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HR Magazine: Do They Trust You?

By Eric Krell  6/1/2006
 

HR Magazine, June 2006Vol. 51, No. 6

Employee trust in senior executives has a tremendous impact on your business. And HR plays a vital role in managing that trust.

Do your employees trust your senior managers? Are you sure? It’s an important question because new research indicates that employee trust in corporate managers—especially senior managers—strongly influences turnover, productivity and profitability.

For example, a 2005 Watson Wyatt Worldwide study found that companies with high integrity—a measure based on employee assessments of senior management’s consistency, communications and other trust-determining behaviors—generate financial returns (in excess of the cost of capital investments) that are twice those of companies with low integrity levels.

That kind of research is drawing the interest of business executives, who want to know where they rate on employees’ trust scale. Unfortunately, the answer is not encouraging: Research shows that senior executives generally score low on employee trust.

Fortunately, HR executives can help because they are intimately involved with the organizational levers that can boost—or bust—employee trust.

Top Management, Lowest Levels of Trust

Trust hinges on employee perceptions, which constantly recalibrate in response to leadership decisions and behavior. “Employees judge you every day as you walk through the halls, hold meetings and have casual encounters at lunch,” says D. Douglas Dorman, SPHR, vice president, human resources, for Greenville Hospital System in Greenville, S.C. “That all goes into an accounting.”

But research consistently shows that executives at the highest level don’t get much credit from employees for being trustworthy. For example, a recent Watson Wyatt WorkUSA study found that 72 percent of employees believe their immediate bosses act with honesty and integrity in their business activities, but only 56 percent believe that about top management.

The results are not surprising: As Dorman and others note, trust is based on day-to-day interactions. “But the average employee doesn’t see senior leaders every day,” points out Ilene Gochman, Watson Wyatt’s Chicago-based central division leader of organization effectiveness and national practice leader of organization measurement. As a result, employees create perceptions of executives’ trustworthiness “based on things that are far removed from them: what they read, videos of the leaders broadcast to the company and what they may hear through the grapevine.”

A leader’s trustworthiness also rests on whether or not employees believe the leader considers their well-being when making decisions—an evaluation based on “100 percent perception or conjecture,” says Gochman. “The way that employees form impressions about those things is based much the same way that impressions are formed about politicians or other public figures.”

Thus, each interaction between a senior executive and the workforce represents a precious opportunity to build or break trust. And—not surprisingly—the importance of that interaction soars when it deals with topics that affect employees’ well-being.

In a February study of employee communications and workplace trust by research and consulting firm Insidedge and public relations agency GolinHarris, employee participants rated the following five topics as being most important to them and deserving of more frequent and open discussion: compensation, incentives and bonuses, career advancement opportunities, health coverage and retirement benefits, and training/career advancement, respectively. Of course, those are issues with which HR is intimately involved, so it makes sense for HR executives to guide and shape executive communications in much the same way a publicist manages the timing, format and content of a political candidate’s or a celebrity’s public appearance.

When Gochman and her colleagues work with senior executives to rebuild employee trust, “a lot of it has to do with the kind of advice I’m sure that a public relations professional would give: getting the executives out in front of employees and making sure they have clear and consistent messages,” she acknowledges.

The reliance on HR for help managing such messages makes sense from another perspective also. “All business is conducted through relationships, and trust is a foundation to the effectiveness of those relationships,” notes Michelle Reina, co-author of Trust & Betrayal in the Workplace: Building Effective Relationships in Your Organization (Berrett-Koehler, 2nd Ed., 2006). “And business leaders turn to HR leaders to be the holders and the keepers of the health of relationships.”

Annette Catino, president and CEO of QualCare Inc., a full-service managed care organization based in Piscataway, N.J., understands the value HR professionals can bring when managing employee communications that influence trust. Catino relies heavily on assistant vice president of human resources Yvonne Attala to shape her communications to employees because, she emphasizes, Attala and her team have far more personal interactions with employees.

“When something important happens and I think it’s worthy of being communicated to employees or managers, I will sit down or talk on the telephone with my HR executive and ask her how she thinks we should best do this,” says Catino. “In a meeting? Or can we do it in a written form? I use my HR executive to really help me [select the appropriate] mode of communications.”

Six Ways To Build Trust

How can HR executives develop a strategy for building and managing trust? It starts with defining corporate values—a task that many organizations have already accomplished, as evidenced by the number of framed value statements proudly hanging in many office lobbies.

But defining corporate values is only the first step in generating and maintaining employee trust, a point underscored by the Insidedge/GolinHarris survey. The survey found that employees rated “my organization’s culture, values, style, etc.” 12th on the list of items they find important and worthy of more communication, far behind issues relating to employee well-being.

Even more to the point, values and culture matter only if they are lived and practiced every day. If the behaviors of senior managers do not support value statements, employee trust will decline.

“To a large extent, people fail to recognize that it is not our values and beliefs that build trust,” says Reina, who also is the co-founder of Stowe, Vt.-based consulting firm Chagnon & Reina Associates Inc. “The only thing that builds trust is the way that we behave.”

Thus, once an organization identifies its core values, it must take additional steps to ensure that those values are reflected in the words and actions of senior executives—especially when dealing with issues of employee well-being.

Distilled from the insights of a variety of experts, the following five steps—all of which can be bolstered with the aid of HR’s expertise—can help foster employee trust:

  • Translating corporate values into behaviors, and training all employees on those behaviors.
  • Ensuring that leaders behave consistently with core values.
  • Ensuring that leaders communicate in ways that support core values.
  • Ensuring that employees feel they are involved in decisions.
  • Measuring employee perceptions of their leaders’ integrity.

Translate and Train

At HR consulting firm Development Dimensions Interna-tional (DDI) in Bridgeville, Pa., all new employees participate in a “values-clarification” exercise during orientation. The exercise is run by company president Bob Rogers, who goes through scenarios where employees will encounter value conflicts. “I believe trust is the result of living your values,” he says.

In practice, “living your values” is nitty-gritty work that demands constant guidance from HR. Michelle Roccia, vice president of HR for Waltham, Mass.-based Authoria, a maker of technology for HR management functions, regularly advises employees and managers to ask what someone meant by a certain comment, to clarify questions and to express trust when they ask someone to perform a task.

“It involves holding each other accountable and confronting each other if there is an issue,” she explains. “It takes a lot of work to do that, and it’s not always comfortable. … We reinforce that you don’t let a problem go. You find the person and talk to that person, in person or on the telephone—you don’t use e-mail to do that.”

Discussing the behaviors that do and do not support the values also can help employees ground their impressions of leadership integrity in less idealistic terms. For example, one of the core values at Benchmark Assisted Living in Wellesley, Mass., is to “accept and embrace change.” Employees who understand that value are less likely to question management’s integrity when a strategic decision nudges them out of their comfort zone.

Benchmark employees know all of the company’s core values because they are “made crystal-clear to everybody,” says Jill Haselman, senior vice president for organizational development and culture for Benchmark. “Everybody is playing on the same set of behavioral rules. When those values are lived and authentically respected, people will trust the organization. When they’re not, they won’t.”

Be Consistent

Consistency relates to the degree to which top managers’ behaviors align with core values and to employees’ perceptions of how fairly those managers treat the workforce.

That’s why Vivian Maza, vice president of people for Weston, Fla.-based Ultimate Software, bristles when benefits providers ask her how the benefits packages for upper management differ from those given to employees. “That’s definitely a trust-killer,” she says. “We’re all in this for the same reason, which is why we don’t have reserved parking for executives or different benefits programs” for top management.

Demonstrating consistency requires a heightened attention to detail and perseverance. Companies with “consistent” leadership seem to engage in ongoing discussions about values and behaviors. “We talk daily, even hourly, about our core values,” says Benchmark’s Haselman. “We hire, fire, develop and grow based on them.” ›

That consistency is enforced at the highest level of the organization. At a pivotal point in the development of the company, Haselman says her CEO clearly announced to the entire company that behaving in accordance with the company’s values always trumps business performance demands, if those two priorities ever conflict. If a superstar salesperson does not live and breathe the company’s core values, “we typically remove them,” says Haselman. “We give them another chance because that’s also a value. But you can’t stand on business performance alone here.”

Consistency can be difficult to live up to. “Leaders, and value statements, often say, ‘People are our most important asset,’ ” says Di Ann Sanchez, SPHR, vice president of human resources for Dallas/Fort Worth (DFW) International Airport. “But that’s the first thing they cut, and they’ve just shot down a corporate value. … Companies that cultivate and maintain true integrity stick to their corporate values in hard times.”

Involve Employees

Experts report that employees who feel involved in decisions that affect their well-being are more likely to perceive their leaders as acting with integrity. Establishing that feeling requires a delicate touch.

“Figuring out how many employees to involve and to what degree is a complex issue, but it’s important,” says HR executive Dorman, who notes that the complexity correlates to the size of the project or change initiative. Sometimes, e-mail input may suffice; on larger projects, such as the construction of a new hospital building, numerous employees from areas of the organization most affected by the project should participate on steering committees and provide progress reports to their divisions.

That sort of involvement, while time-consuming, can prove mutually beneficial—such as when Greenville Hospital System employees helped spot design problems during planning of a new building. Left unchecked, those design issues would have hampered productivity.

When Benchmark designed a new compensation structure, it dispatched a consultant to find out what employees wanted. They replied that they wanted a structure based on merit, and Benchmark gave it to them.

Ultimate Software added domestic partner coverage to its benefits program this year as a result of employee requests. “In the past, it was very easy for us to say ‘no,’ ” Maza explains. “But if you seek input and then say ‘no’ too often, employees get the sense that management doesn’t care.”

Communicate Mindfully

Executive communications mark the riskiest, and possibly the most important, trust-building lever. A message’s content, timing, frequency, deliverer and mode of delivery can acutely affect the receiver’s perception of leadership. That’s why QualCare’s CEO huddles with her HR executive to identify who should deliver an important message and how the message should be delivered.

Timing is also crucial, particularly in sectors—like health care—where employees work night shifts. Dorman and his executives strive to deliver news to employees just before it appears in the media, which is extremely difficult, but vital: The Insidedge/GolinHarris study found that news coverage is the absolute least effective and least useful way to communicate with employees.

Dorman also works hard to identify the proper context of the communications so that employees, who need to understand how a change affects them personally, will gain value from the information.

Too often, that consideration receives short shrift; supervisors often hear of major changes for the first time when the news reaches their direct reports, who turn to them for answers. When those answers consist of “I don’t know,” trust in leadership and in immediate supervisors plummets. To sidestep that problem, Sanchez meets with senior managers and supervisors first to explain the details of major changes at DFW Airport.

It’s notable that Benchmark Assisted Living counts “candor and respect” as one of its eight core values: Both qualities can lubricate communications and lessen the sting when the content of a message from on high is unpalatable. Part of the company’s message to employees is that they might not get everything they ask for—but everything they ask for will be considered. That’s blunt, but fair—and preferable from a trust-building perspective to overpromising.

Maza firmly believes that another form of communication—among employees themselves—functions as a valuable trust-builder. She has noticed that employees frequently relay positive stories—such as the fact that the company has never reduced its generous benefits coverage, or an instance when an employee experiencing difficulty received a no-interest loan on the spot—to each other and to new employees.

“I think it’s crucial for new employees to come in here and hear from other employees what we’ve done for them,” says Maza, who believes those stories help foster trust.

Measure and Manage

The trust-building impact of helping an employee during a time of need is difficult to measure. But other metrics, such as employee perceptions of their leaders’ integrity, can and should be measured regularly, says Rogers.

Every 18 months, DDI conducts an employee survey that contains questions about the extent to which leaders’ behaviors support the company’s values. All 1,000 employees see the results. So does Rogers, who requires all managers to identify two areas of improvement—regardless of their scores—in a step-by-step improvement plan submitted to him. “You can’t manage what you don’t measure,” he adds, noting that integrity has been the highest-rated area on the most recent surveys.

Haselman also measures trust by taking her employees’ pulse on their leaders’ integrity. She is careful to point out that integrity and employee satisfaction are distinct qualities. “An employee can trust their supervisor but not particularly like them,” she explains. Having a friendly relationship helps, but it’s not necessary.

That sort of measurement capability, along with most other trust-management capabilities, resides in the HR function.

HR executives should guide trust-building and rebuilding efforts, but should not own them, Rogers asserts.

“This can’t be a matter of, ‘Well, you have to get the forms into HR,’ ” Rogers adds. “If [trust-building] is perceived as being driven by HR, the processes will tend to atrophy over time.” He believes that executive and line management should set up accountability systems, executive committee reviews and other methods to drive home the importance of the effort.

In other words, senior leadership should trust HR to develop integrity-building strategies, and HR should have faith that management will execute them.

Eric Krell is a business writer based in Austin, Texas, who covers HR and finance issues.

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Rebuilding Phase

A 2005 Watson Wyatt study identified several correlations between profitability and components of integrity. For example, organizations with high levels of employee commitment generated financial returns (in excess of the cost of capital investments) six times greater than those of companies with low employee commitment levels. And companies with a clear line of sight between employee performance and strategic objectives generated financial returns (in excess of capital investments) three times as high as those of companies with weak transparency between strategy and employee performance.

By contrast, low levels of employee trust cause problems.

For example, the most expensive ethics hotline systems can be rendered ineffective if employees believe that executives will not listen to their concerns—or will retaliate against those who raise them. A Watson Wyatt WorkUSA study found that 77 percent of employees say their company boasts a clearly communicated ethics code, and 62 percent “felt encouraged” to relay good and bad news to senior-level leaders. But 52 percent believed they would be labeled “troublemakers” if they picked up the telephone to—anonymously, in most cases—report unethical behavior. Thus, these ethics programs are likely to be underused—and the investments in them wasted—because they lack the vital ingredient of trust.

Experts indicate that low levels of trust also can hamper business development, discouraging employees from recommending new ideas or solutions to existing problems. Employees who believe that management ignores their insights are less likely to deposit process-improvement ideas in the suggestion box.

Bob Rogers, president of HR consulting firm Development Dimensions International in Bridgeville, Pa., says the following costly problems are symptoms of trust-deficient organizations: low initiative; an active, inaccurate grapevine; high turnover; a high “fear factor” among employees; turf wars; and defensiveness.

Each symptom “feeds on the productivity and performance of the company,” notes Ilene Gochman, Watson Wyatt’s Chicago-based central division leader of organization effectiveness and national practice leader of organization measurement. After all, employees who spend more time backbiting spend less time working. (And nine out of 10 employees are exposed to rumor, gossip and backbiting every day, according to research from the Stowe, Vt.-based consulting firm of Chagnon & Reina Associates Inc.)

Michelle Roccia, vice president of HR for Authoria in Waltham, Mass., once worked in a trust-challenged organization and agrees that low trust levels affect performance. “You’ll notice it in low productivity because employees, even management, are spending too much time talking behind each other’s backs.”

But where executives most likely will notice a trust deficiency is in increased turnover, she says. And the problem can compound itself because lower trust can hamper recruitment efforts designed to stem that turnover. “An A player does not want to be in an organization where there is not a high level of trust,” Roccia says. “If a company says it wants to attract and retain top talent, it needs to have a culture that supports that objective. In my opinion, trust is a critical component of that type of culture.”

Higher levels of trust breed positive effects. For example, the turnover rate is only 3 percent at Weston, Fla.-based Ultimate Software, which ranked 12th on the 2005 “Best Small & Medium Companies to Work for in America” list produced by the Great Place to Work Institute. The company’s vice president of people, Vivian Maza, credits high levels of employee trust with keeping turnover low.

And getting employees to engage in the business, offer suggestions and go the extra mile is not a problem at QualCare Inc., a full-service managed care organization based in Piscataway, N.J. President and CEO Annette Catino, who relies on HR for help managing employee communications, believes her proactive communication style inspires employees to come forth with new ideas and, sometimes, with new business opportunities. “I’ve had employees who work outside sales and marketing e-mail me after they’ve run into a potential customer at a picnic during their off time,” Catino reports. That mutual trust helps explain why NJBIZ named QualCare to its “New Jersey’s Best Places to Work” list this year.

In general, says Gochman, employee trust represents a valuable “platform for a whole range of capabilities.” An important benefit, she notes, is that “a trusted leader can take the company through more difficult times.”

-- Eric Krell

The most common trust-breakers stem from employees perceiving their leaders as dishonest and/or inconsistent, according to a Watson Wyatt Worldwide study.

Ilene Gochman, Watson Wyatt’s Chicago-based central division leader of organization effectiveness and national practice leader of organization measurement, views most, if not all, trust-breakers as variations on a theme of breaking promises. Those promises can be explicit (“I promise we’ll never close this plant”) or implicit (integrity is a company value, but a top sales executive who behaves unscrupulously is pardoned because he generates a lot of revenue or is a favorite of the CEO).

Perceptions of “dishonest leadership” stem from a wide range of transgressions. For examplmployees may receive word of an across-the-board freeze of budgets during cost cutting, and then walk into a freshly wallpapered and redesigned lobby the next morning.

“Those kinds of things happen all the time,” says Gochman. “Many times, the executives are oblivious, or they’ll say, ‘Well, this was budgeted two years ago.’ But to the employees, it looks like a breach of trust.”

Di Ann Sanchez, SPHR, vice president of human resources for Dallas/Fort Worth International Airport, notes that employees perceive large executive salaries and bonuses as a form of dishonesty—especially when employees suffer layoffs and cutbacks that affect their well-being. “When employees talk about integrity and ethics,” Sanchez notes, “that’s often what I hear: ‘Hey, I’ve had to suck it up—when are you going to suck it up?’”



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