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Trust in Corporate America

December 12, 2016


Recently, The State of Trust in Corporate America: 2016 Report was published by Barbara Kimmel and Trust Across America, an organization built to facilitate the study and implementation of organizational trust. It’s a word that we’ve heard often the past year, but what exactly is trust and how does it impact corporations and their employees, customers and investors?

According to Kimmel, trust is a natural byproduct of strong core values and the outcome of kept promises. It is closely linked to integrity, which is adherence to moral and ethical principles. Many organizations consider these “soft skills” and assume that they just exist, but when integrity and trust are considered a business imperative, Kimmel argues that the following results are achieved:

  • Decisions are made faster and less expensively;
  • Employees are more engaged and retention increases;
  • Innovation is higher and occurs more quickly; and
  • Profitability increases.

According to Trust Across America’s proprietary FACTS Framework, America’s most trustworthy public companies outperformed the S&P 500 by 1.8X during a three-year period from 2013 to 2016. This barometer, developed in the wake of the financial crisis of 2008, blends indicators of corporate trustworthiness (e.g., good corporate governance, stable earnings) into a qualitative measure that can be used to compare companies to one another, and to determine the impact of trustworthy policies and practices.

The benefits of trustworthy behavior are many. As mentioned above, a more engaged workforce is one. A global study carried out by Towers Perrin-ISR 50 compared the financial performance of companies with a more engaged workforce to their peers with a less engaged workforce over a period of 12 months. Those companies with a highly engaged workforce improved operating income by 19.2 percent over the 12 month period compared with those companies with low engagement, which saw operating income decline by 32.7 percent over the same period.

Similarly, a research study from Interaction Associates found that companies that enjoy high levels of trust among their employees are two and a half times more likely than those that don’t to enjoy superior revenue growth. High-trust companies significantly outperform all other companies in achieving a wide variety of business goals, including customer loyalty and retention, competitive market position, values-driven behavior and actions, predictable business and financial results, and profit growth.

In contrast, low integrity and trust can result in low employee engagement and threats to stability and growth. For example, Gallup reports that in 2014 less than one-third of U.S. workers were engaged in their jobs, with Millennials being the least engaged, and that this level of disengagement costs the U.S. economy $450-550 billion a year, which is over 15 percent of payroll costs.

According to The Economist Intelligence Unit, 84 percent of senior business leaders say that disengaged employees are considered one of the biggest threats facing their business, but only 12 percent of them reported doing anything about this problem. And, the PR firm Edelman found in its 2016 Trust Barometer that nearly one in three employees don’t trust their employer, and more than two-thirds feel that CEOs are too focused on short-term performance. As a result, employees may be less likely to say positive things about the company they work for.

Kimmel summarizes these risks by arguing that this “trust gap” negatively impacts a company’s revenue, market share, brand reputation, employee engagement and turnover, stock price, and bottom line profitability.

But, many companies do focus attention on these issues, and operate according to core values that include integrity, trustworthiness and respect. For example, at American Express, our eight “Blue Box” values include Customer Commitment, Integrity, Quality, Teamwork, Respect for People, Good Citizenship, Personal Accountability and a Will to Win.

Trust Across America publishes an annual listing of the Most Trustworthy American Companies, and also recommends a series of actions that CEOs and companies can take to build trust in their firms, including:

  • Acknowledge that trust building is required.
  • Analyze the company’s current state of trust. Begin to fix what’s broken.
  • Take the following actions and initiatives:
  • Indentify the organization’s core principles and values
  • Practice and regularly communicate these principles to the organization
  • Ensure that leadership is held accountable for doing what they say they will do.



If you have a comment or question, please follow me on Twitter at @timmcclimon and start a conversation there. Thank you for reading and sharing this blog posting with friends and colleagues.

Please note that CSR Now! will be taking a break until January 9, 2017. Happy Holidays!  

 

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