US President Ronald Reagan liked to say, “Trust, but verify,” when referencing Cold War relations with the Soviet Union. Today, this saying can be a mantra for employees, consumers, and investors as they choose the organizations they wish to align themselves with.  In a post-recession economy, corporations must be able to achieve transparency and trust in order to maintain credibility in the marketplace.

The Link Between Trust and Transparency

Without trust, an organization cannot achieve transparency, and the journey toward transparency often begins “at home.” When companies commit to internal transparency, they not only build confidence and trust among the workforce, but they also create an internal structure that aligns with their publicly stated values. And building trust through transparency often originates with communication. As organizations openly share their mistakes as well as their successes with employees, it builds credibility and trust in the ranks.

But communicating freely doesn’t necessarily mean an organization has achieved transparency. Communication is not an indication of transparency, rather, it is a facilitator. Even so, organizational leaders often resist an “honesty is the best policy” approach to communication out of fear.

Team Ownership of Corporate Difficulty

Leaders can be crippled by their concern that sharing bad news will lead to panic amongst employees. One of the easiest and most effective ways to counteract potential panic is to immediately offer up solutions to employees. When breaking bad news, leaders should never just drop a bomb and run for cover. Instead, bad news should be delivered strategically in the following way:

1.     Name the problem.

2.     Identify and announce your solution to team members.

3.     Say to each person, “here is how you can help.”

The immediate presentation of solutions shows team members a plan and how they can help the organization overcome the problem, and gives them a sense of ownership over the solution. They won’t feel as though their jobs are in jeopardy, because they know they are helping move the company forward. When leaders own up to mistakes, it builds long-term credibility. Employees know that leadership values their contributions, and they become far more engaged in the solution, while at the same time feeling more connected to the company.

Internal Trust and Transparency Leads to External Trust and Credibility

It stands to reason that the main advocates of any brand or any organization should be its employees. When companies adopt policies of internal transparency, they build trust and they build a team that reflects the publicly stated mission and goals of the organization. When customers or members of the public seek proof of a company’s claims, they need only look to its workforce to see those claims in action.

When a company’s identity and its reputation align, it creates trust among the general public. People are more likely to work for, buy from, and invest in organizations that they deem to be trustworthy, especially in the wake of the Great Recession of 2008. The collapse of the global economy made consumers and investors far more cautious.  And in our hyper-connected world, information can achieve viral status in a matter of mere minutes, whether it is true or not. A corporate reputation that took 50 years to build can be trampled in less than one hour. But a commitment to internal and external transparency, and the practice of sharing both the good and the bad, can prevent small problems from becoming full-blown crises.