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Trust in the post-trust era

21 September 2018 |Opinion
Four people stacking hands

Trust in the post-trust era

21 September 2018 |Opinion

Balancing the interests of all stakeholders: cultivating trust in the post-trust era

Marnie Baker’s speech delivered to the AB&F Randstad Leaders Lecture Series in Melbourne on 20 September 2018


How many in the room have had their trust betrayed by a friend, family member or relative? How many have had their trust betrayed by a corporation? Keep your hands up if your experience has caused you to change your opinion of that corporation or you’ve taken your business elsewhere?

As you’d expect, the severity of the nature of the breach and in turn the response from the offender, will usually inform and influence your reactions – some which could have a lasting impact, particularly if the breach is ongoing. And underneath it all, we’re all human. We expect people will deliver on their promises and show us mutual respect and empathy. Sadly, this hasn’t been the norm in many, many cases.

For years, banks were considered among the most trusted institutions, but the problem is trust can have many faces. The specific trust placed in banks over time has generally referred to people trusting banks to keep their money safe and protect their privacy. The missing piece, which places the industry at the cross roads today, is people trusting banks to do the right thing.

I am here today to talk to you about what’s happened to trust, its impact on our industry and how the decisions you make every day have a wide-ranging impact on everyone around you – both personally and professionally.

It’s estimated that an adult makes about 35,000 remotely conscious decisions each day. This number may sound absurd, but in fact, we make 227 decisions just on food. As your level of responsibility increases, so does the smorgasbord of choices you are faced with.

Think about your personal life, a large proportion of the decisions you make impact your partner, your children (if you have them), your neighbours, your community, the businesses and services you engage, strangers in the street, your work colleagues and your customers.

I want you to walk away from today with an understanding of our collective responsibility as industry leaders to balance the needs of all stakeholders and a conscious acknowledgment that the decisions we make need to be much more than about us. But first, let’s explore the history of trust and how it has evolved.

Trust History and Evolution.

I assume you all know what I am referring when I cry out loud: Come quick, the wolf is chasing the sheep!

Aesop tells us that ‘Nobody believes a liar...even when he is telling the truth’.

Aesop’s wisdom should personally resonate even more.

Confucius once said all rulers need only three resources:

  1. Weapons;
  2. Food; and
  3. Trust.

The ruler who cannot have all three should give up weapons first, then food, but should hold on to trust no matter what because 'without trust we cannot stand'.

It isn't only rulers and governments who value and need trust. Every person, every profession, every industry and every institution need trust. We need it because we must rely on others acting as they say they will, and because we need others to accept that we will act as we say we will. It’s mutually inclusive.

Trust is one of the most pervasive – and ironically the least noticed – aspects of social life. Because we are social animals by design - we need it to live at all, unless we choose to opt out of human society and live the life of a recluse.

Indeed, the sociologist Niklas Luhmann was spot on when he said, “A complete absence of trust would prevent even getting up in the morning.” For that reason, humans face the world with an attitude of trust. Unless there is strong evidence that says otherwise, we assume when we go out of the front door and walk onto the street in the morning a car won’t try to run us down.

Every time I get in an elevator in one of our offices I presume it has been properly constructed, repaired and maintained, that its cables are in working order and that the electric system is safe. I don’t go about interrogating OTIS before I get in to ensure all will be ok – I confidently take a leap of faith.  Yet, it is not a hundred per cent certain that all those essential things that I need to work together in some invisible symbiosis will do so to get me safely to my floor.

Going on holidays or travelling for business? It’s easy to trust your aeroplane won’t fall out of the sky, even when you don’t know how the engine works or what the Captain’s instruments do and actually mean. We simply have to make these assumptions, otherwise life would be impossible. We don’t have the time to check the professional competence of everyone on whom our health and even lives may depend.  That onus we place on the entity we’re engaging with, to do the right thing within expectations.

Trust is hard earned and rapidly dissolved. It is essential social capital that should never be treated recklessly.

But – let’s unpack the components of trust a little further. There are many aspects that combine to make up trust and one summary that personally rings true to me and Bendigo and Adelaide Bank, actually comes from outside of psychology in the information sciences, from McKnight and Chervany: Trust consists of four different things:

  1. Benevolence;
  2. Integrity;
  3. Competence; and
  4. Predictability.

Benevolence asks, is this person kind? Integrity asks, is this person ethical? Competence asks, does this person have the ability and skills to do what needs to be done? And predictability asks, does this person behave in a way that I can consistently predict?

If you feel I am being authentic, you are much more likely to trust me.  If you feel I have real rigor in my logic, you are far more likely to trust me.  And if you feel my empathy is directed towards you, you are far more likely to trust me.  When all three of these things are working, we have great trust. But if any one is called into question, trust is threatened.

Trust also comes with an element of risk. Where we have certainty or proof, trust comes naturally. For example, I know the sun will rise and set every day – I don’t need convincing from Mother Nature that this will happen.

I know that Carlton will win a flag before Essendon…how’s that for trust? The good ol’ Blue Boys, they won’t let me down. Trust me.  Actually, don’t trust anyone who says trust me. That’s lesson number two.

Trust and reputation are critical to business success – especially in our industry. Trust must be earned. Building up a reputation can take decades.

Consider this example. Whilst companies like The Weinstein Company might have built up a reputation for creating value in the entertainment industry over more than a decade, with no more than 2 years ago the company potentially being valued at 800M USD, the now publicly known misconduct of its co-founder Harvey Weinstein has destroyed almost all that value. The company recently filed for bankruptcy and has now been sold off at 35 percent of its value from just a few months ago. That’s a $511M USD devaluation. Just think about that for a moment.

It’s hard to do a speech these days without someone mentioning Uber. So here goes. In the same vein, Uber, at the end of last year was still valued at $69B USD, it lost over 20 percent of its valuation ($14B USD), due to an originally undisclosed data hack, targeting 57 million users in 2016.

Now, I would like to challenge you to think about your own personal reputation or that of the company you represent. If someone asked you for the three words that would sum up your reputation, what would you say? How would people describe your judgment, your knowledge, your behaviours, in different situations - would your description change?

Today, we’re going to discuss why the answer to this question is essential to the current era, where your reputation is your currency. To do this, it’s important to look at how recent events and the permeating disruption of technology has influenced trust.

Recent Events and Digital Impact.

Consumer attitudes have changed forever.

Facebook and Cambridge Analytica, #MeToo, Volkswagen, fake news and more locally, the increased focus on behaviours within larger institutions, have helped to influence a transformation on the nature of how trust amongst consumers is earned, maintained and deepened.

Whether it’s Rudy Giuliani sprouting that Truth isn’t truth or Kelly-Anne Conway’s Alternative facts, the effect is leading to the emergence of a post-trust era.

What do I mean by post-trust? Well, I mean a general climate of distrust, cynicism and scepticism.

Now of course, one’s mind immediately goes to Washington when I say that but, the core challenge for Australian business leaders is that trust in Australia continues to decline across all four key institutions: media, business, government, NGO and financial institutions.

Where does this lead us. Well to start with, when prospective clients or customers, partners or leaders meet you they may not give you the benefit of the doubt right off the bat.

Pew Research revealed only 19 percent of Millennials believe most people can be trusted, while 31 percent of Gen Xers do. The peer-to-peer digital world relies on trust and a commitment to this, standards and values is essential to its success.

Nobel Prize winner, Daniel Kahneman, proved our reasoning is riddled with biases. The confirmation bias is most interesting of all biases. We are highly likely to believe or at least accept and repeat statements that support our established views, even when little or no evidence is given to support those statements. Yet, we are unlikely to accept or repeat statements that go counter to our established views, even when they are well-supported by evidence. This bias drives the spread of fake news and language like alternative facts and other irresponsible things.

We are at a point where the public now trust those who speak in authentic plain language, appeal to emotion and feel rather than think their way to a decision. Add some neuroscience, the echo chamber effect of social media and the result is that the inevitable losers are facts, experts and truth.

Recently, increasing numbers of data breaches at home and abroad show that technology does not necessarily make trust easier and points to new questions, challenges, solutions as with any innovation or disruption for us to consider.

Technology has made our world more immediate and more intimate. As we continue engage with others in this way, more trust is paramount. Consumers have access to more information than any age, communicated through an ever-increasing number of channels. It’s noisy. And the same technology that is bringing us virtually closer than ever, allowing everyone to broadcast their thoughts into the world whenever they want, is also the same technology that feeds the clouding of truth amongst the noise.

To add to this, we are overloaded with opinion, often masquerading as fact. Today, there is an argument that we have reached a tipping point of information, fatigue has set in and consumers are beginning to adopt a default position of distrust towards the information they receive.

Business can’t hide from public view, but many are still acting in ways that create negative headlines. In the modern internet age, those who feel that they have been overlooked or ignored will struggle to accept statistics, facts or truth from those who they feel are simply treating trust as some form of tool to produce a shift in behaviour (for example vote for me, buy my computer, switch to my bank).

The question is, how to get past “post-trust” to make sense of the modern-day challenge and succeed as business leaders and as corporations? So, what’s the answer? We need to get better at listening.

In this era, trust is our most valuable asset – as I said before, it’s the new currency of business. We need to pay less attention to what we think people want to hear from us and concentrate on what our authentic selves need to say. As leaders, it is our responsibility to encourage authentic behaviour and authentic dialogue. This is critical.

We need to find a way to assemble a narrative that makes sense and appeals to people at a concrete level by bringing together hard (rational, fact based) data and soft evidence (anecdotes or stories).

Reputation capital can only be unlocked if our customers, partners, employees, investors and others trust. You can only earn that trust by acting with integrity and considering the needs of all stakeholders.

How the Needs of all Stakeholders Must to be Considered.

As the saying goes: if you want to go fast, go alone; but if you want to go far, go together.

Our origins stem back to the Bendigo goldfields 160 years ago where miners pooled their funds for community prosperity. Once a month, everyone’s name would go into a barrel with one name drawn and that person allocated the funds to build their house. This defines our purpose: to feed into prosperity…not off it.

It was the genesis of banking itself: the notion that everyone should benefit from a financial transaction - the investor who provides the funds, the borrower who uses the funds, the bank's shareholders who bear the risk of the borrower not paying, and society itself. That original barrel still sits in our boardroom in Bendigo and whilst the Board doesn’t use it for voting purposes anymore, it’s a symbol and reminder of our purpose that still stands today.

We are focused on providing shared value which "involves creating economic value in a way that also creates value for society by addressing its needs and challenges".

The founders of the notion of ‘Shared Value” capitalism conclude: “Short-term profit objectives blind firms to the need to nurture the long-term health of the markets from which they draw their revenues. Businesses must reconnect company success with social progress. Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success. It is not on the margin of what companies do, but at the centre. We believe that it can give rise to the next major transformation of business thinking."

That purpose guides our strategy at Bendigo and Adelaide Bank.

And a great example of that, is exactly 20 years ago, where in response to banks pulling out of communities across the country we pioneered the innovative Community Bank® model what sparked a community-led movement across the country. It has since delivered more than $200 million in profits back to local communities, generating jobs and local economic growth.

Back then, let’s remember this was before there were other banking options available – it’s hard to think I know - but these communities felt powerless and people marched in the streets in protest. Banks were pulling out for financial and business reasons, which on face value can be argued, but we knew the impact this was having on the community and driven by our purpose we sought to find a solution.

Now those communities run those branches for us, we share the risk and reward of the branch and the local communities, clubs, associations, schools and citizens benefit.

We’ve opened 321 locations nationwide since and when we make a profit we continue to invest back. The Community Bank® network in FY 16/17 returned more than $5.5 million in shareholder dividends and employed over 1,500 people, around 2,000 volunteer directors, with $100 million in wages and services spent locally.

While the big four banks have closed more than 100 branches across Australia over the past financial year (16/17), six new Community Bank® sites have opened across Tasmania, Queensland, Victoria and New South Wales, with $18.4 million invested into local communities, backing a variety of new local sporting, infrastructure, education, arts and cultural initiatives.

This model was founded on the belief that successful customers and successful communities create a successful bank - in that order. That last phrase is the key, because it returns us to the philosophy on which banking itself was founded – as I said before, the bank feeds into prosperity, not off it. Simply put, you can't run a successful company in a poor community, so it makes sense to invest in helping to create a wealthier, more cohesive and inclusive community.

The benefit deepens our connection to communities and improves business.

Last year, we were named the winner of the Corporate Organisation Leading Through Shared Value award and were recognised by Fortune magazine in the U.S. as one of the top 100 companies that are changing the world – we came in at number 13 for the record.

The result of a society built on trust is social capital – facilitating social development in the same way that financial and fixed capital, properly deployed advances economic development. Taking a broader look at what our role is in society beyond a narrow transactional role.

Trust is a self-generating, self-renewing resource. Unlike other forms of capital, it does not become exhausted when we draw down on it. It’s self-re-enforcing, when we trust others, they usually reciprocate, and the total value of trust is increased. By the same token, when we distrust others, they will almost certainly pay us back in the same way; the total stock of trust is diminished, and conflict, of whatever kind, becomes more likely.

We only have to look at where the industry has ended up today, where it has focused on favouring one stakeholder over the rest. This imbalance has had, and will continue to have damaging financial, reputational and social impacts.

Looking at another example – this time in South Africa with Standard Bank. Supporting sustainable, job-creating economic growth is the Bank’s core business. It’s encapsulated in the company’s purpose: “Africa is our home, we drive her growth”. But South Africa’s extreme level of inequality constrains the kind of inclusive growth necessary to create jobs and reduce poverty. In this context, economic growth depends on large-scale economic and social transformation. As an enabler of economic activity, a custodian of the nation’s savings, and a major employer, Standard Bank states it has a significant role to play.

For Standard Bank, a focus on creating positive societal impact has also yielded major dividends. In South Africa, government regulations mandate that banks direct 0.2 percent of their profit to black-owned small and midsize enterprises.

Many banks do this simply by making donations to black-owned businesses, treating the program as mandated corporate philanthropy—essentially, a cost of doing business. But instead of making simple donations, Standard Bank invests the money into an independent trust that is used as collateral for loans to aspiring black entrepreneurs.

As a result, the bank leverages those funds, providing capital to many more entrepreneurs than a donation model ever would allow. And because the bank’s return on those loans is intertwined with the success of the entrepreneurs, Standard Bank also provides borrowers with technical advice and services.

This increases the odds that the bank will do well financially, and the entrepreneurs will succeed, gains that will help alleviate poverty and lift communities. That model has proved successful, prompting Standard Bank to expand its financing approach to other kinds of small and midsize businesses.

The job of business is to meet customer needs and to do so profitably. They need to do this to survive. So, one of the best ways for businesses to help ensure their own growth and their own longevity, is to address one of the hardest challenges in our society and to do so profitably. And when they do that innovatively, ethically and responsibly they should be proud – the result is that people will happily choose to do business with them.

So, the impact on the value of mistrust on business in general is clear. We’ve spoken about how to navigate this new world and we’ve seen ways in which Bendigo and Adelaide Bank and others have worked to balance multiple stakeholder needs to deliver shared value.

But what impact, if any, will the notion of post-trust have on the evolution of innovation in the finance industry?

Open Banking and Innovation.

Whether we know it or not, we all love personalisation. It makes us feel important, valued, wanted. Our brains are amongst the laziest organ in our body – how else can you explain how my kids can binge watch Breaking Bad on Netflix hour after hour. Personalisation indulges our laziness, it shortcuts boring processes such as researching, reading and consuming irrelevant items to work out how we can buy what we want.

Make it easy for me.

Open banking will be another way that financial services companies can hyper-personalise their offerings for customers in a much more compelling way.  It’s the next major transformation of Australia’s financial sector but, the many faces of trust will be critical to successful consumer uptake. Consumers won’t engage with it, if they don’t understand it and if they don’t trust it.

Despite the changes in legislation, consumers won’t be obligated to share their data. In fact, most consumers, according to Accenture, will only engage with open banking if they trust and understand what it is and what it can offer them – more than half of Australians (53%) say they don’t understand the benefits of open banking and nearly two-thirds (64%) cite security and privacy as their main concern with sharing their financial data with third parties.

Transparency is expected by customers, as is greater choice and product and service personalisation, which, if delivered upon, will lead to further innovation, opportunity and healthier competition.

To succeed in this new decentralised open banking realm, organisations will need to provide products and services that are valued by customers, new and existing, and prove they respect and can ensure security and privacy of customer data.

They must also be open about how customer data is accessed, used and shared and ensure customers know and understand what open banking can offer them. Achieving the right balance of customer benefit, permission, access, transparency and security will drive a more loyal customer base, innovation, competitiveness and ultimately, a better business outcome.

The Outcomes of Business Operating in This Way.

According to Forbes, the 10 most trusted brands in the UK in 2016 accumulated a market capitalisation of over 39 Billion GBP, representing over 2 percent of the UK’s total GDP in 2016.

And if the impact of trust on the bottom line was ever in question, consider Trust Across America’s research which analysed the performance of America’s most trustworthy public companies in 2016. It found that these organisations outperformed the S&P 500.

Rachel Botsman, author and academic, says the new age of distributed trust has more in common with the era of localised trust. “In many ways, it returns us to that time when we trusted individuals and our neighbours rather than massive faceless conglomerates. The brands that figure out the right balance between the efficiencies, speed and convenience offered by new technologies and authentic human experiences will be the ones to win over time.”

Robert Solomon and Fernando Flores write in their book Building Trust: In Business, Politics, Relationships, and Life that “…the key to trust is action, and, in particular, commitment: commitments made and commitments honoured.”

Solomon and Flores tell us, “Breaches of trust do not mark the end of trust but are part of the process of trusting. (There are many kinds of breaches, from mistakes to betrayal and treachery. It is important not to confuse them or assume that all breaches are betrayals.)” How will you know which one it is? You have to be open to discuss it.

Whilst businesses with low trust can sometimes be very profitable, this model in the modern digital world risks further unravelling. Focusing on profit alone is not a long-term strategy for success. The longer-game focuses on trust as a central business strategy resulting in happier and more productive employees, increased innovation and as a result, happier customers and partners who ultimately benefit from better products and services.

In our globally integrated instantaneous digital world, trust is the new currency. Without it, service economies can’t function, and it’s the companies that misuse personal data or abuse trust that take the biggest hit.

It is for this reason that credibility, transparency, integrity and trustworthiness are key leadership competencies of the new global economy. Trust must be a bottom line requirement for all CEOs. Put simply, it’s a hard-economic driver and not a soft value metric.

And as other financial models continue to evolve – for example digital banks, fintech innovation, automation and AI in home lending - and become more widely used, they will need to be underpinned by consumer trust and confidence to thrive beyond their inception.

I am proud that our long-standing commitment to customers, communities and partners has been central to our strategy for 160 years. Our strategy aims to strengthen our business and at the same time offer benefits for our greater society and Australian communities. We haven’t simply tapped on a separate Corporate Social Responsibility cost centre and instead have focused on being the most credible, that is building a reputation for being trustworthy by doing exactly what we say we’ll do and more.

Because of this, we are ranked as Australia’s most trusted bank and in the top ten (number 7) most trusted brand s in Australia – according to the Roy Morgan Net Trust Score.

But there’s always more to do and ways to improve. Trust is never an end unto itself.

It’s not good enough to hide behind an updated privacy statement, a values commitment or service promise on a website. Whilst it’s important to state your intent, it means nothing if you don’t deliver on your commitment with integrity. You must be seen to be doing the right thing, in the right way, for the right reasons, in the way that you said you would.

Upholding this commitment is essential for all corporations to navigate this brave new digital world.

As leaders, the challenge lies with us all.

Thank you.

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