Fertile ground for integrity opportunities may surprise

There are loads of integrity opportunities at any company. That’s not because companies have little integrity—in order to sell anything you need some integrity—but because there’s no limit to integrity. One clue to sizeable integrity opportunities is whether a firm has a bit of market power. Firms with market power tend not to work on relationships of trust perhaps because they feel it’s unnecessary to their survival. The trouble is market power can change over time and it may be too late to build vital trust.

Think of a company like Verizon Wireless for a moment. Verizon has invested a great deal in its network but not in its relationship with customers. (The same could be said for Microsoft. Both companies have put a lot into their product but not much into relationships with customers.) What happens is that a company can sense its vulnerability (little customer loyalty to the company. It’s all about the product) but instead of doing positive things to build greater trust they end up making it worse by doing things to trap customers. Think of what’s involved when you sign up with Verizon. (I’m with Verizon and I was lucky that my husband took on the frustrating work of signing up)The different plans are difficult to understand (even the people working in the store admit they don’t understand them!) It takes time and energy to work through and sign up. The rebates they offer require lots of paper work (and hope on the part of Verizon that you can’t be bothered and they won’t have to pay out the money). The rebate is sent in the form of debit cards that are clumsy to use and time consuming if you keep track of your balance. On top of all of that, the monthly statements are difficult to understand and the format keeps changing. All in all, it’s a dreadful customer experience! Why would Verizon customers have any loyalty to the company if someone else came out with a better product?

Yet it doesn’t have to be that way. Verizon has a good product and should be building trust with its customers not only about the product but about the service it delivers and the way it values the entire customer experience. If Verizon started trusting its customers and did valuable things to exhibit that trust, it would be a far stronger business than it is today. Other industries are in similar situations. Think of financial services firms or credit cards. There’s a huge opportunity for companies with market power to build stronger relationships of trust with customers. And there’s nothing to lose except fear. If you have a great product, then trusting customers is only a win/win for everyone.

A barometer of prosperity

The latest survey by Transparency International shows an increase in perceived corruption around the world. Most notably, the survey found that 67 per cent of people surveyed in North America and almost three quarters of Europeans think corruption has increased in the past three years. What’s critical here is the perception of greater corruption. That's because it's probably the most devastating on the economy. Here's what happens when corruption occurs:
1. Economic outcomes are distorted.
2. As corruption is perceived, it changes behavior and creates a self reinforcing cycle of greater corruption. If everyone else is corrupt why should I do the right thing?
3. Finally, valuable bonds of trust that help create efficiency in the economy are broken. If you no longer trust your credit card company, you will spend more time checking through your monthly statements, looking for alternatives, or forgo credit altogether.
It’s no coincidence that a perception of greater corruption goes hand in hand with a decline in prosperity. Long term wealth and widely shared prosperity are created by building relationships of integrity and trust not destroying them.

The Politics of Integrity continued

When I speak to audiences about the economics of integrity, I often get asked about how integrity relates to politics. While I’m not an expert on the political world I do think there are some similarities (and differences) with the way integrity works in the economy. The biggest difference is that in politics there isn’t a direct financial payoff from acting with integrity as there is in the economy. But I do think there is a payoff nonetheless.

If some smart person were able to measure outcomes, I bet they would find integrity in politics builds trust and that leads to greater political power. Of course, other factors can also give individuals enormous power in politics and clearly that’s where it can get tricky. But in a macro sense, I think there is a direct relationship between integrity in politics and good policies that create a well functioning social and economic system.

If politicians tell lies, mislead the public, and further their interest ahead of the people they were elected to represent, then we’ll get a mismatch of policies that are pretty ineffective and perhaps even harmful. But if our political leaders act with integrity, that is, tell the truth, keep their word, and act in the best interests of the public they are serving, we should get policies that are beneficial to the nation.

A casual observer would probably find little reason to distinguish between Republicans and Democrats on integrity. Wouldn’t it be a striking way for either party to differentiate itself by becoming the party of integrity? Acting with integrity builds trust among the public. The more trust political leaders have, the greater their mandate. It seems to me integrity would be a powerful way forward for any political party to take.

The Politics of Integrity

Recently I have caught myself thinking a lot about George Orwell’s satire Animal Farm and his masterpiece Nineteen Eighty-Four. That seems to be especially true in relation to the current debate on Bush’s tax cuts. What I am wondering is why we are debating the tax cuts at all? The cuts were bad when Bush introduced them and they’re bad now. Why can’t we let them expire and introduce a new tax policy that makes sense? Change doesn’t mean keeping the same economic policy of the previous administration. Nor does it mean keeping the same economic stewards (Bernanke and Geithner), or fighting in the same wars, or keeping the same head of defense. And change doesn’t mean replacing our troops with private soldiers in Iraq and calling it a withdrawal. Orwell used terms like ‘newspeak’, ‘oldspeak’ and ‘doublethink’ to describe the craziness he saw in governments in his day. Others called it ‘doublespeak’. We used to call it lies. Now we don’t call it anything.