Prioritize Trust or Risk Your Bottom Line

More than half of 7,000 companies examined experienced a material drop in trust at some point during the past two-and-a-half years.
Bill TheofilouOctober 31, 2018
Prioritize Trust or Risk Your Bottom Line

In the not too distant past, trust was considered a “soft” issue for corporations. Business leaders certainly recognized the importance of maintaining a strong external image and cultivating trust with stakeholders. But its connection to a company’s value and financial performance was always difficult to see.

Today, that’s no longer true. With media headlines on everything from tainted food to consumer data breaches or cyber incidents, and from social media to the workplace, “trust” has taken center stage as a pivotal concern for companies. As the digital age ushers in unprecedented visibility and scrutiny into businesses, maintaining trust with six key stakeholders — customers, employees, suppliers, investors, analysts, and the media — has become non-negotiable to earn and keep a healthy bottom line.

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Revenues at Risk

The numbers speak for themselves. New analysis from Accenture Strategy powered by the Competitive Agility Index that launched this week—The Bottom Line on Trust — is the first study of its magnitude and scope to tangibly quantify the impact of trust on a company’s financial performance.

The index analyzes the degree to which a company’s business strategy balances the three pillars of growth, profitability, and sustainability and trust. Prior Accenture Strategy research had concluded that an equal balance of these three pillars is required to maintain and increase competitiveness.

Bill Theofilou

Focusing on trust’s role in the equation and based on a robust analysis of more than 7,000 companies across 20 industries — crunching 4 million data points on an ongoing basis — the study found that more than half of companies examined experienced a material drop in trust at some point during the past two-and-a-half years. This, conservatively, equates to a missed opportunity of $180 billion in potential revenues, based on available data.

What’s more, it’s clear that no one industry is immune. For instance, when a business-to-consumer company launched a sustainability-oriented publicity event that backfired —  breaking trust with their stakeholders — the resulting negative viral publicity caused the trust component of its score to drop 9% in one quarter. Revenues then declined $400 million, while EBITDA dropped $200 million.

Another company was accused of illegally transferring funds. In the quarter following allegations, its trust score dropped 11%. Even though this company was cleared of wrongdoing roughly a year after accusations went public, the reputational damage took its toll. Revenues declined by $100 million and EBITDA decreased $200 million.

A New Business Imperative 

Managing trust can’t be relegated to simply addressing incidents post-factum as it once was. Instead, companies need to systemically incorporate trust into their DNA, strategies, and day-to-day operations.

To achieve this, companies need to fundamentally change their perceptions of trust and execute a balanced strategy that focuses on trust at the same levels as growth and profitability. Companies must prioritize trust to proactively accelerate growth and to thrive — not just survive in the digital age — given the systemic impact on its stakeholders and quantifiable reduction in competitiveness.

Customers are looking to affirm their own values when choosing companies to interact with regularly — and are quick to switch if that trust is broken. Employees, more than ever, are looking for company’s actions to match their values, and will be more engaged workers in cultures built on trust and transparency. Suppliers and trusted partners can enable faster innovation cycles with more flexibility.

Trust is becoming a crucial vehicle for new and sustained growth, as these same stakeholders provide companies with a “license to grow” in today’s digitally transparent world.

Beyond this, trust builds resiliency and can shield companies against major revenue impact if or when a trust event strikes. Companies with a higher overall Competitive Agility Index score are more resilient when their trust score drops — seeing less of a sustained revenue loss and impact on their overall competitiveness.

Minding the Bottom Line

While it can be nearly impossible to prevent trust incidents completely, companies can prepare by having a strategy that balances growth, profitability, and sustainability and trust. In this age of transparency, how a company does anything (and everything) has become equally as important as what it does.

  • Know where you stand. Whether it’s through benchmarks like the Competitive Agility Index or another solid measure. If you can’t measure it, you can’t manage it.
  • Make trust part of your cultural bedrock. Embrace trust as a core element of business strategy. Ensure all teams — at every level — walk the walk. Behaviors and actions must match stated values in the eyes of all six stakeholders.

The bottom line on trust? It’s intrinsically tied to a company’s financial wellbeing. Trust is so important to a company’s financial performance that C-suite leaders that downplay it do so at their own peril. Recognizing we operate in an era of risk, forward-thinking companies will put trust center-stage.

Bill Theofilou, is a senior managing director at Accenture Strategy.