acquisitions have a failure rate of between 50 and 80 percent. Synergy and integration -- the twin holy grails of M&A -- depend on trust, which is why bruising takeover battles often presage failure. Kraft's wanton destruction of trust now tips their deal toward the worse end of that spectrum.
So how can trust be rebuilt? How do leaders become trustworthy? Here are five ways Kraft can begin to repair the damage:
- Stop making promises you can't keep. That may mean few promises, but that's fine. Kraft must honor the pledges it now makes. Having said that no more jobs will be cut, the company needs to ensure that not so much as a part-time canteen worker has his or her hours reduced.
- Put in personal appearances. Rosenfeld is said to be too frightened to appear in front of her new workforce. This may be gender stereotyping, but she needs to get over it and turn up. Trust is to a large degree personal, and it is not build by hapless intermediaries. YouTube appearances don't cut it.
- Don't assume trust; earn it. If it helps, think of it like money. Kraft is running at a deficit and needs to make up a lot of goodwill. But the way they do this must be sustainable; gesture politics will exacerbate, not cure the problem.
- Slow down. Trust takes time. However urgent your timetable, be prepared to spend large amounts of time on relationships.
- Set the tone. The battle between Kraft and Cadbury has sent a lot of insults flying. The trustworthy leader won't get sucked into animosity but will lead the way in mending bridges.