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Risk and reward take spotlight at Kellogg School conference

By Matt Golosinski

2/1/2004 - Leadership failures have helped create rampant cynicism in American society, which in turn has produced a host of challenges for retailers trying to earn customer confidence, said Sam Zell, one of the keynote speakers at the Feb. 19 Kellogg School Conference on Trust in Retailing.

The daylong academic event brought top experts together at the James L. Allen Center to consider hurdles confronting retailers, and to offer potential solutions.

“Trust is risk,” said Zell, chairman and director of Equity Group Investments, a Chicago-based entrepreneurial investment firm. “Risk is integral to everything we do, and we must recognize this.”

Zell noted that the pervasive lack of trust he has seen in business transactions today may be partly the result of intense competition. “We’ve become a highly competitive society — perhaps to a fault — where the ‘I gotta get mine’ mentality drives a lot of the thinking,” Zell said.

“To a large extent, we’ve accepted distrust in our society … and we have adopted ‘victimhood’ as a methodology to deal with our failures,” Zell said. “We also have way too many definitions of ‘truth,’ and all these elements are manifestations of a failure to take responsibility.” A society unwilling to accept responsibility breeds the cynicism that undermines trust, said Zell.

Co-sponsored by the Zell Center for Risk Research and the Ford Center for Global Citizenship, the conference presented the leadership insights of such experts as Loring Knoblauch, president and CEO of Underwriters Laboratories; David Bernauer, chairman and CEO of Walgreen Co.; John Rowe, chairman and CEO of Exelon Corp.; and Michael Krasny, former CEO of CDW and chairman of Sawdust Investment Management LLC.

In a panel discussion, Knoblauch explained how trust was central to Underwriters Laboratories, a firm universally recognized as a leader in public safety certification.

“Trust is absolutely essential. It’s what we sell to our customers so that they can sell it to their customers,” said Knoblauch. He noted that value is also important but that trust was the “doorway” through which customers first walk before considering value.

Knoblauch recounted his experiences at the 2004 World Economic Forum at Davos where sessions presented evidence suggesting that even young people with strong ethical concerns about how goods and services are produced do not always “vote with their pocketbook” in accordance with these beliefs. But as these individuals age, gaining more responsibility and money, said Knoblauch, they typically begin foregrounding their ethical concerns in all areas of life, and this is when they demand more trustworthy commercial relationships.

Knoblauch also discussed changes in corporate approaches to safety since Sept. 11, 2001. Previously, companies such as Disney kept most indications or infrastructure related to theme park security behind the scenes, rather than in public view, said Knoblauch. Today, Disney frequently highlights its safety certifications for visitors to its parks.

The Walgreen Co. CEO echoed the importance of trust for his pharmacy.

“We can’t sell customers our tagline ‘The Pharmacy America Trusts’ simply by advertising it. We have to live it each day,” said Bernauer.

“Trust has to happen at the store level daily,” he noted. “And employees won’t communicate or feelthis trust unless they trust the people they are working for.”

Bernauer said “the job of the CEO is to increase shareholder value, but not at any price.” He emphasized the need for leaders to consider the long-term success of their ventures and ensure that their employees are happy. Happy employees will result in happy customers, Bernauer said.

Michael Krasny agreed. The former CEO of CDW explained how his principal strategy was to “make sure we created the best environment for employees.” Citing the high costs of hiring and training talented employees, Krasny said he sought to minimize turnover by building a workplace founded on trust.

“Trust formed the cornerstone of CDW’s business model,” said Krasny. “My father taught me that a handshake meant ‘a deal’s a deal.’ If you talk and practice this ideal, others will share it.”

Providing some historical perspective on retail trust was Russell Hardin, professor of politics at New York University. The author of Trust and Trustworthiness and Indeterminacy and Society, Hardin explained that the “invention of customer trust” dated back nearly 150 years, to the time of department store pioneer John Wanamaker who instituted the original unconditional return policy in his Philadelphia stores. The policy bolstered customer trust and resulted in repeat business, said Hardin.

“Trust comes from repeated interactions,” Hardin noted. He added that an important component in building retail trust came about in 1863 when the Federal Reserve introduced the guaranteed note, creating stable currency expectations which led to increased stability in commercial transactions. Previously, said Hardin, notes could be issued by any number of institutions, some sufficiently dubious as to cause widespread consumer — and therefore retail — uncertainty.

Suggestions for how to fix the contemporary lack of trust in retail included Zell’s call for increased standards of leadership. “Leaders have an obligation to act above the average expectations that might be acceptable for others,” said Zell.

He added that clarity and consistency also played a strong part in his recommendations for increasing trust. “We need more than the current ‘full disclosure without clarity’ model that forces others to interpret the small print,” he said.

Krasny cautioned business leaders to be mindful of the most important part of their business portfolios — their reputation.

“I don’t care how much money or how many toys you get, you can never buy back your reputation,” said Krasny.

“Trust formed the cornerstone of CDW’s business model,” said Krasny. “My father taught me that a handshake meant ‘a deal’s a deal.’ If you talk and practice this ideal, others will share it.”

Providing some historical perspective on retail trust was Russell Hardin, professor of politics at New York University. The author of Trust and Trustworthiness and Indeterminacy and Society, Hardin explained that the “invention of customer trust” dated back nearly 150 years, to the time of department store pioneer John Wanamaker who instituted the original unconditional return policy in his Philadelphia stores. The policy bolstered customer trust and resulted in repeat business, said Hardin.

“Trust comes from repeated interactions,” Hardin noted. He added that an important component in building retail trust came about in 1863 when the Federal Reserve introduced the guaranteed note, creating stable currency expectations which led to increased stability in commercial transactions. Previously, said Hardin, notes could be issued by any number of institutions, some sufficiently dubious as to cause widespread consumer — and therefore retail — uncertainty.

Suggestions for how to fix the contemporary lack of trust in retail included Zell’s call for increased standards of leadership. “Leaders have an obligation to act above the average expectations that might be acceptable for others,” said Zell.

He added that clarity and consistency also played a strong part in his recommendations for increasing trust. “We need more than the current ‘full disclosure without clarity’ model that forces others to interpret the small print,” he said.

Krasny cautioned business leaders to be mindful of the most important part of their business portfolios — their reputation.

“I don’t care how much money or how many toys you get, you can never buy back your reputation,” said Krasny.

“Trust is absolutely essential. It’s what we sell to our customers so that they can sell it to their customers,” said Knoblauch. He noted that value is also important but that trust was the “doorway” through which customers first walk before considering value.

Knoblauch recounted his experiences at the 2004 World Economic Forum at Davos where sessions presented evidence suggesting that even young people with strong ethical concerns about how goods and services are produced do not always “vote with their pocketbook” in accordance with these beliefs. But as these individuals age, gaining more responsibility and money, said Knoblauch, they typically begin foregrounding their ethical concerns in all areas of life, and this is when they demand more trustworthy commercial relationships.

Knoblauch also discussed changes in corporate approaches to safety since Sept. 11, 2001. Previously, companies such as Disney kept most indications or infrastructure related to theme park security behind the scenes, rather than in public view, said Knoblauch. Today, Disney frequently highlights its safety certifications for visitors to its parks.

The Walgreen Co. CEO echoed the importance of trust for his pharmacy.

“We can’t sell customers our tagline ‘The Pharmacy America Trusts’ simply by advertising it. We have to live it each day,” said Bernauer.

“Trust has to happen at the store level daily,” he noted. “And employees won’t communicate or feelthis trust unless they trust the people they are working for.”

Bernauer said “the job of the CEO is to increase shareholder value, but not at any price.” He emphasized the need for leaders to consider the long-term success of their ventures and ensure that their employees are happy. Happy employees will result in happy customers, Bernauer said.

Michael Krasny agreed. The former CEO of CDW explained how his principal strategy was to “make sure we created the best environment for employees.” Citing the high costs of hiring and training talented employees, Krasny said he sought to minimize turnover by building a workplace founded on trust.

“Trust formed the cornerstone of CDW’s business model,” said Krasny. “My father taught me that a handshake meant ‘a deal’s a deal.’ If you talk and practice this ideal, others will share it.”

Providing some historical perspective on retail trust was Russell Hardin, professor of politics at New York University. The author of Trust and Trustworthiness and Indeterminacy and Society, Hardin explained that the “invention of customer trust” dated back nearly 150 years, to the time of department store pioneer John Wanamaker who instituted the original unconditional return policy in his Philadelphia stores. The policy bolstered customer trust and resulted in repeat business, said Hardin.

“Trust comes from repeated interactions,” Hardin noted. He added that an important component in building retail trust came about in 1863 when the Federal Reserve introduced the guaranteed note, creating stable currency expectations which led to increased stability in commercial transactions. Previously, said Hardin, notes could be issued by any number of institutions, some sufficiently dubious as to cause widespread consumer — and therefore retail — uncertainty.

Suggestions for how to fix the contemporary lack of trust in retail included Zell’s call for increased standards of leadership. “Leaders have an obligation to act above the average expectations that might be acceptable for others,” said Zell.

He added that clarity and consistency also played a strong part in his recommendations for increasing trust. “We need more than the current ‘full disclosure without clarity’ model that forces others to interpret the small print,” he said.

Krasny cautioned business leaders to be mindful of the most important part of their business portfolios — their reputation.

“I don’t care how much money or how many toys you get, you can never buy back your reputation,” said Krasny.

“Trust formed the cornerstone of CDW’s business model,” said Krasny. “My father taught me that a handshake meant ‘a deal’s a deal.’ If you talk and practice this ideal, others will share it.”

Providing some historical perspective on retail trust was Russell Hardin, professor of politics at New York University. The author of Trust and Trustworthiness and Indeterminacy and Society, Hardin explained that the “invention of customer trust” dated back nearly 150 years, to the time of department store pioneer John Wanamaker who instituted the original unconditional return policy in his Philadelphia stores. The policy bolstered customer trust and resulted in repeat business, said Hardin.

“Trust comes from repeated interactions,” Hardin noted. He added that an important component in building retail trust came about in 1863 when the Federal Reserve introduced the guaranteed note, creating stable currency expectations which led to increased stability in commercial transactions. Previously, said Hardin, notes could be issued by any number of institutions, some sufficiently dubious as to cause widespread consumer — and therefore retail — uncertainty.

Suggestions for how to fix the contemporary lack of trust in retail included Zell’s call for increased standards of leadership. “Leaders have an obligation to act above the average expectations that might be acceptable for others,” said Zell.

He added that clarity and consistency also played a strong part in his recommendations for increasing trust. “We need more than the current ‘full disclosure without clarity’ model that forces others to interpret the small print,” he said.

Krasny cautioned business leaders to be mindful of the most important part of their business portfolios — their reputation.

“I don’t care how much money or how many toys you get, you can never buy back your reputation,” said Krasny.