The ROI of Trust, Part II
“Trust is like the air we breathe. When it is present, nobody really notices. But when it’s absent, everybody notices.” – Warren Buffett
What is it that makes employees want to go above and beyond the call of duty to do an exemplary job on each and everything they do?
What makes an organization report better-than-expected results on a consistent basis, and to successfully raise its goals and outpace competitors?
What is it that makes customers want to interact repeatedly with a specific company or brand?
Have you ever tried to identify what separates some organizations from the rest of the pack to make them truly great? We think about it every day. This week, we decided to turn to expert sources to see what they’d say – and their responses didn’t surprise us. As it turns out, the common element that seems to be shared by successful employees, organizations, and brands is trust.
Trust as a Business Imperative
Dr. Scott Tanenbaum of the Group for Organizational Effectiveness has assembled a great collection of current literature that clearly illustrates that trust isn’t just a “nice to have.” By way of evidence, he cites researchers from the Netherlands, USA, and Australia.
Bart DeJong from Vrije University published a meta-analysis in the Journal of Applied Psychology in which he found that trust among teammates directly affects team performance. By statistically combining the results from 112 prior studies involving over 7,700 teams, he found that teams with higher levels of intra-team trust consistently demonstrated better performance, even after accounting for how much they trusted their leader and how effectively the team performed in the past.
This study found that the relationship between trust and performance was strongest when team members need to rely more heavily upon one another to get the job done (“high task interdependency”). It also found that trust was linked to team performance in both short-term and ongoing teams.
Trust is a 2-way street
Research published by Tony Simons in Harvard Business Review found that trust in one’s team leader directly impacts team performance. In this study, 6,500 hotel employees were asked to rank the behavioral integrity of their managers by answering a series of questions about how closely their words and actions were aligned. The study then correlated the employees’ responses with hotels’ customer satisfaction surveys, personnel records, and financial performance. They found that the hotels where managers were perceived as following through on their commitments were more profitable – in fact, even 1/8 of a point on a 5-point scale could be expected to boost the hotel’s profitability by 2.5% of revenues (which, in this case, translated to more than $250,000 per year for each hotel).
But in order to optimize performance, team members also need to feel trusted by leadership. In a longitudinal study of 88 retail stores published in the Journal of Applied Psychology, Sabrina Salamon and Sandra Robinson found that when employees felt trusted, they were more likely to accept responsibility for helping the company achieve its goals. And in turn, that results in higher sales and customer service performance.
Command-and-Control is Giving Way to Collaboration
IBM undertook a study of more than 1700 Chief Executive Officers from 64 countries and 18 industries worldwide. They found that successful CEOs are adding a powerful dose of openness, transparency, and employee empowerment in comparison with traditional modes of corporate leadership. In fact, companies that outperform their peers were 30 percent more likely to identify openness – often characterized by a greater use of social media as a key enabler of collaboration and innovation – as a key influence on their organizations. Outperformers embraced new models of working that tap into the collective intelligence of an organization and its networks to devise new ideas and solutions for increased profitability and growth.
IBM’s research also found that technology was viewed as a powerful tool to recast organizational structures, with more than half of CEOs (53 percent) planning to use technology to facilitate greater partnering and collaboration with outside organizations, and 52 percent shifting their attention to promoting great internal collaboration.
“One of the most compelling findings is how in tune CEOs are about the implications and impact of social media,” said Bridget van Kralingen, senior vice president, IBM Global Business Services. “Rather than repeating the familiar lament about de-personalizing human relationships, this view leans heavily in favor of deepening them, and using dynamic social networks to harness collective intelligence to unlock new models of collaboration.”
Taking Stock in a High-Trust Culture
According to Great Place to Work®, there is such a strong connection between high-trust culture and business success, they advise strategy-minded leaders who care deeply about the financial well-being of their business to make trust a top priority.
“Regardless of industry, company size, or leadership styles, a high-trust culture is a defining characteristic of every company that wins a coveted spot on the Fortune 100 Best Companies to Work For® list that we have produced each year since 1998 with our publishing partner, Fortune. These are companies that consistently outperform their competitors and the rest of the market. They define what it means to be great, and these companies ensure everyone in the C-suite knows how to foster a high-trust culture—which fuels the organization’s continued success.”
For more than 30 years, Great Place to Work® has studied the relationship between a high-trust culture and a company’s overall success. They’ve identified several compelling business outcomes:
- Turnover rates that are approximately 50 percent lower than industry competitors
- Increased levels of innovation, customer and patient satisfaction, employee engagement, organizational agility, and more.
What’s more, FTSE Russell annually conducts independent research that analyzes the cumulative stock market returns of publically-traded Fortune 100 Best Companies to Work For. According to their research, stock market returns on high-trust organizations are approximately two to three times greater than the market average. In other words, if you invested in the publically-traded companies featured on the 100 Best Companies to Work For® list (all of which meet the definition of high trust), and each year divested stock in the companies that were no longer on the list and invested in companies added to the list, your returns would be nearly three times that of the general market.
Is it time to cultivate trust?
It’s clear from this research that trust has a positive impact on the bottom line of most businesses. Trust isn’t an optional “nice to have,” nor is it something that can be delegated to a specific department. It’s a core value that needs to be cultivated as an essential component of every major strategic initiative that the organization undertakes.
Does your organization need help to cultivate trust? Waggl helps by providing an easy and efficient way to integrate active 2-way listening into the business. If you are interested in learning more, please get in touch for a demo.
Check out the first installment of “The ROI of Trust.”