A version of this post appeared in Risk & Compliance Magazine

Trust in business continues to slide. Restoring trust in corporations “is the most important issue of this decade,” writes Oxford University professor Colin Mayer. “Without trust in corporations, economic systems will fail, financial systems will collapse, the environment will continue to degrade and civilizations will clash,” he adds.

But rebuilding corporate reputation is challenging. Largely, it is because such trust is fragile and judgements in the court of public opinion are delivered at the speed of 280 characters or less. Still, nearly 70 percent of global respondents to the annual 2018 Edelman Trust Barometer maintain that building trust is the number one job for CEOs.

To strengthen their companies’ reputation and trust, chief executives in droves are seeking to transform their organizations to respond to an increasingly disruptive and complex marketplace. In the past decade, 87 percent of businesses have undertaken transformation initiatives, estimates Boston Consulting Group (BCG), sparking what the management consulting firm considers “always-on” transformation.

It is not hard to understand why. BCG figures that one-in-three public companies has a chance of failing within the next five years, up from one in 20 just 50 years ago. Yet, it also estimates that only 25 percent of companies that attempt a transformation capture short- and long-term performance gains versus their sector average. No wonder consumer faith in companies and brands suffers.

It diminishes particularly in the wake of a material breach of trust – an event so egregious that it exposes the chasm between an organization’s behavior on core competencies and the expectations of its constituents. So what is required to strengthen and regain trust in market leadership in the wake of a material breach of trust?

What is required is a tailored, multifaceted recovery strategy to drive specific business outcomes. It begins with a transformational marketplace remedy that reflects a deep understanding of the needs of all affected constituents. Companies cannot talk their way to reputation recovery. They must act differently. There is no spin in recovery. Only transformative actions effectively communicated will shift the conversation to recovery from crisis.

Who has done it well? Consider the Italian food company which, in 2013, faced global backlash when its president said he favored “traditional" families in its advertising. In response, the president apologized multiple times, but the company did not stop there. It created a diversity and inclusion board, launched a training program for employees and contributed to LGBT causes.

A year later, the company scored a top rating on the Human Rights Campaign’s list of LGBT-friendly employers. “The real negative reaction that you saw globally to these comments really spurred action [by the company],” said Deena Fidas, who conducted the survey.

Research shows that corrective action offers the best path to recovery because stakeholders gain more confidence in the company, a better outlook toward it, post-crisis, and a willingness to consider the company over its competitors.

When a material breach of trust erupts, a company must act with certainty to regain trust and market leadership. The markers of genuine corrective action include: (i) clear near-term commitments to fix the underlying circumstances and behaviors, including differentiated processes and procedures, customer incentives, leadership and board governance enhancements, and values alignment; (ii) third-party validation of the transformational moment – when trust is mortgaged, an independent expert offers the critical outside perspective that helps ensure business leaders are not inoculated from the change required; (iii) sustained actions and changes that are brought to life constantly through new people, policies and operational improvements in an ongoing battle for inches; and (iv) a belief by audiences, since reputation recovery is in the eye of the beholder, that a company has taken full responsibility for the breach. Companies often conduct regular quantitative research to objectively assess progress and setbacks in trust, audience sentiment and willingness to promote. This data is then used to recalibrate and refresh the recovery continuously.

Reputation-rebound strategies will vary over time as an organization progresses along its pathway to full recovery, and are dependent on circumstances and damage done by the breach. In our experience, a sustained reputation recovery has four critical phases.

First, companies must conduct rapid research and diagnosis. Perform an assessment of reputation and business impact while the crisis is still in its infancy. Grasp the scale, breadth and speed of the crisis and its consequences. Recognize the significance of the problem and demonstrate a commitment to resolve it.

Second, the company must communicate a transformative marketplace remedy. Create a catalytic moment in time, rooted in specific actions that shift the conversation from the crisis to the recovery. The remedy must demonstrate in word and deed a deep commitment to making things right.

Third, companies must activate a recovery campaign. Listen and engage in two-way dialogue with sincerity and candor. Reaffirm competency, and validate words and actions using credible third-parties. Engage in radical transparency to earn back trust. Execute and report out operational and organizational improvements.

Fourth, companies must commit to a sustained recovery campaign to mitigate a dedicated cottage industry of criticism. The guiding principles of long-term recovery include delivering meaningful change and accountability that contribute to a stronger company and industry environment post-crisis. Companies should give people a reason to believe by communicating changes constantly and directly to stakeholders, over-indexing on employee communications through all channels, including personal outreach, reporting on progress with at least the same rigor, thoughtfulness and energy used to report on earnings, and parking your pride and understanding that no one hears an apology when made just once.

During a recovery campaign, business leaders will be judged on their competency, transparency and guardianship. They prove their competency through an effective response that instills confidence that the company understands the scope of the problem and is applying the necessary remedies. They act transparently by living out their values with integrity. They display guardianship through empathy, care and concern that places others ahead of the company’s interests and profits.

When a material breach of trust occurs, many stakeholders – customers, investors, employees and others – consider it an act of betrayal. And they know from other situations in life what betrayal means. How quickly a company, its chief executive and its board of directors take action to close the breach of trust often determines the length of the recovery.

Corporate leaders, including directors, would benefit by doing one other thing after they have journeyed the road to recovery. They should reflect on principal lessons learned – so they can possibly avoid a reoccurrence or be better prepared to handle another in the future.

Ryan Cudney is executive vice president, Corporate Advisory Services, Chicago.

Tim Trad