Managing Reputation

Unconventional Insights for Managing Stakeholder Trust

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Initiatives to build and maintain trust with various stakeholders, including customers, employees, suppliers and investors, have risen to the top of the executive agenda at many organizations. But the problem is that most companies don't really understand how to manage stakeholder trust effectively. In fact, the authors' research suggests that many of the trust-building initiatives and approaches that organizations invest in may be of questionable value. Others might actually be counterproductive.

One of the reasons managing stakeholder trust is difficult is because there are many different stakeholder groups, each with its own particular needs and perspective. That is, trust is multidimensional, and it's not obvious which dimension executives need to focus on when dealing with any particular constituency. What, for example, is more important for building trust with employees and customers: a reputation for kind-hearted benevolence or for fair-minded integrity?

To answer such questions, the authors conducted a study of stakeholder trust in four different organizations. The research analyzed the relevance (if any) of various factors: benevolence, integrity, managerial competence, technical competence, transparency and value congruence. In essence, the study asked what matters — and to whom. Some of the results were unexpected, and a few were even counterintuitive, leading to the following key insights: Transparency is overrated; integrity is not enough; the right kind of competence matters; building trust with one group can destroy it with another; and value congruence matters across the board.

The new framework challenges some existing beliefs and sheds light on a number of areas that companies would be wise not to ignore. Indeed, as the authors illustrate, fundamental misunderstandings about stakeholder trust have tripped up a number of corporations, including Coca-Cola, Google, Apple, Delta Air Lines, Mattel and Sprint. In the future, a deeper knowledge of stakeholder trust will help businesses become more adept at managing stakeholder trust so that they can reap the numerous benefits, including improved cooperation with suppliers, increased motivation and productivity among employees, enhanced loyalty from customers and higher levels of support from investors.

Michael Pirson is a research fellow with the Hauser Center for Nonprofit Organizations at the John F. Kennedy School of Government, Harvard University and a lecturer at the Harvard Extension School. Deepak Malhotra is an associate professor of business administration at the Harvard Business School and the coauthor of Negotiation Genius (Bantam Books, 2007). Comment on this article or contact the authors at smrfeedback@mit.edu.

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