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Trust is Important

Amy LymanEvery year I look forward to reading the results of the Edelman Trust Barometer, a survey of ‘informed publics’ that asks people to respond to a series of questions about their trust in institutions.

The ‘informed publics’ group is a select population of college educated, high-income individuals who regularly use online media and read business publications. It’s a skewed sample of the general population from 23 countries and five continents. Yet despite these limitations the Edelman survey is well administered, consistently implemented over time, receives a tremendous amount of media attention, and serves as a good platform for considering the value of trust in institutions.

This year in particular the reports from Edelman have focused on the importance of trust in business activities – trust inside companies between employees and management, and trust outside of companies between consumers and companies. Unfortunately there’s not much that’s new in terms of what’s being said about the importance of trust, only concern expressed with the low numbers of people who perceive that businesses are trustworthy. Responses from the US and UK are similar with about 45% of people from both countries indicating that they trust that business will do what’s right.

More specific results from the Edelman survey confirm that people believe that transparent and honest business practices (65%), and how well employees are treated (63%) are important to corporate reputations. More people have positive perceptions of technology companies and, not surprisingly, fewer hold positive perceptions of financial institutions. Further information on the Edelman report can be found here.

Edelman’s results are in stark contrast to the results from employees at the Best Companies in both the US and the UK. In the US, eighty-four percent of the employees from the companies on the 2011 100 Best list indicate a high level of overall trust in management, while ninety percent indicate that often or almost always they believe that management is honest and ethical in its business practices. In the UK, the numbers are similar with seventy-nine percent of the employees from the 2010 Best Workplaces list indicating high levels of trust in management and eighty-seven percent indicating their belief that management is honest and ethical in their business practices.

The contribution of high levels of trust to corporate reputations and performance is old news for people who work and invest in Best Companies. In the United States, the publicly traded 100 Best Companies have consistently, over time, outperformed the S&P 500 stock index and the Russell 3000.

This kind of long term sustained performance receives a great deal of attention from some investors, yet financial analysts do not always know how to fully value the intangible assets created by high levels of trust. Dr. Alex Edmans, a professor at Wharton’s Business School has written an excellent analysis of this dilemma.

Creating trust in your own organization will bring significant benefits in terms of corporate reputation and performance – it’s time to get started.

Amy Lyman, PhD is co-founder of the Great Place to Work® Institute and author of the upcoming book, The Trustworthy Leader.