Criticism imposes confronting choices on an organisation.
And repeated criticism, particularly in the media, starts a downward spiral, eroding trust, inspiring more criticism, further eroding trust and so on. 
The most visible illustration of that is what is happening with slow-learning politicians globally, who repeatedly demonstrate an inability to respond to voters’ concerns.
But the same applies elsewhere. It used to be that trust was automatically bestowed on company executives including bankers, as well as lawyers and medical professionals (“I trusted my doctor”). That era has passed: exposés on television, social media giving voice to activists, the global penetration of news, plus the trend towards crusading journalists, means flaws are increasingly exposed to an ever more cynical public.
So, trust now has to be hard-earned. One crucial way leaders can do this is by effectively responding to criticism or managing a crisis.
Yet there are numerous examples of organisations failing in a crisis – in Australia, the Commonwealth Bank and Dreamworld – which only serves to exacerbate the broader erosion of trust.
There are four common fail points in a crisis:
- The Narrative: at its simplest, if the behaviours and key messages are not convincing, fail.
- Spokesperson: again, if not convincing, fail.
- The Crisis Management Team (CMT): it needs the right mix of expertise, particularly managing hostile media and other stakeholders. The temptation is to assume simple responses to complex trust issues – that we can muddle through a crisis. If the CMT is not up to the task, fail.
- Board and Executive unity: the culture and values of an organisation are born here. There is strength in unity; a common fail point is division in a crisis leading to lowest common denominator decisions. This often happens because there is rarely a ‘good’ outcome in a crisis; at best we move the needle from ‘very bad’ to ‘less bad’. This can lead to frustration and expose division at the top.
Then of course there is the cause of the crisis, which needs attention once the crisis has been managed. It sounds counter-intuitive but we manage the crisis and then address the underlying issue, not the other way around.
Rebuilding trust can take concerted long-term effort.
Back to the banks and the downward spiral from trust. The incidents of bad behaviour in Australia have been almost continuous for years, certainly since the Fourex scandals during the period of spiralling interest rates in the 1980s. It’s been death of trust by a thousand cuts.
If the banks want to be trusted, the smart advice is to ask for a royal commission to allow a deep-dive into the cultural issues – the chance to comprehensively reboot the trust-factor.
With the latest CBA money-laundering scandal, the focused probe by the regulator (APRA) is too narrow and does little to address the multiple other causes of distrust. It’s piecemeal and simply won’t achieve what the banks and politicians say they want; trustworthiness.
In comparison, the Royal Commission into Institutional Responses to Child Sex Abuse shone lights into the darkest corners within organisations. This created immediate and lasting culture change, not only in those directly involved, but in many similar organisations watching the media reports.
Yes, a Royal Commission into banks will take years, but it’s probably the fastest way to rebuild bank cultures and restore confidence.
