Without trust, businesses – like many things – will fail. In a company, trust between business partners and clients is vital. In addition, entire societies depend on trust. If societies do not build trust internally and externally, they may decay or succumb to strife.
Deloitte, an auditor of many companies in Ukraine, devoted its annual ‘Conductors of Changes’ conference to the issue of trust. It was held in Kyiv on Oct. 24.
The topic was decided at the start of 2019, when the organizing team understood that “the feeling of deep trust crisis was just obvious,” recalls Deloitte Ukraine managing partner Andriy Bulakh.
In 2018, the nation showed critically low levels of trust in public institutions such as the president (14%), the government (11%), and the parliament (8%), according to a survey by the Kyiv International Institute of Sociology.
The crisis of trust is palpable not only through sociological research. Real life stories support the data. “The society does not trust people who want to do something good for it,” said Mark Zarkhin, co-owner of Kumpel Group restaurants, while talking to Kyiv Post during the conference.
Zarkhin says that he and other restaurateurs in Lviv “take an active civic stance by creating festivals, events, social programs, things not related to business.” For him this is a part of normal give-and-take between a business and a community, and it builds trust.
But Zarkhin feels unhappy when successful people say he is doing this to pursue commercial interests. “This could be so sometimes, but such accusations are annoying, to tell the truth.”
Crisis of trust
Four conference panels discussed particular sub-topics related to trust. The first panel discussion concerned Ukraine’s national crisis in the sphere of trust, and Bulakh moderated it.
While opening the panel, Bulakh claimed that “low levels of trust make up the highest expense item of any organization, a family, and in life.” He stressed that “the crisis of trust is not a myth, but a reality.” As a springboard for the discussion, Bulakh referred to the idea of the writer Stephen M.R. Covey that gaining the trust of others requires professional competencies, integrity, good intentions and results.
Speaking on behalf of the banking sector, Serhiy Chernenko, chairman of the board at FUIB bank, said that since 2004, the financial services market “has rather been in the cycle of forming anti-trust in respect of the powers that be and the disappointments that have taken place.”
For Chernenko, trust in Ukraine “has just been sprouting in the past several years towards certain people and certain teams.” Among such teams Chernenko singled out the National Bank of Ukraine (NBU) because, “they have managed to form a long-term strategy and show how they are moving along this strategy.”
Zarkhin noted that “the only stable thing in the country is constant instability.” He spoke on behalf of mid-level enterprises, which feel that “the only option is to get used to constant instability” caused by changing rules of the game after each power shift in the country.
He noted that as of late, he has “seen mass media degrade … and is deserving of less and less trust.” During the ensuing interview, Zarkhin explained his view, saying that “media are one of the things forming our life, a force forming our consciousness and values.” In Zarkhin’s view “media need to be aware of the responsibility for this (role in society),” as the media “form an objective picture of life in this country.”
Zarkhin believes that understanding this responsibility helps media professionals join forces “for checking incorrect and immoral actions of owners, which is one of the first steps (for media) to renew their reputation.”
Andriy Kobolyev, chairman of the board at Naftogaz, Ukraine’s state-owned gas company, wondered at the inability to learn, that Ukrainian politicians had demonstrated through decades and their related lack of “ability for pragmatic, mathematical and cynical evaluation of the events of previous years and simple extrapolation on themselves.”
This “lack of ability to learn kills trust in people immediately,” Kobolyev concluded.
Andy Hunder, president of the American Chamber of Commerce in Ukraine, referred to the Ukrainian Catholic University as an example of an institution built on trust. “Everything was built on trust without a single kopeck of state support at the beginning – all this was entrusted through fundraising within the last five years in the amount of $70 million.”
For Hunder, the university is a success story that shows competency, integrity and benevolence.
A new social contract
The idea of a new social contract came to the fore in the second panel discussion. Entrepreneur and business lecturer Valeriy Pekar moderated the talk in the ‘state-business-society’ framework.
While deciphering Ukraine’s current social contract “there is one important problem of finding the consensus notwithstanding it is revealing ruptures already,” said Yevhen Bystrytsky, a philosophy professor and former executive director of the International Renaissance Foundation in Ukraine.
The ruptures have shown themselves in efforts to achieve peace through the Minsk Treaty, resolving land market issues and streamlining legislation on small and medium enterprises, Bystrytsky explained.
Alex Lissitsa, CEO of IMC company, believes that Ukraine has functioning social contracts in certain segments of life such as “traffic rules, which the state has written down and almost everyone knows them and abides by them.”
The primary question Ukrainians have to answer, Lissitsa believes is “What do we want – being like in Sweden, or like in America, or in Russia?” The answer to this must be found fast, and Ukraine has no time to develop its unique social contract as “those times have gone.”
Ukraine’s minister of finance Oksana Markarova holds the opinion that Ukraine has a simple and functional social contract. “All citizens of any country want to be happy and prosper financially. The vision varies depending on personality, but in principle (we) all want to live well.”
The backbone of the current social contract is Ukraine’s drive towards “Euro-Atlantic integration, which we have as a goal and, respectively, we strive to European standards,” Markarova explained.
She mentioned that Ukraine suffers from weak institutions and suggested “building institutions in each city, each ministry so that we understand where each of the institutions is moving; and then the social contract will arise by itself.”
Ukraine’s minister of finace Oksana Markarova stressed importance of institutions during ‘Conductors of Changes’ conference held by Deloitte Ukraine in Kyiv on Oct. 24, 2019. (Strokan Iurii)
Trust as an asset
The issue of trust in business came to the discussion during the second panel. Andriy Pyshny, chairman of the board of state-owned Oshchadbank, claimed that “trust is primarily a moral system, organizing, creating, forming a certain number of people, which transforms them into a team.”
In Oshchadbank’s history, 2014 was one of the lowest points in trust, Pyshny remembers the bank losing 300 million hryvnyas (roughly $30 million) in daily outflow of deposits, which “meant a catastrophe, a total absence and destruction of trust even in basic institutions.”
The major decision for regaining trust was that the bank “raised the level of communications, that is we just opened ourselves,” Pyshny said and remarked that at that time he and his colleagues had given countless interviews, as well as other communications and explanations.
The result was fast and astonishing: “we stopped the outflow within several months and by the end of the year we have recovered the losses, which we incurred in the first half of 2014,” Pyshny added.
Andrey Stavnitser, co-owner and CEO of TIS port operator, is known for attracting foreign investments to his businesses during volatile times. His company M.V. Cargo teamed up with Cargill in 2016 for building Neptune, a high tech grain terminal. Neptune is located in Yuzhny port on the Black Sea close to Odesa.
In Ukraine, Stavnitser believes, people traditionally pay too much attention to individuals in charge of companies and authorities. Instead, the country needs to foster trust “in institutions, which show sustainability, (good) procedures, do not waste their reputation over the years and enjoy credit from the people as a result.”
Dina Nemirovich, strategy advisor at Deloitte Ukraine and moderator of the discussion introduced Yuriy Filyuk as somebody, whose “business model has been built around trust.” Yuriy Filyuk has co-founded ‘23 restaurants’ network in Ivano-Frankivsk, a city lying 600 kilometers to the south-west of Kyiv.
Filyuk is currently developing an innovative real estate project called ‘Promprylad.Renovation,’ which involves building a creative business space on the campus of a former factory. Filyuk has invested his own funds into the project and also welcomes investments from the public starting from one thousand dollars. So far he has found about 180 co-investors.
“As trust has cumulative character, we were raising the bar of ambition with each consecutive project. Track record was really important, as well as the reputation as of today,” Filyuk explained his fund raising strategy.
As director general of D.Trading, a big sales team selling electricity nationally and internationally, Vitaliy Butenko approaches trust as “the foundation for building everything to connect a group of people – interpersonal relations, businesses, and further on society, as well as the state. The deeper and wider this foundation of trust is, the more reliable your project will be.”
Speaking of his business relations, Butenko sees trust as “the base point for relations with partners.” For him, this works both inside and outside the company as the relationship of “trust built with the external (partners) is the projection of the company’s internal culture.”
Regarding anti-trust to media Bondarenko said that his company could gather the audience of 5 million readers per month because they “had built the system of relations, checks and balances, communications with precision and awareness of the price of a mistake.”
Leadership through trust
Leadership through trust became the theme of the fourth and closing panel. Leaders from government, private and state-owned enterprises participated in the discussion. Roman Bondar, deputy general manager at the state-owned defense concern Ukroboronprom, moderated the talk.
Oleksii Tymofeiev, co-founder of Trident Acquisitions Corp., advanced the idea of trust as a “practice which is to be exercised consciously as any other ideal.” Tymofeiev believes that “trust does not appear by itself because people are just talking about it,” and that it takes a true leader to take on the mission of building trust.
MasterCard includes trust in its list of core values along with partnership, agility and initiative, said Inga Andreieva, general director of MasterCard Europe in Ukraine. Thus, leadership for Andreieva had to be based on trust, especially because more than 70% of her employees were born after 1980.
Young teams appreciate “openness and approachability of a leader here and now,” Andreieva said, adding that millennials see a leader as someone who “teaches, supports, inspires.”
Sergey Badritdinov, CEO of Intertop, shared his experiences in a retail company and stressed that running a business was possible “through constant communication at all levels.”
Ukraine’s minister of education and science, Hanna Novosad, manages public servants rather than employees. Novosad mentioned that “public servants tend to believe nobody.” In such circumstances, the most difficult thing is “to convince people to actually work towards strategic goals.”
When asked whether she was prepared to fire most of her employees in order to hire “new blood,” the education minister answered that “she was not in favor of such a radical approach.”
Novosad explained that “in public service in the broad understanding of the word, there were not too many people who knew the system well.” Thus in Novosad’s opinion, “just firing all was the simplest solution, but then building something new would take enormous time” to complete.
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For Bulakh, who was in charge of this year’s event, it was important that participants would not only think about trust abstractly but work on it and ask themselves “What shall I personally work on?”
Deloitte bought the copyright for the ‘Conductors of Changes’ conference from Nobles Fortune event company last May. The five previous conferences were organized by Nobles Fortune in cooperation with Deloitte.
Bulakh does not know the topic of the next conference yet, but he said that it would be “burning, poignant and deep.”
20% of the conference’s proceeds, or half a million hryvnyas, went to charitable causes.
