The Importance of Trust

Welcome to The Shift, a weekly newsletter where I provide thought-provoking ideas to help you think differently about your career and money.

Last Week + This Week = It’s All Connected

Last week I confirmed you are working more than you used to. Read here if you missed it. This week I explain how that is a breach of the psychological contract we sign with employers.

Start with Trust

I read a quote that summed up everything wrong with work right now.

The quote came amid a discussion about corporate longevity.

It also came from a man who’s lived through a few things… like the Depression and every other recession in the last 100 years. He’s survived divorce, losing a son and an eye. He served in WWII and experienced financial loss.

Famed investor Charlie Munger believed the companies that live the longest, operate under a sort of ethical standard of what he called “a seamless web of deserved trust.”

According to Munger, the web is all about treating your constituents fairly. That includes everyone from your employees and customers to your competitors and vendors, among others.

His friend and the co-founder of Stripe, Patrick Collison, sums up Munger’s thinking this way: “if you’re structurally adversarial to those adjacent to you in the ecosystem, maybe you prosper for five years, but not for 75 years!”

In other words, surviving and prospering comes down to trust. A company must trust their stakeholders, and vice versa.

That trust, at least between employers and employees, has eroded.

Breakdown of Workplace Trust

Data on the state of trust at work is concerning - a loss in trust is happening rather quickly.

A decade of rebuilding employee confidence in corporate leaders (post financial crisis) was wiped away in a year and a half’s time. My guess is you would see a similar trend in employer confidence in employees. However, to my knowledge, that data isn’t tracked.

Post-pandemic change was a key factor in the deteriorating trust. But it wasn’t the cause of the decline.

Trust, regardless of the direction it is coming from (employee to employer, or employer to employee) is often determined by a few, important attributes¹ :

• Reliability

• Transparency

• Acting responsibly

• Providing value for the money

These traits have broken down on both sides of the aisle. It’s not just perception of a breakdown either. It’s a real breakdown. I’ll summarize it this way:  

Employee Perspective

Employees feel uncertain about their job responsibilities² making it more difficult to rely on previously set expectations by bosses.

They see transparency, communication, and requests to provide feedback diminishing² . They also struggle with inflation as wage growth hasn’t kept up with higher prices.

Employer Perspective

On the other hand, employers feel the pressure of worker turnover dinging reliability.

There’s also the challenge to operate, align and communicate expectations for various stakeholders as the economy and performance return to a more normal, yet slower and uncertain growth rate.

Veering Adversarial

Here’s the thing: the breakdown in trust is more than just those obvious factors.

The unwritten contract between employer and employee has also been broken.

This is what Charles Handy called the “psychological contract” and is defined by the mutual perceptions or beliefs about what is expected, promised, and owed in the workplace.

I think the psychological contract has changed significantly, without notification, in recent years. This has created an imbalance, leaving each party feeling like the other is in breach of the contract.

When these things are combined, the state of this relationship feels as though it is veering too closely to the “adversarial” lane mentioned in Munger’s thinking.

As that happens, people (managers and employees) become defensive and protective.

They act on self-interest. Engagement, retention, and productivity decline.  

That’s not good for anyone. We are all better off if we can restore the trust in this partnership.

An Imperfect Relationship

Trust takes time to rebuild. (did you see the chart above?!)

Which brings me back to Charlie Munger. Another trait I always admired about him is his instance on having an open mind.

An open mind allows one to consider more than what they know and are aware of. For an honest dialogue between leaders and their workforce this will be essential. Both sides should be willing to lay everything on the table, without judgement.

While a perfect relationship may be difficult to achieve, restoring trust is possible.  

Afterall, the longevity of work depends on it.  

Let’s make The Shift!

Lindsey

Sources:

1. Ipsos Global Trustworthiness Monitor. January 2023.

2. Gallup, as of mid-2022.

   - The percentage of employees saying they know what’s expected of them at work dropped to a record low.

   - Only 22% of employees strongly agreed that their leaders communicated a clear plan of action for how they would move forward post-pandemic.