Why Trust is Essential to Success in Business

May 20, 2024 by Eric D. Reicin, President & CEO, BBB National Programs

Success in business flows from a myriad of factors, but a single compelling concept lies at the core, and that is the concept of trust.

When it comes to trust, the external stakes are high. An Economist analysis of a well-known automotive company, financial services brand, and a handful of other corporations reported that a company loses 30% of its value when it suffers a loss of trust.

And, as Paul J. Zak, founding director of the Center for Neuroeconomics Studies, has written, the internal stakes can be even higher: “Employees in high-trust organizations are more productive, have more energy at work, collaborate better with their colleagues, and stay with their employers longer than people working at low-trust companies.”

At a fundamental level, a business cannot be built without adequate investment, and those investments are only made if funders trust that the creators of the business have constructed a model that can deliver the financial success that has been promised. 

The essential lessons of trust can be applied to various aspects of business and nonprofit organizations. And conversely, the breaking of the bonds of trust can be devastating to a business and its ability to thrive.

Sometimes, the essential lessons of trust can – indeed must – be seen through the lens of an entire industry. Take the airline industry for instance. The competition around pricing considerations and customer service perceptions arguably pales in comparison to the fundamental trust in air travel. “Aviation is the safest mode of transportation,” said Anthony Brickhouse, a professor of aviation safety at Florida's Embry-Riddle Aeronautical University. “You're more at risk to have an accident driving to the airport than you are flying at 38,000 feet.” 

While studies continue to reinforce that air travel is the safest mode of transportation, a few recent incidents have served to dramatically decrease the level of trust that passengers have in air travel. A February 2023 report in the Financial Times, “How the US Fell Out of Love with Flying” showed, “cancelled flights, missing bags, and disappearing routes are infuriating passengers – and galvanizing a push for tighter regulation.”  

Similarly, the auto industry is facing a crossroads on trust when it comes to the data collected by “connected cars” both from a customer perspective but also as automakers and others further monetize that data. As Wards Auto reported from this year’s Consumer Electronics Show, “Connectivity solutions and in-car digital offerings, such as entertainment and advance hazard warnings will, according to global consulting firm McKinsey, play an increasingly important role in the future mobility experience and change the revenue streams for automakers.”   

And, as detailed in the New York Times, "connected" cars can also be a gold mine of driver data—not only for automakers, but also for insurance companies. Moreover, last summer, a California privacy agency announced plans to review the data privacy practices of automakers that make and sell connected vehicles embedded with data-mining features such as cameras, location sharing, web-based entertainment, and smartphone integration.

As the leader of a nonprofit organization dedicated to being the place where businesses go to enhance consumer trust, we think about the concept of trust a lot. And in ruminating about it, we are increasingly cognizant that the building blocks of trust must come not just from businesses themselves but ideally from the industries of which they are a part. 

At the beginning of 2024, when data aggregator InMarket Media was “prohibited from selling or licensing any precise location data to settle Federal Trade Commission (FTC) charges that the company did not fully inform consumers and obtain their consent before collecting and using their location data for advertising and marketing,” it was a clear violation of consumer trust, resulting in an action that sent a message to an entire industry. 

As recently as this month, the FTC, in reporting on recent enforcement actions for mass data collectors, wrote in its own blog: “The law and the FTC have long recognized that a need to handle a person’s information to provide them a requested product or service does not mean companies are free to collect, keep, use, or share that person’s information for any other purpose—like marketing, profiling, or background screening.” 

Yet the problem persists, demonstrating that trust cannot be imposed by the government, nor can it be proclaimed by a single company operating in a vast marketplace, and that has been true for decades.

To us, this is where the concept of industry self-regulation, or soft law, comes in. As I have written previously, soft law can fill the gap between corporate compliance to self-imposed rules and hard law, consisting of the vast body of statutes and resultant regulations that have been passed and promulgated during the past century. 

I am not naïve enough to see soft law as an elixir. There is a natural tendency by courts to doubt steps by business alone to ensure fair competition, just as there is a well-founded tendency by business to be skeptical of government. However, credible models of soft law have formed and stepped forward to fill the gap between self-imposed company promises and government-imposed business commandments. Many of those models have been developed and tested within our organization, BBB National Programs, but countless others – such as FINRA – have been built by industry associations here in the U.S. or by quasi-governmental bodies, like those that are predominant in Europe. 

Just as a successful business enterprise or mission-based nonprofit organization must be built on trust, so must a successful industry self-regulation program. As the classic Billy Joel song goes, “It’s always been a matter of trust.”

Originally published in Forbes

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