Professional Documents
Culture Documents
The following article was published on the FT.com website on 10 th June 2004. A major theme is the
link between staff retention and levels of trust in organisations. It also raises wider issues about the
breakdown in trust between American corporations and their staff in recent years and the damage that
this is now doing. Discussion questions are provided.
He likened low trust to paying a tax, 'a huge drain of value' for which companies get no return. In
'high trust' organisations, managers have more control, he said. In organisations where distrust runs
rampant, companies create more and more bureaucracy that leads to higher costs and less efficiency.
'It is very hard to have a flat organisational structure if trust is not high. It is hard to micromanage a lot
of people when trust is low.'
In meetings where trust levels are high, the talk centres on real issues that can be resolved. In
meetings riddled with distrust, real issues get talked about elsewhere and time is wasted. And trust
speeds decision-making; deals can be done more quickly if the two sides trust each other.
Excessive layers of management and bureaucratic procedures produce a higher customer churn.
'If you do not trust customers, you will lose them,' Mr Covey warned.
Is a solution in sight? According to Mr Covey, executives have to improve their characters by
displaying honesty, loyalty and transparency, demonstrating concern for workers, listening to them,
and correcting wrong-headed decisions. They have to become more competent, continuously
improving their own performance, taking issues head on, clarifying and renegotiating, creating and
expecting accountability and delivering on promises.
Trust and loyalty produces a vital sense of cohesion between management and employees, a lesson the
most successful companies have known for decades, said Arie de Geus, business change and learning
guru.
He cited a study by Royal Dutch Shell of the characteristics of companies that have survived for 100
or more years. One of the key traits of those companies was a clear identity that drew all employees
together. 'People knew what these companies stood for and they were happy to be identified with their
value systems,' he said.
He spoke of the tension between internal and external company relationships. The law says the capital
supplier has the ultimate power over companies and whether to hire or fire, he noted. The financial
community imposes short-term targets for growth and profit.
'If you are trying to make your quarterly figures you are on a very different wavelength from someone
who asks "Where should we be in 2 years' time?"' he said. 'If you miss those targets then the sell
notice goes up very quickly. You are a juicy target for takeover.' Although the priority is the survival
of the organisation, the challenge to executives 'is not to just strip people out of the equation'.
Mr de Geus believes the wealth of economies, developed over decades, has produced a change in the
relationship between capital, management and labour. 'Capital is no longer scarce. It is actively
looking for places to invest. Capital is basically a commodity.
The critical production factor has shifted to people; human talent is the key to competitive success.'
The challenge to companies is to shift from managing capital to get the best out of human talent to
attain an ever-higher quality of output.
This requires time, he said, longer than the next quarter. 'You may cut employees to improve the
quarterly bottom line but that short-term gain risks the consequences of long-term death.'
Copyright: FT.com site