By Daniel Hunter
Research from Coventry University’s Centre for Trust and Ethical Behaviour has found that effectiveness of government regulation in restoring trust in organisations has significantly declined since the economic crisis began in 2007.
In the first ever meta-analytic longitudinal study of its kind, researchers brought together 192 separate investigations (79, 264 respondents) from over a 20 year period (1991-2011) including two periods of crisis, to examine the effectiveness of internal and external factors in re-building organisational trust in a B2B and B2C level context.
They tested the impact on trust repair over this period of internal actions, such as communication, co-operation, past history, information sharing and trustful behavior; external factors including regulation and reputation; and direct customer satisfaction.
They also looked at the effect of five key factors: geographical context, industry sector, dyad type, stakeholder groups and temporal context of crises to gain a deeper understanding of the nature trust restoration at an organisational level.
Although they found evidence that reputation and regulatory environment have a positive impact on building trust in organisations, the effectiveness of government imposed regulation — such as the establishment of codes of conduct and imposition of penalties — has showed noticeable decline since 2007.
The research reveals that regulation on its own is simply not sufficient, and instead customers’ direct experiences and wider reputation of competent and benevolent intentions are now more important than ever to trust-building. The study also showed direct exposure to a firms' trustful behaviour was a vital ingredient. Thus firms cannot hide behind legislation - they need to directly change, and be seen to change their ways.
Geographical area was shown to make a difference to trust rebuilding. In South East Asia external reputation and the maintenance of customers’ expectations for both existing and new partners are particularly important in restoring trust, whereas for the North American and European context, aside from customer satisfaction, direct experiences of the firm being more co-operative and trustful were needed.
In terms of industry sector those involved in ecommerce need to pay most attention to trust repair in order to restore confidence.
“Trust in so many firms is being challenged, with financial institutions hit hard through the collapse of mortgage-related securities, and confidence continuing to be denuded through well publicised cases of rogue traders and rate fixing, such as the Libor scandal, yet concurrent with these events governments have introduced policy initiatives to restore the trustworthiness in these institutions," Professor Rosalind Searle, co-director of the Centre for Trust and Ethical Behaviour, said.
"Many of these policies focus heavily on regulation and control as a means of enhancing transparency. Our evidence challenges the merits of governments over-focusing on regulatory environment in this way.
"While ‘governance’ mechanisms, such as the establishment of a code of conduct, do contribute positively to organisational trust after a crisis, our analysis indicates this is just one of a suite of drivers that organisations themselves need to change and start deploying in their efforts to restore trust. They simply cannot hide behind the regulations anymore.
“Post GFC, and in the wake of so many fresh scandals, consumers and other businesses are simply too jaundiced. Firms need to pay active attention and show why they should be trusted. Like the Dutch say - trust comes on foot, but leaves on horseback. Getting it back needs real attention.”
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