How Character Based Business Can Solve The Global Trust Crisis

Posted: Jan 11, 2018 10:00 AM
How Character Based Business Can Solve The Global Trust Crisis

We live in exciting, yet disturbing, times.

Yes, we're all excited because it looks like the economy may be taking off. The stock market is way up and still rising. Orders are increasing quickly. Unemployment markers are plummeting. Consumer confidence is high and rising.

That is the exciting part.

The disturbing part is that there is an uneasy feeling that something crucial is still missing in many business (and other) organizations.

Individual businesses are poised to grow, but will they grow in a healthy way? Will they return to time-honored values and priorities or merely be satisfied with some freedom from excessive regulation and increasing their bottom lines?

Many of us grew up with a sense of the role character-driven business plays in society. It was something we saw portrayed in media all the time. Many of us, particularly in smaller cities and towns, also saw it played out in daily life within our own extended families.

Perhaps you have just gone through another holiday ritual of watching It’s a Wonderful Life, with Jimmy Stewart. An iconic and trustworthy actor, Stewart plays the part of an honest small-town banker with a company mired in an ethical crisis. You probably know the story.

While certainly an idealistic film, it is not totally unrealistic. Many small businesses and not a few large ones still operate with pristine values similar to those of Bailey Bros. Building & Loan.

Unfortunately, many others are operating more like Stewart’s nemesis in the film and are busy turning their communities into Pottervilles.

As we know, some entire industries in America have been suffering a crisis in character. The news media and entertainment industries are only two. Many observers would add others. It is a crisis.

Let’s boil down the main reason character must be placed back in the center in the business world. It can be summed up in a single word: Trust.

Leadership determines the ethical value system of a company (even an industry). Character-based leadership determines which values are prioritized and, more importantly, how the organization acts on them.

The daily experience of ethical reliability determines the level of trust given by customers and society at large. As trust grows, involvement with the trusted company grows. It is natural.

Ultimately, trust is what causes businesses, economies and societies to succeed.

The early-twentieth-century economist Roger Babson once said:

“A character standard is far more important than even a gold standard. The success of all economic systems is still dependent upon both righteous leaders and righteous people. In the last analysis, our national future depends upon our national character — that is whether it is spiritually or materially minded.”

We often discuss character and values solely from a microeconomic perspective, such as the values of a single company. Additionally, the news media often spotlights the failure of ethics in a single business, such as Enron or Wells Fargo — or seemingly less severe lapses like Exxon or Volkswagen.

Business leaders themselves sometimes think of the economic value of character to the company level, and even calculate value to their bottom line.

Jim Collins wrote an excellent book about this, Good to Great: Why Some Companies Make the Leap... And Others Don't. He shared his research findings on dramatic turnarounds achieved by somewhat stagnated companies after character-based leadership took the helm.

He noticed similar effects: Company leadership often introduced values which highlighted humility on the part of leadership, honesty at all levels of management, and the importance of developing a servant-like attitude.

In short, they placed large emphasis on character, starting at the top and working down from.

However, as important as that aspect is, we must think more about character on the macroeconomic level. In other words, we must respect the effects of increasing or decreasing trust (caused by poor character shown in business) as it affects entire industries, economies, and eventually societies.

The highly-respected Edelman Trust Barometer measures public confidence in government, institutions, businesses, technology and other cultural forces around the world.

Last year Edelman issued this alarming report:

“The 2017 Edelman Trust Barometer reveals that trust is in crisis around the world. The general population's trust in all four key institutions — business, government, NGOs, and media — has declined broadly, a phenomenon not reported since Edelman began tracking trust among this segment in 2012.”

The report was issued in January of 2017 and reflects studies not just on American institutions but worldwide.

However, Edelman also stated that, among the majority of people worldwide who were uncertain of whom they could trust, Business was the most trusted institution.

Edelman went so far as to label the worldwide business sector: “The Last Retaining Wall.”

That sounds pretty serious. But it also sounds very optimistic.

Remember, the huge surge in worldwide business and development that began in the 1980s rode a wave not only of developing technology but also of an idealistic and innovative spirit carried by millions of entrepreneurs worldwide. Many brought with them strong character and values which were a vast improvement over those of many in the corporate world at the time.

That revolution not only brought unbelievable new services to the world, but also increased hope. And trust.

Business can do it again. But we must lead with character.

We have the mandate.

See slides 34 and 43 of the 2017 Edelman Trust Barometer - Global Results deck here.