Why trust is the foundation on which wealth is created

Team work: Businesses that are not based on trust suffer from multiple operational and organisational problems. PHOTO | FILE 

By CANUTE WASWA

In Summary

• Reliability and value are the return on investment clients are looking for.

One of the lessons we have learnt from the Chase Bank saga is that customers do not trust the lender.

Trust is one of the fundamental tenets on which today’s society exists. When lost in a new town you ask someone for directions.

You then follow the directions to your destination. When driving down the street you trust that the cars coming against you will stay on their side of the road.

You expect that the contributions your employer committed to make to your retirement benefit scheme are being made, and when you ask your friend for advice you believe that the advice they give is in your best interest.

Trust is at the heart of our everyday interactions and central to the machine that fuels business. In business relationships, such as the relationship between an employer and his or her employee, trust breeds productivity.

For employers, the more they trust their employees, the more the employees feel empowered and the more they are inclined to act in the interest of the business.

Financial losses

Welcome to the trust and value economy. Trust and value are the return on investment (ROI) customers and prospects are looking for.

When trust and value are recognised and felt by your prospects, then trust and value — not price — become the deciding factor. The challenge is trust and value cannot be traditionally sold, they have to be built.

Businesses that are not based on trust suffer from multiple operational and organisational problems. Decision making gets delayed because one stakeholder might not trust the others to act for the greater good of the company.

Employees are not motivated to work hard because they do not trust the management to reward them appropriately for their work.

Negative feelings dominate the office ambiance. As a result, overall productivity drops. The general brand image of the business suffers because of lack of unity resulting from lack of trust.

Besides financial losses, a business that does not focus on trust based relationships loses goodwill in the market and paves the way for a downward slide.

And it is not just about business. If you take a broad enough definition of trust, it would basically explain the difference between the per capita income of the United States and Somalia.

Steve Knack, a senior economist at the World Bank who has been studying the economics of trust for over two decades, suggests that trust is worth $12.4 trillion (Sh1.24 quadrillion) dollars a year to the US economy. The figure represented 99.5 per cent of the country’s income in 2006 when the research was done.

In other words, if you make $40,000 (Sh4 million) a year, then $200 (Sh20,000) is down to hard work and $39,800 (Sh3.98 million) is down to trust.

How could that be? It is because trust operates in all sorts of ways, from saving money that would have to be spent on security to improving the functioning of the system.

But above all, trust enables people to do business with each other. Doing business is what creates wealth.
In branding, we always say that customers would rather do business with a trustworthy brand than an untrustworthy one.

This is because customers know they have a higher chance of satisfaction with a dependable brand. They also know that they are unlikely to regret their purchase decision. Establishing your company as trustworthy will attract customers to you.

You must help them to feel more comfortable with making purchase decisions as well as referring you to others.

It also encourages repeat buys. If the overall buying experience was good, customers will want to return to you.

Since a relationship is based on trust, establishing this dependability can foster long-lasting relationships with your customers, who will be more apt to make bigger purchases in the future.

International research has identified that profit depends to a surprisingly large extent upon trust.

In other words, if you want to make a quantifiable impact on your bottom line, look deeper than the surface analysis that’s often employed; trust is a significant key to building long term relationships, and long term repeat business.

Mr Waswa is a management and HR specialist and managing director of Outdoors Africa. waswa@outdoorsafrica.co.ke