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Trust in the Boss

Well, it's US Labor Day and one thing that seems pretty clear is that lots of workers don't trust the companies that they work for. Consider the following.

The AFL-CIO has released a poll of workers conducted by Peter Hart Research They found that fully a third of workers don't trust their employer at all.

The Council of Public Relations Firms talked to employed workers in a statistically-representative nationwide sample of 1,013 men and women. They found that two thirds of them believe their company's communications aren't open and honest all the time.

The recruiting firm found similar attitudes. In their survey, thirty percent of respondents indicated that they feel that their corporate leadership is untrustworthy.

Watson Wyatt Worldwide found, in a study of 7,500 employees, that only half trusted their senior managers.

A study of 1,800 workers by the Aon Loyalty Institute found that more than one in eight, or 13%, of U.S. workers distrust their employers on the most basic level -- that is, they don't feel free from fear, intimidation or harassment at work.

This is powerful stuff. Trust is important. It's not just an academic issue, either, one where you can safely hand things over to the ethicists and be done with it. Trust is a pre-requisite for employee loyalty and employee loyalty leads to greater profits.

This is not news. Even a quick, back-of-the-envelope calculation will show you that if your employees are loyal there are lots of good things in it for you. You'll have lower recruiting and training costs, to start with. Then, as folks stay around, they get better at what they do. That means greater efficiency.

Loyal employees are also the key to the current management holy grail-great customer service. Knowledgeable, competent folks who care about your company are the ones who tend to go the extra mile for your customers and for you. But they won't be loyal if they don't trust you.

So the question is, "Why don't they trust the boss?" Just like no parent starts out to be a lousy parent, no boss that I've ever met gets up in the morning, looks in the mirror and says, "I'm going to be a really dishonest, unfair boss today, and have a great time doing it!"

Losing trust is something that happens, it seems, while you're doing other things. Those things look important. They're supposed to make the business better. But many of them violate the basic trust that folks bring to work with them when they start. Workers distrust their bosses because of the boss's behavior. Behavior is what you say and what you do. Here's some boss behavior from the last few years.

Let's start with some of the small stuff. Benefit packages that used to be employer paid are, more and more, paid for in part by the workers who are covered. Workplace surveillance has become common. A survey of 2,133 human resources managers by the American Management Association found that 73.5 percent of firms use some form of workplace surveillance.

Working conditions aren't getting much better either. Ten years ago, the typical office offered an employee 250 square feet of space, according to Peter Capelli, a professor of management at the University of Pennsylvania's Wharton School of Business. Today, the average is 200 square feet, while some employers are cramming workers into 100 square feet apiece. Then there are layoffs.

Layoffs have become endemic. Now they're often the first response to a downturn in the marketplace. In October, 2000, the US had an unemployment rate of 3.9%, a thirty year low. Since then the rate has climbed to 4.5% as of July 2001 and continues to rise. That's the result of almost a million layoffs. It makes folks nervous.

The Council of Public Relations Firms (CPRF) found that 28% of the workers they talked to were worried about being laid off. 25% described themselves as layoff survivors.

The impact of layoffs on trust, though, isn't just about the number of layoffs. Part of the problem is that while coworkers go away, the work doesn't. 57% of the layoff survivors that CareerBuilder found said that their workload had increased in the last seven months.

It's also about how the layoffs are handled. 54% of the CPRF respondents feel that most companies that downsize fail to clearly communicate to the surviving employees both the need for the layoffs and the future outlook for the business.

After years of giving lip-service to the idea that holding down layoffs helped build employee loyalty, the captains of the slave ship Theory X are getting bolder about saying what they've thought all along. That's what's behind statements from the likes of MIT economist Paul Osterman. "Companies are finding that they can achieve their goals by maintaining a certain level of fear in the workforce."

I guess that's OK. The fear's probably there anyway. After a couple of decades of downsizing and rightsizing and re-engineering, workers are a bit cynical when they hear management or one of the gurus who push this stuff talk about how "re-engineering is not about layoffs." Maybe not, but when management starts talking about re-engineering, folks start disappearing. They don't come off the top of the pyramid, either.

The gap just seems to keep widening between the folks at the top of the pyramid and the ones at the bottom. The folks at the top seem to make increasing multiples of what those at the bottom make. A recent article that I saw put that disparity in monetary compensation at four hundred nineteen to one.

That's bad enough. But, more and more, the folks at the top are protected by their contracts from the consequences of their actions, actions that can have disastrous consequences for others. Take the case of Lucent Technologies, a company who appears to be flopping about on the beach and which has announced almost forty thousand layoffs this year.

Richard McGinn used to be the CEO of Lucent. It might be reasonable to consider him responsible for those layoffs, along with the draining off of shareholder value that's been happening there. So, Mr. McGinn was let go after barely three years on the job and extravagant claims that the company was going to grow at better than twenty percent per year.

It took Lucent more than fifteen pages to describe McGinn's severance package (and that of former CFO Deborah Hopkins) in the company's quarterly statement filed with America's Securities and Exchange Commission. For doing a job that resulted in massive layoffs and vaporizing shareholder value, Mr. McGinn was quite well rewarded.

The severance package was worth about $13 million. That seems ludicrous in itself, but some of the details add to the fun. Poor Mr. McGinn had borrowed money while he was CEO. He figured his salary would help him make the payments. The language used for this is "assumption of continued active employment." Just like the rest of us borrow.

But if you get fired, the odds are that no one will bail you out. Lucent did that for Mr. McGinn, though, granting him a new loan of $4.3 million. He still gets his pension which weighs in at nice $870,000 per year. There are also all kinds of health and life insurance benefits.

But the capper is the biggest portion of McGinn's $13 million. It's stock. When he was hired as CEO, shares were set aside as an incentive for good corporate performance. But when Mr. McGinn got fired, the company turned those shares into an outright grant. They were given to him. If I read it right, that means that the incentive must have been to screw up the company, lay off lots of folks, and get fired.

As you've probably guessed, this is a bit better treatment than most of the folks who got laid off at Lucent. In the same quarterly report that detailed Mr. McGinn's settlement, Lucent took less than a page to cover its decision to lay off over ten thousand workers.

And what did those individuals get? The answer for many of them is nothing, zero, unless they were willing to sign a release promising not to sue the company. Not millions of dollars. No help with loans taken out on "assumption of continued active employment." No insurance.

Is it any wonder that workers don't trust bosses? From the record it sure looks like an awful lot of bosses want to put their workers in leaky ships, whip them to row faster, and throw them overboard at the first sign of bad weather.

This is bad ethics and bad business. Loyalty, flowing in both directions, is one of the things that lubricates profitability. Trust is essential. And it doesn't have to go away.

The 2001 Randstad North America Employment Review study asked workers if they wanted to work for one company for a long time. Three quarters said, "Yes." The study also found trust to be a key driver of employee satisfaction. A recent Towers Perrin study linked a reputation for being a good employer to higher return to shareholders. It should be a win-win situation. But in many places, it's not.

We have to work on this. We have to work hard because it's very important. We have to start now, because it takes time to fix and it's steadily getting later.

This feature appeared on 2 September 2001


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