Trust is a significant aspect for an efficient economic system. Trust plays a central role in bringing companies together to create value that no individual firm could manage on its own. Trust emerges from interactions and working together with people from diverse backgrounds in order to attain a certain goal or objective with the mutual benefit. Corporate leadership plays a central role in nurturing and fostering public trust which is critical for the success of any business. Trust impacts various aspects of business operations such as employee performance, client acquisition and retention, innovation, and general business efficiency, especially among large firms.
Ensuring trust in business is an exercise that entails mutual value creation among players have unequal resources, knowledge or power. The core ingredient for nurturing public trust in business is a mechanism that would encourage the creation of real value for all the concerned parties. However, studies indicate that increased surveillance more often than not decreases trust in those who are monitoring the conduct of others. Hence, there is a need to provide a balance in the level of business trust to ensure the optimal operation of all business activities.
Trust is significant for the operation of the economic system. It enhances the efficiency of businesses. Trust and other similar attributes such as loyalty in business are examples of positive externalities which increase business efficiency. Apart from improving operational efficacy, trust also positively contributes towards improving employee performance, client acquisition and retention, and encourages innovation. Trust plays an important role in bringing persons together to create value that no individual firm could manage on its own. Apart from the trust within the business, trust among businesses or societies is important for the success of any business. This paper will endeavor to explore the implications of general public’s trust in business operations in a highly competitive business environment.
To begin with, trust is a perspective which is best captured by past actions as well as the current endeavors. Both strong and weak businesses can crumble easily when public trust is lost. The loss of public trust can easily freeze the capital of the business and render millions of people jobless, directly or indirectly (Arthur W. Page Society, 2007). The current knowledge gap on the essence of public trust in business calls upon the corporate leadership to take on a proactive role in developing and implementing an elaborate long-term strategy of nurturing mutually beneficial public trust. The current world economic crisis in which the absence of trust negatively impacts the global financial system illustrates the significance of trust.
The three basic dynamics of trust in business are the balance of power, mutuality and trust safeguards. The balance of power is a mechanism of fairness that restricts one actor from imposing his/her will on another actor. Mutuality refers to the state of affairs where many parties seek to pursue a certain interest perceived to have a shared benefit. Trust safeguards are legal mechanisms that enhance the fairness of business interactions through the punishment of bad actors or reparative measures for the victims. Mutuality is also crucial in building sustainable trust in a competitive world. The argument of mutuality is evident in the aftermath of the world economic crisis where the fates of businesses and the public are intertwined.
Trust in business has certain salient features that are different from other kinds of trust. More specifically, there are inter-firm, interpersonal and cross-societal types of trust. Trust in business roughly describes the types and levels of vulnerability the members of the public are willing to assume in terms of business relations. Nowadays, a large percentage of the public are of the opinion that their vulnerability in terms of business relationships is a result of relatively large businesses sizes. A considerable corporate size enables business executives to assume less risk as compared to the average individual.
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Even chief executive officers agree that dealing with public trust issues is the major concern that businesses are facing in the 21st century (Arthur W. Page Society, 2007). For more than 100 years now, governments all over the world have been safeguarding the public interests by checking corporate activity to ensure trust in the business environment is maintained (Friedman, 2008). Some economists argue that the challenges of public mistrust in business can be resolved through tighter regulations. However, on the part of employees, tighter supervision will compromise trust as workers tend to be less committed to the internal standards meant to foster integrity and honesty. Therefore, additional oversight of employees may shift attention away from the fundamentals of nurturing trust because excessive control creates an environment of distrust. Furthermore, excessive oversight sends a signal that employees are no longer individually responsible for maintaining standards of the business operations.
Studies indicate that increased surveillance more often not decreases trust in those who are monitoring the conduct of others (Arthur W. Page Society, 2007). A survey of flight attendants employed by a major airline in the United States of America in 2008 revealed that oversight policies implemented to improve customer satisfaction caused flight workers to distrust and fear the passengers they were meant to serve (Friedman, 2008). Nevertheless, some checks are necessary, especially when the analyzed activities are vital for the success of the business. However, the research study has established that it is important for firms to put in place formal ethical programs embedded in a corporate culture so that employees can be encouraged to comply (Friedman, 2008).
Additionally, corporate leadership is crucial for nurturing and fostering public trust which is critical for the success of any business (Fukuyama, 1995). Some researchers argue that making a profit and creating value for stakeholders can easily cause conflict. However, the empirical evidence indicates that businesses that incorporate social concerns in their strategies are more profitable as compared to those firms that do not consider social aspects. Being socially responsible does not imply offsetting adverse impacts such as planting trees due to firm’s pollution activities but participating in social activities to create value for stakeholders. While public trust surveys may contradict the day-to-day operations of individual businesses, the statistics of companies which shy away from incorporating social concerns in their strategies is troubling. They send a serious signal that firms’ social relations need urgent attention (Kramer, 1999).
Corporate leaders need to nurture an environment of trust because they operate in a highly technological, political, social, economic and competitive environment (Fukuyama, 1995). For instance, it is difficult for an individual firm to thrive when the entire economy is in trouble, so only a single firm may be trusted when all other firms in the industry are mistrusted. Although the individual company may not be negatively affected by the industrial-wide distrust, it may still be too complex for an individual firm to address adequately. Such a complicated situation includes industrial-wide business distrust that adversely affects individual firms and other players in the global economy. Trust creation in business is an exercise that entails mutual value creation among the participants who have unequal resources, knowledge or power. The core ingredient of nurturing public trust in business is encouraging the creation of real value for all the concerned parties (Friedman, 2008).
The currently low levels of business trust present potential game-changing opportunities which can be exploited to improve business efficiency and value creation for all interested parties (Kramer, 1999). For a business to fully benefit from the opportunities produced by business trust and mitigate potential threats, corporate leaders must understand the three central dynamics of trust. They include mutuality, which is anchored on shared interest or value; trust safeguards, which limit the susceptibility in the context of imbalance of power; and balance of power where opportunities and risks are equally shared among all interested parties.
To nurture and sustain business trust at the fundamental level, a business should endeavor to manufacture and market high-quality goods or services that are fairly and reasonably priced, offer fair job opportunities in the healthy and safe environment, provide shareholders with meaningful returns on their investments, and engage in the corporate social responsibility. Besides these basic ingredients of nurturing business trust, corporates should put in place mechanisms that foster mutuality, create trust safeguards and balance power. Each business should strive to generate a set of values that elaborate and clarify the core value of an enterprise as well design a detailed execution plan to ensure that values are persistently adhered to across all departments. The enterprise should nurture and manage strong ties anchored on mutual trust as well as embrace transparency in its operations. Furthermore, the business should enhance trust within its sector of operation as well as be committed to making a contribution to the community.
It has already been established that trust is critical to the success of any business. Probably the most prominent recent crisis of trust happened during the 2008 global economic downturn. As a result, the world equity market incurred a loss of $30 trillion (Friedman, 2008). In 2009, 650,000 Americans lost their jobs as result of the recession – the highest number in the span of the past 60 years (Guerrera, 2009). This world economic crisis may have originated from too much trust, especially in the stability of housing market and risk management. Corporate leaders are faced with a difficult situation as they attempt to get away from the crisis triggered by low general public trust in business. Although governments all over the globe have taken unprecedented measures to restore trust in businesses and marketplaces, their actions are causing restricted impact on addressing public anxiety and restoring confidence. As a result, public trust in government remains extremely low. A survey carried out in 2009 revealed that only 23% of Americans had trust in government that it would do the right things all the time (Guerrera, 2009).
Liberty and trust are at core Centre of many capitalistic concepts (Pirson & Malhotra, 2007). Trust is so significant that no business can survive without it. For a firm to be able to mitigate the negative consequences of the global economic downturn in a capitalistic setting, there is a need to build capacity and manage trust in business undertakings. However, it is important to note that business crisis can take place not only when trust is too low but also when the trust is too high. In accounting discipline, the employees who are highly trusted are more likely to commit fraud as compared to the less trusted workers (Pirson & Malhotra, 2007). In the wake of ever-rising world economic crisis, modern regulations incorporating aspects of trust in business will certainly help mitigate business risk and improve the efficiency of business operations.
Next, trust emerges from interactions and working together with people of diverse backgrounds in order to attain a certain mutual goal or objective. A corporate leader needs to be active not only in his/her area of operation but also in all other sectors. It implies not only that a certain business may be threatening the economy and thus the government has to punish it. On the contrary, enterprises themselves have to be proactive in punishing the corporate players that are not to be trusted by the members of the public. Such approach promotes economic efficiency and prosperity for small- as well as large-scale businesses at the macroeconomic level. Trust acts as a social catalyst that allows businesses to create value in the today’s competitive global business environment (Guerrera, 2009).
In conclusion, trust in business is critical for every enterprise’s success. It enhances the efficiency of business operations. The three basic dynamics of trust in business are the balance of power, mutuality and trust safeguards. Besides these main ingredients of nurturing business trust, corporates should put in place mechanisms that can help create value for every stakeholders who may or may not be affected by the operations of the business. At the same time, tighter supervision of employees compromises trust as workers tend to be less committed to the internal standards when controlled at every step of their work. Moreover, it has been established that corporate leadership plays a significant role in nurturing and fostering public trust which is critical for the success of any business. After all, it is necessary for businesses to strive to enhance public trust in their undertakings because it plays a vital role in business success.