Are You in it for 5 Years or 50? The Trust You Earn Will Determine How Long Your Business Lasts. Your personal and business ethics have significant impacts on your business's longevity.
By Ray Zinn •
Opinions expressed by Entrepreneur contributors are their own.
You cannot last long in this world without trust. It creates friendships, keeps partners by your side and grows your businesses.
Trust inspires loyalty, and it extends to businesses as well as people. Venerable brands such as Coca-Cola and Nike understand their committed fans would disappear quickly if they believed that trust was being abused. No marriage and no company can survive if the people who depend on them always are worried that the other party won't deliver on promises.
According to my marketing-guru friend, trust is the foundation of all relationships. "You trust the maker of the candy bar not to poison you, which means you trust their trust in agricultural and chemical suppliers," he says. "You trust the store to not sell you past-dated products, and you trust the cashier to make correct change. There is a lot of trust in snack food."
Related: How to Build Trust and Avoid Being Lied to as an Entrepreneur
Your business survives only by keeping trust. It determines whether your company will last for five years or endure for five decades.
Uberly ridiculous.
In recent business scandals -- Uber among the most newsworthy -- we see the interplay between ethics and trust. Fortunes have been and are being lost when companies lose the trust of customers, stockholders, investors and regulators.
The breakdown of corporate trust begins with the abandonment of corporate ethics. Ethics are defined by corporate leaders and maintained by corporate culture, which also is defined by corporate leaders. The two halves of the equation -- defining and maintaining -- are essential. Both are the responsibility of top management.
Consider these two sides of the ethics coin:
- An organization that does not define its corporate ethics has none. No amount of oversight will prevent some employees from taking shortcuts to achieve their personal goals or spoofing their Management By Objective targets. You'll see this at work whenever sales people, striving to meet quotas but not hobbled by ethics, take every shortcut to make a sale.
- Likewise, well-defined ethics are useless unless there are means for enforcing them. A top-down, data-driven monitoring and inspection process is as impractical as it is expensive and organizationally disruptive. In this respect, corporate culture plays two important roles. It is both the communicator of ethics and a peer-enforcement mechanism.
Related: 7 Ways to Build Consumer Trust Naturally
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Lapses and consequences.
Even ethically loose companies often can glide toward a five-year life span. Jawbone relaunched with massive funding in 2011. Despite being one of the original unicorns (its market capitalization was more than $1 billion), the company is dead in 2017. Silicon Valley venture capitalists will throw money at anyone with a competent five-year plan. In fact, there's a cottage industry in minting companies that will soon be history. Many, and perhaps even most, will fail due to ethical lapses:
- Lying to customers to land sales and generate the sort of top-line revenues that venture capitalists like.
- Shortchanging customers on support.
- Making irrational financial projections to garner more investor cash.
- Abandoning employee wants and needs.
The list of ethical lapses is functionally endless. But there are also many companies with no such lapses. They defined their cultural basics, encoded them in ways that can be easily understood and shared (think the HP Way and Google's Ten Things) and used both peer-level and boss-staff enforcement of ethical rules. They set these rules of engagement and made them stick. They act according to the ethical principles by which their people consistently abide. These actions, in turn, lead people to trust them. And it's no coincidence their companies are thriving.
Related: Why the Golden Rule Must Be Practiced in Business
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I founded my semiconductor company, Micrel, on the willingness to follow the same approach. I led the Silicon Valley business for 36 profitable years. Our culture informed our employees of our ethics and made those golden standards easy to practice. Three of the four pillars of our corporate culture were honesty, integrity and respecting the dignity of every person. This created trust within and outside of Micrel, leading to the lowest employee turnover rate in the industry -- and an unmatched profitability streak detailed in "Tough Things First."
Trust is created through faithful execution of ethical rules. Without this, you might last a few years. With it, your company can outlast you (and possibly your grandchildren).
