Trust in Business: A Strategic Role in Financial Performance
How important do you think that cultivating trust in business is to the big-picture success of a firm? It’s probably more important than you think, based on the results of a new study that was recently conducted by Accenture Strategy. This is true not just in so-called “soft” areas of a business, but also in areas like financial performance and boosting overall company value.
According to The Bottom Line on Trust1, a study that used a Competitive Agility Index to quantify the magnitude and scope of trust on a corporation’s financial performance, the strategic role of trust in business is more important today than ever. This isn’t too surprising when you consider the cyber concerns, data breaches and heavy use of social media in the workplace that is so common today.
The Strategic Role of Trust in Business
The Accenture Strategy study notes that “business trust incidences are on the rise and increasingly visible to everyone.” This is making trust “an inescapable issue for corporations,” the study adds. “To be truly competitive, your company must look at trust as a critical component of your business strategy.”1
Trust in business is defined by the Accenture Strategy researchers as “a consistent experience of competence, integrity, honesty, transparency, commitment, purpose and familiarity.”1 Fifty-four percent of the corporations that were examined in the study experienced a material drop in trust sometime within the past couple of years. And while trust only accounted for a small portion of a corporation’s Competitive Agility Index score, it affected a company’s revenue and its EBITDA disproportionately.
The challenge for businesses is to ensure that risk management includes elements that build trust and transparency that improve competitiveness, growth, profitability and sustainability. Your business could experience potential negative impacts by failing to do so, including the following:
Exposure to adverse publicity and damage to your public reputation.
Damage to non-financial performance metrics including social media activity attributed to the company.
A lack of defenses to combat cyber incidents, data breaches, etc.
Loss of revenue and EBITDA.
Strategies to Implement
It’s impossible to eliminate trust incidences. The key to avoiding these negative impacts is to devise a business strategy that balances the three components of the Competitive Agility Index: profitability, growth, and trust and sustainability. Here are five strategies you can implement to accomplish this:
- Incorporate trust into the day-to-day operations of your business.
- Make trust a core principle of your business strategy and cultural bedrock.
- Communicate and reaffirm your corporate values to all employees and business stakeholders.
- Ensure that the behaviors and actions of all employees match the trust values to all your business stakeholders.
- Audit all your processes and procedures and make sure they’re understood and followed by all employees.
Your company could realize many positive outcomes by focusing on trust in business as a key component of your overall business strategy, including the following:
Improved competitiveness and a stronger bottom line.
Protection of the company’s reputation.
Alignment of corporate initiatives with your customers’ values.
Faster company growth.
Reassurance among suppliers and customers of your company’s good name.
Trust in business is probably more important to the big-picture success of your company than you think. This isn’t too surprising when you consider the cyber concerns, data breaches and heavy use of social media in the workplace that is so common today. The challenge for your business is to ensure that risk management includes elements that build trust in business and transparency that improve competitiveness, growth, profitability and sustainability. An on-demand CFO partner from a CFO services firm can help you devise a business strategy that reduces trust incidents at your firm.
1 The Bottom Line on Trust; Jessica Long, Chris Roark & Bill Theofilou; Accenture; October 30, 2018
John W. Braine, Partner, CFO Edge, LLC