Listening: A Strategy and Change Blog | Hosfeld & Associates

By Kathleen Hosfeld and John Forman

Trust in business is starting to make a comeback from historic lows during the Recession, according to the 2010 Edelman Trust Barometer research.  It’s a fragile trust, the report tells us. Those surveyed say that after the economic pressure is off, they expect business to go back to unbridled self-interest. In other words, they don’t really trust business – not for the long-haul. At a Young Presidents Organization event last week, members said that “trust” was their number one concern, regardless of the specific business they were in. The gap is enormous.

The Business Case

The business case for trust is well established. A lack of trust can create a number of problems for a company. It can impact reputations as conversation in the market place is fueled by assumptions of ill-will (like BP), gossip and innuendo, slower decision-making processes, as well as loss of sales. And the misbehavior of one Bernie Madoff can sour public perception for organizations that have never been connected to him.  On the other hand, a company that has the trust of its customers or other stakeholders can count on better collaboration and decision-making, resilience in the face of a crisis (like Toyota), more word of mouth advertising from advocates, and fewer legal or regulatory costs.

Trust matters to a lot more companies than a skeptical public might imagine. While there are egregiously self-interested firms that can be said to not care about trust, the larger part of the business world cares deeply. Yet, in the current  environment, positive intent may not be enough to reclaim trust.

The Trust Formula

One model of trust in relationships offers some lessons for senior executives and marketing specialists for how to reclaim trust with customers, partners and other stakeholders. The trust “formula” has four factors: Credibility, Reliability, Openness, and Self/Other Orientation. This model is adapted from David Maister’s “Trusted Advisor,” a classic in the field. All four elements in the model play an important part, but the fourth — Self/Other Orientation — can either undermine or enhance the other three factors.

Credibility – The credibility of a firm is built on the truthfulness of its communications, its reputation, its experience base and credentials. If there’s a gap between what a firm says and the customer or partner’s experience, trust can break down. If the firm’s reputation or verifiable credentials or experience don’t line up with its claims or communication, trust can be lost. Marketing initiatives to build credibility center on brand alignment, certifications, client/customer testimonials, promotion and sales processes.

Reliability – The reliability of a firm is demonstrated in its actions. Does the firm follow through and keep its commitments? Does it create predictable experiences, does it set expectations that it can keep? Uneven quality, inconsistent experiences, poor performance, lack of follow up or follow through, all contribute to a loss of trust. Marketing initiatives to build reliability include product management and sales and customer service.

Openness – In interpersonal relationships, openness is often confused with sharing intimate information. That does not foster trust. Openness that fosters trust involves the risks taken  in the relationship, and  the discretion and empathy with which one treats other people’s risks. In business life, this translates to transparency, and sharing information with stakeholders, sometimes hard-to-admit information like “we made a mistake.” Marketing initiatives that demonstrate openness include stakeholder engagement, supply chain transparency, sustainability reporting and open design standards.

Self/Other Orientation – In individual relationships, we most deeply trust those people who we feel have our best interests in mind. So too with companies. We trust companies that  care for our benefit as much they care about profit.  Marketing initiatives that foster trust also include integrating social good into all aspects of mission, marketing and communication. Demonstrating this commitment amplifies the benefit of a firm’s efforts in regards to Credibility, Reliability and Openness. Marketing initiatives that “go first” involve making a stand for social and environmental responsibility in the communities and the environment where they operate. But efforts at these forms of conscious capitalism must be genuine, and seen as genuine, efforts to make a positive difference.

How are We Doing?

Each of these qualities shows up in organizations in slightly different ways, but all lend themselves to meaningful measurements. As a result, organizations can benchmark perceptions and behaviors, and objectively assess progress towards trust goals.  Companies can be comprehensively assessed on these four qualities to determine the greatest opportunities for reclaiming or enhancing trust with customers and other stakeholders.

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Kathleen Hosfeld is the principal of Hosfeld & Associates, a strategy and marketing firm.  John Forman is the principal of Integral Development, a teaching and consulting firm focused on leadership, performance, strategy and decision-making.

By Kathleen Hosfeld

Following a recent Special Report by the Wall Street Journal, commentators had a field day with columnist Dr. Aneel Karnani’s assertion that the concept of Corporate Social Responsibility is fundamentally flawed.  Many of the comments pointed out that not only was his analysis fundamentally flawed, it was the “same ole, same ole” whateverness we’ve been hearing from free market idealogs for the last 15-20 years.

Karnani, who is Professor of Strategy at the University of Michigan’s Stephen M Ross School of Business, asserts that all CSR initiatives have to “pencil out” financially before they are embraced by CEOs. “Pleas for corporate social responsibility will be truly embraced only by those executives who are smart enough to see that doing the right thing is a byproduct of their pursuit of profit. And that renders such pleas pointless.” See the article here.

Based on the interviews that Pat Hughes and I did for her study: “The Leadership of Sustainability,” and my work with clients, my perspective is that engagement with CSR or sustainability evolves.  Some leaders we spoke with started with a “because it’s the right thing to do” mentality. They kept their experiments small to see if they would hurt or help them financially. If it didn’t hurt, they kept going. In businesses where CSR or sustainability was not baked in from the beginning, it is developmental, occurring in stages.  As a result, early experiments have to be either revenue positive or at the least revenue neutral.

However, there are many firms who find that holding objectives for financial, social and environmental benefit simultaneously creates a crucible for innovation. They have broken away from the either/or thinking represented in Karnani’s article, and are now in the territory of Third Way thinking. Third Way thinking goes beyond hierarchical rankings of choices, one being the better “good” than another. Instead, it “holds the tension” between competing “goods” until a new solution appears that honors all of them. Harvard Business Review even published an entire special edition last summer about CSR and sustainability as drivers of innovation, citing breakthroughs of over 30 companies.

So, what is the Wall Street Journal’s problem? Commentators responding to the article repeatedly questioned the lack of balanced perspective, and a pattern of editorial bias against values-based management approaches. Companies every day are proving Karnani wrong with their actions. Is the Journal simply blind to the evidence? Or are the editors ignoring the firms who are doing well by  “doing good”  because they seem to be “outliers” rather than  mainstream. If they are intentionally disregarding outliers, then they do their readers a disservice because it’s in the outliers where the seeds of breakthrough innovations are sown.

By Kathleen Hosfeld

Few companies argue that fostering trust with customers and other stakeholders is an important business task. Where there’s disagreement, however, is what specifically fosters trust, and the degree to which trust between customers and companies – particularly as it relates to green or sustainability claims – is suffering.

Our academic partner, Jenny Mish, PhD., assistant professor of marketing at Notre Dame, explored this and other questions in her doctoral research. Her study, which explored food standards and sustainability, resulted in insights about marketing behaviors that foster trust.

Mish interviewed a wide variety of individuals representing institutions engaged in developing or promoting the use of market-based product standards, such as Fair Trade or organic, that specify reductions in negative environmental or social impacts.  She spoke with people in large corporations like McDonald’s, in government such as the United States Department of Agriculture, and  smaller, grassroots organizations such as the Portland, OR-based Food Alliance.

The spectrum of types of trust she found span from the very impersonal and institutional, to the highly personal, local and dare we say “intimate.”  Large corporations tend to look primarily at repeat purchase behavior to evaluate the degree of trust they’ve engendered with customers. Some companies evaluate trust on the basis of their ability to fulfill key expectations of sustainability performance. Still others evaluate trust on the basis of direct, personal interactions with customers, and the degree to which they had actual contact with customers and other stakeholders.

Her findings suggest that marketers may be able to foster trust three different ways:

Preserving the Integrity of the Brand: The least personal form of trust is embodied in the brand attributes that create a predictable customer experience. This is true even when the context is not sustainability or green attributes.  This calls for organizational and channel alignment to fulfill brand promises consistently, which means full commitment to green or sustainability standards…not merely claims that show up in features and benefits.

Compliance with a Market-Based Standard: A company’s ability to merit certification such as the USDA’s organic standard or Fair Trade, creates a type of performance contract with customers that fosters trust. Marketers may encourage their organizations to qualify for certification, but ultimately this will require cross-functional collaboration to bring operations into compliance. Standards that inspire trust are those that are either objectively evaluated (by government or third-party) or that are developed and supported by a wide coalition of contributors/stakeholders.

Designing Highly Personal Forms of Contact with Customers: A company’s ability to deal directly and personally with its customers, such as “meet the farmer” programs, can foster the most personal type of trust.  These programs are common in “local” exchange relationships, such as those formed at farmer’s markets.

One implication of the study, as I see it, is that human interactions (personal) are where trust can be lost altogether, or maintained in either an impersonal or highly personal and reciprocal manner. Mish’s study was not designed to explore trust as engendered by the sales process, but we know from other experience that the quality of those interactions also impact on consumer perceptions. While they make good marketing sense, authentic interpersonal relationships are usually not driven by marketing goals. They usually reflect a sense of “this is the right thing to do regardless” in the company culture, as is the case with local relationships described above.  They manifest from the shared values of everyone in the company.

Ultimately fostering trust is not a matter of choosing between these forms. It’s bringing all types of trust-fostering practices to the marketing agenda. The assumption is that if the organization is large, then personal interaction is not possible.  If we believe, however, that it’s the right thing to do, then it becomes an opportunity for innovation. There’s the marketing challenge — creating trust-engendering relationships between human beings on both sides of the exchange process, regardless of company size.

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Jenny Mish’s dissertation is “Centralizing and Decentralizing Forces in the Development of Sustainable Markets: A study of Food Product Standards.” It was published in 2009, by the University of Utah.

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Hosfeld & Associates leads clients in the alignment of vision, purpose, strategy and brand. We join a community of others who recognize that new forms of organization are arising that have the power to positively reshape our economy and society.

As a result, our approach to purpose, strategy and change leadership is markedly different than traditional strategy firms. Unlike other firms that focus on short-term programs, we specialize in finding the unique elements of an organization that give it long-term strategic advantage. We guide clients in creating an adaptive framework that allows each organization to reinvent itself profitably over time to meet changing market conditions, while retaining its essential brand and market identity.

Unlocking this source of sustainable advantage takes both left-brain and right-brain processes, both head and heart. We create and facilitate team-based strategy design processes that intensify focus on priorities, align and engage stakeholders, and build strategic capacity within and across lines of business.

Through our associate network, we also support our clients as they take their purpose and strategy deep within the organization. Implementation services include leadership development, culture and change, as well as, of course, branding and messaging programs.

An initial consultation is free, and we invite you to contact us to discuss your situation further.

Please also browse our blog, where we share articles on strategy, purpose, sustainability, dialogue in business, and stakeholder engagement.

A representative list of our services:

Core Identity and Strategy
• Purpose/Mission/Vision/Values Creation
• Strategic Assessment and New Strategy Development
• Four Quadrant (Wilber) Mission/Purpose Analysis
• Brand Strategy and Alignment
• Institutionalizing Strategy and Brand

Customers, Stakeholders
• Stakeholder Analysis and Alignment
• Stakeholder Focused Process Redesign
• Customer Satisfaction Research
• Communication Strategy and Messaging

Leadership and Team Performance
• Executive Coaching
• Decision-Making and Improved Execution
• Mission Critical Team Coaching
• Dialogue, Crucial Conversations

For additional information please visit the Experience and Services sections of our website.

The future of brand building “will involve all stakeholders (in a)… fluid, uncertain world where a brand evolves in dialogue with others. This in turn will require both openness and trust.” So say Nicholas Ind and Majken Schultz in an article from Strategy + Business.

Pointing to two examples – LEGO and Robobank – of companies among other examples, the authors comment on how brand building is slipping from arms of marketers into the hands of managers who are tending the total customer or stakeholder experience. “These organizations have understood that brand building (even if the terminology of branding is not used) is a participative process involving the whole organization and is the responsibility of all employees.”

Critical success factors for organizations creating brands in this environment, we predict, will include the abilities to align the organization on compelling strategies based on stakeholder dialogue, to foster and facilitate dialogue among multiple stakeholders, to channel greater flows of information into, within, and outside the organization, and to build authentic trust with stakeholder groups.

Strategy + Business Article: Brand Building Beyond Marketing

Think about the last strategic planning process you went through. Was it energizing? Did it create breakthroughs with lasting impact on the organization? Did it tap the creativity of the planning team? If it did, it’s likely that your process went beyond traditional planning techniques to tap the potential of the artistic mind. It was likely more like a strategy design session than a strategic planning session.

What’s the difference?

Effective strategy design calls on us to engage the artistic mind – capable of pattern recognition, synthesis, story, empathy, play and meaning-making – to create compelling futures that inspire adaptive change. In our Strategy Jazz workshop, we explore an archetypal pattern of human creativity through the eyes of jazz musicians to see ways we can get greater outcomes from strategy processes.

Strategy Jazz will be presented at the OSR (Organizational Systems Renewal) alumni conference at Seattle University, June 19, 2010, but can also be adapted for on-sites, retreats and other conferences.

Through this workshop, we invite participants to shift their mental model of strategy design from a linear “planning” model to an innovation-based approach that taps the artistic, intuitive mind.

Using conversations with jazz recording artists Greta Matassa and Jovino Santos Neto, we take participants on a guided tour of the elements of jazz improvisation, laying down an archetypal pattern that repeats itself in our approach to strategic innovation for businesses and other organizations.

The OSR Conference explores the emerging field of arts in the design and leadership of change. For more information about the OSR Conference or to register, please visit the event website. To find out about options for presenting this workshop for your own organization, please contact us. Additional information is also available here.

Terrific blog post at Harvard Business Review  by Umair Haque who is Director of the Havas Media Lab  saying the proof of the benefit of responsible business is in. Wait too much longer for more proof and the responsible businesses will have eaten your lunch. Statistics he cites are:

• Ethisphere Institute: In 2008, ethical leaders outperformed the growth of the S&P 500 by 40%. In 2009, again. In 2010, by 35%.
• CSR Magazine found a shareholder value performance gap of about 10% between, for example, the most and least transparent companies.
• SRI Research finds that the mean Market Value Added of the top 100 Corporate Citizens is $36 billion, more than four times the Mean Market Value Added of the remaining companies — which is less than $8 billion.
• Berkeley’s Haas School of Business: Study found that companies high in social responsibility had significantly higher profit margins, returns on equity, and returns on assets.

What type of behavior characterizes these types of companies? It’s important to note that these are self-regulated practices of companies that take responsibility for relationships with and impacts on a variety of stakeholders, and incorporate an active, conscious commitment to the public interest (versus self interest alone) in their decision-making.

For additional details see the entire blog article here.

By Ron Benton and Kathleen Hosfeld

With a global economy in slow recovery and many businesses fighting for survival, what is the significance of sustainability thought, practices, and execution in shaping a better and more prosperous world?  A just-released comprehensive global study conducted by MIT’s Sloan Management Review and partners provides some revealing and reassuring answers including the following:

• Sustainability is continuing to have a material impact on how companies think and act
• Sustainability is surviving the downturn
• Most firms are not decisively acting on the opportunities presented by sustainability
• A small number of firms are capitalizing on the opportunities and reaping the rewards.

What do these findings mean for you and your organization?  In general, the findings affirm that thoughtful investments in sustainability will positively differentiate early adopters in their industries.  The specifics depend on the issues your organization faces and where you and your firm are in your evolution of adopting and benefiting from sustainability practices.

The study also supports our assertion that engagement in sustainability has a developmental aspect to it.  It says that those who have experience in sustainability see more clearly the business case and strategic benefits it can offer. Those with less experience don’t have a clear sense of the business case for sustainability.  This suggests that a good way to explore sustainability is through a well-designed pilot. Well-crafted sustainability strategy projects can help companies explore the potential benefits of sustainability in ways that create value over the long and short term.
Read the MIT Sloan Management Report “The Business of Sustainability.”

Hosfeld & Associates and Ron Benton & Associates work together to offer services to help companies thrive in the sustainability economy. Additional details are available here.

Noticing the gap between what consumers say and what they do.

Recently the radio industry was rocked by the results of using new listening measuring devices to monitor listener behavior. Called “People Meters,” the devices “listened” to the sound in the room of the person wearing them, and recorded what stations they picked up. Prior to the use of these devices, people kept journals of how many hours a day they listened to particular stations. What people reported was that they listened to National Public Radio stations and classical music stations. What the People Meters revealed however is they were actually tuning into easy listening , oldies and country western stations. This is something like reporting that you read National Geographic, Scientific American or Town and Country magazines, when in fact you’re actually reading People, Cosmopolitan or Seventeen.

The difference between what we know we should do and what we actually do is something that smart marketers have noticed for a long time. It’s a lesson many forgot in the dot.com bubble days when focus groups asked people to evaluate whether or not they would use a certain Web technology in the future.

The Hartmann Group, a Bellevue research firm, has explored the gap between our so-called “new thrift” and the actual purchase behavior of many consumers. We clip coupons for the grocery store, but then go out and buy an iPhone. This phenomenon helps us understand why people report that sustainability is very important to them, but their purchase behavior doesn’t necessarily confirm it.  Read more here.

“The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.”
— Peter Drucker

By Kathleen Hosfeld

Freeze and wait. That’s been the reaction of many to this time of economic uncertainty. While that works for animals who camouflage themselves in their surroundings until danger has passed, its wisdom only goes so far in the human marketplace.

This strategy assumes that the “danger” will indeed pass, and that things will “get back to normal.” Early signs, however, suggest that the old status quo has been disturbed permanently. How much consumer and corporate behavior will change for good remains to be seen. Many agree, however, that this crisis has changed them in fundamental ways.

In this time those that are thriving are doing something fairly counter-intuitive. They are moving in the direction of their hearts, and doing the things they long to do. As a result, they are stepping out of stagnant eddies into places where new energy and activity are flowing.

I recently watched a short film called Lemonade that tells stories of people in the advertising industry who used their layoffs as a call to action. By unleashing the power of what was meaningful to them, their lives and careers were redirected in important ways.

Around Thanksgiving 2009, I wrote a small blog article titled “Let the Beauty We Love Be What We Do.” It’s a challenge to counteract fear with a move toward what we love.  What do you feel called to do? Now is the time. Take your own career or your organization in a direction you have always longed to go. It may not make sense and yet it’s the right move.

Yesterday’s logic is to focus on the numbers – the numbers you can hit or the numbers you can earn. The new logic is to find the place where you can make a difference, the place that is meaningful to you, and let that energy carry you forward.

No-cost places to start include:

• Watch the Lemonade movie.
• Read the blog article I wrote and spend some time thinking about the beauty that you love.
• Reconsider your value propositions for key stakeholders.  Are they compelling to you? Do they speak to your desire to make a difference in the world?  Use our free value propositions worksheets for this exploration.
• Start a conversation in your workplace around the question: “How do we want to make a difference at this workplace, through this work, or using the assets and resources we have available to us?”

I’m interested to know what changes you decide to make. Let me know.