In this issue of CFO Insights, we’ll not only detail ways CFOs can help pinpoint trust gaps and establish a culture of trust, but also zero in on what companies can do to help fortify the bonds of trust with three specific stakeholder groups: customers, employees, and investors.
Organisations traditionally cultivate trust over time, earning it from different stakeholders as a byproduct of their consistency and transparency. But, in repositioning themselves to adapt to a shifting economic environment, companies may discover the need to embed trust as part of their core foundation, which means fostering, deepening, and monitoring it as they would any other driver of enterprise value.
Demystifying trust as an asset—rather than linking it with such subjective concepts as integrity—often begins with quantifying the company’s current trust level and assessing its trajectory. How much is trust worth? Such calculations are often reached only once trust has been breached. A Deloitte LLP* analysis, for example, found that three large global companies, each with a market cap of more than $10 billion, lost from 20% to 56% of their value, or a total of $70 billion, when they breached their stakeholders’ trust.1
In the current environment, however, trust has never been more valuable—or elusive. In one study, fewer than 20% of respondents said they trust the current economic system.2 Meanwhile, trust in institutions has been dropping for many years.3 And the 21st annual Edelman Trust Barometer, which drew responses from upwards of 33,000 global respondents, tracked a precipitous drop in trust between May 2020 and January 2021.4 Among institutions, government took the steepest fall; trust in business, however, dropped less than in other studied institutions.
The findings suggest that companies may have reached an inflection point where investing in trust may pay off, yielding increased credibility with—and commitment from—stakeholders. And, as leaders, and primary financial spokespersons, for their companies, CFOs have a vital role to play in creating trust both internally and externally.
One main reason, of course, is that the COVID-19 pandemic has accelerated a long-term trend: the increasing contribution that intangibles, rather than physical assets, make to value creation.5 With more and more of that intangible value residing in how stakeholders feel about a business or product, trust can be a key ingredient binding consumers and employees to a brand.
The CFO's role in building trust, however, is compounded by the number of stakeholders they have to balance. As Sandra Sucher, professor of management practice and the Joseph L. Rice III Faculty Fellow at Harvard Business School, notes: “Trusted companies know how to balance the trust of all their stakeholders. They act in favor of one group while still serving the interests of others.”6 And in this issue of CFO Insights, we’ll not only detail ways CFOs can help pinpoint trust gaps and establish a culture of trust, but also zero in on what companies can do to help fortify the bonds of trust with three specific stakeholder groups: customers, employees, and investors.
For now, the trust journey includes assessing initiatives that affect stakeholder relations across the organisation, then developing tailored strategies that can be monitored periodically. Leaders may find it necessary to regularly question if their actions are aligned with their intent, and whether the business has the required competencies to deliver on that intent. But overall, building trust starts with modeling the expressed values and purpose of the company. That process can begin with these steps:
As a part of the exercise, leaders should ensure that the decisions made consider both the opportunities and implications for either strengthening or eroding trust. Consider the four dimensions of human trust—physical, emotional, financial, and digital—as the lens through which to view how those decisions can affect stakeholders’ trust (Figure 1 in the PDF file).
A company that does not actively build trusted relationships is likely exposed to risk. What follows are some of the strategies CFOs can utilise to help instill trust with three important stakeholder groups:
Finance executives should consider making a commitment to quantifying trust. Just as many traditional processes have likely fallen by the wayside over the past year—for good, perhaps, in some cases—it seems that treating trust as a valuable asset may help companies move beyond merely regaining their pre-pandemic footing. While coming out of a crisis in which many companies have stumbled over expectations, honesty may be the most valuable policy.
*In this article, Deloitte LLP refers to an Ontario limited liability partnership that is the Canadian member firm of Deloitte Touche Tohmatsu Limited.
1 Deloitte, The chemistry of trust, Part 1: The future of trust, March 2020.
2 Indranil Ghosh, “The global trust crisis,” Foreign Policy, January 22, 2020.
3 Knight Commission on Trust, Media and Democracy/Aspen Institute, Crisis in democracy: Renewing trust in America, February 2019.
4 Edelman, “2021 Edelman Trust Barometer,” January 2021.
5 “Pandemic Hastens Shift to Asset-Light Economy,” Wall Street Journal, October 7, 2020.
6 Deloitte,The chemistry of trust, Introduction to three-part series, March 2020.
7 Punit Renjen, “The value of resilient leadership: Renewing our investment in trust,” Deloitte Global, 2020.
8 Deloitte, The chemistry of trust, Part 2: Navigating consumer trust, March 2020.
9 Deloitte, The chemistry of trust, Introduction.
10 ServiceNow Blog,“ServiceNow global survey shows how COVID-19 is changing work,” October 7, 2020.
11 "If we rebuild, will they come back?," Deloitte Insights, October 2020.
12 Business Roundtable, "Business Roundtable Redefines the Purpose of a Corporation to Promote ‘An Economy That Serves All Americans'," 2019.
13 Deloitte,The chemistry of trust, Part 2: Navigating consumer trust.
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