If the organization consistently delivers what its stated purpose promises, stakeholder trust will grow. By measuring, shaping, and intentionally building that trust, organizations will nurture a durable, positive reputation, too, driving enduring value for the company and its stakeholders. In sum, reputation, linked to value, emerges from the firm establishment of trusting relationships with stakeholders, rooted in a company’s ability to reliably deliver on its articulated purpose.

How Purpose Fuels Trust

Authentic purpose requires a straightforward understanding and articulation of what the company can accomplish at its highest level and what role it can play in the world. Then it must live up to that purpose visibly and tangibly, so that stakeholders feel that the company is honoring the commitments it has made to them.

Leaders must work to embed clarity of purpose across their organization—in people and culture, strategy and operations, and branding and communications—and abide by it. When they do, they will see lasting benefits:

• They will build a deep relationship with staff and customers alike. Research shows that 78% of respondents are most likely to want to work for a purpose-driven company, 72% are most likely to forgive that company if it makes a misstep, and 71% would rather buy from a purpose-driven company than from an alternative when cost and quality are equal.
• Over the next 15 years, they are likely to see annual total shareholder return that exceeds the market average by 9%, and annual growth that is 10% higher.
• They will unlock greater benefits through transformation. Companies with consistently aligned purpose, strategy, and culture show sustained performance improvement from transformation 96% of the time, versus 33% among companies that lack consistent alignment.

The most powerful benefit of all may be that a purpose-driven organization gains the trust of its stakeholders by exploiting its authentic strengths to have a positive impact on those it aims to serve. It follows through from promise to action, encouraging people to trust that it will continue to do so. That trust grows over time, as the company repeatedly meets stakeholders’ expectations.

Consider, for example, Johnson & Johnson, the pharmaceutical and medtech giant. In 1943, on the verge of its becoming a publicly listed company, Robert Wood Johnson authored the “J&J Credo,” which set forth the company’s core values and business priorities, emphasizing its responsibilities to customers, employees, communities, and shareholders.

The Credo has guided J&J through challenging events and helped it make sound strategic choices over the years—most notably, during the Tylenol crisis of 1982, when criminals laced capsules with cyanide and planted the adulterated bottles on store shelves, leading to seven consumer deaths. The company promptly initiated a nationwide recall of approximately 31 million bottles of Tylenol and introduced tamper-proof packaging. This response, prioritizing consumer safety over immediate financial gain, bolstered stakeholder trust and set a new standard in corporate crisis management.

Continued adherence to the Credo, especially in times of crisis, has helped drive commercial success while contributing to stakeholder trust and corporate reputation over more than a century.

The Need to Measure and Manage Trust

Being trusted is important, and corporate trust—or all too often the lack thereof—gets a lot of attention as companies operate under the pressure of a web of stakeholders whose expectations are inherently diverse, dynamic, and growing. Leaders must guide their organizations to serve and add value to all stakeholders.

If an organization is delivering on the promise of its purpose, as described above, it should be building trust with this cast of characters. But how can leaders know if this is happening? Businesses earn a reputation for trustworthiness not just by honoring explicit promises but also by fulfilling implicit ones that arise out of a company’s positioning, behavior, and role in markets and the world—so having a clear picture of perception is important. If stakeholders do not perceive the company as leaders would wish, what are the leaders getting wrong, and how can they shape perceptions for the better?

The answer starts with measurement. One way of quantifying an organization’s level of trust is through BCG’s Trust Index, which uses artificial intelligence to scrape the web and listen to traditional and social media, identifying trust-related signals and distinguishing between positive perceptions and negative perceptions expressed by multiple stakeholders. With that information, and the help of a natural-language processing engine, we can calculate a trust score and examine the underlying semantics of posts about the organization to identify why its trust is high, low, or in flux.

By more fully understanding the complex factors that undergird trust, leaders put themselves in a better position to build and hold onto trust and to align perceptions across the spectrum of stakeholders. BCG’s Trust Index has shone the light on a number of important characteristics of trustworthiness, which make the ambition less abstract:

• Trust is not monolithic. It exists along four dimensions: competence (how effectively the business lives up to its promises), fairness (how equitable the business is in delivering on its promises), transparency (how visible the process is), and resilience (how the business handles mishaps and external influences). In each of these dimensions, stakeholder perception can be at least as important to trust as objective reality.
• Trust drives value. The most trusted companies generate 2.5 times as much value creation as companies at the market average. This is primarily due to more effective interactions with stakeholders, reflected internally by lower turnover, higher premiums, and faster growth, and externally by measures such as higher ESG scores and price-earning multiples.
• Trust is fragile. Trust accrues gradually, generally in a process that involves a combination of incremental progress, several moderate spikes, and occasional lapses. The company itself is responsible for most declines in trust, typically in connection with issues involving its products and services. And when trust goes down, it’s three times as likely to take the form of a big loss than any given rise in trust is to manifest as a big gain. Recovering from a big loss takes time: in 70% of the cases, companies that experienced a big loss haven’t fully recovered to their previous level of trust within two years.
• Trust can be managed. By deeply understanding how stakeholders perceive its business, a company can actively shape those perceptions. First, leaders need to guide the company to deliver on its purpose and promises to key stakeholders. They also need to refine how they communicate their promises so that these communications consistently align with stakeholder expectations and with the organization’s capacity to deliver. Gaining a high level of trust entails ongoing work to reach or maintain a targeted trust metric, avoid big losses, and respond quickly when challenges arise.

Building a Strong Reputation

Reputation is the final element in this equation. If an organization stays true to its purpose and drives a high level of trust, its reputation will be strong and will have multistakeholder impact.

Although the concept of reputation is nuanced, there are ways to measure it. For example, Glassdoor ratings provide a glimpse of reputation from the perspective of employees. Sentiment analysis focuses on the general public’s view. Scores related to ESG, human rights, and governance reflect a company’s reputation from the standpoint of various stakeholders.

A positive reputation helps build goodwill—the intangible asset composed of positive characteristics such as loyal customers, good customer service, and strong employee relations—which increases a company’s price over fair market value. In direct business terms, goodwill reflects a buyers’ premium. Indirectly, it influences a company’s success through increased talent attraction, higher employee engagement and productivity, and a superior ability to recover from crisis.

Meeting All Stakeholders’ Needs

To bring value and positive impact to all stakeholders, leaders must capitalize on the integrated and self-reinforcing power of purpose, trust, and reputation. Several actions are critical to this process:

• Excavate your timeless purpose. This step involves uncovering the organization’s distinctive strengths as well as key stakeholders’ needs that the company can reasonably fulfill. To accomplish this, leaders should craft a clear purpose statement and story to serve as the foundation for the company’s existence. They should communicate this purpose and embody it through their actions and commitments with each category of stakeholder. This will ensure that the resulting growth of trust is authentic, intentional, and consistent with the company’s strengths and the role it plays in the world.
• Conduct an analysis of your stakeholder trust gap. Once leaders have articulated and activated the organization’s purpose, they need to know where and why gaps in trust exist. Completing this involves using AI to measure the company’s trustworthiness across the four dimensions of trust—competence, fairness, transparency, and resilience—to illuminate where the company stands with its stakeholders and where it is not delivering on its promises to them.
• Develop a trust strategy that aligns with reputational dimensions. Using the organization’s trust score as a key reference, leaders should develop a strategy consistent with the reputational dimensions that it wants to prioritize, thereby ensuring that the promises it makes to stakeholders are consistent with its articulated purpose.
• Continuously measure and refine. Leaders need to keep revisiting the organization’s trust strategy—measuring it and adjusting it—to ensure that it remains aligned with the organization’s purpose, stakeholders’ needs, and various reputational considerations. This is particularly relevant in light of the dynamic nature of stakeholder demands and exposure to multiple risks of trust breaches. Building and maintaining trust should be an integral part of the leadership agenda. The resulting advantage in trust will enable the organization to stand out from and outperform its peers.

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The most successful business leaders understand the need for alignment among stakeholders at different levels. When Satya Nadella took over Microsoft as CEO, he inherited a territorial, not cooperative, culture. Recognizing purpose and vision as cornerstones, Nadella worked to overhaul the behaviors and expectations of team members at every level, modeling the behaviors he wanted to see and not exempting any team members—most particularly in management—from those standards. He created a consistent ecosystem of sharing, respect, and performance, which over time built a culture of trust among Microsoft employees.
 
Leaders need to ensure that their company’s purpose addresses the needs of all stakeholders, and then they need to articulate that purpose clearly. If the organization delivers what it promises, trust will grow. And by measuring and shaping the level of trust it achieves, and making steady progress, leaders can ensure that its reputation will grow holistically and positively, too, driving value for the company and for everyone and everything it touches.

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