Can we measure trustworthy business behavior?

Guest post from Barbara Brooks Kimmel,
CEO & Cofounder Trust across America-Trust around the World

Barbara Kimmel
Barbara Kimmel

Where does trust come from, what does it really mean, and why is it so important in business? 

As a former CEO once told me, most leaders are too busy dousing day-to-day fires to give much thought to “soft skills” like trust.  Yet ironically, many of these same fires could have been averted by treating trust as a business imperative. 

While there are many ways to describe trust in business, one of the easiest to understand is

It’s a natural byproduct of strong core values. Putting this slightly differently it’s the result of promises kept.   

Why does trust matter?

When the core values of an organization are both strong and reinforced daily, people tend to keep their word. When that happens the result is:  

  • More engaged employees
  • Lower employee turnover
  • An increase in innovation
  • Faster decisions
  • Higher profits

Aligned cultures

 

Should we try and measure trust?

If trust does indeed matter to most businesses, then it’s sensible to try and get a handle on how much of it is actually happening. Rather easier said than done though. Corporate culture, core-values, good citizenship, ethics, integrity and trust are widely believed to be intangibles. That is, they are hard to measure. Consequently they are usually treated as wooly soft skills.

Many leaders continue to hold fast to this viewpoint. This is mainly because neither they nor their Boards of Directors are thinking about them since to obtain credible metrics demands time and hard work.

Much of what we do at Trust Across America-Trust Around the World focuses on measuring the trust “worthiness” of public companies and identifying “best in breed”. We use a holistic lens called the FACTS® Framework.

This unique measuring tool was originally developed by a multidisciplinary team, in the wake of the 2008 financial crisis. It began by asking the same question of dozens of professionals from leadership, compliance and ethics, legal, accounting, finance, HR, consulting, and CSR, sustainability.

The core question addressed to these professionals was:

  • What do you consider an indicator of corporate trust “worthiness” that can be independently and quantitatively measured, without requiring the input of the organization itself?

While every professional had a different perspective, the same indicators kept being mentioned. For example:

“For a company to be trust “worthy” it must display good corporate governance,” said those working in governance. Similarly, the financial professionals pointed towards stable earnings, while the accounting group talked about forensics, and so on.

By blending all their answers and indicators of corporate trustworthiness we were able to measure trustworthiness fairly accurately. A master “trust” spreadsheet made it clear where and why the Enron-like “risk” often lies hidden.

Since then, despite eight years of unique and compelling data, most companies and their leaders continue to cling to the mistaken notion that trust is a soft and immeasurable factor. Few see the importance of viewing data across different corporate silos to produce a holistic “whole body” scan.

Many reasons explain this reluctance, especially the difficulty of balancing long-term value creation with the need to “maximize earnings” and to meet ever-looming quarterly numbers.  Far better to instead wait until the next corporate crisis occurs, to talk about the importance of trust and how new measures will be implemented (perhaps) to safeguard against future missteps.

Trust works as a business strategy

Such short myopic vision flies in the face of the hard evidence from our FACTS® framework that identifies the most trustworthy companies. During the three-year period from February 2013 to February 2016 America’s most trustworthy public companies significantly outperformed the S&P .—see chart at: http://tinyurl.com/h3uey64

While no company is perfect, a growing group of visionary leaders have seen the connection and are reaping the rewards. Over the years our FACTS® Framework has identified trustworthy corporate citizens like Costco, Nike and Starbucks. They share high scores across all measurable indicators of trust “worthiness” and a leadership vision that embraces the new strategic business imperative of elevating trust.

Leaders that measure what matters, including trust, really do make better decisions and over time they are rewarded with lower risk and higher profitability.

  Trust4

 

 

Barbara Brooks Kimmel is the CEO and Cofounder of Trust across America-Trust around the World whose mission is to help organizations build trust. Now in its seventh year, the program’s proprietary FACTS® Framework ranks and measures the trustworthiness of over 1500 US public companies on five quantitative indicators of trust.

Barbara also runs the world largest global Trust Alliance, and is the editor of the award winning TRUST INC. book series and a Managing Member at FACTS® Asset Management, a NJ registered investment advisor. She can be contacted at: barbara@trustacrossamerica.com

Copyright © 2016, Next Decade, Inc.

 

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