Trust, or lack thereof, has a measurable effect on the financial health of any organization because it affects customer loyalty, word of mouth, employee retention, and ultimately, reputation. In fact, the foundation of your reputation is the trust that exists between your organization and your publics.

The biggest damage a badly managed crisis will have on your organization is what it does to that trust, and to the relationships and reputation built on it. Trust between individuals and organizations has been widely studied. Measuring it is a vital component to both building your reputation and defending against crises.

You need look no further than the accounting firm Arthur Andersen to see evidence that lack of trust can ruin a company. Arthur Anderson was destroyed after the Enron scandal not because of financial wrongdoing, but because its clients lost their trust in its results.

Likewise, in the world of fast food, whenever news of tainted beef hits the airwaves, consumers lose trust in the safety of their favorite burger and McDonald’s sales take a dive. Conversely, a key to FedEx’s success is that customers do trust the company’s pledge to deliver “when it absolutely, positively has to be there” overnight.

Thanks to the economic collapse of 2008, people trust corporations less than at almost any other time in our history. Thus, when trust helps an organization build relationships with key constituencies, it saves that organization money by reducing the costs of litigation, regulation, legislation, pressure campaigns, boycotts, and lost revenue.

  • A high level of trust helps cultivate relationships with donors, consumers, investors, and legislators who are needed to support organizational goals.
  • When employees trust their employer they are more likely to support the mission of the organization and be satisfied with their jobs. Lower employee turnover has a direct impact on the bottom line.
  • Trust from the financial community is critical to an organization’s access to capital and, therefore, its ability to grow.
  • Good relationships with the media can often avert a crisis.

The essential transparency of social media has also helped redefine the importance and relevance of trust in today’s marketplace. If you are doing—or perceived to be doing—something wrong, bad, or hurtful, chances are that someone will report it somewhere in social media. If you’re lucky it won’t be filmed and end up on YouTube. If your stakeholders have a high degree of trust in your organization it’s likely they’ll come to your defense, and what could have been a devastating scandal may be forgiven in a day or two.

Even though examples such as these make it clear that trust is important, few companies actually measure the trust that their constituencies have in them.

Katie Paine is CEO of KD Paine & Partners, a leader in public relations measurement, and author of Measure What Matters: Online Tools for Understanding Customers, Social Media, Engagement and Key Relationships.