Why Trust is the Bottom Line

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Trust is a critical factor in organizational performance. Consider the Facebook example: When the Cambridge Analytica scandal first broke (directly breaching the trust of over 50 million users), Facebook’s stock plunged 18%, costing them $80 billion in market value (1). Over the years we’ve seen solid companies like Tylenol and Mattel suffer huge crises and manage to respond quickly and responsibly enough to fully recover. Others have not been so successful; Toyota stumbled after its sticky-accelerator struggle, and Volkswagen’s “diesel dupe” scandal caused a $18 billion loss (2). History continues to remind us that a company’s trustworthiness – both to the public and to its employees – has a massive impact on its bottom line.

On top of the more infamous examples seen in the media over time, research also demonstrates trust’s impact on financial results:

  • Organizations with high levels of trust experience better financial performance, greater labor productivity, and better product/service quality (3)
  • High-trust companies outperform the S&P 500 (4)
  • High-trust companies are over 2.5 times more likely to experience high revenue growth compared to low-trust companies (5)

Clearly trust is a critical component to success, and it needs to be built and carefully nurtured for organizations to thrive. One key area in which trust can easily be formed – or broken – is decision making. Nearly all of those who work for high-trust organizations say that their leaders make decisions that are consistent, predictable, and transparent (5), and there is a high correlation between trust and decision-making (6). Those who enjoy trust and confidence from their superiors and are invited into the decision-making process experience higher satisfaction and benefit from this bond of mutual trust (6). It has also been suggested that more opportunities to participate in decision-making is rewarding to employees and allows them to feel empowered, resulting in greater levels of trust for their leaders and improved work performance (7).

High levels of trust in an organization will also lead to positive behaviors and feelings among employees and their leaders:

  • Trust has a positive relationship with job performance, job satisfaction, and commitment (7)
  • Trust is linked to high organizational citizenship behaviors (OCBs), including altruism, conscientiousness, courtesy, and sportsmanship (7)
  • Trust is highly related to satisfaction with one’s leader and perceptions of the quality of the leader-follower relationship (7)

Having an evidence-based, transparent and participative decision-making process not only increases trust within your organization, but increases the quality of your resulting decisions and in turn, your performance – a win for everyone except your competitors. Having a decision process where diverse perspectives are able to be heard, candid discussions are cultivated, and a traceable result of the process is made means you can feel confident in your decision and move forward with the best options for your organization, all while increasing the trust between leaders and employees and ensuring a successful step forward is taken. Trust is the “leadership weapon of the future” (8); if you utilize it, you’ll be sure to come out on top – in your leadership and employee performance, as well as your organization’s overall success.

If you would like to assess the current state of trust in your organization, see our Trust Alliance Principles (TAP) Assessment, based on Trust Across America’s 12 core principles for ensuring a high-trust environment.

 

References:

(1) La Monica, P. R. (2018). Facebook has lost $80 billion in market value since its data scandal. CNN Money. http://money.cnn.com/2018/03/27/news/companies/facebook-stock-zuckerberg/index.html

(2) Sloat, S. (2016). Volkswagen posts deep loss after taking $18.28 billion hit on emissions scandal. The Wall Street Journal. https://www.wsj.com/articles/volkswagen-posts-deep-loss-after-taking-18-28-billion-hit-on-emissions-scandal-1461333307

(3) Brown, S., Gray, D., McHardy, J., & Taylor, K. (2015). Employee trust and workplace performance. Journal of Economic Behavior & Organization, 116, 361–378.

(4) Kimmel, B. (2016). Return on trust: The “state of trust”. Trust Across America. http://www.trustacrossamerica.com/documents/index/Return-Methodology.pdf

(5) Interaction Associates. (2014). Building workplace trust 2014/2015. Boston: Interaction Associates, Inc.

(6) Shagholia, R., Hussina, S., Siraja, S., Naimiea, Z., Assadzadehb, F., & Moayedic, F. (2010). Value creation through trust, decision making and teamwork in educational environment. Procedia: Social and Behavioral Sciences, 2(2), 255–259.

(7) Bligh, M. C. (2017). Leadership and trust. In J. Marques & S. Dhiman (EDs.), Leadership Today: Practices for Personal and Professional Performance (21–42). Springer International Publishing.

(8) Green, C. (2012). Why trust is the new core of leadership. Forbes. https://www.forbes.com/sites/trustedadvisor/2012/04/03/why-trust-is-the-new-core-of-leadership/#647f0011645a

PN7Jill Prince