Increasing productivity means getting the fundamentals right

My end of year blog concluded that we were unlikely to see sustained growth and improved living standards without productivity growth.  This means investing more in people and generating more value from their creativity and effort.  As Peter Cheese remarked in this month's podcast, this year could be the point when organisations start to think less about stripping out cost and more about innovating to create new value propositions.  During this year I'll be blogging on various aspects of the contribution that people management makes to productivity growth.

Just before Christmas, we published the second report in our series following up the Megatrends report, asking whether organisations were losing the trust of their workers.  The report used CIPD employee survey data to show that employees' trust in senior management is weak.  The latest data for autumn 2013 show that 37% of employees said they trusted their organisation's senior management and 31% of employees said they did not trust senior management, with the remainder neutral.  These figures were actually improvements on previous years, as 2009 to 2011 had seen levels of trust fall, especially in the public sector.

The report also shows trust is an economic issue.  Think about a workplace where employees do not trust senior managers and senior managers do not trust employees.  Managers spend time and effort checking and double checking the activities of their staff.  Employees, in turn, make sure they cover their backs.  They also monitor the actions of their managers and attempt to second-guess their intentions, so they will be combing through analyst reports and monitoring customer chat rooms looking for additional intelligence on the organisation and its future direction.  Employees who do not trust their leaders are also more likely to be looking for another job, so this will be another preoccupation.

This all adds up to a lot of time that is not being used to drive the organisation forwards - indeed, anywhere.  It is lost productivity.  If trust was strong and reciprocated, much would be unnecessary.

But the damage arising from a lack of trust is not confined to inefficient working.  Innovation also suffers.  Employees will be reluctant to share knowledge - who knows what someone will do with it? Risk taking would be, well, very risky.  Questioning established approaches and suggesting improvements, or pointing out when something is going seriously wrong, may be seen as career-limiting behaviour.  Businesses wanting to switch gears towards innovation-led growth might find a lack of trust means their employees are not with them.

So if a lack of trust is costly, how can organisations rebuild trust?  An important first step is recognising it is an issue that needs to be addressed.  While the actions required to restore trust will vary from organisation to organisation, recent research and survey data suggest some common themes.  These include regular and honest communication and a culture that encourages behaviour in line with organisational values and holds everyone accountable to those values.  Senior managers need to connect with middle managers.  Attention needs to be given to "nuts and bolts" issues such as whether systems for appraisal or promotion reinforce values in practice as well as by design.

Growing a business without the trust of the workforce is like running with a ball and chain - a drag.  Stronger trust gives businesses, and the economy, the opportunity to move ahead at a swifter pace.

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