Second in Series: Calling All (Crisis) Leaders to Rebuild Trust in the Finance Industry
In the first segment of this ongoing blog series, I ended with the question, “How can the financial industry rebuild its image?“ An obvious answer is through performance, right? Once investors and others begin to recoup losses and the market rebounds, any concern or hostility toward the industry should dissipate, at least temporarily. In fact, should we not begin to see evidence of this happening now? The market is beginning to rebound. The Dow has climbed to over 10,000. Investment banks are once again paying out enormous bonuses. In the past such performance let to public cheers. Today, however there are jeers rather than cheers. What accounts for the differing reaction? For one, the public’s relationship to the industry has changed: Before, the industry could get by on competence-based trust (demonstrating the capability to produce economic prosperity), but now, having been betrayed by the industry, the stakes are higher and the public is demanding not only competence-based trust but communication-based trust (e.g. being open and honest about their process for producing wealth) and integrity. I think society has always had an expectation that industry leaders were working with their customers’ (the public’s) best interests in mind; they trusted that their money was being taken care of. There are many layers to this breach of trust, and it will take a gargantuan effort for the public to even enter back into a sense of comfort, much less trust. So, although performance is critical to image management, the industry must also consider a more humanistic approach in the midst of the financial crisis. What I propose for doing so requires the careful and deliberate establishment of trust, a fundamental element of what I refer to as “crisis leadership.”
Crisis leadership is more than managing communication and public relations during a crisis. It is about building a foundation of trust not only within the industry, but across the industry’s stakeholders as well. Effective crisis leaders then use that foundation to prepare their organizations for difficult times; to contain crises when they occur; and most importantly to leverage crisis situations as a means for creating organizational change and innovation. Much of my work is about helping leaders to seecrises as sources of potential opportunity. It is in fact those industry leaders who recognize that crises events can be a catalyst for positive change, and who have the wherewithal to act toward that end, who will propel the financial industry forward.
I support the notion from The Business Roundtable Institute for Corporate Ethics at the Darden School of Business that “Today’s low levels of public trust, rather than signaling a capricious public or no-win situation, may represent opportunities for game-changing solutions that can lead to greater efficiency and value creation.” Kodak, for example, had at one time been on the brink of organizational demise with the advent of digital technology. Yet because of the forward and innovative thinking of firm leadership the company has not only survived but developed new lines of business and product and service offerings. Kodak created game changing solutions in the midst of a crisis. Crisis leadership, therefore, is a frame of mind accompanied by a key set of behaviors. The frame of mind is characterized by openness to new experiences, willingness to learn and take risk, an assumption that all things are possible, and a belief that even in times of crisis people, organizations, and industries can emerge better off after the crisis than before.
Clearly crises are traumatic events and I do not want to leave a false impression or indicate that there is not real pain and suffering resulting from them. Crisis handlers must address and deal with these circumstances. Gifted crisis leaders, however, create possibilities even in the most dire of circumstances. These leaders establish followers based on trust.
In the third segment in this series, I’ll explore trust in relation to the financial industry, what happens when the public’s trust is betrayed, and the initial steps that can be taken to begin the rebuilding process.