Trust in business ~ Management 2.0 developing social capital

Tuesday 21 April 2009

Trust in business

McKinsey have published research suggesting why trust has fallen in business (supporting one of Edelman’s findings) as a result of the global economic turmoil.

Of the 85% who said that trust in business had fallen, 56% blame financial firms' mishandling of risk. 33% of executives said job losses also contributed to the decline in trust and 29% cited executive compensation levels:

“There is much less consensus among the respondents on whether CEO compensation is excessive in their industries: 43 percent say it is, and 47 percent say it isn’t. Perhaps not surprising, nearly 60 percent of respondents in finance say yes, as do 49 percent of respondents at very large companies (those with annual revenue of $1 billion or more).”

The most interesting point from the research concerns how companies are attempting to do more with less.

“More than half of all respondents—57 percent—say that because of good management, their companies have been less hurt than most by the crisis. Although that figure probably indicates hope for better results than are entirely plausible, it also indicates a confidence in management that runs counter to many other reports. Indeed, even at companies where executives expect profits to drop in the first half of 2009, 51 percent say that their companies have been well managed, along with 52 percent of executives at financial firms.

Perhaps even more interesting, companies that (according to their executives) are well managed have a focus somewhat different from the one that executives at poorly managed companies support. Well-managed companies have a much stronger emphasis on reducing both operating costs and capital spending, as well as on improving productivity. Although executives at poorly managed companies also advocate cutting operating costs, they then turn to restructuring and hiring [talent that would not otherwise have been available].”

Ie while better and worse performing companies are reducing bottom line costs, the ones performing best are also putting more emphasis into building the top line as well. And they’re doing this by utilising the talent they already have that much better.