Leading Change While Building Employee Trust
The silver lining of a recession is that it forces organizations to re-examine every facet of their operations — even those that were previously considered "in good shape" — in order to identify every possible opportunity for performance improvement. Business leaders search for areas where they can reduce costs, boost productivity and perhaps even gain a competitive advantage.
Rarely taken into account, however, is how these organizational changes can negatively affect employee trust levels. Moreover, during bad economic climates like today’s, small rifts in trust can grow into gaping voids quickly, and even minor issues can become rally points for negative reactions.
So why should organizations care about maintaining — or even increasing — employee trust? There are a number of reasons: like wanting to avoid having employees "quit and stay" (according to Gallup Research, disengagement costs corporations up to $300 billion per year), or to prevent a culture rife with office politics, back-stabbing, excessive red tape, information hoarding, hidden agendas and manipulation. All are expensive for companies.
But none of the reasons carry as much impact as this one: trust is a key indicator of an organization’s overall financial performance, playing a significant contributing factor to the bottom line.
According to the Great Place to Work Institute, trust is the "primary defining characteristic," accounting for a full 60 percent of the criteria used to identify FORTUNE Magazine’s "100 Best Companies to Work For." Interestingly, the companies comprising the 2007 FORTUNE list achieved an 18.1 percent return to shareholders over three years, compared to only a 10.5 percent return earned by companies comprising the S&P 500. And, over the prior five years, the FORTUNE Top 100 earned an average of 15.7 percent, while the S&P returned only 6.2 percent.
Even more convincingly, global performance consulting experts Watson Wyatt found that high trust organizations had over the long term a total return to shareholders that was 286 percent higher than low-trust organizations.
Don’t get us wrong. These data points are nothing new. What is new, however, is that organizational changes — including business performance improvement efforts implemented in response to the recession, and now being implemented in anticipation of a recovery — create a ripe new breeding ground for negative trust levels to develop.
By their very nature, periods of significant transformational change result in things like breakdowns in communication, lack of transparency, broken promises, the appearance of wishy-washy decision-making and the "blame game."
So what are organizations to do? After all, change isn’t just inevitable — it’s essential for survival.
The key is to focus on best practices for change management. John Kotter, whose eight-stage change process is one of the most commonly used, emphasizes that1 whether you are reacting to market conditions or driving a transformation, leading change requires a structured approach. Indeed, it is a necessary part of the future-state roadmap.
Within that context, a key aspect of successfully leading any type of change is to understand that people’s reaction to change is based on emotion, not logic. Many times, leaders analyze the information gathered, think about the appropriate solution and then launch into the answer that will be the new change paradigm, all without taking into account the people factor.
Kotter addresses this emotional side of change in his See-Feel-Change Model (The Heart of Change, p. 181), in which he advocates creating a way for both leaders and employees to visualize the problem (or business challenge) in a real and tangible way. This approach, he argues, helps people feel the need for the change on a deeper emotional level, an important component in building what could be called a trust bridge: improved linking of employees and leaders across the different levels of the organization.
Kotter divides his eight-stage change process into three phases. The first phase focuses on creating the right climate for your team. This starts with increasing the urgency of your effort across the board in order to make it meaningful. The next step is to form a guiding and executing team, including designating formal and informal leaders. In other words, get the right people on board! The final step in this phase stresses the need to create a strong vision: a compelling future state the team can buy into and that they’ll be able to communicate clearly and concisely to the broader organization.
The second phase involves successfully engaging and enabling the organization as a whole by communicating directly and openly. In order to achieve buy-in, leaders should engage in a continuous dialogue that tells a compelling story with all key stakeholder groups. This phase also focuses on empowering employees. This requires removing barriers, enhancing team member’s skills, and realigning business performance measurements. Meaningful and timely short-term wins need to be created. They should be planned, visible and unambiguous. These short-term wins start a successful execution path forward.
Kotter’s last phase involves two steps: persist and embed. Persist means to consolidate your gains, maintain your momentum and measure results. Embed requires modeling the new behavior, rewarding success, and hard wiring actions so the organization and its employees can’t go back to their old ways.
This three-phased approach is a dynamic process. There may be simultaneous steps and there can be iterative events, but every step is needed.
DuPont’s former CEO, Charles Holliday Jr., and his business leaders, were able to use some of these best practices in their reaction to the economic crisis as they recognized it was becoming a global problem.2 They quickly assembled key business leaders to assess the impact of the global economic downturn on operations, devise a proactive response strategy and then inform employees around the world of the plan.
Working in partnership with their communications team, leadership communicated openly and frequently about the roots of the crisis and the ways in which it was affecting DuPont. Critical to their success, leadership moved quickly. Early in the crisis response, for example, DuPont’s managers held face-to-face meetings with employees during which they practiced two critical pieces of effective employee communications: they explained what the company needed to accomplish to weather the challenges and what employees could do to help.
Specifically, employees were asked to identify three things they could do immediately to help reduce costs and conserve cash. Shortly after the communications program was launched, employees were surveyed to see how well they understood the crisis and what their emotional reaction was. By taking this action, DuPont was able to gauge how well prepared it was to confront the crisis. These focused actions enabled DuPont to better meet its cost and working capital targets.
DuPont’s experience is an excellent case study of an organization that recognized reality, devised a path forward, communicated with employees timely, openly and frequently, and engaged its workforce to help solve the challenge.
Of course, there are many examples of poor responses to this same economic crisis. They mostly involve leaders adopting a "let’s ride it out" philosophy, wishful thinking of "it will be back to normal soon," or the ever-so-popular "since we’re not sure what our response strategy is, let’s not communicate anything" approach.
None of these methods creates the right climate nor engages and enables the workforce. In fact, these approaches generally create an organizational silence — a failure to openly discuss how the economic crisis and the wounds that were created by business decisions impacted the organization — that stems from unhealthy (and unwarranted) fear. In these scenarios, any trust bridges that exist are quickly torn down — and employee satisfaction and engagement levels suffer.
Research conducted this year by the Conference Board shows this scenario is in fact playing out. According to the study, only 45 percent of Americans say they are satisfied with their work. This is the lowest level ever recorded by the Conference Board in 22 years of research.
As the market strengthens — and consumer and investor confidence builds — the race for growth will once again be on. Companies will begin hiring, which will create a global game of musical chairs. Those that fail to improve job satisfaction will be at significant risk of losing their top talent to the competition.
On the other hand, wise employers will begin building trust bridges with their employees right now so that they’re able to keep their top performers in place.
Bottom line: Organizations that cultivate a culture of high employee trust are better able to execute their business strategy, resulting in better overall business performance. This is especially important during times of significant change. The charge to executive management and the board is to take proactive steps to measure, maintain and build trust levels in your organization before it reaches a breaking point. Trust is not a "nice to have." It’s a business imperative.
1. Leading Change 1996, The Heart of Change 2002.
2. "What DuPont Did Right," BusinessWeek; January 19, 2009.