University of Arkansas

Walton College

The Sam M. Walton College of Business

Season 1, Episode 3: Trustworthiness

Cindy Moehring and Matt Waller
June 04, 2020  |  By Cindy Moehring

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This video explores how people decide which companies to trust. Research has shown that people base their trust in a company on two things: the company’s ethics and competence, but the two are not equally weighted. Ethics is 3x more important. Watch this episode to learn more about how you can establish trust with your customers by focusing on business ethics.

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Episode Transcript

00:03 Cindy Moehring: Welcome to this edition of The BIS, the Business Integrity school. Your resource for practical tips from a business ethics pro who's been there. I'm Cindy Moehring, the founder and executive chair of the Business Integrity Leadership Initiative at the Sam M Walton College of Business. Joining me today is Dr. Matt Waller, dean of the Walton College.

00:23 Dr. Matt Waller: So one of the reasons that business ethics and integrity is so important is because of trustworthiness, and we discovered that in a article recently, would you mind talking about that a little bit?

00:36 Cindy Moehring: Yeah. So it was the 2020 Edelman Trust Barometer report, and they're a global communications firm, they've been actually measuring trust for the last 20 years among the major institutions in society. So, it's business, and it's NGOs, and it's government, and it's the media. And sad to say, but what they actually found is that none of those institutions in society are trusted. None of them. Not a single one of them. What they also found, some are better than others, but what they also found are there are two main components to what makes up trustworthiness, so whether or not an individual decides to trust a business, is two things. And one is three times more important than the other, do you wanna guess at what the two things are that make up trustworthiness?

01:23 Dr. Matt Waller: I've read the article so that's not fair.

01:25 Cindy Moehring: It's your ethics and it's your competence, and the one that's three times more important is your ethics. So people will decide whether or not to trust your business three times more if you're ethical, if they think you're just good at what you do, that's only 25% of the equation. So, it's a really important finding for business to dial in on.

01:46 Dr. Matt Waller: You know, one thing I thought interesting about that is that in business schools throughout the country, we really teach and instill competence.

01:55 Cindy Moehring: Right. And you got to have that.

01:57 Dr. Matt Waller: You got to have that.

01:58 Cindy Moehring: That's your baseline, you got to have it.

02:00 Dr. Matt Waller: We do it by teaching things like accounting and finance and marketing and business law, etcetera, etcetera. We also do it by having students get involved in extra-curricular activities.

02:10 Cindy Moehring: Yes.

02:11 Dr. Matt Waller: And internships.

02:12 Cindy Moehring: Yes.

02:12 Dr. Matt Waller: And all these things build competence, and we want them to be mentored, etcetera, etcetera, but really ethics and integrity needs to be a core part of that as well. I mean, these students in business schools, both undergraduate and graduate, they're brought up in homes where they learn about things, but context really does matter.

02:35 Cindy Moehring: Context matters a whole lot, which is why I love the approach we're gonna take where we integrate the business ethics along with the competencies. So, while you're sitting in your accounting class, you can also talk about a business ethics issue that relates to accounting or one in your supply chain class.

02:51 Dr. Matt Waller: Or if you're a leader in business of any sort.

02:54 Cindy Moehring: In business you're going gonna be talking about it, of any of these issues, because what you'll learn is that these issues apply regardless of what you choose to do with your life and business, they apply. So, you can't just focus on in business being a good merchandiser or being a good accountant, you've gotta focus on how do I be a good... How do I show up as an ethical individual that is gonna contribute to the company, and as I rise in the company how do I show up as an ethical leader because that's gonna matter three times more than your competence.

03:23 Dr. Matt Waller: And trust is so important.

03:25 Cindy Moehring: Yeah, it is.

03:26 Dr. Matt Waller: Because consumers and customers don't want to buy from companies that they don't trust, and so that is part of the business... I guess the business model or argument for making ethics so important in your business.

03:46 Cindy Moehring: That's right.

03:46 Dr. Matt Waller: It's because consumers and customers will trust you more, but I think also for the leadership team to be trusted, means that they can get people aligned more easily and set the direction in a way that is more effective than if they aren't trusted.

04:03 Cindy Moehring: Yes. And customers will vote with their... They'll vote with their wallets. And so if they don't believe that you are doing the right thing ethically and that you're doing something that's good for the communities in which you operate, 'cause that's a broader kind of view of ethics, they're gonna vote with their wallets and they're gonna take their money somewhere else. And so, you really wanna make sure that your customers trust you so you can grow your business.

04:26 Dr. Matt Waller: And nowadays, people are, the young people in college are way more concerned about the purpose of the company. When they're trying to see should I go to this company or that company to work, they think, "Does this company... Is it moral? Is it ethical? Is it doing what's good for the environment?" Etcetera, etcetera. I don't think that was as true 30 years ago as it is today.

04:53 Cindy Moehring: Yeah. I think it's really changed and I think that we've kind of... Business round table's definition of what the purpose of a corporation is has really changed, and it used to be that it was there only to serve the shareholders and to get the most profits or the most gain, and now they've really redefined, at least 181 of the world's largest company CEOs signed on to redefine the purpose of a corporation more broadly, to recognize some of the things we're talking about. You've gotta have ethical dealings with your suppliers and you've gotta look after your own employees and you've got to think about the communities that you serve. And all of that matters a tremendous amount to the customers that you serve. So...

05:32 Dr. Matt Waller: Yeah. One thing I really found interesting in that report was they looked at the main institutions, business, government, NGOs and business...

05:44 Cindy Moehring: Media.

05:45 Dr. Matt Waller: Media, but media and government were low on competence and low on trust.

05:51 Cindy Moehring: Low on both, yes.

05:52 Dr. Matt Waller: Whereas business was high on competence, low on trust.

05:57 Cindy Moehring: Yes.

05:58 Dr. Matt Waller: And NGOs were low on competence and high on trust.

06:01 Cindy Moehring: Well, high on ethics, actually.

06:03 Dr. Matt Waller: High on ethics, yeah.

06:03 Cindy Moehring: To have trust, you gotta have both.

06:05 Dr. Matt Waller: Ethics, that's right.

06:06 Cindy Moehring: And so nobody was up or right. So business was competent but not seen as ethical. And NGOs were seen as ethical but not particularly competent. And then unfortunately, both government and media were seen as unethical and incompetent.

[chuckle]

06:20 Cindy Moehring: So it really speaks to, I think, the mood of the country right now.

06:25 Dr. Matt Waller: Yeah and what, as a dean of a business school, what really caught my attention was their finding that business really needs to lead the way in this.

06:36 Cindy Moehring: Yes.

06:36 Dr. Matt Waller: People are expecting business to lead the way.

06:39 Cindy Moehring: Yes, they are. And that was one of the findings on the report, is that the individuals expect business to lead the way. They have the most freedom to act and they can act quickly, and you have to act quickly today in business if you wanna stay ahead of the pack. So, a lot of people expect business to lead the way and I think that's a wake-up call really for business leaders to understand that they... They've got the ball and all they need to do is run with it. And the way you can run with it here and really make a difference is to focus on the six business ethics principles we talked about and then find a way to communicate that. I mean, part of it is a marketing strategy, you gotta do it. You can't talk about something if you're not actually doing it, but do it and then find ways to celebrate that, both internally and externally. Find ways to talk about what you're doing to improve the communities where you operate in as a business and find ways to highlight some of your employees that are actually really living up to those business ethics principles in a way that can inspire some of your other employees, and if you talk about it, then that will help drive what you were just mentioning about people wanna join a company where they believe in its purpose and they know that the company is true to what they said.

07:49 Cindy Moehring: Thanks for listening to today's episode of The BIS, the Business Integrity School. You can find us on YouTube, Google SoundCloud, iTunes, or wherever you find your podcasts. Be sure to subscribe and rate us, and you can find us by searching The BIS, that's one word T-H-E-B-I-S. Tune in next time for more practical tips from a pro.

Matt WallerCindy Moehring is the founder and executive chair of the Business Integrity Leadership Initiative at the Sam M. Walton College of Business at the University of Arkansas. She recently retired from Walmart after 20 years, where she served as senior vice president, Global Chief Ethics Officer, and senior vice president, U.S. Chief Ethics and Compliance Officer.


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