June 18, 2004

Robert Eckert of Mattel Shares Insight with Class of 2004

Commencement Address

Los Angeles — Thank you Dean Willison and good evening graduates, and guests. Graduates let me paint a picture of the world you are returning to after your brief academic hiatus. Since you left the “outside” world: Martha Stewart was convicted for lying about her stock trading although one of the government’s witnesses against her may also have been lying. Go figure. WorldCom CEO Bernie Ebbers was indicted; two Tyco executives allegedly looted more than $600 million from shareholders.

Two of the countries largest and most respected newspapers – the New York Times and USA Today — admitted that their correspondents fabricated stories. Stories so compelling that one was nominated for a Pulitzer. Dick Grasso, chairman of the world’s most powerful financial market, stepped down after criticism over his exorbitant compensation package. He’s currently being sued to return a portion of his almost $200 million in compensation. For $1.8 million in personal gain, Richard Strong, founder and former CEO of Strong Financial, agreed to a $60 million fine. Enron, HealthSouth, Adelphia, unfortunately, the list goes on and on..

And there have been some very real consequences because of this reprehensible behavior.

In July 2002, the toughest overhaul of the U.S. securities legislation since the 1930s was enacted — the Sarbanes-Oxley Act. It requires all U.S. listed companies to set up systems that allow employees to blow the whistle on accounting and auditing misdeeds Another very real outcome according to a recent study by public relations giant Golin/Harris is that 69 percent of Americans say, “I just don’t know who to trust anymore.” That tells me that all of this negative behavior is hurting our institutions. Granted, there have always been episodes of people cheating. It’s almost cyclical. There were the savings and loans scandals of 1980s. The junk bond of the early ’90s. And now, the corporate greed scandals.

Every time one of these high-level and deep-seated incidents is uncovered, the American public trusts a little bit less. We just don’t bounce back as fast. And right about now, you are probably thinking about turning to your classmate next to you and whispering, “aren’t commencement speeches supposed to be uplifting and inspirational? This guy is plain depressing.”

Well, I am not here to talk to you about scandals. I am actually here to talk to you about a topic that I hope you will find useful as you transition back into the world of full time employment. On your last official day of business school, I’d like to talk to you about Trust, its importance in the business world and the responsibilities that go along with it. Your own Senior Associate Dean Al Osborne suggested this topic to me.

When I began thinking about trust as a topic for this speech, I started doing some research. First, let’s define trust. Webster’s defines it as an “assured reliance on the character, ability, strength, or truth of someone or something.” Trust is different from integrity. Trust is more organic in nature. It can be earned and it can be lost. With integrity, you either have it or you don’t. There are different levels of trust. And it is the foundation of relationship building. Relationships between business and consumer, spouse to spouse, shareholder to corporation or supervisor to employee.

It’s much harder to define than integrity and may be just a feeling or perception. And it takes time to develop — it’s not instantaneous. Trust is also natural Think back to when you were a little kid, standing on the side of a pool. And your mother or father was in the pool, arms outstretched, encouraging and coaxing you to jump in. The moment you jumped is the ultimate display of trust. For those of you with kids, you know exactly what I am talking about.

In a recent Harvard Business Review article entitled the Geography of Trust, the author has surmised after 10 years of study that there are three fundamental types of trust: personal trust, expertise trust and structural trust.

Personal trust is based on faith in a person’s integrity and is developed in the workplace through shared experiences. For example, we quickly learn whom we can trust when working on tight deadlines or during times of crisis. According to the article, expertise trust is reliance in an advisor’s ability in a specific subject matter. Structural trust reflects how roles and ambition colour insight and spin information. Given this person’s role and responsibility can he offer judgment untainted by his goals or interests?

So whom do we trust and whom don’t we trust? According to a few different surveys: The least trusted organizations — without naming any names — are brokerage and accounting firms, Wall Street in general, media companies, and journalists. Organizations that most consistently rank as trustworthy — and here I will name names — include Johnson and Johnson, Coca Cola, Ford Motor Company, BBC, Dell Computer, Harley Davidson, BMW, Mercedes, Toyota.

When I was looking at the most trusted organizations, I asked myself “what does Johnson and Johnson, makers of baby shampoo, have in common with Harley Davidson, makers of motorcycles?” It’s not always tangible but I think the similarities of these organizations outweigh the differences. They all stand for quality, respect for the consumer, innovation, originality

Let’s go back to Webster’s definition — there is an “assured reliance on the character, ability, strength, and truth” of each these companies and their products I find it interesting that trust can be such a key element to a company’s success yet only in recent years has any thoughtful discussion of anything to do with ethics appeared in business school curriculum. Trust is a key building block in the creation of a company’s reputation, and as a direct result, its shareholder value.

According to the Edelman Public Relations Trust Barometer survey, nine out of 10 people agree that a corporation’s reputation plays a large role in forming opinions about products and services. Eight out of 10 agree to pay more money for goods and services from a company with a well-regarded labor and environmental record. And if you think the business world is under a microscope when it comes to the issue of trust, the media is really taking a beating. According to a survey by Journalism.org entitled the State of the News Media in 2004, Americans think journalists are sloppier, less professional, less moral, less caring, more biased, less honest about their mistakes and generally more harmful to democracy than they did in the ’80s. I happen to agree. The survey looked at changes in the public’s attitudes from 1985 to 2002 and they found that the number of Americans who think news organizations are highly professional declined from 72% to 49%.

The number of Americans who think news organizations generally get the facts straight declined from 55% to 35%. The believability of Daily newspapers fell from 80% to 59%, ABC News fell from 83% to 65%, CBS News fell from 84% to 64%, NBC News fell from 82% to 66%. Not very encouraging statistics regarding a supposedly impartial medium of news, information and truth.

And since this is an election year, I wanted to touch briefly on the world of politics. I find it amusing that if you really think about it, this country was built on the premise of distrust, not trust. Isn’t that really the point of three distinct branches of government? That ultimately the founding fathers didn’t trust each other!

During my research, I came across an editorial in the London Evening Standard entitled: Trust is a Must on the Road to Good Business. I want to read you the first couple of lines, which I not only found amusing but also very telling: “There is a paradox with trust: those who talk most loudly about it are often trusted least. Politicians, who regularly ask for your trust, seem to be trusted least.”

When my teenage son says to me, “trust me,” my response is always the same: “deeds not words.” We ought to hold our politicians to the same standard. Why is it so difficult to be trustworthy? After all that I have read about trust, and from my personal experience, I think it can be boiled down to a few areas that you all will face as you leave business school and re-enter the workforce. As I said earlier, building credibility takes time. Unfortunately, credibility can dissolve in an instance. In business, many times we mix messages about a single event. For example, when announcing a layoff, the message to shareholders is a positive one about cost cutting, but the message to employees is vastly different. These inconsistencies devalue trust in leaders.

In the book the The Trusted Leader, authors Robert Galford and Anne Drapeau take a look at repairing broken trust, which is really quite simple but can be difficult to implement because it takes a lot of looking inward. First, they recommend that you figure out what happened. Was trust broken down over time or was there a single incident? Then assess the damage. Was it a widespread event or an isolated incident? Own up to the mistake. That doesn’t mean you have fix the mistake immediately but you need to acknowledge the mistake so that you can move forward.

And finally, Galford and Drapeau encourage you to identify and communicate remedial actions. In 1982, seven people were murdered when they took Tylenol that had been laced at the store shelf with cyanide. Johnson and Johnson recalled 31 million capsules at a cost of $100 million and the Tylenol legend was born.

Charles Handy, a fellow of the London School of Business, says quite succinctly that the “surest way to make your employees trustworthy is to trust them.” He identifies seven Rules of Trust and I’d like to touch on a couple that are the most meaningful to me. Trust is not blind. Or said another way: it’s difficult to trust people you don’t know. Trust needs touch. The more virtual an organization, the more chance there is for a failure of trust. To remedy, virtual organizations need to make time and effort for face-to-face meetings. E-mail and teleconferences are not always the answer.

And my favorite from Handy: Trust requires leaders. You’ll notice that I said “leaders” plural. Trust does not require one leader, but many leaders — and at different levels of the organization, responsible for different things Handy compares it to a crew team. You may assume that the captain of the crew team is the leader. That’s what I would assume. But it’s not the case. Yes, off the water, the leader is the captain. But in the water, there is the stroke, who sets the pace. There is the person responsible for steering. And there is the coach, who builds the team. Each member has a unique role to fill and is trusted at different times, for different reasons, by the team.

You are the future leaders of business. And when it comes to trust, your leadership style affects those you are leading. In a recent behavioral integrity study by Cornell University, researchers studying Holiday Inn found that hotels where employees strongly believed their managers followed through on promises and demonstrated values they preached were substantially more profitable than those whose managers scored average or lower. Boiled down to even simpler terms that even an old-fashioned MBA like me can understand — the more the employees trusted management, the more productive the teams.

As you go to work, your top responsibility should be to build trust. To perform every day at the highest standards. Not just for yourself, but for your team, for your supervisor, for the consumer, for the company’s shareholders, for the rest of us in business, for those.who have passed before you or will succeed you at UCLA Anderson School of Management.

It’s day one of the next chapter of your life, and I’m putting my trust in each of you.

Thank you and congratulations.

Media Relations