Unlocking Performance: The Power of Trust within Corporate Environments

Natalia Illarionova

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Published Feb 29, 2024

“Virtually every commercial transaction has within itself an element of trust, certainly any transaction conducted over a period of time. It can be plausibly argued that much of the economic backwardness in the world can be explained by the lack of mutual confidence.” (Kenneth Arrow, 1972)[1].

Is trust one of the key factors in a successful company? Can trust transform corporate environments and make an impact on profitability? What factors contribute to building trust, and what transparent communication has to do with it? We tried to understand this complex issue and found an answer for you.

Trust matters

Adam Smith's description of self-interest and competition as the 'invisible hand' that guides economic activity has long dominated discussions on market dynamics. However, studies show the evidence of a non-selfish behavior of individuals, when people care about the wealth of others, trust and fairness[1]. Individual’s decisions are not context irrelevant. The attitude to trust or a willingness to cooperate can be dependent on actions of other people or environment , including the business setting.

In general, trust can be described as the belief “that someone is good and honest and will not harm you, or that something is safe and reliable”[2]. Research on various aspects of the trust has a long tradition. Researchers proposed various concepts of trust, which was later revised and deconstructed. One can recall, for example, the theory of Talcott Parsons. He claimed that “trust in the presently relevant sense is the attitudinal ground – in affectively motivated loyalty – for acceptance of solidarity relationships”[3]. His student Niklas Luhmann proposes that the main function of trust is to reconstruct or to reduce the growing complexity of society[4]. According to Francis Fukuyama[5] high level of trust among population leads to increase of the performance of all institutions in society including firms.

Thus, we can conclude that trust is a concept that permeates all aspects of our life, and the corporate environments is not an exception. When the level of trust is low, the corporate environment can be characterized by misunderstandings and poorly connections. As a result, it may have negative long-term consequences such as financial losses. Global CEO survey of PwC's reveals that 55% of CEOs consider a lack of trust as a business threat to their organization's growth prospects[6]. At the same time, high level of trust has positive influence on the efficiency and functioning of organizations, shaping the attitudes and behaviors of employees in a way that foster the achievement of company’s goals. Employees who trust are more committed to the organization, motivated to work, and are more cooperative[7]. Workers in high-trust companies are 76% more engaged and 29% more satisfied with their lives[8].

Decoding Trust

The positive impact of trust on firms' performance motivates researchers to find the most influential factors that may contribute to it. For example, these are public recognition of employee achievements, honest feedback from employers, and transparent communication. Study by Slack finds that over 80% of employees hope for better understanding of decision-making process, and 87% of them want their future company to be transparent[9]. Companies looking to hire talented employees should know that today's workers prefer organizations that support a transparent culture of collaboration. Thus, effective interaction between employees and management is crucial for workplace relationships. Moreover, studies show that companies with a high level of transparency have profit margins that are 21% higher than average[10]. So, transparency is profitable and open communication is a key to that.

How to achieve transparent communication?

Therefore, in the corporate environment creating and maintaining trust has become a crucial factor for effective functioning of companies. However, how can this be effectively achieved? Trust can be established through transparent communication involving the honest exchange of information between the management and employees. But it's not just that managers should be more available with information. From the employee’s perspective, it is about being heard, seeing what happens within the company on all levels, and being respected by management. According to Slack’s study, not all companies can successfully build communication strategies. Only 31% of employees are “extremely satisfied” with their current work communication tools and 76% want to higher availability of communication instruments[11]. The positive changes can be achieved by modifying communication, recognition, flexible benefit and award systems. Building trust is an excellent way to increase workers’ motivation, to improve commitment.

AlbiCoins provide you a practical guidance on measuring and implementing transparent communication practices with your employees that promote trust and benefit to firms’ performance.

References:

1. Kenneth, A.. 1972. Gifts and Exchanges. Philosophy and Public Affairs, 1(4), pp. 343-362.

2. Ashraf, N., Bohnet, I. and Piankov, N., 2006. Decomposing trust and trustworthiness. Experimental economics, 9, pp.193-208.