Safe food has a financial payoff for all.

It’s no coincidence that we’ve been seeing the growth of both the ‘eat locally’ and organic food movements at the same time as shocking lapses in food safety. Who wanted to eat mass produced eggs last summer or feed them to their kids after the horrifying scenes from the henhouses in Iowa? In recent years, Americans have been losing trust in the nation’s food supply and that’s a huge problem. Not just for a population that faces significant health care costs and job insecurity but for the food production industry as well. You’d think that instead of opposing plans to improve food safety, the industry would get on board and find good solutions for all involved. Apparently that hasn’t been the case as Michael Pollan and Eric Shlosser point out in an op-ed in today’s NYT. It reminds me of the way the financial industry opposed financial regulation after the crisis of 2008. When will big business learn that integrity isn’t a cost but an investment?

Fallout from the exploding Rolls Royce engine

Qantas announced yesterday it had checked 16 engines of its A380 fleet and was satisfied the planes were safe to fly. It would begin to bring back the aircraft into service this weekend after having grounded its flagship fleet for 19 days following the Singapore flight safety incident. Pretty quickly into the investigation, the companies involved announced that leaking oil was probably the cause of the engine exploding. So is that it? Crisis over and everyone back to business as usual?
Not so fast. The incident is revealing about the state of the companies involved. Qantas seems to have emerged from the crisis well. CEO Alan Joyce has been adamant about safety first at the expense of losing money and his approach has helped build trust with the public. Rolls Royce is another matter though. Tight lipped and not very communicative to the public, its announcements have served merely to allow doubt to linger about what’s actually going on at the company, especially in light of other high profile engine mishaps. It may be worth watching what happens next at Rolls Royce. My bet is there could be further bumps ahead.

The power behind rules that enable activity

Try this thought experiment. Have you ever tried to stop doing some activity, say cutting down on eating junk or watching television? What happens when you make a rule that you won’t do something? It’s a safe bet that after a while you’re not all that successful and you end up breaking your own rule. That’s the problem with a lot of the rules we have in our social and economic system; even in our own households! We tend to set up systems where the rules tell us what not to do instead of what to do. Admittedly, it’s not always easy to create rules enabling activity when there are certain things that we want to make sure never happen—say murder for instance. Yet in many cases it can be done and simply requires a different way of thinking about the problem. For instance, if I want to cut down on junk food I might make a rule that I eat fruit for every snack or with every meal. Or that I’ll only eat nutritious or organic food. If I’m trying to cut down on television then maybe I’ll make a rule that I read a book a week. Next time you find yourself struggling not to do something, make a rule for doing something positive instead. It really can work to change behavior.

How to make rules that work

Rules are a bit like exercise or a healthy diet. Most of us would prefer to live without yet we know that in the long run we really can’t. Part of what is undermining our confidence in our economic system is that we’re seeing one high profile case after another of rules that have been flaunted or broken. Think of the banks’ failure to follow the rules on foreclosures for instance. One way to restore confidence is to understand what makes rules work and incorporate those insights into the design of our new economic rules.

In that spirit, here are some ideas for what makes a good rule:

1. Must be based on sound principles
2. Should be clear, simple and consistent
3. Works best if it is intuitive
4. Should be designed to be self reinforcing
5. Ideally is enabling of activity not restrictive

Taking Trust to the Next Level

There’s a typical pattern companies tend to fall into when it comes to thinking about trust. A common question asked might be something like this: how do I get customer x to trust me enough to sign the contract?

But that’s where any thought on the matter usually ends. An extremely valuable follow up question should be: how can I get customer x to trust me more?

When a business starts to think about how to build more trust with its customers, it helps make transactions automatic, more frequent and more valuable. Try it!

A final thought on integrity crises:

You’re not done until you’re done! A company in the middle of an integrity crisis must keep going until it makes changes on four fronts:
1. What it does
2. What it says
3. The outcome for those who have been hurt
4. What the public thinks

Another integrity crisis blows up!

It’s hard to imagine a worse integrity problem for an engine maker than having its engine blow up mid air on a passenger aircraft. Yet that’s exactly the situation Rolls Royce is now in after its engine on a Qantas Airbus blew up out of Singapore last week. Of course, it’s not just the engine maker’s problem now but the airline and manufacturer as well.
So what should they do?

There are three key steps the trio should make together:
1. Identify the problem as quickly as possible
2. Release those findings publicly and in real time
3. Ensure the solution is public, understandable to all, and credible beyond any doubt.

So far, Qantas has been handling the crisis well. Its engineers are working closely with Rolls Royce and Airbus to identify the problem. Meanwhile, the CEO of Qantas has grounded its A380 fleet until it is sure there is no safety issue. One analyst estimated that the cost of that decision could amount to $15 million to $20 million in lost revenue a week. Yet Qantas knows its business depends on its safety record. Flying long distances across the Pacific to and from Australia without even one plane crash is not a trivial accomplishment. It has been the result of many people working diligently over decades to achieve such a stellar safety record. It’s another reminder; integrity really is a company’s most valuable asset and worth protecting even if it costs in the short term.

A quick checklist for an integrity crisis

Here’s a ten point checklist to keep in your bottom drawer in case of a crisis. It incorporates the DNA of integrity and helps build trust with stakeholders.

1. Be honest and open
2. Determine the truth
3. Prevent death or illness regardless of the cost
4. Go see for yourself
5. Reach outside the company for help—ask the leading experts in the field to help find solutions to the problem.
6. Report developments in real time
7. Be generous to those who have been affected. This is not a time to pinch pennies
8. Don’t rest until the problem is fixed
9. Execute organizational changes
10. If someone is at fault, hold them accountable.

Replicating the DNA of integrity to come out ahead of a crisis

The media focus and coverage resulting from an integrity crisis is a harsh and unforgiving trial. But the really exciting news is that with the right approach it’s possible not just to regain one’s reputation but even to enhance it. When everybody is looking, it’s a great time to impress them.

To do that, you need to appreciate the process that creates trust. Knowledge of the “DNA” of integrity—Disclosure, Norms and Accountability—is the key. Honoring those three concepts allows a company to make smart investments in its relationships with customers and stakeholders.

Start with the single most important one: disclosure. When a crisis hits the last thing anyone feels like doing is admit a problem or mistake and deal with it publicly. Hunkering down, being cautious about what is said to the media or even to staff and following the advice of lawyers is all too common a response. Building trust is not about playing a defensive game. It’s about taking risks and reaching out to people. In times of crisis it’s worth remembering there’s no problem that can’t be fixed so long as there’s not an attempt to hide it. That doesn’t mean disclosure is easy. Facts, details and explanations can be difficult to marshal in the midst of a fast moving crisis. For the manager there’s no better approach than to go and see for yourself. And as you communicate in real time, updates can correct mistakes or erroneous data in an honest and open way.

Next address norms. Crucially, you need to make things right with people who have been hurt. Secondarily, you need to change your product, or process, or staffing in a way that credibly removes the public’s concern. The change should be clear, capable of simple explanation and effectively communicated.

Finally demonstrate accountability. If nobody is at fault, say so. But if there was a lapse, hold him or her accountable. And what if it’s your own lapse? Good luck trying to hide it. A far better approach is to address things in an honest and forthright way.

Is 2010 the year of the corporate integrity crisis?

Remember Toyota, Goldman Sachs, BP, Apple, Hewlett Packard and J&J? Just to name a few of the big name corporate crises we’ve seen this year. Instead of learning from the mistakes of others, companies seem to react in the same way each time a crisis breaks: by being defensive and denying any fault. In the midst of a corporate integrity crisis, companies tend to limp from one mistake to another. Bruised by an ‘unfair’ media, misunderstood by the public and unappreciated by the market, corporate leaders tend to hold their breath until the crisis is over and hope that the damage isn’t too great.

But it doesn’t have to be like that. Recognizing that integrity is an investment with a financial payoff can be empowering. Smart companies can learn how to build enormous integrity during a crisis and actually come out ahead. And they can do it without calling in the emergency troops, legions of PR and consulting experts waiting to make money from corporate missteps.

So here’s the single most important point for any manager to remember when a crisis hits: you are no longer in the [fill in the blank] business. You are in the trust business. And your job description is now all about building trust.

While there are plenty of examples of how not to handle an integrity crisis there are only a handful of positive role models. And here’s the reason why: how many managers consciously think about how to build trust and really know how to do it systematically?