Sam Keller's TEC Blog

Wednesday, July 25, 2012

Is Trust Important to Organizational Success?

In a recent posting in Working Knowledge published by the Harvard Business School, James Heskett, HBS Professor Emeritus raises some interesting questions about the impact of trust on organizational performance.

Well known thought-leaders such as Chris Argyris and the late W. Edwards Deming argued years ago that trust is an essential condition for good performance. Most of us intuitively believe that there are economic benefits that trust may impart to an organization. These include` higher morale, increased loyalty to the organization, more delegation of authority, and greater assurance in transacting business faster and cheaper. Professor Heskett states that while this may be true "there is surprisingly little hard evidence to support these assumptions".

He goes on to point out that 30 percent to 69 percent of employees in the organizations he studied, agreed with the statement, "In my office, management is trusted,"  a wide range to say the least. Coincidentally, these numbers coincided with the financial performance of each organization, but he cautioned that his data base was not sufficiently large to be statistically significant.

Based upon comments from the readers of Working Knowledge, I conclude what I already believed - that trust is difficult to gain and easily lost. Professor Heskett goes on to suggest that trust is engendered by the process of setting and meeting expectations. Conversely, it is lost by setting and then not meeting expectations.

"Knowledge sharing would seem to foster trust as well. Other research suggests that trust may be associated with managers who hire, recognize, and fire the right people. At an organizational level, an aversion to letting people go in bad times may be associated with higher levels of trust."  This suggests that a "no surprises" approach to management would be beneficial in gaining and preserving trust. Again Professor Heskett cautions again that "there is not much good data on which to base a conclusion".

These thoughts regarding trust in organizations suggest that building trust should not be difficult. " It should be pretty simple, in fact. Don't create expectations that can't be met; share knowledge; hire, recognize, and fire the right people; be consistent and predictable; and avoid large-scale layoffs as much as possible."

Click here to read the entire article.