Trust is the Bedrock Beneath Every Lead With We Business — Part 3 of 8 “Hyper-Transparency & Trustworthiness”
This post is the third in a series of eight that examines the bedrock beneath every Lead With We business: Trust that builds reputation, culture, sales, and loyalty during a time of crisis.
Driven by a relentless corporate culture that mandated ambitious standards and instructions to meet or exceed them — or else! — it’s not surprising that Volkswagen AG — in 2016 the world’s third most valuable auto brand — finds itself today still scrambling to climb out of the reputational quagmire it dug for itself.
Why? Because it chose deception over honesty — and as a result, lost incalculable trust capital.
With their careers on the line, management and engineers sacrificed integrity for short-term “results” derived from deliberately — albeit ingeniously — fraudulent methods, all in service of making VW the number one automaker in the world.
“As with many an ambition built on hubris and deception, VW’s backfired spectacularly and will end up costing the company tens of billions of dollars — if not its very existence,” I wrote in 2016.
Worse than that major financial loss was the loss of reputation — of the public trust.
When the US Environmental Protection Agency (EPA) uncovered VW’s less-than-transparent emissions output — the infamous “diesel dupe” — on its allegedly “clean diesel” 2015 models, the automaker found itself on the line for about $10 billion in recalls, repairs, consumer restitution, and promotion of real clean electric vehicle technology — which ultimately benefited its competition.
“‘We’ve totally screwed up,’ said VW America boss Michael Horn, while the group’s chief executive at the time, Martin Winterkorn, said his company had ‘broken the trust of our customers and the public.’” Indeed. Winterkorn resigned as a direct result of the scandal — and the company lost a third of shareholder value in 2016.
Consumer loyalty is earned over time, not overnight. But ask VW leadership how quickly it can be lost.
Extensive fines were levied against the company (including the profits made from the offending autos). Earlier in 2016, another auto giant, Toyota, had weathered its own expensive recall scandal in an effort to become the world’s number one automaker (GM suffered its share of trust-eroding scandal, too) — but since rebounded to become just that. I wrote:
As David Haigh, CEO of brand valuation and strategy consultancy Brand Finance puts it, “The cost of recalls and fines could be far more significant than those Toyota faced, whilst the apparently deliberate nature of VW’s actions compounds the impact on its credibility. Its sins of emission are sins of commission. This sits particularly badly with Volkswagen’s brand identity, which is founded on reliability, honesty, efficiency (both efficiency of production and fuel economy), and more recently for environmental friendliness … Brand Finance, therefore, estimates that as much as $10 billion has already been wiped off the value of the brand.” …
All of that falls under the umbrella of trust.
“We are using the current crisis to fundamentally realign the Group,” VW’s CEO, Matthias Müller, told EU parliamentarians in Brussels … “I strongly feel we now have the chance to build a new and better Volkswagen.”
Admirable. Those businesses last over the long haul, especially in today’s atmosphere of hypervigilant scrutiny and ubiquitous social media influence, are those that are most transparent, even when they’re not perfect.
Take Starbucks, for example. Faced with scandal in 2018 — when two black men were needlessly arrested in one of its Philadelphia stores — the company shut 8,000 of its coffee shops for a day to put in place training for 175,000 employees. Importantly, it never said this was a solution, but “a first step.”
Even better are proactive measures, pre-loading your brand with consumer affinity, social capital, trust, and goodwill, which go a long way to mitigate the likely eventuality of a “gotcha” moments occasioned by consumers with their vigorous fingers on sensitivity triggers. Such social capital, largely based on prior and ongoing transparency, is part of a constant deposit and withdrawal cycle. You’ve got to have a balance from which to withdraw when you need it.
“The infallible leader is an old-fashioned idea. Being open about your weak points demonstrates an authenticity that will resonate with people,” says Kara Goldin, CEO of brand disruptor Hint Water of its success.
Starbucks’ former environmental impact director, Jim Hanna (now at Microsoft) calls this “pre-competitive trust” (PCT). I love that.
At the time of its faulty Prius accelerator crisis, and several simultaneous brake recalls — admittedly life-and-death problems — Toyota had demonstrated a standing commitment to safety. It had built up enough social capital reserves that some Prius drivers came to the brand’s defense. Toyota used the opportunity — especially being forced into Starbucks-level “hyper-transparency” — to reassess and redouble its commitments and investments, ask its consumers for help, find new partners, and launch new initiatives so that it eventually wound up stronger because of confronting the problems head-on with relative humility, honesty, and proactivity.
We can’t hide. We shouldn’t. There’s no need to anymore.
