Most of us have some version of, “Trust takes years to build, seconds to break, and a lifetime to restore.” This applies not only to personal relationships; it is relevant to consumers’ interactions with businesses (and other institutions). If a company does something to make customers question its trustworthiness, those customers are likely to look for alternatives. Needless to say, this is not good for the company’s revenues, profitability, or stock price.
Depending upon the extent of the damage, when trust is shaken or lost senior executives may be forced to resign, and earnings and shareholder value could take a hit. A particularly bad problem could even pose an existential threat that pushes a business into the arms of an acquirer at a discounted valuation. This is one of the many examples of why environmental, social, and governance (ESG) issues (in this particular case, a mix of social and governance) matter to investors.
Viral social media postings help rumors and negative news to spread like wildfire, and AI-generated content is making it easy to distort, misstate, and falsify. But even without these new weapons of mass-trust-destruction, companies risk a loss of trust for many reasons, such as cybersecurity incidents, product quality problems, misuse of customer data, and cover-ups that blow up (such as Volkswagen’s emissions scandal).
What can companies do to protect the valuable yet intangible asset of trust, an asset that does not appear on the balance sheet but in some sense supports everything a business has worked hard to build?
Is a Chief Trust Officer the solution?
There is no magic potion that can protect businesses from damaging customers’ trust, no way to ensure that employees and suppliers will always act appropriately and resist the temptation to take risky short-cuts. But instead of leaving it all to chance, many companies are creating the role of Chief Trust Officer, or CTrO. Here, we explore why.
There is no hard-and-fast definition of what a CTrO does (still early days for this role). Many companies already have a Chief Information Security Officers (CISO) but it’s not the same thing. As this article in Forbes points out, information security has evolved (with good reason) to adopt a “zero trust architecture” mentality, to prevent data breaches and protect against other security risks within a company’s network. But that doesn’t address a business’s ethical duties to its customers. This is not just feel-good, performative stuff. As the Forbes article notes, ethical business decisions are good business.
In a nutshell, a CTrO is primarily responsible for preserving trust between the company and its customers. This might include:
- Governance/Risk/Compliance and Security Assurance –identifying and mitigating risks involving compliance with a company’s ethics and rules governing customer relationships, and managing whistleblower policies
- Privacy & Data Governance – ensuring compliance with data privacy standards (such as Europe’s General Data Protection Regulation, GDPR), and keeping up with evolving standards in this arena.
- Use of Data in Marketing – developing policies and maintaining oversight of how customer data is used to promote and market a company’s products or services.
Before your Chief Marketing Officer’s hand shoots up to object, we’ll ask the obvious question: wouldn’t that last point be part of the CMO’s domain? Creating highly personalized marketing campaigns that target customers based on data a company collects or otherwise acquires can be a minefield. The CMO is almost certainly not equipped to ensure that this data is secure, and could have a conflict of interest about how that data could be used. The CISO would have the technical know-how to protect the data but may not understand the marketing context.
A report from MIT Technology Review titled “Introducing the Chief Trust Officer” observes that this can be a particularly sensitive issue in the pharmaceutical and healthcare industries. The digitalization of healthcare has radically changed the way patients and health-care professionals interact, and hospitals and pharmaceutical companies collecting data on millions of patients and healthcare providers via apps and other online platforms. It’s not difficult to imagine how this could go awry, causing severe reputational damage.
Trust in business: perception doesn’t match reality
We’ll ask another question that may be bubbling up: Is this really necessary? Can’t companies just “do the right thing”? To answer that, imagine asking senior managers in your company, “do you think our customers have a great deal of trust in us?” You probably think they would say yes. Most likely, they would be wrong. According to a recent survey by PWC,
- 87% of executives think their customers highly trust their company, but in fact, only about 30% do.
- 71% of consumers say they are unlikely to buy from a company that loses their trust
- 71% of employees say they would leave a company if it lost their trust
In the survey, PWC found that almost half (47 percent) of executives say trust is built more from the bottom-up—from customers, employees and other stakeholders—than from the top-down, from senior leadership. Only 27 percent of customers and 35 percent of employees agree; they expect senior management to take the lead on matters of establishing and maintaining trust.
But what does that mean, in practical terms? Some things are probably obvious – don’t lie about a product’s capabilities, don’t consistently overpromise and underdeliver, don’t use a customer’s purchasing data in a way that might reveal personal information, and so on. But the C-suite may be focusing on the wrong things when it comes to protecting their customers’ trust. PWC’s survey shows that many business leaders focus on social issues such as diversity, equity and inclusion (DEI) to drive trust. But while consumers may view DEI as important for other reasons, it is not one of the top five issues cited when it comes to trusting a company.
The results of PwC’s Trust In US Business Survey shows that for customers, providing affordable products and services is currently the top priority. Not a big surprise when inflation is high and consumers are feeling pinched while companies continue to report strong profits. Another top priority for consumers is how a company treats its employees, which is all the more important when many of a company’s employees are also customers.
Trust has bottom-line impact
Research from Deloitte states that when companies demonstrate capabilities that translate into trustworthiness, customer engagement, loyalty, and purchasing behavior can increase from four to ten percent per capability. Conversely, each action or inaction that loses trust can decrease desired customer behavior by 20 percent to 53 percent. It’s consistent with the choice most of us make to avoid associating with people we don’t trust.
Companies are just starting to recognize the impact of trust on business performance. Deloitte notes that trustworthy companies outperform their competitors by up to four times. Why? Because 88 percent of customers who highly trust a brand buy from that brand again, and 62 percent who report highly trusting a brand buy almost exclusively from that brand over competitors in the same category. Furthermore, 79 percent of employees who have a high degree of trust in their employer feel motivated to work. That boosts productivity and reduces turnover, which helps the bottom line.
In short, trust helps to protect and even increase value for a company. Another Forbes article summarizes things by saying that it’s no longer good enough for companies to have the best product or service. “To grow and succeed, companies must have the trust of their customers and stakeholders.” Maybe having a Chief Trust Officer is an idea whose time has come.
OWL ESG’s extensive data can help you to analyze whether a company tends to make good on its promises and commitments in various arenas. To learn more, contact us.