Organizational Trust: The Secret Ingredient to High Performing Organizations

user Darren Gold

Rarely a day goes by without some commentary lamenting the lack of employee engagement. Indeed, less than one-third of employees report being engaged in their jobs in Gallup’s 2014 survey of US companies. One of the main reasons: a systemic lack of trust. The vast majority of employees don’t trust their managers, managers distrust leadership, and most senior leadership teams suffer from a lack of trust.

Noted leadership and organizational scholar Warren Bennis once said “trust is the lubrication that makes it possible for organizations to work.” Research has shown convincingly and consistently that organizations with high levels of trust outperform those with low levels. Yet few companies possess high levels of organizational trust and even fewer leaders deliberately focus on building trust as a core characteristic of their businesses.

So how do we begin to build trust within organizations?

  • First, we need a more practical and clarifying definition of organizational trust.
  • Second, we need to better make the case for why trust should be elevated to the top of capabilities that organizations seek to develop and grow.
  • Finally, and in particular, we need to understand a key benefit of organizational trust that is often overlooked or underappreciated — namely, trust has the potential to significantly reduce friction in company decision making, allowing high trust organizations to outcompete and outmaneuver their competitors in what is an increasingly fast changing, volatile and dynamic world.

A More Practical and Precise Definition of Organizational Trust

Warren Buffet famously said, “Trust is like the air we breathe. When it is present, nobody really notices. But when it’s absent, everybody notices.” It’s true that we all have an intuitive sense of what trust is and when it’s not present. Yet, if we are to develop ways within organizations to develop real and sustainable levels of trust, it’s important that we have a clear and practical definition.

One very helpful way of thinking about trust is to distinguish between four types of trust: basic, simple, blind and authentic.[1] It is authentic trust — that which is fully self-aware and based on conscious choice and responsibility — that leads to high performance in organizations. A number of ways of defining this type of organizational trust has been offered over the years. Some commentators have defined trust as a function of two variables: benevolence, or the extent to which I believe you care about me and will continue to back me up, and aptitude, or the extent to which I believe you are competent and capable.[2] Another popular model of trust adds integrity to benevolence and aptitude.[3] This particular framework also cites the importance of two additional factors: the propensity of the trustor to be trusting and the perceived risk of giving trust. Finally, Amy Lyman, co-founder of the The Great Place to Work Institute, has found that organizational trust occurs when employees see others as credible, when they are treated with respect, and when they are treated fairly regardless of their position.[4]

While this work has done a lot to advance our understanding of trust, most companies and leaders find it difficult to both measure and build trust within their organizations. At the Trium Group, we have found that the most useful and practical model for understanding and building trust consists of three fundamental assessments (Figure 1). The first concerns competence. Do I believe that you have the expertise or skills for a particular role? The second involves reliability. Am I confident that you are a person who does what you say you are going to do? And third, trust depends on motive. Are your interest and intentions transparent and/or aligned with mine?

Figure 1

In our work with senior leadership teams in hundreds of companies across dozens of industries, these three questions have proven remarkably effective in helping individuals have honest and respectful conversations about their levels of trust for one another. Importantly, given trust’s inherent reciprocity, this model provides people with a useful framework for understanding the behaviors they must engage in if they are to become trustworthy in the eyes of their colleagues. And the model works at all levels of the organization, from front line employees to the most senior leaders of a company.

The Benefits of Organizational Trust

The research is overwhelming and clear. In terms of return on shareholder investment, high-trust organizations outperform companies with low levels of trust. Consider the following studies:

  • In a Watson Wyatt 2002 study, high-trust companies outperformed low-trust companies in total return to shareholders by 286 percent.
  • A later 2007 Watson Wyatt study found that organizations where front-line employees trusted senior leadership had a 42 percent higher return on shareholder investment than low-trust businesses.
  • Lyman’s tracking of publicly traded 100 Best Companies has shown that these organizations consistently post meaningfully higher returns versus the broader stock market.

And the benefits extend well beyond shareholder returns. A 2009 study by Interaction Associates found that high-trust organizations outperformed low-trust organizations on a number of dimensions: exhibiting organizational behavior consistent with company values and ethics (85 percent vs. 46 percent); retaining employees (80 percent vs. 42 percent); and attracting, deploying, and developing talent (76 percent vs. 24 percent).

Speed: The Overlooked Benefit of Trust

One of the most valuable products of organizational trust is often the one that is most underappreciated. That benefit is speed. Over the years, we have noticed a pattern among high performing companies. They make decisions quickly and the decisions they make stick. Rarely do they engage in endless debate in search of the perfect answer. Nor do they make decisions only to see those decisions unravel through back channel dealing or front-line resistance. Rather, they seem to move effortlessly through their decision making process, producing decisions that are clear and that enjoy the broad support of the organization. They are not always right, but they are certainly more agile and adaptable than their competitors. And when they are wrong, they are quick to alter course and decide on a new path forward.

What lies underneath the ability to be so agile and decisive? Well, if you guessed trust, you’re right. In order to understand why trust results in organizational agility and decisiveness, it is important to understand the distinction between agreement and alignment. Agreement describes a state of decision-making where all participants view the ultimate decision as their first choice. On the other hand, a group is aligned when all participants behave as if the ultimate decision is their first choice even if it may have been their second or third. In practice, an outside observer should be unable to distinguish between a group that emerges from a decision in agreement or in alignment. And if the decision turns out to be wrong, each member of the decision making group will act as if they have shared ownership in the outcome.

In high-trust organizations, individuals perceive most decisions as having low personal risk. If you trust the motives, competence, and reliability of your colleagues, you are much more willing to align behind a decision, even if that decision is not your first choice. In contrast, in low-trust organizations, decisions are rarely made without unanimity of agreement.

Figure 2

As Figure 2 illustrates, it is easy to see why high-trust organizations are able to move more quickly. The share of decisions around which they are able to align as opposed to reach agreement is much greater given the high levels of reciprocal trust and the corresponding low levels of perceived risk.

Perhaps the most vivid illustration of the way in which trust enables organizations to act with speed in uncertain situations is the storied effectiveness of the Navy SEALs. In his recent book Team of Teams, General Stanley McChrystal attributes the exceptional capability of SEAL teams not to individual prowess but to the exceptionally high levels of trust that exist between soldiers:

“A fighting force with good individual training, a solid handbook, and a sound strategy can execute a plan efficiently, and as long as the environment remains fairly static, odds of success are high. But a team fused by trust and purpose is much more potent. Such a group can improvise a coordinated response to dynamic, real-time developments… Harvard Business School teams expert Amy Edmondson explains, ‘Great teams consist of individuals who have learned to trust each other. Over time, they have discovered each other’s strengths and weaknesses, enabling them to play as a coordinate whole.’ Without this trust, SEAL teams would just be a collection of fit soldiers.”

How to Build Organizational Trust

Building trust, like any core competency in a business, is hard work. Organizations that have successfully built high-trust cultures can generally point to the following five things.

1. Leadership. A company must have a CEO who is truly committed to role modeling, rewarding, and prioritizing trust within her organization. This requires that the CEO use every available opportunity to demonstrate authenticity and vulnerability. Leaders who are authentic tend to be trusted. And the leader must follow through on the commitments he makes. That means being careful about promising too much and being honest about what can and cannot be delivered.

2. Senior Team. The hallmark of high performing teams is trust. When we work with senior leadership teams, we spend a lot of time facilitating deep one on one and group dialogues where senior leaders are given the space to be vulnerable and to allow their colleagues to learn deeply intimate aspects of their personal and professional aspirations and realities. Only by knowing each other can members of a senior team begin to trust each other. This trust allows teams to have open, constructive, and courageous dialogues, which lead to high quality decisions with a strong sense of shared ownership and accountability. Just as important, high levels of trust within a senior leadership team is palpable and radiates throughout the organization. Managers and front-line employees almost have no choice but to respond in kind.

3. Transparency. High-trust organizations almost universally default to being open and transparent. These companies almost always view sharing of information as an important aspect of their culture, and, accordingly, are willing to take measured risk associated with potential over-sharing of information rather than incurring the loss of cultural capital that comes from withholding information.

4. Autonomy. Companies tend to lean in the direction of one of two management philosophies: a command and control hierarchical approach, on the one hand, or a bias toward empowering employees to take risk and make decisions consistent with a set of clear company goals and objectives. High-trust organizations almost always fall into the latter category. By giving employees latitude to exercise creativity and take measured risk, an organization sends a very strong and clear signal that its employees are trusted to act as responsible stewards of the company. The case of Netflix illustrates this concept powerfully. In its famous culture deck, Netflix eschews the traditional (and often reviled) corporate expense policy in favor of the following five words: “Act in Netflix’s best interests.”

5. Performance-based Culture. Organizational trust can only exist if individuals in the company consistently demonstrate competency and reliability. To ensure system-wide competency and reliability, an organization must be truly committed to building a performance-based culture. Organizations with strong performance-based cultures are obsessive about the way they hire. They have very clear and high standards for bringing new people into the system and they very rarely if ever compromise on their hiring processes and criteria. They clearly communicate individual employee goals and objectives and ensure that individual goals are closely aligned with company objectives. They are rigorous about regularly providing direct and honest feedback. They empower and make resources available to individuals to take control of their learning and development. And when it becomes clear that there is a mismatch between employee performance and clear expectations, they don’t hesitate to make a change. It’s almost impossible to build a high-trust organization without also building a high level of accountability for performance.

Trust is an ambiguous term, often thrown around without real regard for what it truly means and what it takes to build it as a core competency within an organization. Yet, in our experience, with hundreds of companies, trust stands out as perhaps the most important driver of high performing organizations and teams. Leaders seeking to find ways to propel their organizations to higher performance would do well to start with building trust.

Darren J. Gold is a Partner at The Trium Group, a boutique leadership, culture, and strategy consulting firm based in San Francisco, CA

[1] R.C. Solomon and F. Flores, Building Trust in Business, Politics, Relationships, and Life, Oxford University Press, 2001.

[2] Peter R. Scholtes, The Leader’s Handbook: A Guide to Inspiring Your People and Managing the Daily Workflow, p. 43, McGraw-Hill, 1988.

[3] R.C. Mayer, J.H. Davis, and F.D. Schoorman, “An Integrative Model of Organizational Trust,” Academy of Management Review, Vol. 20, 1995, pp. 709–734.

[4] A. Lyman, The Trustworthy Leader: Leveraging the Power of Trust to Transform your Organization, Jossey- Bass, 2012.

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