Employees are often a company’s most important, yet most sceptical, stakeholders


Employees are often a company’s most important, yet most sceptical, stakeholdersThe recession has made many hands idle. Not all sectors have fared poorly, however. Discount retailers, home delivery pizza firms, bailiffs: all have seen business jump. So too, it would seem, have statisticians.

Consideration of dips and double dips are not all that have kept the data crunchers busy. Slumps in employee trust have also occupied their energies.

Never, it seems, have employees been more distrustful of their employers. At a global level, employees’ trust in their employers dropped by 60% during the recent recession, according to the Great Place to Work Institute.

Things are perhaps improving, albeit slowly. Increased confidence in the economy is generating a slight turnaround. The benchmark Edelman Trust Barometer found that trust in business in the US jumped 18% to 54% earlier this year.

Trust is not uniform, however. Confidence in banks among the public remains at an all-time low, for instance, down from 68% in 2007 to 29% in 2010. Neither is trust stable: one in seven believes companies will return to their old ways as soon as the downturn is over.

“There is such a lack of trust in the market. People see business leaders with very different eyes from those of our parents’ generation,” says Williams Johnson, managing director of the Great Place to Work Institute.

The statisticians’ picture is equally bleak when it comes to issues of responsible business. A fifth of US employees believe company leaders are not “completely honest and ethical”, according to a study by pollsters Maritz Research. The same survey finds that as few as one in ten of US employees agree that their managers show consistency between their words and actions.

A costly business

The cost to companies of a sceptical workforce is huge. Repeated studies show a correlation between financial performance and employee engagement.

The Tower Watson ISR survey is perhaps the most comprehensive. The study highlights a 52% gap in the performance improvement in annual operating income for companies with highly engaged employees versus those with poorly engaged employees.

As well as productivity, staff retention, morale and recruitment are all hit when employee trust levels fall. Less than a tenth of employees with weak trust in management would be happy to spend their entire career with their present company, the Maritz study finds. Even fewer (3%) look forward to coming to work every day.

Research shows that a poor opinion of companies’ corporate responsibility practices also carries serious performance-related repercussions.

Employee commitment marks one obvious area. Less than half (49%) of employees with a negative perception of a companies’ responsibility record say they are “highly committed”. Conversely, three-quarters of those with positive views say they are.

Recent decades have seen a gradual decline in general employee trust in their employers. The reasons stem from a liberalisation of the economy and consequent increase in labour flexibility.

Today, the job for life is dead. Outsourcing and short-term contracts are the new reality for many in work. For employees, that means less job security and a concomitant decrease in trust.

Distrust in management increased substantially during the recent recession. Concern over redundancies and lack of clarity of companies’ future are cited in survey after survey.

Nearly half of US executives concede that lack of transparency in leadership communications will encourage employees to look for new jobs once the economy picks up, according to a recent survey by professional services firm Deloitte.

Loss of trust during the recession is not uniform, however. The UK’s top 50 best workplaces actually saw internal trust levels increase by 3%. Why? Because management proved itself to be more “accessible” and more “upfront with employees”, says Johnson of the Great Place to Work Institute.

Martin Clarke, a specialist in employee engagement at Cranfield school of management, agrees. Honesty and openness are critical weapons in winning the trust game.

“Imagine if you go to employees and say, ‘We’re up the swanny. What sorts of things can we do?’ In my experience, when you treat people as adults they respond as adults,” he says.

One company to have taken such an approach is KPMG. As a way of avoiding redundancies during the recession, the company introduced a Flexible Futures initiative. Staff were asked in principle whether they would work a four-day week. Nearly nine in ten (86%) agreed.

Pay freezes, flexi-time, voluntary secondments, prolonged career breaks and shorter hours are other measures taken by responsible employers to avoid job losses. Levels of employee trust in such companies rises accordingly.

Even when job cuts are required, progressive companies seek to reflect commitment to staff. The human resources team at London-based law firm Wragge took on a quasi-outplacement function, for instance, trying to find alternative employment for those it had to lay off.

b>CR cynics

General employee distrust is clearly related to, and often exacerbated by, lack of trust in a company’s corporate responsibility claims.

Arguably, employees are harder to convince than other stakeholder groups. Working inside an organisation, they have first-hand experience of its commitment to ethics – or otherwise.

Companies’ concern for non-financials is also counter-intuitive for many employees. Giles Gibbons, chief executive at consultancy Good Business, says: “Because most employees believe management only really cares about making money, then naturally they are inherently sceptical about claims regarding sustainability.”

At the same time, employees frequently rank as companies’ most important stakeholder. That is especially true for corporate responsibility. A survey by the Charities Aid Foundation, for example, shows that companies identify employees (47%) as more important than either charities (19%) or communities (18%) when it comes to social investment activities.

Nor is responsible business an issue that employees take lightly. More than half of the workforce thinks it is important that their employer takes society and the environment into account, according to a recent book by David MacLeod and Nita Clarke. Graduate recruiters repeatedly cite companies’ responsibility record as a primary concern for job applicants.

Adopting genuine commitments and making demonstrable steps to improve a company’s social and environmental performance are an obvious first step to win the confidence of employees.

But is that enough? Perhaps not. For employees to trust, they need to become engaged and involved.

Share ownership

Most responsibility improvements, however, especially in the early stages of a company’s sustainability plans, occur at a policy level rather than on the shop floor.

Take, for example, energy procurement, Gibbons says. For a company to shift its energy procurement to renewable sources requires the decision of the director, not the whole workforce. “Because these decisions often happen in a vacuum in terms of what employees see themselves, they don’t feel any ownership or that any real change is really happening,” Gibbons says.

To convince employees, therefore, requires engaging with them. Such engagement can be achieved through internal communications, particularly methods that promote employee feedback and dialogue.

Evidence from UK telecoms giant BT shows that simply knowing about the company’s corporate responsibility programmes increases employee pride. Under the banner of BT Better World, the company has invested heavily in sustainability over the past decade. Scores for its internal Pride Index have increased by about a fifth over the same period.

Three-fifths of employee volunteers would speak highly of their employer, according to research by Mori. That compares with only two-fifths of non-volunteers.

Try as companies may, the battle for trust carries several stings in the tail. First, trust is not uniform. There are at least two types: trust on a personal level (ie trust in a company’s motivation), and trust on a competency level (ie trust that companies can deliver). Employers can easily win on one and fail on the other.

Second, trust is finite. Research into organisational and human psychology indicates that humans are capable of trusting only a limited number of people on a personal level.

Cranfield’s Martin Clarke explains: “It is genetically impossible to get trust at a personal level with everybody. The only way to get trust is to trust those immediately around you.”

The implications for companies are significant. Line managers, not senior managers, suddenly become the benchmark against which employees trust their companies or not. That requires open and transparent leadership on the part of mid-level managers. Over and above, it necessitates a high standard of personal ethics from across management.

Worryingly, research by Deloitte suggests that nearly a third of employees are more likely to act unethically as a result of the current economic downturn. If there are volunteering opportunities going, it’s precisely these individuals who need to be in the front of the queue.

Great Place to Work Institute, UK;
Maritz Poll, Maritz Research, April 2010;
Global Workforce Study, Towers Watson, 2010;
US National Employee Benchmark Survey, 2001;
Trust in the Workplace: The 2010 Ethics and Workplace Survey, Deloitte, 2010; Getting Engaged, Charities Aid Foundation, 2009;
Engaging for Success: enhancing performance through employee engagement, David MacLeod and Nita Clarke, 2009;
Good Companies, Better Employees, Corporate Citizenship, 2003.

Business impacts of low trust and engagement

  • Nearly half (48%) of employed Americans who plan to look for a new job when the economy is more stable cite a loss of trust in their employer. (Deloitte’s 2010 Ethics and Workplace Survey) 
  • Total shareholder return for companies with high levels of engagement (where 65% or more of employees are classed as engaged) was 19% higher than the average total shareholder return in 2009. (Hewitt Associates)
  • Companies with low engagement (where less than 40% of employees are engaged) had a total shareholder return that was 44% lower than the average. (Hewitt Associates)
  • Only 6% of employees in companies with low management trust would invest money in their employers, compared to 51% of those in companies with strong management trust. (Maritz Poll)
employees. employee engagement  HR 

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