12 Feb. 2020 | Comments (0)
When it comes to making intangibles tangible, nothing is more important than trust. Trust is a vital component of every corporate interaction with all of its critical constituencies. Trust is defined as the outcome of principled behavior.
As an intangible descriptive attribute, nothing can be more vital or more impactful than trust. Trust is a value enhancer for corporate value, and conversely, a lack of trust can destroy market value in an instant.
To better understand how to manage trust as an intangible, I had a conversation with Barbara Brooks Kimmel, the Founder, of Trust Across America–Trust Around the World. I asked Barbara if the management of corporations are aware of the importance of trust as both an intangible asset and as a strategic management tool. Her answers are both informative and exciting.
Businesses have historically focused on profits. Now the “buzz” has turned to “purpose,” but it’s “principled” leadership that not only builds trust but also ensures that it flows through the organization and then on to external stakeholders.
Principled leaders focus first on elevating trust with employees and, second, with their customers. Profits come third. While this is somewhat of a reversal in current business thinking, our research shows that this approach actually increases profitability over the long-term.
Why is that important?
Employees are happier and more engaged, and this translates to the way customers are treated, creating loyalty and a reputation/brand advantage. Jim, wouldn’t it be nice if the word “trust” were used proactively, instead of being something that’s only talked about after a crisis? Principled leadership is where authentic trust-building starts.
Trust relates to all of the intangible attributes that are measured in Tenet Partner's CoreBrand Index®. Trust and reputation go hand-in-hand. Trust is closely associated with the actions and perceptions of management. A company can't build a culture of innovation unless there is trust in the team. And, who would purchase stock in a company unless they trusted it?
Exactly. Fear is the opposite of trust. If employees are afraid to fail, for example, then the level of innovation in a company will decline. How can a team of people be innovative if there is a fear of trying new things? I see innovation as one of the most significant benefits of a high-trust organization.
In August 2019, The Business Roundtable redefined the "Purpose of a Corporation," which was signed by 181 CEOs as needing to benefit all key stakeholders – customers, employees, suppliers, communities, and shareholders. How do your ideas on principled leadership and trust relate to this sea change of stakeholder obligations?
What is still being disregarded, and I don’t believe it’s by accident, is the “principles” part of the discussion. The purpose is easy. Maybe you can rally your people around purpose as a short-term Band-Aid, but without principled leadership, purpose becomes a PR campaign that will be viewed with cynicism by educated stakeholders. I’ve seen this sentiment shared in many articles published since the announcement.
Is it the CEO's responsibility for managing trust in their companies?
Trust cannot be delegated, and it takes work. The CEO has to “own it” and have a strategy to build trust. Most leaders consider trust a soft skill and take it for granted, while others talk about it. Our work encourages business leaders to move beyond trust “talk” to trust action.
Is it possible to measure trust?
If you think of trust as an outcome rather than an input, trust can be measured in teams and organizations. We use our 12 Universal TAP principles in a survey form with leaders, teams, and organizations to create a baseline trust profile, identifying both weaknesses and strengths. Then we can address the weaknesses, which vary from team to team and organization to organization. The principles form the acronym TAP INTO TRUST. They are truth, accountability, purpose, integrity, notice, talent, openness, transparency, respect, understanding, safety, and tracking. When you think about trust as an intangible, it’s not easy to measure. But when it’s broken down into pieces, it becomes almost like a jigsaw puzzle. If pieces are missing, the puzzle will be incomplete.
Can you give us examples of companies that do it right?
The key is finding business leaders who have gone beyond "talking trust" to sharing their strategy for building it. High-integrity leaders understand the benefits that a long-term holistic trust-building strategy can have on their stakeholders. We publish an annual list of CEOs who acknowledge the importance of building trust. A few examples include Aron Ain, CEO, Kronos, who builds trust by focusing on "us" not "me." Marc Benioff, co-CEO, Salesforce, considers trust the company's highest value. Fisk Johnson, CEO, SC Johnson, is transparently sharing the ingredients in his products. Beth Mooney, CEO, KeyCorp, is a strong advocate for transparency, truth telling, and a mission mindset. These are just a few examples of leaders who are at least giving trust some consideration in how they run their businesses.
Why aren't more business leaders choosing to share their stories publicly?
This reluctance is attributable to one of several factors: Perhaps most important is that, in most organizations, nobody takes ownership of trust because it’s not considered a risk. And when nobody owns it, nobody thinks about it. Trust is mistakenly viewed as one of those “soft” intangibles. And when the inevitable crisis hits, that becomes the story that gets shared, much to the dismay of the leader, not to mention the financial hit to the organization. The irony is that many an expensive crisis could be avoided if business leaders acknowledged and acted on trust as an intentional business strategy.
One last question, do trusted companies financially outperform less trusted peers?
Yes. In 2010, we launched a study that is called the FACTS® Framework. It is an independent annual analysis of over 2,000 public companies using rigorous research conducted by Trust Across America. Companies do not participate, nor do they know they are being analyzed. On average, and over the long term, the “Top 10” most trustworthy public companies have outperformed the S&P 500 by over 25% since inception.
Trust is an important, but often neglected, intangible asset of the corporation. Trust impacts every aspect of the corporate brand. Trust contributes directly to financial performance because consumers want to buy products from companies, and investors want to purchase shares of companies that are trustworthy. CEOs need to own the issue and develop a strategy to build trust over time, and not just to rebuild when the company is in a crisis. As an intangible descriptive attribute, nothing can be more impactful than developing a sense of trust with those constituencies who are vital to the success of your company.
Trust is the bedrock of all intangible assets.
Barbara Brooks Kimmel is the founder of Trust Across America-Trust Around the World, whose mission is to help organizations build trust. She also runs the world's largest global Trust Alliance and is the editor of the award-winning TRUST INC. Book series. Barbara holds a BA in International Affairs from Lafayette College and an MBA from Baruch at the City University of New York. For more information visit our website at www.trustacrossamerica.com firstname.lastname@example.org