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Archive for June, 2011

When trying to make sense of complex concepts, we like to use metaphors. We frequently think of money having the properties of water, as in “cash flow” and “liquidity”. These metaphors have important consequences, because they make certain decisions and policies more plausible. Take for example how that once we think of the drug problem as a “war” rather than an “epidemic” certain policy solutions become more plausible (wars are won by armies, not public health professionals, and methadone programs don’t fit).

When we consider corporate trust, one of the most influential metaphors is the “bank account”. Companies “make deposits”, and can “make withdrawals” if necessary. This seems plausible enough, but it suggests certain inferences that are not supported by evidence.  For example, if today I put $100 into my checking account, I can take $100 out tomorrow. Putting aside bank failures and the like, the money will be available when I need it.

In some of our recent research based on laboratory experiments, however, we find little evidence for these claims. In a crisis context, previous “good deeds” are swamped by current actions (good or bad). Trust it seems can’t easily be deposited, it must be earned.

But there is another way to think of the potential benefits of a long-term record of trust. That approach works more like a currency (the fact that currencies require trust adds another interesting wrinkle to this idea). Currencies act like multipliers (not “linearly” as the bank account suggests). That is, if a currency is strong, purchasing power increases for all sorts of goods.  So, what does this mean in the context of trust? The idea is that the same statement carries more weight, has more impact, if it comes from a trusted company.  Or alternatively, a company with a strong record of trust (“strong currency”) will need to do less than a company with a lower record of trust (“weak currency”).

Some recent evidence from the 2011 Edelman Trust Barometer  2011 Edelman Trust Barometer supports this intuition.

Company Trusted Will believe negative information if hearing 1-2 times Will believe positive information if hearing 1-2 times
High 25% 51%
Low 57% 15%

In case of “low trust” we find the well-known negativity bias. A negative message has roughly 4 times as much impact as a positive message. But, strikingly, the situation is reversed in the “high trust” case. Now a negative message has only half as much impact as a positive one.  So, by moving from a high to a low trust “currency,” a company gets an eight-fold increase of positive information impact. Not bad, right?
Now, these results are to be treated with some caution. Ideally, one would want to replicate this intended behavior in a controlled laboratory setting. I would be surprised if the absence of negativity bias (indeed a positivity bias) in the “high trust” case would hold up with experimental subjects, but the prospects are intriguing.

Perhaps this approach also can explain Apple’s (and to a lesser extent, Google’s) “Teflon” effect: The apparent limited impact of issues such as the iPhones’ dropped calls/antenna problem and smartphones’ transmission of consumer data. What’s more, survey data from Harris Interactive consistently puts the high-tech industry on top of the most trusted industries. So, even a less than stellar response strategy may have a stronger impact than a comparable (or even better) strategy by a less trusted bank or insurer.

A 2007 Harris Interactive survey measured the public's perception of companies based on key attributes. Source: Harris Interactive's Reputation Quotient Survey, Wall Street Journal.

Bottom line: If the results survive in other research contexts, the case for investing in trust is strong. And don’t think about it as a bank account, but as maintaining the strength of your currency through a record of trusted actions.

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 Instinct may lead us to focus on  finding a quick solution to the crisis. Total Football suggests otherwise.

While still in the afterglow of Saturday’s glorious Champions League final, here are some observations on the similarity of soccer and crisis management.

In the 1970s the Dutch soccer coach Rinus Michels—first with Ajax Amsterdam and then the Netherlands national team—developed a new approach to soccer strategy. Known as Total Football (“Total Soccer” for Americans) it reached its pinnacle with the 1974 FIFA World Cup team and its embodiment with striker Johan Cruyff.

Total Football is usually understood as the idea that players rotate into different situations which requires highly technically skilled players at all position, a task made possible by Ajax’s famed youth system. While the 1974 team never reached its zenith (it lost to host Germany 1:2 after a legendary second half of non-stop attacks on the German goal), its approach to soccer has found modern heirs in CF Barcelona and Arsenal London. Cruyff is the connecting link in this lineage, first as player and then as coach of Barcelona, which also established a famed youth academy, La Masía. In the 2010 the three finalists for the FIFA Ballon d’Or (formerly known as the World Player of the Year award) were Andres Iniesta, Xavi (Hernandez), and the eventual winner, Argentinean superstar Lionel Messi. All three were La Masía graduates.

Neither Arsenal nor Barça play total football. Barcelona’s style, also known as Tiki-Taka, is characterized by ball possession, extensive (short) passing, and constant movement, but lacking the extensive player rotation typical of the Dutch approach. But Total Football has another characteristic. Players do not intend to score directly, but rather to increase the overall chances of scoring. A sense of space and movement is critical for this approach. Both Cruyff and Barcelona’s midfield master strategist Xavi have repeatedly emphasized the importance of space and movement. This leads to extensive passing even close to the goal rather than excessive dribbling and low probability long-range attempts. Some observers are critical of this approach complaining that the teams try to “carry the ball into the goal”, but that’s the idea: rather than go for the goal, maximize the opportunity space, the room to maneuver.

So, what does this have to do with crisis management? It becomes a useful analogy when dealing with a reputational crisis, especially during the all-important first 24 hours. As I have argued in Chapter 1 of Reputation Rules, during a reputational crisis a company is “on stage”. Customers, employees, business partners, and other stakeholders are all paying particular attention to the company’s actions. But in most cases the company is on stage only for a very short time—often no more than 24 hours, a consequence of a much accelerated media news cycle. Companies may wish to be out of this spotlight as quickly as possible. But this is a misconception. Getting out of the headlines is desirable only if the last impression by customers, stakeholders, and the public is positive rather than negative. Otherwise, a negative impression will tend to stick in the mind of observers with few opportunities to correct it. After all, public attention has now moved on to a different topic.

But this creates a conundrum. During the first 24 hours it is virtually impossible to establish even the most rudimentary facts about an incident. Yet, without a response or a “no comment” statement observers will draw negative inference (lack of transparency, commitment, empathy and so forth). The solution is to take a lesson from Total Football. Our instinct (the direct path to the “goal”) may lead us to focus on trying to find a quick solution to the crisis. But a more promising approach is to put this desire aside and instead attempt to create a trusted process to get to a solution, e.g. by setting up a task force, bringing in trusted third parties, commit to a schedule with updates and so forth. The point is to create much needed room to maneuver, not a quick shot on goal. Another advantage is that it is much easier to prepare for setting up processes than for anticipating solutions.

This approach, however, is counter-intuitive for many managers as (in their day-to-day existence) they are used to solving problems quickly and competently. Resisting this impulse requires discipline and teamwork. Watching Barcelona play is a pleasurable reminder of this insight.

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