Date: 6/12/11 Duration: 00:24:22

In this podcast Vanessa Robinson, CIPD Head of HR Practice, Veronica Hope-Hailey - Associate Dean, MBA Programmes & Professor of Strategic Human Resource Management, Jane Beine, Head of Partner Development at John Lewis, Kirit Patel, CEO, Day Lewis Pharmacy, Plc and Carol-Ann Edwards, Director of Learning and Organisational Development, Norton Rose examine trust in the workplace and in leadership generally: whether it has diminished and if so, how it can be rebuilt.

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SIR TERRY LEAHY: The key ingredients in business success are not capital or technology or these other things, the key ingredients are trust and confidence. The human species is amazing because we can work together, we're the only species that can. We can have a collective intelligence but that will only operate if we can trust each other. So if you create trust you release exponential capacity within the organisation because of the pooling of knowledge and ability.

PHILIPPA LAMB: Sir Terry Leahy the recently departed CEO of Tesco Plc on the subject of trust. Do you trust your boss? Do your colleagues trust you? Well according to Sir Terry having high levels of trust in an organisation can release exponential energy and as the man credited with overseeing the biggest retail company turnaround in history he's well worth listening to. It’s worrying then that according to research from the CIPD levels of trust for senior managers within UK organisations have dropped so much over the last three years that we're now facing a trust crisis. It’s not just in organisations that there's a problem though, mistrust is in the air and visible everywhere. We trust MPs less after the expenses scandal, the financial services sector less after the credit crunch and the press less after the revelations about hacking. The CIPD tracks levels of trust within UK organisations through quarterly employee outlook surveys. Vanessa Robinson is Head of HR Practice Development.

VANESSA ROBINSON: Every quarter the levels of trust in senior leaders has seemed to get lower and lower and this led us to think this summer that actually the time was probably right to do a more in depth piece of research really trying to understand not just actually the reasons why trust was getting lower but more practically speaking what we could do to start to restore trust and in particular HR’s role in that. At the moment we're at a really exciting stage we've worked with 14 case study organisations from different sectors, so private sector, public sector, some family-owned, some professional services organisations. We've gathered shed loads of data and we're just at the stage where we're pulling the findings all together and then we're ready to publish the report early next year.

PL: Veronica Hope-Hailey is a professor of HRM and Change at Cass Business School and she's been leading the research. One of the particularly interesting early findings is that we can't blame this so-called trust crisis entirely on the recession.

VERONICA HOPE-HAILEY: We had a breakdown of trust relationships between the workforce and senior managers and the organisation before the crisis.

PL: What’s exacerbating it if it’s not the financial crisis we've been through?

VH-H: Okay what was happening before the crisis there were a number of factors that were affecting people’s ability to trust senior people and the organisation. One was the level of merger and acquisition activity. The larger the organisation became the more remote people felt from identifying with the organisation and from just literally seeing senior managers. So that's one aspect. The second one is global restructuring, particularly where you’re bringing in centralised reporting lines which again mean that the local units in multi-nationals feel as though they’ve got much less control over the local agenda so they feel as though they’re manipulated by the corporate centre which is on another continent many miles away. And the third factor is, of course, before the crisis and the recession, we need to remember this, there was job insecurity anyway. I mean we were in recurrent rounds of downsizing, certainly within the private sector, before that. So those three trends that were worrying people before the sort of crash I think they’ve certainly not gone away and in some cases they’ve got exacerbated.

PL: A combination then of globalisation, merger and acquisition activity and general job insecurity has given rise to a sense of unease. The situation is certainly worse in the public sector at the moment due to the public spending cuts but the research has also shown that in some organisations trust has actually grown over the last three years, convincing evidence then that we can’t blame it all on the credit crunch. Vanessa Robinson.

VR: Some of the organisations seem to have maintained levels of trust or even trust has increased during the last three years. Others, similarly actually were suffering from lower levels of trust going back five, ten years and so whilst the recession has certainly had an impact I think the levels of trust there are a lot of other factors that seem to be coming out.

PL: Distrust is commonly aimed at senior manager. So there are lessons to be gleaned from the research about the sort of leadership styles that engender the greatest levels of trust.

VH-H: We need a very long, cool look at leadership and what constitutes good leadership in the context we're in now and one of the things I would say to people is the mechanisms or interventions that worked in 2001 or 2005 I don't think are going to work now because we're just in a different economic social and political context. We need to rethink what is a good leader for establishing trust.

PL: Vanessa Robinson.

VR: I know the research talks about benevolence and integrity of leaders and I think those two things really are possibly coming to the fore at the moment and where those leaders can really demonstrate that they understand what the employees’ issues are they seem to be able to maintain higher levels of trust than those who possibly focus more on the external needs, the stakeholders, the customer and almost lose sight of actually what it’s really like to be an employee in what are at the moment difficult times.

PL: I talked to a few of the case study organisations involved in the trust research about the techniques and practices they’ve put in place in order to generate greater trust. First up was Kirit Patel. He's CEO of Day Lewis Pharmacy the biggest family-owned pharmacy in Europe with 187 branches employing over 1,300 staff. According to Kirit he learnt a big lesson about trust in the recession of the late 80s when the leadership was hidden away in head office at a time when they had to close 24 of their 32 outlets.

KIRIT PATEL: First of all I recognise that following the last recession of the 80s where my model was wrong it was top down and all the authority and power was in the head office and that was not very visible and I had to wind down from 32 to 8 shops. So after 95 when I started buying it’s a much more bottom up culture and I believe, I seriously believe the most important people in my organisation and I tell my board that I don’t mind how upset they get, it’s the most important people are people who face the customer. They live in the community and that's why we all wish to do everything possible to support them and very visible policy in every staff two, some three times a year, we bring them in conferences, the shops really stay in touch and I look after their needs.

PL: That's a lot of time spent visiting staff but it’s paid off and the pharmacy is flourishing. The second big lesson Veronica has gleaned from her research is that the honest truth about the financial outlook, however bad, is absolutely vital.

VH-H: We have to stop spin. If things are bad say they’re bad. Do not spin bad stuff as good because I think that is just a real annoyance going on.

PL: And employees are very savvy about this now.

VH-H: Very savvy, they can go on Google, they can find out the company and financial information. They are reading newspapers, you know, are much more informed, don’t tell them things are good if they’re bad.

PL: The John Lewis Partnership is another of the organisations involved in the CIPD research. They have 72,000 partners who together co-own the organisation. They’re often held up as an example whose partnership ethic has brought them sustained success through good retail times and bad and indeed trust levels within the organisation are high, however, there has been cultural evolution.

JANE BEINE : We have been almost parental in the past and that was the journey for us to move, we still want to be a family, we are still a family in many respects but we needed to move away from the parent/child, we needed to be more open with people. We needed to share some of the uncertainty and trust people to be able to handle that and they can and they are doing.

PL: John Lewis has had to restructure certain areas of the business, as Jane suggests this was a big test of the organisation’s new ethic of honesty.

JB: Over 3,000 people’s roles were affected but 90% of those people were redeployed into other jobs. So it’s the role of the leadership to look at what the organisation needs to be commercially to be fit and agile and competitive and for the individuals impacted it’s for them to be open-minded about upskilling, considering different options.

PL: That’s interesting isn’t it so it’s about as you say you’re moving away from the idea of paternalism.

JB: Yes.

PL: And encouraging the idea of personal responsibility and personal career development within the umbrella that we’ll keep you if we possibly can and we’ll help you on the journey and you can see how that's a really great message, particularly at times like this.

JB: Yeah one of the questions that we use within our partner survey is, ‘I understand the reasons for change.’ So for all managers in our business they can get an annual health check on whether they're doing enough to explain what is happening to the business in the future.

PL: So this is all about stripping out as much uncertainty as possible, uncertainty being a big driver of lack of trust?

JB: It’s not about stripping out the uncertainty it’s almost the opposite of that it’s about helping people to be comfortable with uncertainty.

PL: Prepared for it?

JB: Yeah and understanding that continuous change is a facet of our everyday working lives now.

PL: CEO Kirit Patel took the issue of communication very seriously in 2006 when Day Lewis Pharmacies was under financial pressure. He took it upon himself to write to every member of staff to explain the situation and outline his recovery plan.

KP: I'm very open for example in 2006 the NHS decided to take out of our pharmacy £½ billion and my share was £6 million, so I had to pay back £½ million a month and I wrote to every single employee personally and I stated the case that we have an issue, we need to work together, we want to try and protect jobs and this is about a period of austerity, less watching on people costs but what I'm looking for, for every pound of extra revenue that you bring in it makes the company safer and secure and really look after everybody else’s jobs.

PL: And so you did lay it on the line that there was a possibility that jobs might be lost?

KP: I laid on the line that there was a possibility that the company itself could be in trouble if we didn’t pull this one off but we also have a communication channel where they can write into me personally or they write into the area manager or the line manager, upstream.

PL: And do they do that?

KP: Yeah you’d be amazed at what I get sometimes.

PL: Kirit’s got a determinedly open door policy inviting comment and opinion from staff members at every level. This brings us to the third key element in building trust as highlighted in the CIPD’s research and that's listening.

JB: Some managers will say, “But what’s the point of listening to anybody because I can’t do anything about their problems?” That's not the issue you may not be able to address their issues but you do have to listen to them and in listening people feel they’re valued. So this whole nature of communication, this whole nature of voice and this issue of leadership I think are three things that you could pay attention to.

PL: It’s interesting isn’t it because it’s not so much the obvious things one might think of. It’s not about the fact that there may be job cuts. It’s not about the fact that cash is tight it’s about how those messages are handled. That's what’s underlining the trust?

JB: Yeah and I think what I would say very strongly is that organisations are not families and senior managers are not parents and senior managers are charged with ensuring the organisation’s survival so they do have to take decisions that ensure the survival of the organisation. That's their mandate but the way they implement those decisions and the way they explain those decisions to the workforce that's what’s really key.

PL: Norton Rose is a large international legal practice operating in Europe, Asia Pacific, Africa and the Middle East and expanding into Colombia, Venezuela and Kazakhstan next year. They employ 2,600 lawyers. Carol-Ann Edwards is the firm’s director of learning and organisational development.

CAROL-ANN EDWARDS: The way trust looks in an organisation such as Norton Rose is it’s multi-faceted it’s absolutely essential, it’s critical.

PL: When you say it’s key, it’s critical, it’s core to the business, Norton Rose has been expanding globally rapidly, very rapidly in the last few years and clearly in terms of delivering high quality, consistent client service across the globe that must present a load of issues as well. How do you build trust between people in London and people in Venezuela who may never have met? How does that work? How do you do that?

C-AE: We devote a lot of time creating systems to ensure that that people do get to know each other. For example, we've just had our partners’ conference and there we brought partners from all of the jurisdictions into London to spend three days together actually getting to know our business, getting to know their colleagues, getting to know our clients better. We have found that most people in the world will work together better if they know their colleagues.

PL: At the beginning of the recession the organisation decided to invite all UK employees to vote on how they thought the difficult financial situation ought to be managed. Not only did Norton Rose demonstrate a willingness to listen to what the staff thought but it helped the organisation to navigate a difficult time without losing the trust of its people.

C-AE: The decision was taken to introduce Flex which is a short term weekly working and also sabbaticals.

PL: So a four day week?

C-AE: Four day weeks or between three and four months sabbaticals.

PL: And this was for everyone?

C-AE: This was for everyone, both fee earners, the lawyers, and non fee earners what in some other industries one might call back office. It was done on a very healthy basis in line with our business principles which was to actually put the proposal to all of our staff and actually say to them, “This is something we want to do,” to explain the reasons and the reasons were to ensure that we continue to provide to our clients the best possible service but also to ensure that we did not follow the market in simply responding to recession by making people redundant and in particular the idea was that we have really, really good people working for us, we wanted to retain them and look after them and the management decided to find a creative way of ensuring that we achieved that objective. And so people were asked to vote, which they did.

PL: I remember the headlines it was big news at the time wasn't it?

C-AE: Yes it was fantastic. We had assumed that we would get, or certainly we had hoped that we would be able to get something in the region of around 75 to 80% of people voting for it. In the end it was well in advance of that, over 90% of our people voted.

PL: It was a fascinating exercise wasn't it because it ticked so many boxes in terms of as you say sustaining the business, holding on to your talent, serving your clients, maintaining your reputation. I mean it was a very, very smart thing to do wasn't it? Did it work in the sense that your clients stayed on board and people didn’t opt out after a bit? How long did this go on for?

C-AE: Well it went on for nine months.

PL: So quite a long time.

C-AE: Well we had at the point of the vote we’d actually asked people to sign up for a year and one of the things that played extremely well to trust was that the scheme was closed after nine months but I think it’s a measure of the integrity of our management they actually said, “Okay we've done nine months, these things are never easy let's suspend it now,” and people were very grateful for that and the number of people who want to join Norton Rose as trainee lawyers increased by 60% and we won a whole raft of accolades, for example an award from the Financial Times around innovation. We won Law Firm of the Year 2009. We won HR Team of the Year, so the degree to which other businesses have been able, and other organisations have looked at us as a role model within the legal sector, has been quite significant.

PL: According to Carol-Ann Edwards the flexi time solution worked brilliantly at that moment in time but of course establishing real trust isn’t a one off move. If it’s to be permanent and ongoing it has to be nurtured across the organisation all the time.

C-AE: We would be very foolish as members of the Norton Rose Group to feel that that responsibility lay with management, it’s a responsibility that has to sit with all of us who work for Norton Rose in whatever capacity. We all have to play our role every day in ensuring that we do the best possible job we can do but also ensuring that we are a well managed and successful business.

PL: The culture change at John Lewis has been just as holistic. It’s had to involve relationship change at every level of the organisation. Here’s Jane Beine.

JB: We’re not describing top to bottom relationships we're describing internal relationships which are much more holistic. Of course you can replicate that. You replicate that through honest and open communication, by showing respect, regardless of status and by not allowing bad behaviour, specifically not allowing bad behaviour from your managers and your leaders.

PL: So that’s quite a stretch for HR isn’t it because that's, I mean ideally this is how it would work everywhere but the onus really is on your team to make sure that that goes from top to bottom throughout the organisation.

JB: It’s not a stretch just for HR and maybe that's a slightly different way of looking at it. It’s a stretch for every board member and for every function. So behaving in the right way, living the values of the John Lewis Partnership is not the responsibility of our personnel partners it’s a responsibility for every business owner.

PL: In all these examples trust has enhanced organisational performance and employee engagement but what if there is too much trust? What happens if trust makes everyone too comfortable? Can trust erode competitive spirit?

C-AE: I think there is that danger. I think the thing that prevents it from becoming too cosy, certainly in our case, is there's a lot of change in dynamism at Norton Rose. If you think about the fact that we've done three mergers in less than three years you can see there is a lot of momentum in there. So what I would say in answer to your question is there is a healthy degree of change and ((21:35?))

PL: Veronica Hope-Hailey.

VH-H: With most things in life it’s a question of balance and certainly we've been doing research on the lack of distrust as well. So we've done research into the Shipman affair, the Leeson affair, there will be I think research done on some of the banks where actually there wasn't sufficient distrust of what was going on, with disastrous consequences, both in banks and particularly in Harold Shipman’s case for instance. So yeah.

PL: These are dramatic examples though and all the evidence points towards the fact that more trust would benefit the vast majority of organisations. The debate about this trust crisis really goes to the heart of what constitutes work. It’s about the contractual agreement between employees and leaders and as far as Veronica sees it the research is revealing a fascinating shift in that employee contract.

VH-H: I actually think employers should get back to promising less and they might actually get more trust. I think one the difficulties is that we may just need some really realistic conversations about what people can expect from employment and from employers and actually you may find trust rises. Eliciting a climate of extreme high trust which you then breach could be worse than actually having a pretty realistic trust relationship. I think it’s something that the UK is going to have to get to grips with. We’re not necessarily going to play the same part as an economic superpower in the great world order that we have done and therefore some healthy realism about what people can expect from employment might be helpful.

PL: The CIPD ‘s trust research will be published in full early next year.

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