In the wake of the financial crisis: rebuilding the image of the finance industry through trust
“In the Wake of the Financial Crisis: Rebuilding the Image of the Finance Industry through Trust” by Erika Hayes James links the financial crisis with positive organizational management. When stable corporate entities, such as Merrill Lynch and Lehman Brothers, enter bankruptcy, a crisis is definitely occurring. A crisis is defined as a low-probability, high-impact event that poses a threat to a company’s security. What has now become known as “the financial crisis” has affected banks, but also insurance companies such as AIG, and automakers such as GM, Ford, and Chrysler. Perhaps because of what some would call the source of the problem, the subprime mortgage lenders, and their predatory lending practices, an environment of corporate distrust has emerged.
Trust is built when expectations are met over time. Companies acquire trust by fulfilling the public’s needs and avoiding negative outcomes. When a crisis happens, trust is disturbed. Confidence in the abilities of a company and a perception of honesty from its leaders are important to stakeholders. When stakeholders can rely on management to do the right thing, a relationship of trust exists. When that trust is betrayed, however, negative feelings and unproductive behavior can occur on both sides.
Crisis leadership involves not only rebuilding that trust with the public, but recognizing new opportunities to make an organization even better. Some characteristics of good crisis leaders are an open mind to new experiences, a learning orientation, and a willingness to take risks. The leader must identify its company’s core values and align its actions with those beliefs.
Three pillars of trust include integrity, positive intent, and clear capabilities. The firm’s policies and procedures should reflect its values, and its communication with the public should express its beliefs. There should be a unified commitment to maintain integrity across the industry as well as within the organization. The motives that underlie industry behavior must be transparent to the public in order for trust to grow. And if a firm’s leadership is competent, it will convey its intentions in a way that instills confidence in its practices.
To request a complete copy of this article as posted in the Journal of Financial Transformation, please contact Erika at www.erikahayesjames.com/contact.
Tags: crisis leadership, rebuilding trust