Can relationships in and between organisations make tangible differences to business performance?
This article originally appeared in BSRIA’s Delta T Magazine, published in April 2015. It was written by Professor Rosalind Searle, Chair in Organisational Behaviour and Psychology, head of trust research, Coventry University.
Can relationships in and between organisations make tangible differences to business performance? Our studies across an array of firms reveal they can. For example, one case study involved a large organisation forced to make redundancies for the first time. Prior to this, it had invested in building consistently high quality relationships across all its different stakeholders. It worked with its supply chain to try and identify win-wins. It listened to its customers and made changes to its services and goods. It was a fair employer across its many sites.
When the recession hit, it had to focus on its customers. As it started to communicate this change of emphasis with its other stakeholders, something surprising happened. Instead of facing these challenges alone, a whole set of allies emerged: its suppliers listened to these changes, and then offered win-win solutions, with fresh terms and conditions that gave more flexibility. In reducing staff costs, it identified roles it no longer needed, but realised what great people it employed. Affected employees recognised the firm was trying to be fair, and in focusing on re-deployment, they saw it was not them, but roles that had to change. Due to how these-at-risk staff were treated and the provisions put in place to deal with the staffing impacts, employees felt increasing confidence and less vulnerable. Their trust levels actually rose during a redundancy programme. This firm had a trust bank that could now be drawn on. It is a delight to see the ongoing rise in its market share which attests to the tangible difference trust can make.
In another example from a much smaller firm, we found a similar trust bank. Here the founder acknowledged the employees’ contributions in writing every day and hosted an annual party for them. As market conditions changed the firm realised on the eve of one of these events, that an earlier good decision was now a major liability. Instead of cancelling the party, the founder invited their bank. His speech outlined the problem the firm was now facing, and the bank was so impressed with the high levels of staff engagement and innovation, that it changed the terms of the loan. It had clearly seen the resources available to turn this situation around. In showing employees respect – both in terms of recognising their contribution, but also telling them the truth about problems they were facing, a trust dividend was created.
Our research shows some clear patterns in firms who are able to create and then use their trust banks:
- First of all these organisations have goal clarity. They have a consistent focus on what they are trying to achieve as an organisation.
- Second they build collaborative networks inside and outside based on good quality two-way communication. The exchange of information is vital, because it draws on a wider and diverse set of insights which can significantly shift perspectives and alter how a problem is seen. New and previously unseen possibilities are opened up, and novel resources can be deployed.
- Third, successful firms create and develop trust. They build what we call ‘cognitive-based trust’ through demonstrating their competence and ability. But they also create ‘affect-based trust’ through the genuine respect they show for all their stakeholders, and the integrity in how they operate. There is a consistency in how they do things so they avoid creating in-groups and out-groups amongst stakeholders. Instead, they show categorical respect toward others, but also they strive actively to try and do the right thing even when it is difficult or costly. This trust approach builds support and psychological safety, with members of different stakeholder groups able to suggest the out-of-the-box suggestion, or admitting when something has gone wrong. In this way new perspectives can emerge, but much more importantly errors can be detected earlier, and learnt from rather than be hidden away.
This research has enabled us to create audit tools which show organisations the balance on their trust banks. We now differentiate between trusted – either high or low, or distrusted organisations. Our evidence shows that distrusted firms are different – especially in terms of affect-based trust. People feel vulnerable and therefore their decision making and behaviour is informed by strong negative emotions. Firms who try to go forward without attending to distrust will actively undermine the trust bank they are trying to achieve. Sources of distrust must be understood and attended to before they can even begin to build trust.
Trusted organisations are more effective organisations – they have access to a broader array of resources. They become aware of problems more quickly. They can be more creative, innovative and adaptable. They are cheaper to run with better and easier supply chain management, and more engaged and committed staff. They are healthier and happier places to work and so attract and retain better staff. They promote a passion about the firm. Trust is a real dividend for an organisation.
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