Trust is the foundation of success for any organisation, and governance is a key enabler of building organisational trust and trustworthiness.
A culture of trust supports the resilience and adaptability of organisations and their people and enables them to achieve positive outcomes for stakeholders – both internal and external. By reimagining their corporate governance structures to foster a trust culture, organisations can fuel innovation, enhance collaboration and support people to navigate effective change and progress.
Alongside KPMG Australia Chairman Alison Kitchen, Nicole Gillespie and Susan Staples discuss the increasing expectations surrounding governance and how organisations can create a trust culture for positive transformation.
What is organisational trust?
Trust is becoming a major point of consideration in boardrooms across the country. As trust breakdowns and breaches become more common, market leaders are increasingly accepting trust as a measurable gauge of success. Building a culture based on trust can transform organisations, empower employees, enable high performance and facilitate greater profitability and productivity.
Trust and effective governance go hand in hand. Leaders should consider critical governance levers and examine their existing structures, processes and behaviours that encourage – or inhibit – a high trust culture.
Despite large scale remediation and customer refunds in the billions of dollars in the financial services sector over the last 5-6 years, a recent APRA survey found that there are still questions about the accountability and transparency of ongoing conduct, with a large discrepancy between executives and other employees in relation to clarity of roles and responsibilities and how easy it is to challenge decision making.
Hallmarks of a high trust culture
Information is shared and not withheld as a resource; there is open and honest communication.
People feel empowered to make decisions, and exercise choice and discretion in how they do their work; there is minimal politics and bureaucracy, people feel trusted to try new things and challenge the status quo. Failure is seen as a learning opportunity, rather than something to punish.
Creating a high trust culture
Nurturing trust within an organisation doesn’t follow a one-size-fits-all model; the key lies in governance structures that suit each organisation, its people and its culture. However, there are three core governance levers that can inform a solid framework:
Structural levers
Structural governance levers involve the foundations of organisations’ governance frameworks. Organisations need a clear purpose and a strong direction, and the right committees, policies and frameworks in place to support oversight and decision-making. This provides a level of board transparency that act as an anchor for stewarding the organisation.
Procedural levers
Procedural levers refer to how information travels through an organisation to oversee performance and inform decision making. The boardroom should no longer be a private echo chamber – instead, leaders should consider multiple sources of data, and meaningful insights, based on answering fundamental questions of performance and culture, rather than simply generating volumes of reports based on the data already on hand. Consumer and employee voices are also a rich source of information that needs to be brought into the boardroom. There should be a standard escalation process and high levels of assurance.
Behavioural levers
Stakeholders need to see role modelling and enforced accountability in action in order to place their trust in an organisation. Leaders have to be open to hearing bad news and willing to make changes in response.
Building trust in AI
We are seeing consumer and employee distrust more and more, as Royal Commissions, cyber scams and public inquiries become more frequent. Issues such as 'greenwashing' of environmental and social performance and the emergence of artificial intelligence into the mainstream are giving organisations an opportunity to examine their trust cultures and shake up governance frameworks to improve stakeholder trust.
Recent insights suggest that most Australians are distrusting of AI systems, perceiving the potential risks as greater than the benefits. Specifically, people have the lowest level of confidence in commercial organisations and the government to develop, use and govern AI.
Three-quarters of Australians would trust AI more if organisations had proper governance practices in place.
Organisations should see this as an opportunity rather than a hindrance. Ensuring appropriate accountability and governance functions, listening to the concerns of their stakeholders, and supporting and adopting best practice approaches and standards will help to build trust while also harnessing the benefits of new technology.
KPMG can help you rethink your governance framework
Our Governance Advisory team is made up of governance, risk and controls experts who will work with you to shake up the way you approach your governance practices and build stakeholder trust. No matter where your organisation is in its journey, we can help.
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