Trust: From intangible asset to financial driver
How boards leverage trust to drive results
The Governance Lens series provides boards with timely insights on issues shaping today’s business environment. This edition examines research on the financial impact of measuring trust, which can help boards better oversee the enterprise.
As discussed in the book by Ashley Reichheld and Amelia Dunlop, The Four Factors of Trust, trust is no longer simply a qualitative factor, but rather a discrete metric and a measurable driver of performance that can be quantified.1 Boards use a variety of indicators throughout the oversight process.
Leveraging trust indicators could offer boards a new performance measurement to request, leading to potential competitive advantage:
- Financial benefit: Research on the impact of trust conducted by Reichheld and Dunlop has revealed that high-trust companies can reach market valuations 4x higher than their peers.
- Compounding effect: The more trust earned, the greater the potential return. According to the same research, low-trust brands see 3% return per point of trust gained. For trust leaders, that could climb to 6% and beyond.
As boards evaluate the performance metrics provided by management, there are a few reasons to incorporate a quantitative look at trust. The following examples illustrate how such returns could be generated, though, of course, the exact process will vary by industry:
In ROI, we trust
Trusted businesses are 2.5x more likely to be high revenue performing organizations.4
When consumers trust a brand, 88% plan to buy from the company again.5
Trusting employees are about 50% less likely to look for another job.6
Questions for boards to consider asking to leverage trust metrics
- How can boards integrate and enhance trust metrics to show clear links to revenue and profit?
- What type of reporting could provide timely trust data for specific groups, and how can trust thresholds trigger board updates?
- Could changing trust levels alter tech implementation, and when does speed risk eroding trust?
Christine Davine
Ashley Reichheld
