Alan Van der Molen, Edelman’s Global Vice President, believes that these data clearly reflect that while trust in institutions – companies and governments – is low, it is even lower with respect to those people who manage and represent these institutions: in the case of politicians and governments the difference is 28 ppt. That is why leaders are advised to change their leadership style and introduce more open, participative and inclusive elements in their leadership behaviour, thus encouraging dialogue, transparency and awareness of the opinions of different stakeholder groups.

Corruption, fraud, incompetence and bad economic results as well as some erroneous incentives used in different business or institutional policies are some of the main reasons that drive respondents to doubt credibility of current leaders in 26 countries where the survey was held. These judgements are confirmed by the data revealed by Alberto Andreu, Telefónica’s Director for Corporate Reputation, Institutional Relations and Social Innovations: 60% of crisis triggers are of internal origin, especially those linked to corporate culture (remuneration systems, control, management, etc.)

Trust in Experts and Peers is GrowingIn 2012, persons described as peers (friends, colleagues, family members, etc.) and experts (academics and technical professionals) enjoyed more trust than chief executives and politicians, including leaders of non-governmental organizations. In 2013, this trust grew significantly and reached twice the level of institutions’ official representatives. At the same time, employees’ position in this respect declined while trust in financial analysts grew by five points.

Angel Alloza points out that democratization of trust, influence and authority have become undeniable trends, and their importance grows at a gigantic pace. These trends mean that recommendations and comments made by peers play the key role in our decisions, and this may have both positive and negative implications.

In the traditional vertical pyramid of authority, top positions are taken by chief executive officers in the corporate segment and politicians in the government segment. These are followed by directors, experts, technical experts, employees, journalists and the general

Traditional institutions are undergoing a crisis of leadership as a result of reputational rows. Only one out of five people polled internationally for the Trust Barometer report carried out by Edelman every year believe that a business leader or a politician say the truth when facing a sensitive situation.

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Trust, Key to Achieve Legitimacy and Credibility

Reputation

Insights&Trends

This document was prepared by Corporate Excellence – Centre for Reputation Leadership and contains references to the statements of Alan Van der Molen, Edelman’s Global Vice President, Ángel Alloza, CEO of Corporate Excellence, Alberto Andreu, Telefónica’s Director for Corporate Reputation, Institutional Relations and Social Innovations, Alberto Artero, Director of Elconfidencial.com, and Ana Sainz, General Director of Seres Foundatio, made during the presentation of 2013 Edelman Trust Barometer 2013 held in Madrid.

Insights&Trends 2

Trust, Key to Achieve Legitimacy and Credibility

“Leaders need to change their

leadership style and introduce

more open, participative

and inclusive elements thus

encouraging dialogue

with their stakeholders

and transparency”

public. This hierarchy is compensated by the horizontal community pyramid, where the general public finds itself between the management and other actors, such as employees, consumers and social activists. The two pyramids shape what came to be called the new diamond of influence.

In order to become leaders, companies need to secure support of their stakeholders. Stakeholders no longer accept the dictatorship of organisations who impose a one-way relationship. Instead, organizations feel the need to initiate dialogue with stakeholders and secure their cooperation. Thus traditional control gives way to autonomy, and rigidity of relations transforms into flexibility.

The Need for Inclusive ManagementWithout a doubt, the boom of telecommunications as well as social networks and the mass media largely accounts for the change in the influence pyramid and emergence of a new paradigm. In this new paradigm, the role of traditional sources of influence and public opinion, such as official leaders, the mass media, experts, etc, is changing and decreasing. However, Elconfidencial.com’s Director Alberto Artero says that the new media still have not squeezed out traditional media in terms of trust.

Greater authenticity, empathy, courage, integrity and dynamism of stakeholders lead to consolidation of the new social leadership (or collective leadership, to use the terminology of Artero who contrasts this phenomenon with personal leadership), based on these new growing social values and the environment governed by behaviours and coherence between what is said and what is done, as described by Van der Molen.

According to Ana Sainz, General Director of the Seres Foundation, these circumstances offer a clear opportunity for all those companies who understand this new context and are able to substitute old values for new vectors, change the focus from authority to community and place socially responsible policies at the heart of management.

The best way to do it is to design management models aimed at achieving trust by accepting this new paradigm and adapting to the new rules of the game. As Corporate Excellence’s CEO Ángel Alloza put it, trust is not an abstract social capital, but a key prerequisite for any successful exchange.

Results Do Not Match the ExpectationsNo matter whether it is because expectations are too high, or results are too low, or both at a time, the fact is that there is an important gap between the results and the expectations. The attribute that reveals the largest gap (37 points) is fair treatment of employees, while the smallest gap is demonstrated by the attribute describing presence in the rankings of best employers or the most admired companies.The list of the most significant gaps between results and expectations (30 points difference and higher) is presented below:

1. Fair and correct treatment of the employees: 37 points.

2. Prioritizing consumers’ interests over profits: 36 points.

3. Responsible crisis management: 33 points.4. Transparent policies and practices: 33 points.5. Meeting customers’ needs: 32 points.6. Open and transparent

Graph 1: Trusted sources are experts and peers

Source: Edelman, 2013.

Credible spokespeople

Academic or expert

Technical expert in the company

A person like yourself

Regular employee

NGO representative

Financial or industry analyst

CEO

Government official or regulator

Academic or expert

Technical expert in the company

A person like yourself

Financial or industry analyst

NGO representative

Regular employee

CEO

Government official or regulator

68% 69%

66% 67%

65% 61%

50% 51%

50% 51%

46% 50%

38% 43%

29% 36%

2012 2013

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Trust, Key to Achieve Legitimacy and Credibility

“Trust is not an abstract

social capital, but a key

prerequisite for any

successful exchange between persons”

Edelman’s Vice President believes that trust is essentially stakeholders’ expectation that a company will behave in the way it promised to behave. He agrees with the CEO of Corporate Excellence – Centre for Reputation Leadership that trust may be built by the employees internally and then projected outwards.

Conclusion: the Recovery PeriodSeveral years of the economic crisis and perception of its effects on the economy and society caused severe damage of trust. However, in 2013 we are observing signs of recovery in some countries, especially in the business segment, as opposed to the institutional segment (only in South Korea more trust is placed with institutions than with businesses). The number of countries where trust is recovering and comes back to the 2011 values is growing.

In terms of industries, Edelman’s Trust Barometer is still topped by technologies, the automotive and consumer sectors internationally, followed by the mass media, finance and insurance. If there was an element that could explain low trust in companies, it would have to do with commitment and integrity.

Corporate cultures, especially those in the financial sector, are viewed as the main cause of bad economic conditions and rows that led to the fall of trust in banking institutions. Maybe it is not accident that

communication: 31 points.7. Ethical business practices and codes: 30 points.

All attributes (16 in total) are divided into five categories. Seven attributes included in the list belong to two out of these five categories: commitment (59%) and integrity (58%). Other three categories are products and services (54%), objective (47%) and operations (39%) with gaps smaller than those included in the list.

Undertaking and Fulfilling a CommitmentAccording to Andreu, trust does not have a clear definition: it is not defined as long as it is not expressed in the form of an explicit commitment. The capacity to undertake and fulfill commitments is the shortest path to trust. A good example of this approach is the corporate culture of such companies as Johnson & Johnson, where employees and directors have to follow five specific steps before taking any decision that may affect the company.

According to Alloza, reputation is a tool that helps to transform trust into an operational value for companies, whereas long-term vision is an adequate instrument for turning these commitments into reality and meeting the expectations of stakeholders, always moving from inside outwards.

Graph 2: Embrace the new mandate: inclusive management

Source: Edelman, 2013.

PYRAMID OF AUTHORITY

(Vertical)

PYRAMID OF COMMUNITY

(Horizontal)

“Grounded Leadership builds legitimacy in key constituent groups and is based in personal dynamism, empathy, authenticity, inspirational goals and courage.”

Jeffrey Sonnenfeld

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Technical ExpertsElite Media

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Trust, Key to Achieve Legitimacy and Credibility

truth has become the main victim of this crisis: citizens believe that truth is incompatible with business leaders when it comes to delicate situations and their personal interests.

©2014, Corporate Excellence - Centre for Reputation LeadershipA foundation established by major companies aiming to excel in the management of intangible assets and facilitate promotion of strong brands with a good reputation and a capacity to compete on the global markets. Our objective is to become the driving force, which would lead and consolidate professional reputation management as a strategic asset, fundamental for building value of companies around the world.

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