Trust and Organizational Performance: The Role of Management

Introduction

The overall success of an organization is shaped by a variety of factors. According to Eric Krell, a writer for the Society for Human Resource Management, one of the greatest of these influences is the perception of senior management held by employees at all levels, and the resulting level of trust between them (2006). This paper discusses the correlations between organizational productivity and employee perception of senior management, drawing on Krell's article to explore how trust relates to overall organizational performance.

The Financial and Productivity Case for Employee Trust

When senior management makes itself known to employees at all levels, it begins to open the door to trust. Communicating genuine concern for employee well-being pushes that door further open, which ultimately benefits the company's bottom line. While management may believe it already enjoys a high level of integrity with its staff, steep turnover rates in many organizations suggest otherwise. By focusing on issues that personally affect employee well-being, management can achieve significantly increased productivity and stronger employee–management trust.

There are compelling reasons for upper-level management to pay close attention to — and respond to — the needs of employees at all levels. First, an organization's financial performance tends to move in the same direction as the level of trust employees have in upper management. Second, the more trust employees hold in senior management, the higher their production and loyalty toward the organization. Third, valuing employee input and empowering staff at all levels produces measurably positive outcomes. Krell's article draws on the 2005 Watson Wyatt Worldwide Study to support these findings.

How Management Behavior Shapes Organizational Culture

That study found that organizations reporting high levels of trust between employees and top-level management exhibit twice the financial returns of companies reporting low trust. Such findings carry clear practical significance for improving organizational performance. Furthermore, when employees are highly committed to their organization, companies have reported up to six times the returns compared to those with low employee commitment. Upper-level management can foster this commitment by maintaining visibility and holding open discussions about the issues employees care about most: compensation incentives and bonuses, career advancement opportunities, health coverage and retirement benefits, and training and professional development.

Krell's reporting includes the perspective of Michelle Roccia, VP of Human Resources at Authoria, who reinforces the importance of trust between employees and senior management. She stated that without that trust, a negative organizational culture develops. "You'll notice it in low productivity because employees, even management, are spending too much time talking behind each other's backs." She added that a lack of trust also manifests in high employee turnover — a serious concern for any Human Resources department. Such an atmosphere is deeply toxic to an organization's culture. A gossipy workplace is a distrustful one, because employees at every level begin to assume others are speaking negatively about them. This distrust is not confined to the relationship between staff and upper management; it permeates all levels of the organization.

When senior management allows the voices of all employees to be heard, the effects are positive throughout the organization. Involving employees in organizational decisions from the top down fosters greater loyalty and respect. Critically, it is not enough merely to listen — employees must also see that senior management follows through on their suggestions. As partner Reina of Chagnon & Reina Associates Inc. stated, "The only thing that builds trust is the way that we behave." The benefits of designing an organization that genuinely values employee input are lasting. Krell reported that employees of the Greenville Hospital System were involved in designing the facility and identified several design errors in the process. "Left unchecked, those design issues would have hampered productivity." Such involvement creates a genuine atmosphere of trust, signaling to employees that management truly values their contributions.

Conclusion

The relevance of this topic is immense for organizations. To heed or not to heed the advice given to upper-level management about the importance of cultivating a culture of trust is a major difference between exceptional success and merely mediocre performance. The availability of senior managers is understandably limited, and creating genuine communication and connection with employees requires deliberate effort. Nevertheless, the long-term benefits are substantial for all parties involved — employees, management, and the organization itself.