Building Employee Trust

As we have learned throughout history, success in carrying-out a corporation’s strategy is significantly affected by the culture of the organization and the effect it has on developing and maintaining levels of intensity and dedication among employees. How then do strong culture organizations develop intensity and commitment?

This article discusses two components that instill motivation and dedication among employees through a commitment building program: one that addresses issues of equity and trust and a second that builds on this trust foundation to increase involvement and create a commitment relationship.

A mistake many companies make is to try to implement the second step through such schemes as job involvement, total quality management, various team building programs, etc., without first establishing a foundation of trust. Quite often, well-intentioned TQM type programs fail because of general suspicion by employees, who view these programs as attempts by management to squeeze more contributions from them. With a proper trust foundation, these second step programs are more likely to be perceived as win-win opportunities.

Trust and Value

To address this trust issue, leaders need to convince their employees that they are valued members and partners and treat them as such. They need to take an interest in workers’ concerns and be willing to share fairly with them gains of the organization. Leaders can convey caring and concern through benefit programs, flexible work schedules, employee recognition programs, sharing of information, etc. These programs are well-documented in books and other articles on management and the purpose here is not to reiterate these ideas. No attempt, however, is likely to succeed if it fails to address the issue of equity in pay and compensation. Money may not be that much of a motivator, but it can certainly be a big demotivator. Fail to fairly or adequately compensate someone, and they are likely to see all other programs aimed at building trust and commitment as attempts to manipulation.

Does this mean that organizations must continuously raise everyone’s pay and jeapordize their financial solvency as well as undermine the stock price? A number of compensation alternatives exist, which may be linked to profitability, and which will help build trust even in difficult financial times without jeopardizing a company financially. The important thing is to address the issue and eliminate the gross disparities that exist when executives reap huge rewards even in bad times.

Establishing Equity

The simplest technique for restoring equity is to set a limit on the ratio of pay that any employee can earn compared to the lowest paid worker. Establishing reasonable CEO-employee pay ratios is a critical step to building trust and a sense of partnership. One of the most often cited criticisms of upper management is that they fail to practice the values and principles that they preach in corporate mission statements and ceremonial speeches.

For organizations willing to go further in recognizing employee contributions, there are gain-sharing options – plans that tie employee compensation to corporate profitability. Since this can be done for employees at all levels, it can potentially generate a sense of togetherness with all persons benefiting, or not benefiting, depending on an organization’s performance over a pre-established period. One problem with gain-sharing plans in general is that they may contribute to a short-term focus on employees’ parts at the expense of long-term orientation. Another approach is to reward all employees for successful, long-term company performance. A further approach is to offer warrants, that is, rights to buy shares of a company’s stocks, at a price linked to the current price, only after a specified date in the future, three or four years out. The warrants would orient employee thinking to the future because they would be linked to the price of the company’s stock down the road, not in the present.

Conclusion

The intent of these plans is to instill a sense of ownership and responsibility for an organization’s success among employees, and to support the value of equity among professional and rank-and-file workers. More importantly, they help erase what employees often perceive as a major inequity in companies – the excessiveness of executive compensation. With a base equity established, an organization is prepared to pursue programs and policies that may lead to commitment.



This article has been extracted and modified from Brown. R. (1997). Building trust through equity: The foundation of organizational loyalty and commitment. "Proceedings of the 26th Annual Meeting of the Western Decision Sciences Institute, Hawaii, USA. March 25-29, 1997."

George Tanewski is Research Fellow in the AXA Australia Family Business Research Unit at Monash University. Dr Tanewski writes extensively on family business issues and also sits on the board of a prominent Melbourne family business. For further information please contact George Tanewski on 61-3-9903-2388 or george.tanewski@buseco.monash.edu.au
First published: 29 August 2001.
Last updated: 6 October 2005.