Business owners and senior executives would unanimously agree that trust is essential to a business’ success and longevity. Leadership needs to be able to trust their subordinates to do their jobs efficiently and effectively, to be honest, to act with integrity, and generally to do ‘the right thing’. They would also probably agree that if they don’t trust an employee, that employee should be moved on – fired or persuaded to resign.  But there is a question senior management seldom, if ever, consider. It is whether their employees trust them to act honestly, with integrity and generally to do the right thing?

If executive management were to get all employees to complete an anonymous survey on whether they trust management to do the right thing and act with integrity, the answer they get may not be music to their ears. That is particularly the case with large businesses. Of the top 100 companies listed on the ASX, it is unlikely the employees of any of them would trust their senior executives.

If wanting to get to the truth, senior management should not just ask whether the employees trust management, they should put a few scenarios to them?  Here are some that could be included:

1. If you were a bearer of bad news, is it more likely that you would you get praise and recognition from senior management or is it more likely that you would suffer some adverse consequences? In that regard, how likely is it that senior management would conclude that you are ‘not a team player’ or are a ‘troublemaker’ that needs to be moved on?
2. If you were to stumble across or otherwise become aware of some unacceptable conduct by your boss, how likely is it that you would (as a whistleblower) alert more senior management? In such a situation, how likely is it that you would get some recognition for doing so and how likely is it that you will suffer adverse consequences, possibly even ultimately losing your job?
3. If you were to tell senior management that you had made some or other costly mistake, how likely is it that you will lose your job?
4. If you identified an opportunity to make a significant improvement to the business and management gave you the responsibility for making the change, how would you expect management to react where it went to plan and where it did not. If it went to plan, would you expect senior management to award you a material financial benefit? If it did not, resulting in it costing a lot more, would your job be at risk?

It is important, very important, to the success and longevity of a business that senior management is made aware of problems early, and that opportunities to increase revenue, reduce costs and/or reduce risk are brought to their attention. And that is unlikely to happen where the risk for the employee concerned exceeds the benefit for that employee.

If employees conclude that there is more downside to them than there is upside, they are unlikely to act in the best interests of the company and more likely to protect their own interests. They are more likely to hide mistakes and other ‘bad press’ from senior management and are much less likely to alert senior executives to business opportunities – preferring to ‘keep their heads down’.

Many would think that if they alert senior management to the opportunity, they are likely to be given the responsibility to ‘make it happen’, which will add to their workload without their getting a commensurate increase in their salary package. They would also think that if the project worked out as planned, senior management would not bestow a material financial reward on them, thinking he was just doing his job, but if it doesn’t work out, he faces a real risk of being fired. So, the employee may see little, if any, upside potential but lots of downside risk. In such situations nobody in their right mind will take that risk while paying off mortgages, paying private school fees, saving for retirement and so on.  That could result in a huge opportunity cost for the business.

Most employees have a lot at stake, so if an employee feels there is a fair (or even a remote) chance of losing their job, the employee would be much more inclined to hide the mistake or problem, try and shift the blame on to someone else, distance themselves from it, and delay bringing it to senior management’s attention. That would be far from ideal for the company or its shareholders.

While it is important that employees feel that they can trust senior executives, gaining that trust can be (and invariably is) a challenge. It would be naïve of the senior executives to think that if they tell employees they can be trusted, employees will believe them and act accordingly. Employees will also not trust senior executives merely by their including such foundational values in the company’s “values statement” and stating that they adhere to such values.  Employees will be sceptical of anything senior executive says – verbally or in writing – in this regard.

R&M can help business owners make the changes needed to win the trust of their employees. For more information on what R&M offers, why and how, follow this link to R&M’s Advisory webpage – https://www.rogersmorris.com.au/rm-advisory/