Friday 21 February 2014

Integrity and engagement are the most important factors in building trust

And finally, from the Edelman Trust Monitor 2014, the top 2 factors which build trust in an organisation are integrity and engagement.
  • Integrity consists of being ethical, acting responsibly in a crisis and being transparent and open.
  • Engagement includes listening to customers, treating employees well, putting customers before profits and communicating often.

What is more relevant perhaps is the massive gap that the respondents to the monitor see between the importance of these factors and the actual performance of the organisations they relate to. So if we relate this to Ryanair for example, viewed as one of the Damascene brands in their current re-positioning, (prompted by shareholders being hit where it hurts) it will be very interesting to see just how long it takes for their customers to trust that they have really changed and have customers' interests as well as profits at heart.

This blog continues to focus on the "3 Ts", transparency and fair treatment of all stakeholders as key ways to build trust.

Wednesday 19 February 2014

Actions CEOs can take to build trust

Again from the Edelman Trust Monitor 2014 , some guidance on how the top people can build trust.
  • Communicate clearly and transparently
  • Tell the truth regardless of how complex and unpopular it is
  • Engage with employees regularly.
These are actions that everyone in an organisation can adopt too. Interestingly,the Monitor also reports that employees are considered the most trusted source across most of the " trust attributes" in the survey. The public want to hear directly from employees as ambassadors and advocates to attest to the integrity, quality, relevance of the products and services sold.

Again this bolsters the argument for a stakeholder response to sustainable business with employees figuring highly in any investment calculations. It also reinforces the "value creation cycle" theory ie if employees believe they have a good deal from the firm  (compared to alternatives) then they are more likely to put more effort and loyalty in, which results in better behaviour/conduct when dealing with customers, more sales, better reputation etc etc.

Tuesday 18 February 2014

CEO: the Chief Engagement Officer

The 2014 Edelman Trust Monitor report states that 84% of respondents believe that "business can pursue its self-interest while doing good for society". Adopting this kind of thinking would obviously result in some major change for organisations. In the report it talks about the CEO becoming the Chief Engagement Officer taking responsibility for the establishment of the context in which any change will occur. This would include spelling out not only the economic rationale but also the emotion,risk and societal benefit.

The report points to a three step approach to establishing context ie.
  • Participate: seek input from a broad range of stakeholders.
  • Advocate: clearly articulate strategy i.e. how a proposed change improves the lives of customers as well as the bottom line.
  • Evaluate: evolve behaviours based on collective outputs.

One of the many benefits of business ethics is the engagement with stakeholders so that instead of them being more of a risk to the business (e.g. employees, suppliers, investors not on-side with change) they genuinely feel part of the change, are less resistant, more positive (may even generate ideas and opportunities themselves) which helps to reduce overall cost and build better value.

Getting stakeholders involved in how a proposed change improves the lives of customers as well as the bottom line will also help to provide balance and change thinking .

Monday 17 February 2014

It costs not to take customers complaints seriously

Over the weekend it was announced that the FCA had fined HomeServe £ 30.6m for mis-selling insurance policies and mishandling customer complaints. The pay to sales teams was structured in a way that gave staff incentives to increase the volume of products sold, irrespective of of customers' need for the products. Many of the customers were vulnerable older people.

The pay structure also meant that people handling complaints were paid according to how many they closed, regardless of the outcome for the customer. As usual with these cases, the Board and senior management were also found wanting IE not "sufficiently engaged" with compliance matters.

At one time there used to be a marketing mantra which was treat " a customer complaining as a loyal customer giving you a second chance" and with this kind of ethos a complaining customer provides the company with opportunities to turn the transactions round and build relationships and loyalty (i.e in the main all people need is to be listened to and taken seriously).

Which? also reported that the big six energy companies had problems with complaints as they received 5.5m complaints in a year. There may not be any genuine loyalty with utility companies but it is clear that by not investigating complaints early enough (root cause analysis, feedback, action) they have engendered contempt for customers rather than creating opportunities to prove they really care. Thankfully this kind of behaviour is no longer tolerated by any of the regulators.


Wednesday 12 February 2014

Is relationship pricing the answer to better pricing?

The issue of dual pricing for organisations is a tricky one i.e. providing introductory offers to new customers which are not available to existing ones. It is a pretty common practice in a wide range of sectors from consulting services through to mobile phones, health clubs etc and can be a real source of discontent for existing customers who see their loyalty go unrewarded.

However the whole concept generally flies in the face of fairly common knowledge within the marketing industry that it is c 5-6 times more cost-effective to retain customers than to lose and recruit new ones. This would then point to the power of relationship pricing where customers get more discounts if they have more products with the same company thereby making them more "sticky" and more likely to stay. There is an assumption by the customer that the discounts offered are giving them a good deal competitively, not always the case, and a trade-off in reducing choice but making decision making easier.

In reality, relationship pricing is only really better if there is a genuine commitment from the company to treat both new and existing customers fairly. Sometimes the lack of fairness is only identified when customers choose to leave and discover that there is indeed a better deal which  would benefit them. Finding examples of best practice is difficult, but a key factor has to be in being proactive in providing existing customers with genuinely better deals, which might actually include simplifying what's on offer rather than complicating it more!.


Tuesday 11 February 2014

"Running the right business in the right way a source of competitive advantage" says Barclays CEO

On BBC Radio 4 "Today" programme Barclay's CEO Antony Jenkins talked about the bank's results, profits down, bonuses up as well as his plans to transform the bank. This transformation is all part of his ambition to bring ethics back into banking and he seems to have a fairly realistic timescale of 5- 10 years before customers see a difference (following c 140,000 employees having been trained in the new values)..

One of the key points that he made was in relation to a major business benefit of ethical conduct, that of competitive advantage.He seems to be leading the bank in the right direction with a new balanced scorecard being announced today with 2 financial targets and 6 "good citizen" measures including a "net promoter score" by customers and measures on being the "most trusted bank" by YouGov.

However, any form of market positioning, or re-positioning has to have 4 elements to be successful, clarity, consistency, credibility and competitiveness. Jenkins is telling a pretty convincing story but where it still falls down is in the areas of consistency and credibility. However hard the bankers tell the public that big bonuses are necessary for competitiveness etc the perception is quite different and is still not believed (even when Jenkins himself has waived his own bonus this years). The public and customers still need convincing because big bonuses are inconsistent with the rest of the messages and in fact continue to damage them.

Let's hope Jenkins stays the course for the next 5- 10 years to continue to communicate clearly and with more credibility.

Friday 7 February 2014

More pressure needed on suppliers;Bangladeshi workers still suffering

It was reported yesterday that factories where clothes made for Lee Cooper, Bhs and other UK stores were still abusing their workers both physically and verbally, along with flouting fire safety rules.This is even with an international movement to improve standards with such things as the Bangladeshi Fire and building Safety Accord (following the horrendous loss of life last year in factories due to fire).

The Accord involves nearly 150 retailers and brands and the aim it to survey up to 1,500 factories by October this year as well as train workers. This illustrates the growing increase in businesses recognising the impact on their reputation and brand of poor working conditions in their supply chain and the need to more rigorously apply fair treatment to all stakeholders.Solving the problem in places like Bangladeshi is not easy. Pulling out of these countries and factories has a massive economic impact on the families and children working in them and there isn't a quick fix. More investment in education and training are clearly needed and the question will always be, where do you draw the responsibility line as a company for more active involvement and investment?

Wednesday 5 February 2014

Benefit of ethical conduct: attracting investment

One of the business benefits of ethical conduct is attracting investment. This is illustrated by the fact that Royal London Asset Management (RLAM), a leading city fund manager, considered pulling investment in Amazon from its ethical funds because of tax avoidance and its employment conditions for its staff around the world.

Basically Amazon do not allow "collective bargaining" and RLAM see this as hindering its ability to recruit.(Interestingly, another business benefit engendered by good ethical conduct is employee engagement and ability to attract and keep talent). As Amazon has apparently shown some signs of progress the fund managers have not made any change.

It is this kind of pressure however which can really help to get the message across to our growing "corpocracy".

Tuesday 4 February 2014

Are banking CEOs finally getting it? The importance of building trust.

It's quite nice to blog something more positive about the banks.

Yesterday Barclay's CEO Antony Jenkins announced that he was waiving his £2.75m 2013 bonus due to the many problems still being experienced at the bank. However he referred in his address to "progress they had made to rebuild trust".

In the same week Antonio Horta-Osorio, the CEO of the Lloyds Banking Group will state "Rebuilding a sound reputation founded on the highest standards of responsible behaviour is key. But words alone are not enough to change public perception and regain trust. We must provide meaningful commitments to allow ourselves to be independently measure against against them." He was announcing a number of initiatives including the aim of 40% of the top 5,000 roles to be held by women in 2020. So it looks like these two get that action speaks louder than words.

These two examples demonstrate a new "tone from the top". It would be really something if the CEOs start to actively compete against each other in terms of who can be the best responsible leader and, more importantly, how soon it will be before customers really see improved outcomes from this leadership - after all that is what it should really be about.

Monday 3 February 2014

More transparency from pharmaceuticals

GlaxoSmithKline (GSK) has recently announced that it would no longer pay doctors to promote its products at speaking engagements or give financial support to health care professionals attending medical events. Its sales force will also not receive individual sales targets. This is part of the overall industry's move to greater transparency. These initiatives demonstrate that some big companies are now responding to the competitive advantage that better ethical conduct brings i.e. being more open and clear about what you do helps to build trust from your stakeholders which in turn boosts value.