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COMPENSATION & REWARDS
Jan 20, 2014

Low levels of trust impeding organizational performance

Study highlights strategies for rebuilding employee confidence in leaders
    

By Claudine Kapel

When organizations want to fuel higher levels of performance they often consider revamping compensation programs or creating stronger links between rewards and results.

Such strategies can be valuable, but there are limits to what compensation programs can achieve on their own. The reality is that while such programs can reinforce desired behaviours, performance and results, they don’t resolve the more foundational challenges that may be eating away at an organization.

For example, one major barrier to organizational performance is an eroded level of employee trust in leadership. While compensation design can help ensure desired behaviours are rewarded, you need to do a lot more than rethink compensation if you want to rebuild employee trust.

And for many organizations, taking action to reestablish employee trust may be a business imperative.

Recent research by the Chartered Institute of Personnel and Development (CIPD) found just 29 per cent of employees think trust in senior management is strong at their workplace.

“Operating in a low-trust environment is costly,” warns CIPD in its latest Megatrends report. “Both managers and employees spend valuable time and energy monitoring each other. Employees lack commitment, are less likely to take risks and are more likely to be looking to move on.”

Adds CIPD: “There is the additional risk of this building at some stage into a more fundamental challenge to the reputation and legitimacy of the organization. These are costs that organizations cannot afford.”

Although CIPD’s research focuses on employers in the United Kingdom, the themes of its research will likely strike a universal chord.

“Problems of trust have been building up for some time,” CIPD observes. “There has been a fairly continuous diet of crises and scandals in both public and private sectors in recent years, and the recession made the trust issues worse as many employers had to take tough measures to pull through, cutting jobs and freezing pay.”

While highlighting the challenges, CIPD’s report also points to what is needed to forge stronger levels of employee trust in organizational leaders.

For example, CIPD found that employees are more likely to trust senior managers when they feel they are listened to and when their views are taken into account when decisions are made.

In addition, “leadership, culture and behaviour make a big difference to trust,” reports CIPD. “Trust is stronger when management and ‘the system’ are seen to treat people fairly, when people (including senior leaders) behave in line with corporate values and when leaders also show trust in their employees.”

CIPD identifies some key actions organizations can take to strengthen or rebuild employee trust, including:

  • Acknowledging trust as an issue.
  • Keeping employees well informed about what’s happening in the organization and providing them with opportunities to make their views known.
  • Demonstrating trust in employees.
  • Treating employees fairly, especially with respect to organization-wide processes such as pay and promotion decisions and performance appraisals.

As CIPD acknowledges, it takes time to strengthen or rebuild employee trust. But given the corrosive and damaging nature of broken trust, organizations ignore such conditions at their own peril.

While the path forward may not be easy, the effort is critical to help restore open and trusting internal relationships and, ultimately, optimal organizational performance.

Claudine Kapel is principal of Kapel and Associates Inc., a Toronto-based human resources and communications consulting firm specializing in the design and implementation of compensation and total rewards programs. For more information, visit www.kapelandassociates.com.

    
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