Much has been written about no one trusting Julia Gillard any more. Issues like the carbon tax, asylum seekers and deals with Malaysia, gay marriage, poker machines – and more lately, the workings of her office during the Australia Day debacle – have generated so many column inches and talkback conversations about ineptly executed policies, lack of fortitude and credibility.
Trust in Gillard has plummeted but then, she’s not Robinson Crusoe. In a world of uncertainty, the latest Edelman Trust Barometer, a global index, shows that most people don’t trust governments any more, and business isn’t far behind. The financial meltdown has precipitated a crisis in trust and that will have complex ramifications for business and management. The machinery of business, economies, relationships and civil society cannot work without trust. Buying equity, making loans, lines of credit, contracts and the division of labour in the workplace would not exist without it. Trust is not a soft and fuzzy concept. When it’s not there, the motor stops.
The collapse in trust is not surprising with the financial crisis, failed rescue plans and the inability of European leaders to come up with solutions. There is now more economic and financial insecurity in the face of escalating CEO pay and economists are warning that the 'freakouts' about debt loads are resulting in budget cuts that are likely to make things worse. Also, we are witnessing social unrest around the world, from the Occupy movement and Arab Spring to the riots in London. From arsonists in Germany torching the expensive cars of 'fat cats' to the protests by Israel’s middle class against high housing prices. In a report released last month, the World Economic Forum said we are now seeing the "seeds of dystopia’’, the opposite of utopia, where life is devoid of hope.
The 2012 Edelman Trust Barometer reveals an unprecedented nine-point decline in trust in government right around the world. "Political brinkmanship on the debt ceiling in the United States, dysfunction on bailouts in the European Union, corruption in Brazil and India and a natural disaster in Japan drove the downward trend,’’ writes Edelman CEO Richard Edelman.
While governments now trail business in trustworthiness, trust in business has dropped in developed economies. It’s a crisis reflected in growing civil unrest. Both business and government are failing to meet expectations. Ironically, nearly half the global respondents want more regulation of business. Banks and financial services remain the least trusted and technology companies the most trusted. Business has been doing well operationally bringing innovative products to market but failing to meet society’s expectations. While 64 per cent said that treating employees well was a good way of building trust in a company, only 27 per cent felt business was doing that. While trust in government leaders fell dramatically, CEO credibility fell to its lowest level in three years.
The survey suggests business and government have let their stakeholders down.
Clearly in these times of uncertainty, much work needs to be done to restore trust in our institutions. Significantly, the trust barometer shows that trust in NGOs and social media has soared. Trust in social media rose by an astonishing 75 per cent. Trust in media also increased for the first time, thanks partly to the fragmentation which has led to an explosion of different news sources, as it reports on the turmoil and corporate crises, and uses social networks to extend the life of stories. Trust in online multiple news sources, made up of search engines and news/RSS feeds, surged 18 per cent.
The research also shows that people are turning to their peers as trusted sources and that, according to Edelman, is an opportunity for managers, particularly in small to medium companies.
"Smart businesses will take advantage of this dispersion of authority. They will talk to their employees first and empower them to drive the conversation among their peers about the company and its role in society.”
"Listening to customer needs, treating employees well, placing customers ahead of profits and having ethical business practices are all considered more important than delivering consistent financial returns.”
All this was picked up last week at Davos by founder and chairman of the World Economic Forum Klaus Schwab, when he told Associated Press leaders had to win back trust. "I'm a deep believer in free markets but free markets have to serve society," he said, lamenting excesses and "lack of inclusiveness in the capitalist system".
For the first time ever, Davos delegates unsettled by the unrest around the world focused on income inequality as the greatest threat to the global economy. It is not known whether the protesters camped in igloos near the invitation-only gathering of VIPs in the Swiss resort town would have picked that up.
After decades of making companies more efficient and profitable, there’s growing pressure on the pendulum to swing the other way. As political leaders have discovered, trust is like smoke. It never returns once it’s gone.