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Imagine the following scenarios:
Scenario 1: Your organization is a relatively new player in the consumer goods industry. Your market share has been growing steadily over the past few years, but your profit margins could be improved. You are about to launch a new product in the market to grow your brand when you find out that your organization has been involved in a data breach. Customers start losing trust in your brand, as there is no transparency as to how the breach has occurred and with whom their data has been shared. Your new product launch is delayed, and you fail to capture a new segment of the market that would have allowed you to increase your profits. What’s more, sales decline as a result of customers boycotting your products.
Scenario 2: You run a global organization and you have just expanded your operations to a new market. Your new business is going well, until you find out that the suppliers you’ve been working with have been bribing government officials to obtain their contracts. You were hoping to attract more investors to support the acquisition of a small competitor, but in light of this incident, your investors lose trust, and you miss out on the opportunity to grow your business. Your stock prices fall as a result of the negative press surrounding the incident.
Stories such as these, involving privacy breaches, mis- and disinformation, and companies failing to live up to their promises, are rather common in today’s business world. In many of these scenarios, the business initially appears to be doing well and leaders assume that the organization is trusted, only to suffer a breach in trust in an unexpected area. In other cases, they simply aren’t thinking about trust at all. The stakes, however, are high: A recent Deloitte analysis found examples of three large global companies, each with a market cap of more than US$10 billion, that lost 20% to 56% of their value—a total US$70 billion loss—when they lost their stakeholders’ trust.1 Trust—or lack thereof—has thus become a mainstay topic in headlines across the world.
Many senior executives recognize the need to build or rebuild trust in their organizations. However, they often struggle to understand exactly how trust can be managed. Indeed, in today’s dynamic and challenging business environment, trust is becoming increasingly complex to understand and manage, especially as organizations are expected to build trust across growing ecosystems of stakeholders and amid evolving expectations.
One of the first steps in managing trust is understanding how it can be defined and measured. Trust is commonly considered an abstract or even nebulous concept, and many organizations don’t typically prioritize trust or treat it with the same focus and urgency as they do other business priorities. But the benefits for those companies who are trustworthy are significant. Recent research suggests that these companies outperform the S&P 500 by levels as high as 30% to 50%.2
We propose that trust should be seen as a tangible, strategic, and critical asset, given the real, quantifiable value that it can bring to an organization. And it should be managed much like other key performance indicators on the organization’s balance sheet, by considering its drivers and implications more deeply across the enterprise. With this perspective, organizational trust should be built from the inside out,3 through levers and actions that cut across the functional areas of a business, from product quality to data protection to financial integrity.
Organizational trust also depends on the needs and perspectives of an organization’s different stakeholders—board members, investors, customers, suppliers, and employees—so the relative impact of trust-building actions must be framed and viewed through the lenses of these stakeholders as well. Organizations that proactively approach trust management in this way can build what we refer to as trust equity, helping create positive impacts on their bottom line and a layer of resilience protecting the organization against potential breaches of trust. Trust and resilience go hand in hand. Deloitte’s 2022 Consumer products outlook finds that 95% of executives whose companies have high levels of consumer trust believe their companies are more resilient.4
This paper offers a statistically verified approach for measuring trust across different operating domains, helping leaders identify their organization’s potential sources of a trust breakdown or areas where building trust proactively can create a competitive advantage.
The potential for a breakdown in trust grows as business complexity increases and the array of stakeholders with whom organizations engage broadens. Some of the factors that contribute to this growing complexity are listed below.
“What gets measured gets done ... If you know the impact you want to create and how much of it has already taken place, then half the battle is knowing what further changes need to be made.” ―Sandra Sucher and Shalene Gupta12
Organizational trust is multifaceted— so to understand, act on, and manage it across stakeholders, it may be helpful to consider its different components. At its core, trust is the foundation of a meaningful relationship between an entity and its stakeholders at both individual and organizational levels. Trust is built through actions that demonstrate a high degree of competence and the right intent, which result in demonstrated capability (possessing the means to meet expectations); reliability (consistently and dependably delivering upon promises made); transparency (openly sharing information, motives, and choices in plain language); and humanity (genuinely caring for the experience and well-being of others).13
Managing an asset as complex as trust thus necessitates a more robust lens; it requires understanding trust-driving activity enterprisewide and through the perspectives and priorities of different stakeholders, including customers, employees, the board, investors/shareholders, communities, regulators, suppliers, and others. (See the sidebar, “Stakeholder trust is becoming increasingly complex.”) Only at deeper operating levels and with a multistakeholder perspective can an organization earn—and when needed, rebuild—trust.
Deloitte interviewed more than 50 internal subject-matter specialists and more than two dozen C-suite executives from global Fortune 500 companies across sectors to identify the operating areas within an organization that influence trust with different stakeholders. We refer to these operating areas as “domains.” From this list (figure 1), a set of actions was identified that support earning and building trust in each of the given domains.
A trust questionnaire was then built from this analysis and fielded in October 2020, April 2021, and again in September 2021. Nearly 3,000 executives across the globe representing a wide range of industries and sectors were surveyed to understand what actions and operating domains are most important to driving trust in their organizations and sectors, and to measure how their organizations are performing relative to peers. Statistical tests indicated a high reliability of these measures,14 meaning that the trusted actions indeed reflect the domains being measured.
Given the fluid and dynamic nature of business, actions taken in these areas may overlap and complement each other at the same time. For example, cybersecurity actions can be closely linked with data privacy and protection, whereas ethics can be reflected in an organization’s culture, values, and mission statement. Some domains are more customer-facing and front-office–oriented, such as customer experience; while others are more back-office/operationally focused, such as compliance, strategic governance, and financial integrity and health. All domains are important, but, as would be expected, some will be more important than others for different stakeholders, depending on the business and its sector. In our research, we asked senior executives to rate which areas are more important for their business, relative to other areas, in maintaining stakeholder trust (figure 2). For example, executives in the consumer industry in our study are more likely to consider customer experience to be the most important contributor to trusted relationships, in contrast to executives from the energy, resources, and industrials industry, who rank product quality to be most important.
As the rankings in figure 2 reveal, organizations recognize the relative importance of trust across these different operating areas, and yet their performance levels in building trust across domains may differ. Specifically, in our research, we measured trust performance by asking executives to indicate the extent to which their organization performs a series of trusted actions related to each operating domain. Consider, for example, the measurement of trust performance in customer experience where we asked respondents the extent to which their organizations prioritize providing superior customer service, including digitally driven experiences.
Trust performance scores for each domain as measured by executives at large global organizations are presented in figure 3. The results indicate that most companies are taking some action in all areas, but there is still room for improvement, and thus room to build trust. Interestingly, these trust performance scores suggest businesses are more likely to be better at building trust in areas where they have more experience developing capabilities and taking action. For example, trust performance measures in operating domains such as crime, culture and purpose, compliance, and product quality were higher than for domains such as DEI, ESG, or innovation, intelligence, and technology. This may indicate that the large organizations that these executives lead have more experience building trust in areas that are essentially table stakes for running a business, such as preventing fraud and crime, developing a supportive organizational culture, and improving product quality.
While “table-stakes” domains are indeed crucial for the business, research suggests that areas such as data protection, DEI, and ESG are becoming increasingly important to a growing number of stakeholder groups—so it’s likely that businesses will start paying more attention to these domains going forward. Organizations should prioritize earning trust with stakeholders in areas that go beyond their comfort zone, with which they’re not as familiar and where capabilities are still maturing. Otherwise, companies risk leaving themselves exposed to a loss in trust if issues arise.
Specific, tangible actions within a given operating domain that demonstrate an organization’s competence and intent can arguably make a positive impression on stakeholders, impacting their behaviors and ultimately generating value for an organization. For instance, an organization can offer specific training to mitigate unconscious bias and prioritize DEI in its hiring and retention methods, policies, and programs, which can then create a more inclusive workplace and foster innovation.15 For ESG, organizations can set meaningful goals and targets, review their ESG impact, and effectively embed this into financial decisions, all of which can drive “social credibility” and positively impact areas such as talent retention and investment returns.16 The following examples show specific actions that well-known organizations have taken that build trust in different operating areas, and the improved performance metrics they have experienced as a result.
In 2017, Tommy Hilfiger launched Tommy Adaptive, a line of clothing for people with disabilities. The new line was designed to meet an unmet market need, but, perhaps more significantly, it signaled to stakeholders the company’s intent to help others in a unique way. This helped employees develop a sense of purpose in their jobs, encouraging them to feel that they are making a meaningful, positive contribution to society. Customers also noticed. The feedback captured the success of their campaign:
“Usually, customer service centers for retailers can expect at least some complaints, along with customer inquiries. However, the customer service team for Tommy Hilfiger had the opposite experience with Tommy Adaptive: People called to say thank you and share stories about how the product had helped them.”17
Operating domains in which trust increases
Patagonia was one of the first clothing companies to use recycled materials such as plastic bottles for its products. It further aimed to reduce its environmental footprint by switching to more sustainable materials such as organic cotton, despite the increased cost of production; it also worked to teach customers how to repair and reuse their gear instead of buying new products. Patagonia encouraged transparency in its supply chain and cut relationships with suppliers using forced labor. Its actions helped enhance trust in multiple ways, particularly through transparency and a commitment to the well-being of its stakeholders. All of these actions translated into increased profits: In 2012, Patagonia’s sales increased by 30% to US$540 million, after running its “Don’t buy this jacket” campaign.18 Today, Patagonia has a reputation of “shirking profits in favor of doing the right thing.”19
Operating domains in which trust increases
The Ritz-Carlton shows a powerful example of how an organizational culture that promotes purpose and performance can help improve workforce experience and earn stakeholder trust. Its motto, “We are ladies and gentlemen serving ladies and gentlemen,” instills respect and a sense of purpose in all employees at the hotel.20 Hotel managers also invite and expect employees to participate in continuous improvement programs, giving these workers a voice in the operations of the hotel chain. Enhanced employee involvement increases the trust that employees have in their leaders as they can see the value that their participation offers. And by being invited to participate in continuous improvement, the organization hopes employees are given “a sense of equality and purpose to their jobs.” All of these benefits translate into annual turnover rates (20%) significantly lower than the industry average (78.8%), numerous quality awards, and an improved bottom line.21
Operating domains in which trust increases
As these examples show, improved performance around these trusted actions can drive positive stakeholder behaviors such as increased employee engagement, higher employee and customer retention rates, and customer loyalty. In fact, data suggests that nearly 80% of employees who highly trust their employer feel motivated to work.22 Nearly 90% of customers who highly trust a brand have bought again from that brand, and 62% of customers who report highly trusting a brand buy almost exclusively from that brand.23 Significantly, these improved stakeholder behaviors can contribute to firm operating metrics as well. Employees who are more satisfied in their job tend to be more engaged, delivering greater productivity, lower costs via lower turnover, and greater innovation.24 Customers who are more loyal to their brand are more likely to try new products and to spend more, on average, than new customers, resulting in higher margins.25
In order to manage the expectations of a growing ecosystem of stakeholders, organizations should make trust a strategic priority. While organizations know this, moving from knowledge to action can often be a struggle given the complex nature of trust. There are a number of relatively straightforward steps leaders can take to manage trust as a strategic asset comparable with other critical organizational assets:
Following these steps, organizations can be in a position to make trust a strategic asset rather than a potential risk should problems arise. However challenging managing trust may be, it is an effort worth taking if organizations are to continue to meet their strategic objectives and serve the needs of a growing list of stakeholders in an increasingly complex world.
The authors wish to thank Don Fancher, David Levin, Anahita Panthaky, and Brenna Sniderman for contributing their insights. The authors would also like to thank Saurabh Rijhwani, Julia Rutherford, and Lisa Carlton for their marketing support and Negina Rood for her research support.
Cover image by: Steffanie Lorig
