Organizations looking for ways to boost employee morale should forget about annual raises and focus on building trust, according to a new study.
Researchers at the University of British Columbia (UBC) found that when an employee’s trust in management increases one point on a 10-point scale, it has the same effect on that employee’s level of life satisfaction as a 36-per-cent raise.
Conversely, a 10-per-cent raise, much more than the average 3.5 per cent most Canadians will get this year, will boost an employee’s level of personal satisfaction by only a small fraction.
But organizations shouldn’t be too quick to relegate compensation to the back burner, cautions Liz Wright, head of HR consulting firm Watson Wyatt’s human capital practice.
“While pay practices aren’t always key motivators, they can quickly become dissatisfiers,” she said, adding that competitive compensation and benefits are the foundation for employee satisfaction.
UBC economists John Helliwell and Haifang Huang based their estimates on an examination of three large Canadian studies — Statistics Canada’s
Ethnic Diversity Survey
General Social Survey
, as well as the Social Sciences and Humanities Research Council of Canada’s
Equality, Security and Community
survey. Besides trust, Helliwell and Huang found having a variety of projects, a position that requires a high level of skill and enough time to finish work all significantly contribute to overall happiness — equivalent to a 21-per-cent, 19-per-cent and 11-per-cent pay raise respectively.
However, Helliwell was surprised by the one result he didn’t find. The 1991
study, by professor Michael Marmot of the University College in London, found workers high on the corporate ladder in the British civil service were healthier than those further down. This was attributed to the fact senior jobs afforded employees more decision-making capability and control. However, Helliwell didn’t find a significant connection between decision-making and life satisfaction.
“It did have a significant positive impact on job satisfaction,” he said. “The extra satisfaction that you get on the job is lost in the home and that probably means that jobs with a lot of decision-making probably impose stress that spreads over into the time available for family and friends.”
Instead, Helliwell suggested the four elements that his research tied to life satisfaction, and by extension better health outcomes, are more likely to be found in higher-level jobs.
Besides increasing individual happiness, and possibly health, trust is good for the organization’s bottom line, said Wright.
“Trust is the most fundamental good practice,” she said. “If employees don’t feel there’s trust there, they’re wondering ‘Why should I make a contribution?’ If you don’t get that trust, you’re losing an opportunity to really make people successful and ultimately your organization successful.”
With such a strong connection between trust, employee satisfaction and productivity, companies that make even small improvements would see large returns, said Helliwell.
And there is definitely room for improvement. While 70 per cent of employees surveyed in Watson Wyatt’s
study viewed their managers as respectful and trustworthy, only 37 per cent said they trusted their company’s executives.
Open and honest communication between executives, management and employees is the best way to build trust, said Helliwell.
“You’ve got to have a dialogue with the people involved,” he said. “And from the point of view of managers, it’s more important to listen than to talk.”
Communication itself has a positive effect on an organization’s bottom line. Organizations that effectively communicate with employees are 19.4 per cent more profitable than those that don’t, according to Watson Wyatt’s 2005
Effective Communication: A Leading Indicator of Financial Performance
Building trust with employees during difficult times is especially important because trust helps people work together more effectively during times of uncertainty, said Helliwell.
Owning up to the fact that management doesn’t have all the answers takes courage, said Wright.
“It’s a lot easier in many ways to just ignore some of these things but, to quote a colleague, it’s like termites eating away at the foundation of your house and you won’t know it until your house collapses,” she said.
Employee surveys are a useful tool for beginning the communication process and gauging what they view as barriers to trust in the workplace, said Wright.
However, once the survey has been taken, management must implement the suggestions.
“The worst thing that can happen is to not act on it,” she said. “You have just put in place another notch of mistrust.”
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