organisations-trust

How Organisations Can Repair Trust

Dr Husni Kharouf, CBiS Research Associate

Organisations spend considerable resources and effort in developing strong relationships with their customers. Often the aim is to enhance their customers’ satisfaction and cement their loyalty to the organisation. Trust plays a key part in this relationship development, and although it takes time to achieve, it can be easily destroyed. As with any relationship, problems will occur, so in order for organisations to maintain strong connections with their customers, an understanding of what actions are most appropriate to recover trust, is required.

The effects of trust violation do not necessarily imply an automatic loss of customers; it all depends on the perceived degree of the violation in the customers’ minds. In addition, trust violation does not always indicate a severe negative outcome that cannot be fixed; a minor product or service failure might have a small impact on trust. If the organisation deals with these minor violations effectively, they may actually strengthen their relationships with their customers, by demonstrating the organisation’s commitment and willingness to adapt and resolve problems.

In our study, we argue that organisations should have a contingency trust recovery strategy in place to enable them to respond quickly, and appropriately, when problems occur. To help organisations develop these strategies, we examine six trust recovery approaches (apology, compensation, excuses, reticence, ignorance, and denial), which organisations can apply to repair trust, and assessed their effect on customer loyalty, satisfaction and perceptions of organisational trustworthiness.

Before attempting to repair trust, organisations should first understand the nature of the violation. There are two broad categories for trust violations, and the resulting repair efforts: competence-based and integrity-based trust violations. Competency-based violations happen when the organisation unwillingly commits a violation, while integrity-based violations occur when an organisation knowingly commits a violation (e.g. VW scandal or the PPI bank scandal).

Based on empirical evidence, we propose each of the six trust recovery strategies (apology, compensation, excuses, reticence, ignorance, and denial) as appropriate responses to one of two types of trust violation: competence-based and integrity-based.

Competence based recovery approaches: compensation, apologies and excuses

  • Compensation, as a recovery approach, can be monetary or involve the transfer of something of intrinsic value to the customer. This acts to impose a visible penalty on the organisation for their actions, therefore reducing the probability of future violations
  • Apology is a statement from the organisation that acknowledges responsibility of the situation and regret for a trust violation
  • Excuses: Are explanations from the organisation that aim to reduce personal responsibility for the violation events, and try to minimize an organisation’s responsibility for negative events.

Integrity based recovery approaches: denial, reticence and ignorance

  • Denial is a statement from the organisation in which it explicitly declares the violation to be untrue (i.e. the statement acknowledges no responsibility and hence no regret). This approach could have a positive effect on trust repair because it rejects admitting liability for the violation, and hence may lead the customer to give the accused organisation the benefit of the doubt
  • Reticence is a statement in which the organisation explains that it cannot or will not confirm or deny the allegation
  • Ignorance: When the organisation states that, they do not know about the event or in some situation bears some, and not all, responsibility for the violation

We found that trust is most effectively recovered through compensation (in the case of a competence-based violation) or denial (integrity-based violation) in customer relationships. We found that customers have a higher tolerance towards a competence-based violation over an integrity one. This could be ascribed to the fact that customers are more sensitive to violations related to the organisation’s honesty and might feel cheated as a consequence; while competence-based violations could be explained by an accident which occurred despite the company’s good intentions.

For organisations, enhancing perceived organisational trustworthiness is important to the development of customer loyalty and satisfaction. The implications of our research for managers is that they should have contingency trust repair strategies in place, in case of a violation of trust, to enable them to implement the most appropriate approach in a timely manner.

References

(Main paper) Kharouf, H., & Lund, D., (2018), An empirical examination of organisational trust recovery: influences and implications, European Management Review, 10.1111/emre.12309

Bachmann, R., Gillespie, N. & Kramer, R., (2011). Trust In Crisis: Organizational and Institutional Trust, Failures and Repair. Organization Studies, 32(9), pp.1311–1313.

Basso, K. & Pizzutti, C., (2016). Trust Recovery Following a Double Deviation. Journal of Service Research, 19(2), pp.209–223.

Kim, P.H. & Harmon, D.J., (2014). Justifying One’s Transgressions : How Rationalizations Based on Equity, Equality, and Need Affect Trust After Its Violation. Journal of Experimental Psychology: Applied, 20(4), pp.365–379.

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