Back to reality

I don't know what you find but I'm always disappointed how short the 'holiday dividend' is once you've got back into the routine of life and have caught up on how little has happened while you've been away. No magic wand has been waved over the economy and sadly despite some well laid plans the action list has grown. While I can cope with my to do list, the state of the economy is concerning - although as wiser men than I have pointed out, "why worry about something you cannot effect". Never could a truer statement be made, but sadly most people are not single-minded enough to think like that and the noise in the system is what drives mass behaviour.

Trying to interpret the current noise in the system is difficult but the action last week of the Bank of England to extend its Quantitative Easing Programme by £50bn is a sure fire indication that we are a long way from getting out of the woods. This figure while significant in the context of the UK economy is dwarfed by the IMF's recent $11.9 trillion estimate of the cost of mopping up the financial crisis - an amount equivalent to about a fifth of global GDP. Having read the weekend press, I sense that a consensus of business writers believe that the market bounce of the last few months may be short lived as people come to terms with the fact that the recovery may be as painful as the downturn itself. Let's hope we are not heading, as some predict, for a Japan-style lost decade.

The news this week that France and Germany appear to be coming out of recession should make us a tad more optimistic.

As I've mentioned in previous blogs, one of the main casualties of the past 12 months has been trust in business. So it was with some optimism that I read Edelman's Midyear Trust Barometer. In summary the survey indicates that trust in business has stabilised and is recovering significantly in some of the world's largest markets. In the US, 48% trust business to do what is right, up from a low of 36% in January. Much of this change is attributed to tangible actions such as repaying bailout money, reducing CEO pay and firing non performing teams.

Perhaps the most critical point however, given that we may be facing a long haul out of recession, is the importance trust appears to play in determining peoples' buying decisions. The survey indicates that cost is only marginally more important than trust with 53% saying that in the past six months they have switched brands for a lower cost and 45% saying they switched because of lost trust. This must be music to the ears of those businesses that have made a virtue of maintaining their standards and investing in key stakeholders over these difficult times. After all these are things every business can control when all around is in a state of flux.

I would be really interested in hearing your views on this by commenting on the blog, or by email..

David

Comments

[David Phillips]

Edward, I would agree entirely with your observation that we do not fully understand the value of trust as a corporate asset. How it is created and maintained is something that we are giving more thought to given its importance to the workings of the economy and society and a sense that there has been a wholesale erosion in many aspects of it over recent decades. Your point that there is limited research in this area provides a great opportunity for the academic world to take up the challenge - let's hope they do.

If anyone else is aware of any meaningful research do let us know.

[Edward Harkins]

David it's maybe instructive that there have been no comments on this thread. I fear that many practitioners and commentators still have not fully comprehended the value of trust as a concrete corporate asset. This value is especially acute in times of recession or crisis. For myself, my learning on this was in doing research a few years back on leadership and communities in the context of urban regeneration. Some other research by the Joseph Rowntree Trust had demonstrated that trust was more than an 'apple pie and motherhood' thing - it was an driver of the extent to which stakeholders will engage with an organisation - and even decide whether they will be allies or enemies. Unfortunately that research was very limited and there seems to be a continuing lack of attention to this important potential source of competitive advantage in times of trouble.