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Why Transparency Is Essential to a Trusting Staff

This story appears in the June 2013 issue of Entrepreneur. Subscribe »

Consumer spending is on the rise; the housing market is rebounding; hiring is at a five-year high. Prosperity, it would seem, is on its way back. Yet while the numbers are up, spirits are still down. That's because, despite five years of rebuilding, one essential to business success is still nowhere close to its pre-crash levels: employee trust.


"Building Trust in Business," an annual survey conducted by Boston-based Interaction Associates, has mapped sentiment in the workplace for the past half-decade. And in quantifying the long-term impact of back-patting and back-stabbing, this study has found that organizational trust has a definitive link to business performance. 

"High levels of trust equals high performance," says Linda Stewart, CEO of Interaction Associates, which helps organizations build collaborative cultures. "If you look at the lower-performing companies, in all cases they had lower levels of trust."

This is not just the fuzzy math of high-fives and hugs. Surveying approximately 450 respondents at more than 300 randomly selected companies since 2009, Interaction Associates saw clear patterns emerge from its respondents. Throughout the study, high-performing organizations (those whose net profits grew 5 percent or more in the previous year) have consistently placed more value on customer and employee relationships than lower-performing respondents. This has served to double workers' involvement levels at the high-performing firms, ultimately making those companies better at retaining key staffers. 

Meanwhile, low-performing outfits, which make up 65 percent of respondents, were more focused on cost-cutting and productivity, despite (or possibly because of) their lack of financial success. And in most instances, number crunching failed to pay off for these firms, with 45 percent falling short of their net-profit goals.

According to the study, trust levels have declined every year (except in 2013) since the financial collapse began, with the largest drop coming immediately after the crisis hit. By swiftly (and sometimes secretively) executing layoffs and cutbacks, many bosses hid their company's problems from their staff, leading to a significant loss of faith in management. Later, as employees vied for their jobs against their peers, trust eroded among the workers, too. 

"People just felt as if everything happened to them. Even the managers responsible for executing it never felt empowered to have any discussion," Stewart says. "Everything was done very secretively."

Companies that better weathered the storm operated more transparently, allowing staff to provide solutions and participate in brainstorming sessions. Stewart recalls how one Interaction Associates client, a 100-plus-person professional-services firm that had struggled with layoffs in the past, had to make changes because it wasn't meeting its revenue goals. "They got the entire company in a room and said, 'Here's our problem, and here's a list of everything we could do. How would you prioritize this list?'" Stewart says. 

By including the entire company in the discussion, everyone understood the plan of action, and all shared in the responsibility for executing it. "The impact was amazing," she says. "They didn't lose anybody." 

Of course, sometimes leaders must act quickly by making and announcing decisions without additional input. "If the building is burning down, you don't get people together and say, 'What are we going to do?'" Stewart says.

Yet while some bosses acted like their businesses were ablaze during the economic crash, in hindsight circumstances may not have been as bad as they appeared. And now, as they try to rebuild, it's the damaged relationships caused by those false alarms that are torching the bottom line.


John Patrick Pullen

Written By

Based in Portland, Ore., John Patrick Pullen covers travel, business and tech for Men's Journal, Fortune and others.