A Watson Wyatt survey of nearly 13,000 workers in all job levels andindustries reveals that fewer than two out of five employees today have trust orconfidence in their senior leaders. It’s an appalling statistic from a humanrelations standpoint, and potentially disastrous to corporate profitability. Butreally, can you blame employees for feeling the way they do?
Since the collapse of Enron a year ago, some of America’s biggestcorporations have been rocked by greed, scandal, bankruptcy, reportingviolations, executive dishonesty, and massive confusion over who is--or shouldbe--safeguarding the corporate coffers. The long list of egregious legal andethical violations is causing even the most loyal corporate employees to looksideways, cock their heads, and wonder: Can we trust what the top dogs aretelling us?
Now, maybe you’re thinking this isn’t something that concerns you,because your company has a clean record. No executives have been indicted.Profits are intact. There’s no reason for employees not to trust, right? Notso fast. Although high-profile malfeasance makes headlines, in the averagecompany it’s the little things that chip away at the trust bedrock. Littlethings like saying one thing and doing another. Forgetting promises. Generatingconfusion.
“Those of us in senior management often get so many projects going that weforget about or don’t pay as much attention to the promises we’ve made,”says Chuck Fitzgerald, vice president of HR for DFB Pharmaceuticals, Inc., inSan Antonio. Most executives are not a bunch of crooks, he adds. The vastmajority are concerned about doing the right thing. But the truth is, executivesare human. They get busy, forget to communicate, and neglect to follow through,and trust declines as a result.
Loss of trust can be devastating to company performance.
This loss of trust can be devastating to company performance. When people don’thave confidence in management, productivity falls, turnover rises, gossipspreads, cynicism sets in, and initiative evaporates. As an employee in thefinancial services division of American Express said recently: “Why should Iput in any extra effort when nobody has a clue what is happening around here?”
Left unattended, low trust can exact a high financial price. According toWatson Wyatt’s WorkUSA 2002 survey, the three-year total return toshareholders is almost three times lower at companies with low trust levels thanat companies with high trust levels. A report by Towers Perrin on employeeengagement shows similar findings. “Those organizations that have highemployee engagement [which is driven by high trust] have higher revenue growth,lower cost of goods sold, and lower sales, general, and administrative expenses,”says Emmett Seaborn, a principal with the Stamford, Connecticut-basedconsultancy. Simply stated, trust matters, and it matters now more than ever.
But just because maintaining trust is going to be difficult, that doesn’t mean HR shouldn’t try.
But addressing trust in the current economic climate is not going to be easy.“We’re concerned that employee trust could be further eroded by virtue ofthe fact that companies are having to make hard choices about health care,retirement, and compensation,” Seaborn says. Think about it: If you had justhad your pay frozen and benefits cut, as have many employees, would you be moretrusting?
But just because maintaining trust is going to be difficult, that doesn’tmean HR shouldn’t try.
HR and employee trust
So, how do HR professionals shore up the trust levels in their organizations?They do it by first understanding that trust cannot be fabricated with slickvideotapes, family picnics, or corporate rah-rah sessions. Today’s skepticalemployees can see right through such transparent efforts. In reality, trust isbased on honesty, confidence, and the ongoing belief that management will followthrough with its commitments.
“When people think of trust, they often think about what’s legal andwhether or not someone is lying to them,” says Ilene Gochman, organizationmeasurement practice director for Watson Wyatt. “But that’s not necessarilytrue. A lack of trust can also be fostered by incompetence, a lack of direction,or a sense that the organization is floating.” In other words, trust is theresult of countless management decisions made over a long period that helpemployees feel secure about their own--and the organization’s--future.
Because of this, it’s perhaps no surprise that a key predictor of employeetrust is the effectiveness of an organization’s HR function. In companieswhere employees believe that the HR department is effective, 62 percent ofworkers also believe that the organization is trustworthy, according to theWorkUSA research. However, in companies where HR is deemed ineffective, only 8percent of employees believe that management can be trusted. “This clearlymakes the case that there is a definite relationship between HR and employeetrust,” Gochman says.
But let’s be clear about this. HR isn’t necessarily responsible forbuilding trust. The CEO and other senior leaders are the true stewards oforganizational trust and integrity. If they are saying one thing and doinganother, no amount of HR backpedaling can fix the kind of doubt that’sgenerated. “HR, in and of itself, cannot make the culture of a company,”says Suzanne Smith, director of HR for Concurrent Computer Corporation inDuluth, Georgia. “HR can help guide the culture, but if HR doesn’t have thesupport and leadership of top management, it won’t work.”
But while HR cannot build trust without the help of senior leaders, trustcannot be maintained without an effective HR function. Why? Because, accordingto Gochman, there are two primary drivers of trust in organizations, both ofwhich fall into HR’s bailiwick. The first driver is communication. “Oursurvey reveals that companies with high levels of trust communicate both goodand bad news to employees and they do it often,” she says. The secondtrust-driver is how well a company manages changes such as mergers, downsizing,and restructuring. “It doesn’t matter what the change is,” Gochman says.“What matters is how well it is handled. High-trust companies simply do abetter job of it.
Communication drives trust.Change management is accomplished by good communication. And in the center ofthis organizational knot sits HR.
“From a statistical point of view, communication and change areintertwined,” she adds. “While they are distinct threads that can beanalyzed separately, they are also woven together. Communication drives trust.Change management is accomplished by good communication. And in the center ofthis organizational knot sits HR.”
Making it work
If effective HR departments are associated with higher levels of trust, what,then, does an effective HR department look like? What does HR do, exactly, tokeep trust high?
To begin with, HR professionals don’t do anything about trust directly. Asking to be trusted without being trustworthyis like expecting to be loved without being lovable. Instead, HR professionalswork diligently to build and maintain the kind of organizational culture thatinstills faith, loyalty, and confidence among employees.
According to the WorkUSA research, the most effective HR departments do fivethings to accomplish this--and they do these five things well. Effective HRdepartments:
1. Communicate openly. Companies with high trust levels give employeesunvarnished information about company performance; explain the rationale behindmanagement and HR decisions (such as compensation and promotion); and encourageemployee involvement and information-sharing. They also are unafraid of sharingbad news and admitting mistakes.
Two years ago, Brent Longnecker, president of Resources Consulting Group inHouston, designed a long-term bonus plan that affected two-thirds of the company’s1,500 employees. He calculated what each employee was likely to receive atyear-end based on revenues and head count, with a certain level of turnoverfactored in. He then communicated these figures to employees. Then the dot-combust occurred, turnover at the company fell, and consequently, the amount ofbonus money available per employee dropped by a whopping 40 percent.
“Our leadership group sat down and acknowledged that we hadn’t managedemployee expectations very well,” Longnecker says. “As a result, our trustand credibility were threatened.”
To remedy the situation, Longnecker and other company leaders traveled to 40cities over a two-week period and held meetings with employees to personallyexplain what had happened and admit they’d made a mistake in theirprojections.
“It wasn’t easy,” Longnecker says. “One employee came up to me andsaid he’d bought a new PT Cruiser believing his bonus would be a certainamount. Because the bonus fell short, he wanted me to personally pay thedifference.”
In the end, though, the visits from executives helped the majority ofemployees understand the problem and forgive management. “I was proud of our company,”Longnecker says. “We didn’t hide behind the bad news and refuse to addressit--which was good. Today’s workers demand explanations and expect employersto admit fault and communicate bad news.”
2. Communicate the value of benefits. Over the last few years, companies haverealized that many if not most employees are unaware of the value of theirbenefits package. To change this--and increase employee appreciation of benefits--some companies have begun to issue an annual “total awardsstatement” that communicates the total value of an employee’s compensation,including salary, medical and disability benefits, retirement, and so on.
An unexpected side effect of this is that companies that do communicate theoverall value of benefits tend to enjoy higher trust levels. The reason isn’tentirely clear, but it may be because employees in these companies have a morethorough understanding of what their employers do for them.
Five years ago, when Suzanne Smith joined Concurrent as its HR director, thetrust levels in the organization were low. Instead of trying to change theoverall culture, Smith focused on changing the culture of HR. She maintained anopen-door policy. She walked around and chatted informally with employees. Andshe focused her attention on shoring up the HR systems, such as compensation,rewards, and health care. She also began to talk to employees about the value oftheir benefits and work with them to take full advantage of the benefitsoffered.
One employee, for example, needed a loan from his 401(k) to avoid aforeclosure on his home. Another employee needed some mental-health counseling.Slowly, as it was made clear to employees that the company’s benefit program--andHR department--was there to help, trust began to creep back into the workplace.Today, company morale has improved to the point where there is virtually noturnover. While many factors were involved in this turnaround, communicating thevalue of benefits certainly played a part.
3. Make constructive changes based on employee input. One of the first thingsthat companies suffering from low trust should do is assess worker attitudes andtry to determine why trust is low. But as the WorkUSA data reveals, companies can’tstop there. To create a high-trust organization, executives must also seekemployee input for improving the work climate and act on those suggestions.
Maril MacDonald is a partner in the strategic consulting firm MathaMacDonald, which is based in Chicago. Two years ago, she worked with a5,000-employee midwestern manufacturing plant where quality and customer servicehad plummeted, morale was in the basement, and worker trust was nonexistent.
“Our first step was to sit down and talk with employees to determine whatwas wrong and why they felt they couldn’t trust managers,” MacDonald says.Employees made it clear they were tired of the fact that management promotedquality but refused to give workers the tools or decision-making authority toput out a quality product. They also made several suggestions for plantimprovements and reorganization.
MacDonald says plant managers not only implemented many of the suggestions,but also became disciplined about telling employees when the changes were made.“It’s not enough to seek employee input and make changes,” she explains.“You also have to tell employees you made the changes they suggested. You can’tassume people will notice on their own.”
According to MacDonald, acting on employee suggestions improved trust levelsat the plant, and the company also exceeded its cost-reduction targets, boostedquality by 70 percent, and increased on-time delivery by 40 percent.
4. Establish clear lines of sight. High-trust companies do a good job ofcommunicating the company’s business goals and explaining to employees whattheir role is in achieving those goals. “In order for employees to beeffective, they have to know what to do--and how,” explains Gochman. While it’sdifficult to dictate everything an employee should do, if you rely too heavilyon employee discretion, it’s too easy for employees to make mistakes. And whenemployees make mistakes, they don’t blame themselves. They blame managers fornot making it clear what was expected of them. Then, they hesitate to trustmanagers in the future.
5. Hold employees accountable. Companies where trust is high not only rewardhigh performers but also hold poor performers accountable through discipline andtermination. Companies that don’t do this risk immediate and lastingconsequences.
Several years ago, Chuck Fitzgerald worked in HR at a company where one ofthe senior leaders was engaging in ongoing sexual harassment--and everyone inthe company knew it. “Our HR recommendation was that this person be removedfrom his position,” Fitzgerald says. “Unfortunately, my boss, who was anofficer in the company, chose not to do that, and it was clear to me thatemployees lost trust in management because of it. About nine months later, myboss was terminated, and soon after that, the perpetrator of the harassment wasremoved from the job. Afterward, the president of the company called and told meI’d been right.”
For Fitzgerald, the experience underscored not only the importance of holdingpeople accountable for their actions, but also how important it is for HR tomaintain its own integrity. “Everyone in management has to be accountable forthe organization to be trustworthy,” he says. “But in particular, HR has tobe accountable because we are the interstitial tissue between management andemployees. We are advocates for both sides. If we aren’t trustworthy, nothingin the organization can be trusted.”
To maintain the trust levels in your organization, youhave to remember that trust, in and of itself, isn’t the end result you shouldbe aiming for. Effective HR departments maintain employee trust because they arefocused on business results.
How true that is. But to maintain the trust levels in your organization, youhave to remember that trust, in and of itself, isn’t the end result you shouldbe aiming for. Effective HR departments maintain employee trust because they arefocused on business results. They understand how things like communication,consistency, follow-through, respect, and internal customer service contributeto those results.
In a nutshell, effective HR departments gain trust by being trustworthythemselves. It’s true in personal relationships. It’s true in familyrelationships. And it’s definitely true in the workplace. Somebody has to bewilling to trust first, and in corporate America, that somebody is HR.
Workforce, October 2002, pp. 28-34 -- Subscribe Now!