Reward’s role in building trust

A series of scandals in the banking industry, including product mis-selling and huge executive pay deals, caused a breakdown in trust between investors and bank employees. This has prompted business leaders in all market sectors to examine, and sometimes try to rebuild, trust in their own organisations.

If you read nothing else, read this…

  • Organisational trust is based on co-operation, co-ordination and collaboration.
  • Employers should be realistic to staff about their employment proposition.
  • Robust service level agreements are not the only way employers can build trust-based relationships with providers.

A desire to rebuild employee and investor trust was clearly at the centre of an internal memo sent by Barclays chief executive Antony Jenkins in January 2013.

The memo, sent to more than 140,000 Barclays employees, said: “There is no doubt that 2012 was a difficult year for Barclays and the entire banking sector. Again, financial institutions found themselves too often in the news for the wrong reasons. This damaged trust in banks, which was already at a low ebb, and overshadowed the excellent and valued work you do.

“The behaviour which made those headlines in 2012 took place in the past. But it helped underline how banking as a whole had lost its way, and had lost touch with the values on which reputation and trust were built.”

Barclays is one of a range of UK banks to have been involved in the ongoing payment protection insurance (PPI) mis-selling furore and was fined £290 million last June in connection with the Libor interest rate rigging scandal.

Jenkins, who took the helm at Barclays in August 2012, sent the memo to communicate to staff the bank’s new Purpose and Values blueprint, which identifies five key values and behaviours: respect, integrity, service, excellence and stewardship, on which he expects all Barclays business to be based.

Word cloud: corporate trust

Source: Cloud created by Employee Benefits from Barclays’ Purpose and Values, February 2013.

Jenkins’ message was clear: there is no future for employees who cannot uphold these values.

Set clear goals

Clear goals are essential for any trust-based relationship, whether it is a case of building or rebuilding that trust, and HR and reward professionals can help their organisations achieve these aims.

Michael Lewis, professor of operations and supply management and head of the information, decisions and operations group at Bath School of Management, says: “The way you move forward is having clear goals, clear expectations. It’s rather like having a reconciliation process pre-divorce [and asking]: ‘what do we want to achieve together?’ and being very formal about clarity of goals, timelines and who does what and when. If [employers] think about that, then that’s the contract.”

Employers need to learn how to manage the expectations of both providers and employees as part of this goal-setting process.

Claire McCartney, resourcing and talent planning adviser at the Chartered Institute of Personnel and Development, agrees, particularly where employee benefits are concerned. “Sometimes it’s about employers promising less, then employees might trust more instead of employers promising the earth and not delivering on that,” she says.

“It’s not [employers] saying they will be more paternalistic towards [employees] and that they will do all these types of things around [employees’] wellbeing and give them all these types of benefits, but actually saying realistically, in the current economic environment, there are probably going to be two or three things that [employers] can do, but [they will] deliver on those.”

Conversely, Thomas Martin, a procurement specialist at procurement service provider Proxima, says employers can help to optimise the performance of a new employee benefits provider by ensuring it puts robust service level agreements (SLAs) in place.

“The biggest mistake is [employers] taking things at face value from a sales person and believing that will happen once they go into their contractual relationship,” he says. “Employers need to make sure they tie down everything that’s sold to them into the contract, so they have that protection.”

Fair pay graph

Give relationships time to flourish

But Richard Wilding, professor of supply chain strategy at Cranfield School of Management, says SLAs are only part of the process of building trust with third-party providers, and that the secret to forming a long-lasting, successful relationship lies in giving it adequate time to flourish.

“We talk about something called C3 behaviour, which is co-operation, co-ordination and then collaboration,” he says (see graph). “The big mistake many organisations make, even with their own people, is that they go rushing up to people and say ‘hey, collaborate with me’ and they get a pretty poor response. It would be a bit like me rushing up to a girl in a bar and saying, ‘hey, marry me’. People just can’t relate to that.”

Wilding says employers should instead focus on developing a relationship that is low-risk and offers both itself and the provider in question something of value within a fixed period of time. “So, when I met my wife, we didn’t suddenly say ‘let’s get married’,” he says. “The first thing I said to her was: ‘do you fancy going to the cinema on a Friday night?’ She said: ‘sorry, but I’m going out with my friends, but I’m free on the Saturday’, so we went out then.

“That next level was co-ordination: Saturday night was agreed. When we started to co-ordinate, we were then into collaboration; employers have to go through that particular process to develop trust.”

But employers need to qualify exactly what they want before embarking on this process with new providers, which may involve sourcing references from fellow employers and other businesses that are already working with the providers in question, to check out their experiences.

Proxima’s Thomas says: “Another good thing [for employers] to do is to meet with the supplier, and don’t just meet with the sales people. Then, when the salesman is doing the sales pitch, [employers should] watch the body language of the operations person because they’ll wince every time the sales person over-promises something.”

Corporate trust graphic

Under-performing third-party provider relationships can have catastrophic consequences, and those with employee benefits providers are no exception. Consider the payroll provider that fails to pay employees on time, or the healthcare provider that fails to appropriately manage a rehabilitation programme for an employee on long-term sick leave.

Encourage the right behaviour

Encouraging the right corporate behaviour can help to avoid such disasters. For example, creating a value proposition like Barclays can help communicate to employees the behaviour that is expected of them when dealing with third-party providers.

For example, how and when should an HR or reward professional cultivate a relationship with the account manager assigned to them by one of their employee benefits providers? How transparent should they be with these providers about their organisation, and what is the protocol for dealing with any service standard-related issues?

That said, the behaviour expected between employees and an organisation may need more careful attention. Cranfield’s Wilding says: “It’s not uncommon that [employers] will find that [employees] will actually act worse with their colleagues than they do with suppliers. It’s a bit like a dysfunctional family.

“In other words, they put a nice smile on for their suppliers and their customers and are extremely good at working with them and accommodating them, and very good at managing win-win relationships, but internally, between the functions, it can be very dysfunctional in terms of what is going on.”

Executives have the power to drive good, ethical behaviour down through their organisation with the help of their line managers. The CIPD’s McCartney says organisations should have trust role models at different levels of an organisation and multiple trust-based relationships, so they can compensate for each another if one of these relationships breaks down.

“It’s about [employers] having adult relationships with employees: having dialogue around difficult issues,” she says. “For example, in difficult economic climates, where employers have to make redundancies, key issues need to be addressed with no spin. Employees don’t want spin, they want the truth of the situation and that may involve giving them lots of information around how the organisation is performing, and also giving them a say, so they have a voice in the organisation.”

Create fair practices

But employers should first examine the fairness of their current corporate behaviour and practices before embarking on such transparency, in view of the fact that fairness is critical for employers that want to build engaging, trust-based relationships with employees. Pay is a case in point.

Research by the Kenexa High Performance Institute, Research is reality: the importance of pay fairness to employees and organizations, published in 2012, shows that employees who believe they are paid fairly are nearly twice as engaged as those who do not (see graph).

Fair pay graph

Oliver Auty, Europe, Middle East and Africa regional sales director, compensation, competencies and skills manager at Kenexa, says: “Belief in pay fairness contributes to overall trust in managers and leaders. Those who believe they are paid fairly tend to have a higher level of trust in their leaders.

“This indicates that organisations should take care not only in setting competitive and equitable pay rates, but also in helping managers and employees to understand how and why the organisation chooses a particular approach to compensation.”

Duncan Brown, performance, reward and talent principal at Aon Hewitt Consulting, adds: “We need to be more open about how rewards are determined and what they are, with hugely improved reward communications in many employers. Practising what they preach on values and reward principles is essential.”

Barclays’ Jenkins, like a number of chief executives, this year waived his annual bonus in light of the bank’s ‘difficult year’, with many organisations having also frozen executive pay. In addition, Jenkins restructured the bank’s bonus criteria in October 2012, linking bonuses to customer satisfaction, rather than sales.

There are, of course, critics who dismiss the concept of organisational trust as woolly and meaningless, but the numbers relating to the impact of organisations that are addressing the concept speak for themselves.

Take Barclays: the bank’s share price rocketed from 179.90p in August 2012, when Jenkins started as chief executive officer, to 317.05p at the end of July.

Only an HR professional in the wrong career would not want to present such numbers to fellow executives at their next board meeting.

Emma Scott

Viewpoint: Emma Scott

The recent scandal that saw horsemeat detected in a range of products claiming to contain beef has made the food industry begin to wonder whether it can trust some of its suppliers.

Tesco reported a loss in sales in the three months following the scandal, which caused its share price to drop by 5%, demonstrating the impact of supplier relationships on organisations’ reputation.

Of course, supplier relationships vary between employers. Some are purely transactional, but those that have the greatest impact are nurtured and built on trust and transparency, so here are a few basic rules for employers to follow.

Firstly, select the right supplier, which means working with a business that can deliver products and services that an employer needs and which match its culture and values.

All organisations want the best possible deal, but employers should also consider what really constitutes ‘fair’. Perhaps some of the unscrupulous suppliers that brought horsemeat into supermarkets’ supply chains would not have felt the need to do so if they were making a healthy enough profit margin on the meat they were asked to produce.

Employers can also build trust by being open and honest about their business. They should, where possible, share business plans, forecasts and customer feedback with their suppliers to help them better understand the business and deliver what the employer wants and needs.

Finally, employers should endeavour to build bridges with their suppliers to make it easy for them to share information, good or bad. An employer is far better positioned to resolve an issue if it is flagged by a supplier as early as possible.

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But, ultimately, a trust-based relationship should involve employers treating their suppliers as an extension of their own organisation and making them feel part of their team, which will enable both parties to reap the rewards.

Emma Scott is representation manager at The Chartered Institute of Purchasing and Supply