Focusing on Fairness to Close the Trust Gap

FOCUSING ON FAIRNESS TO CLOSE THE TRUST GAP How fair performance management can drive employee trust and a昀케nity. 2023 HR RESEARCH REPORT EBOOK SERIES

Trust is one of the most fundamental aspects of being human. Whether in personal relationships, society, or the workplace, trust lets us interact with others in a way that helps us to feel safe, build a昀케nity, and be productive, whether in personal relationships, society, or the workplace. At work, trust is a necessity — setting the bar for culture, communication, and collaboration. Unfortunately, today’s workplaces — like today’s society — are facing a crisis of trust. Prior to the global pandemic, a trust de昀椀cit had eroded con昀椀dence in many institutions and organizations. However, according to trust trackers like Gallup and the Edelman Trust Barometer, employers are among the most trusted relationships people have. Since the pandemic years, however, Gallup has found a decrease in trust in organizational leaders — with workplace trust levels in 2022 reaching their lowest ebb since 2014. Our 昀椀ndings from the Betterworks 2023 State of Performance Management Report show a trust de昀椀cit among employees toward their leadership, organizations, and even HR departments that also correlates with concerns about fairness. As Gallup warns: “The red lights are 昀氀ashing on America’s business leadership dashboard” as “Leaders are losing trust with their employees.” If leaders are going to foster a productive work environment with a truly engaged workforce, they are going to need to address the trust gap — and quickly. 2 Focusing on Fairness to Close the Trust Gap

Five kinds of employee trust Trust isn’t monolithic. There are di昀昀erent kinds that contribute to our overall feelings of trust at work — and all of them play into how we develop and work with each other. So, what aspects are we focusing on when we talk about trust? Peer and team trust: Coworkers’ trust enhances productivity, creativity, and open idea sharing. However, its absence can cause fragmented team dynamics and skepticism. Our Betterworks 2023 data found that trust in coworkers is the healthiest trust in today’s organizations, with 68% of employees saying they trust their team members. Manager trust: Employees’ trust in managers is tied to job satisfaction, engagement, and retention. According to SHRM, 9 out of 10 employees (91%) who rate their workplace culture as good also say they trust their supervisor. The success of performance management correlates Our 2023 Betterworks research shows that 63% of employees trust their direct with levels of trust across the organization managers; unfortunately, fewer employees (56%) think managers genuinely care about their advancement. Leader trust: Employees’ trust in organizational leaders boosts loyalty, buy-in 68% Trust in peers and team members into the company vision, and feelings of purpose in one’s role. Qualtrics ranks leadership trust as the top employee engagement driver. Yet, Betterworks 2023 survey indicates a mere 32% trust their leaders, and Gallup’s 昀椀gure is 63% Trust in even lower at 21%. direct manager HR trust: Trust in HR ensures employees feel comfortable addressing concerns and con昀椀dent with con昀氀ict resolution. Despite — or perhaps because 32% Trust in of — HR’s prevalent role in performance appraisals, only 26% of employees organization leaders expressed trust for HR according to our 2023 research. Organizational trust: Organizational trust encompasses con昀椀dence in a 26% Trust in company’s overall integrity. Scholar Paul Zak has shown that at high-trust HR companies, employees reported 50% higher productivity and enjoyed their jobs 60% more than their peers at low-trust companies. However, in our 2023 survey, trust in organizational leaders stood at 32%, while 12% of employees said 12% Trust in no one they don’t trust anyone in their organization. 3 Focusing on Fairness to Close the Trust Gap

The critical link between trust and performance management Performance management may be the most important lever to push when addressing a trust de昀椀cit. Fairness in feedback, reviews, and compensation are all deeply intertwined with perceptions of trust in an organization, HR, and managers. The data here is compelling. Our 2023 research found that when employees view performance reviews as biased, trust in managers drops 23 points from the baseline, while trust in leaders and HR drops 20 points and 16 points, respectively, from their baseline levels. When employees view performance management as successful, trust metrics skyrocket 2x-4x higher than baseline 昀椀gures (except team trust, which is the highest to begin with). Trust levels when satisfaction with PM is seen as successful vs. as failed Trust: When performance 79% management is seen as a success 73% Trust: When performance 61% management is seen as a failure 49% 40% 41% 21% 10% 12% 4% Trust in HR Trust in organization Trust in direct Trust in team Trust in no one leaders manager members The message in the data is clear. Addressing the trust gap by increasing fairness in performance management and enablement isn’t just essential – it’s existential. 4 Focusing on Fairness to Close the Trust Gap

Why trust matters at work Business benefits of trust: by the numbers Most of us spend a huge portion of our lifetimes in the workplace, whether in the o昀케ce From a business perspective, trust delivers or virtually. For many, a job is about much more than a paycheck. It’s a place where immense dividends. relationships are formed, goals are pursued, and challenges are overcome. Our well- being at and outside of work is profoundly in昀氀uenced by the trust we have at work. Increased productivity Scientists have found that trust a昀昀ects the actual chemistry of our brains. When we A high-trust company can see incredible feel psychologically safe, our brain releases oxytocin, a hormone often referred to as bene昀椀ts in the form of a more motivated, the “trust molecule.” Oxytocin not only bolsters feelings of bonding and security but 1 energized, and collaborative workforce. also reduces feelings of stress and anxiety. Trust in the workplace fosters a neurological According to Deloitte research, trusting environment conducive to collaboration and innovation. Work connections built on trust employees are 260% more motivated to work. are key for our sense of belonging, purpose, and overall mental and emotional health. Higher engagement The Trust Model: Earlier we mentioned that GPTW sees trust as a better predictor of a great workplace than 2engagement — but scholars have also found Organization Oxytocin Leadership that increased feelings of trust also lead to Practices Release Practices higher engagement. Reduced turnover and absenteeism According to Deloitte research, trusting employees have 41% lower rates of Engagement Performance absenteeism and are 50% less likely to look Trust 3for another job. By contrast, our own research found that those who see the review process as very biased are more than 2x as likely to Retention Innovation be looking for a new company. Stronger employer brand and EVP Well-Being Source: Kenneth M. Nowack, The Edelman Trust Barometer report has Ph.D., and Paul Zak found a correlation between trust and EVP, noting that “high employee expectations, This is why trust is a critical part of a strong employee value proposition (EVP). It’s also 4ampli昀椀ed by high levels of trust in business” why trust is rated so highly by the Great Places to Work (GPTW) organization, which says result in high levels of loyalty, advocacy, and trust is a better measure than engagement when it comes to assessing culture. discretionary e昀昀ort. 5 Focusing on Fairness to Close the Trust Gap

A framework for rethinking trust What are the underlying contributors to workplace trust? One useful model is this framework articulated by Dr. Paul White, a psychologist, speaker, and leadership expert: Competence: Character: Consistency: Believing that the colleague or Believing that the colleague or team Believing that the colleague or team has the capability (knowledge, has integrity, dependability, and team is able to and will follow experience, ability) to complete employees’ interest at heart (versus through in doing the task repeatedly the work. just his or her own interests). and consistently. COMPETENCE CHARACTER CONSISTENCY Doing one’s job well can obviously What does it mean to have a trustworthy Finally, what does it mean for leaders help peers trust one another to pull character at work? Generally speaking, to earn trust through consistency? their weight. But how does leadership it is about upholding ethics, leading Inconsistency is often a story about demonstrate competency and win trust? by example, and treating people fairly. bias and unfairness — two themes that Gallup has found trust is higher when Another piece of this — according to were prevalent in our 2023 research leaders practice three qualities: They scholars — is providing reciprocal report. Bias in the system can a昀昀ect trust lead and support change — setting and respect and trust. The 2022 Edelman in leaders and vice versa. In fact, our communicating goals that then take on Trust Barometer found that when research found that only 1 in 3 employees life throughout the organization. They organizations give people trust, see their performance review system as inspire con昀椀dence in the future, setting employees tend to be more trusting free of bias. This is problematic, as the “the expectation that every manager in return. This can be extended to research showed that more than half discusses with their team how change practicing empathy, transparency, of all employees (55%) see fairness as will impact them.” And 昀椀nally, they and looking to ESG — as the World the single most important factor in their communicate clearly — listening and Economic Forum recently found that employee experience. regularly communicating with team 74% of consumers believe that ethical members via check-ins. practices and values are crucial reasons for choosing a brand, as consumers or employees. 6 Focusing on Fairness to Close the Trust Gap

Fewer than 1 in 3 employees see performance reviews as very fair and equitable 25% 37% 8% Inspiring trust in the modern workplace 30% By making real e昀昀orts to back employees and managers, organizations have the potential to elevate trust. A signi昀椀cant opportunity exists in crafting a more fair and balanced performance management system — as part of a better EVP. Alarmingly, our 2023 report revealed that under 1 in 3 employees view their performance evaluations as truly fair — a factor directly in昀氀uencing trust. They are somewhat fair and equitable To turn this around, organizations can focus on robust coaching and more transparent communication They are very fair and equitable among leaders, managers, and employees regarding performance, aspirations, and objectives. This is They are biased also where modern calibration, with its transparency and equity, comes into play. Don’t know Take the next step: Delve into how to establish a performance management process that boosts trust. Download our checklist, 7 Ways to Build More Trustworthy Performance Management. Looking to build a performance management strategy rich in competence, character, and consistency that can amplify trust and foster a culture of inclusion? Betterworks’ platform is designed to align goals, promote fairness, and strengthen manager-employee rapport, laying the groundwork for stronger trust. Together, we can help your workplace bridge the trust gap. Contact us today for a tour of the Betterworks platform. 7 Focusing on Fairness to Close the Trust Gap

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