Low levels of trust can have a profound impact on the bottom line results of a company. For example:



• High trust companies had a total return (stock price plus dividends) that was 286 percent higher than low trust organizations (Watson Wyatt study, 2002)

• Fortune Magazine's “100 Best Companies to Work For”, in which trust accounts for 60 percent of the rating, earned over four times the returns of the broader market over a seven year period (Russell Investment Group study, 2005)

According to Stephen Covey, trust impacts the economics of a company in two ways—speed and cost. Low levels of trust require a company to create redundancy. There is excessive hierarchy, control, and overlapping responsibilities. This is coupled with bureaucracy that creates excessive rules, procedures, policies, and paperwork.

When people feel that they aren't trusted, they become disengaged and put forth just enough effort not to get fired. A Gallup study showed that 96 percent of engaged employees trusted management, yet only 46 percent of actively disengaged employees trusted management. Gallup's research puts the annual cost of disengagement at $250 to $300 billion dollars per year.

Recent corporate scandals such as Enron, WorldCom, Health South, Adelphia, and Rite Aid have hurt employee confidence in management. Despite their best efforts, managers in all companies are losing trust because of guilt by association. If they are not careful, business executives will be placed in the same category as politicians, lawyers, and used car dealers as professions with low public perceptions of trust.

To build a culture of trust, a senior leader must recognize the value of a high trust organization, model trust in his or her personal behavior, and align systems and structure around trust. I recently read about a hospital CEO who wanted to change the culture of his organization. Turnover is a significant issue in the health care industry because of the shortage of skilled people. In order to reduce turnover, the hospital was focusing on improving employee satisfaction. One issue that the nurses had was that there wasn't a copier at each nurse station and when they went somewhere to use one, it was locked and required checking out a key to use it. This was a trust issue—what management was saying was that nurses could not be trusted with using a copier properly. The CEO agreed to put copiers in all of the nurses stations. And to further emphasize the culture change, he gathered all the copier keys, borrowed a steamroller from a nearby construction site, and ceremoniously ran over the keys.

Research by WorkUSA shows a direct relationship between employee's perception of the effectiveness of the HR function and the level of trust in an organization. In their research they found if employees view HR as effective, 62 percent thought the organization was trustworthy. On the other hand, if they viewed HR as ineffective, only 8 percent thought that management can be trusted.

The first point to make clear is that HR is not responsible for building trust in the organization. The senior leaders of the organization are responsible for building trust and modeling integrity in the organization. The role of HR is to maintain trust. HR cannot build trust without the help of senior leaders, and senior leaders cannot maintain trust without the help of HR.

According the WorkUSA research, there are five things that effective HR departments do well:

1. They communicate openly and honestly about company performance, the rationale behind decisions, and encourage employee involvement and feedback. The are unafraid to share bad information or to admit mistakes. Today's workers expect explanations and expect managers to admit mistakes.

2. The make sure that employees recognize the full value of their benefits. In a recent employee survey that one of my clients did, they received low marks on benefits. What they found was that people really didn't understand or appreciate what they had. All the client had to do to change employee perceptions was to communicate.

3. Make changes based on employee input. Most employees want to contribute to the success of the company. They have ideas that could improve quality or reduce costs. Successful companies realize that do you not only have to implement changes suggested by employees, but that you also have to tell them what you did.

4. Clearly communicate business goals and explain how each employee contributes to those goals. In order for employees to be effective, they need to know what to do and how to do it. Employees will make fewer mistakes when they clearly know what is expected of them.

Hold people accountable. Companies with high levels of trust not only reward high performers, but also hold low performers accountable through discipline and termination. HR must maintain its integrity and the integrity of the organization. In a recent story I read, a senior level manager in a company was engaging in sexual harassment and everyone in the company knew it. Although, the HR manager recommended termination, his boss elected not to do that. Nine months later, both the senior manager and the HR manager's boss were terminated by the company president. The president said, “Everyone is management has to be accountable for their actions for our organization to be trustworthy.