High-performance teams only exist when they’re built upon a foundation of trust and psychological safety. Experts share tips to help HR bake both into their strategies.

Businesses stand to gain a lot when they embed trust at their core. As well as being morally important, it’s an organisational enabler. 

Research conducted by Paul J. Zak, Founding Director of the Centre for Neuroeconomics, found that high-trust companies gain 76 per cent more engagement from their employees, 40 per cent less burnout and 50 per cent more productivity. Also, their employees take 13 per cent fewer sick days.

“Trust can bring a lot of additional discretionary efforts, increased creativity and innovation,” says Will Harvey, Professor of Leadership at Melbourne Business School. 

“Trust is also incredibly important in terms of retention. Once you’ve got people who feel a sense of belonging, and that they can be themselves, that’s the sort of organisation people are going to not only work harder for, but also want to stay with.”

On the flip side, a lack of trust can cause severe and long-term damage. On a macro level, economic instability, globalisation and industrial dislocation, combined with the rise of misinformation and disinformation, are all driving people from the establishments that have supported western societies since the Industrial Revolution. 

Businesses’ own internal practices are also introducing risk. There is no shortage of recent examples of high-profile businesses that have had their trustworthiness called into question. Whether they’re under the microscope for claims of price-gouging, widespread underpayments, the ‘moral blindness’ of certain leaders or unethical business practices, it’s safe to say trust in our institutions is eroding.

“There’s a polarisation effect in society that has always been there, but with social media and the algorithms behind it, reinforcing the content people are seeing, it has polarised us further,” says Harvey. “That creates a structural polarisation effect; more and more people are divided.”

Harvey points to geopolitical issues, climate change and the failed Voice referendum as examples of conflicts that could be spurring similar results in Australian workplaces. This can further impact work relationships, he says, which may already be under stress due to remote/hybrid work setups and tensions over return-to-office mandates. 

This means HR has an opportunity, once again, to use challenging global circumstances as its burning platform to encourage change. 

“In HR, there is the psychological contract between an organisation and its employees, and underpinning that is trust,” says Harvey. “If you build trust within an organisation, it enables individual employees [and] the wider stakeholders, as well as the leaders of an organisation, to be truly authentic in terms of who they are and what they stand for.”

Trust and psychological safety 

Trust supports collaboration and ideas sharing. It underpins a transparent, open culture and is critical to the pursuit of psychological safety at work.

Novartis Professor of Leadership and Management at Harvard Business School Amy Edmondson, one of the world’s leading thinkers on psychological safety, says trust is paramount due to the complexity of the contemporary business environment.

“Uncertainty is a given,” she says. “We lack a perfect line of sight on the future, so we are required to do things for which there is risk.”

She says trust and psychological safety are prerequisites for people to overcome the natural inclination to stay silent, and instead to speak up with a new idea, admit a mistake or provide potentially unpopular feedback.

“Performance in today’s environment of uncertainty and interdependence is very much dependent on psychological safety and trust.”

But this isn’t on employees to solve; organisations need to create the right environments. Take Icon Water, an Australian utility company, for example. In an attempt to break cycles of silence that often surround challenging topics impacting employees’ mental health, it developed the ‘building trust through storytelling’ initiative.

“Trust accounts for about 30 per cent of variation in performance. Dependability was a little over two times as important as benevolence-based trust.” – Rob Cross, Senior Vice President of Research for i4cp and Edward A. Madden Professor of Global Leadership at Babson College in Wellesley, Massachusetts

This allowed its workforce the opportunity to hear stories about mental health from keynote speakers from all walks of life. This has included fellow colleagues, a former politician, CEOs of local charities such as Lifeline and Menslink, former Australian Defence Force soldiers and mental fitness educators. 

Hearing stories from a diverse and broad network highlights the myriad issues faced by different individuals and communities and “injects ownership and empowerment to the workforce”, according to Icon Water.

After the initiative was implemented, many employees found the courage to speak up and share their own stories without fear of retribution, and felt more able to support others.

While this was an effective way for Icon Water to mitigate against polarisation in its workforce, efforts to embed psychological safety will look different in every organisation, says Edmondson.

“Importantly, psychological safety is not an organisational-level phenomenon; it’s a group-level phenomenon. There can be as many differences in psychological safety across teams within a company as there are differences between companies.”

Mapping patterns of high performance

Once psychological safety and trust are embedded into an organisation’s fabric, one of the greatest benefits to be gained is improved performance levels.

High-performance researcher Rob Cross is an expert on the intersection of trust and positive outcomes. As the Senior Vice President of Research for i4cp, and Edward A. Madden Professor of Global Leadership at Babson College in Wellesley, Massachusetts, Cross maps patterns of collaboration across organisations to analyse the effect of trust on high-performance teams.

His work draws links between who interacts with who to get work done, how they make decisions and who energises or blocks others.

“The team is the primary unit of value creation in organisations – but they’re not really managed,” he says. “Individuals are managed, they have feedback, and the units are managed. [There should be team] guidelines that people can follow on start-up practices and ways of establishing trust early.” 

However, findings from a recent i4cp study show that trust involves a fundamental trifecta of interdependent forms, says Cross. There is benevolence, or the feeling of psychological safety; competence, or knowing the person can do what they say they can do; and dependability, or integrity that comes with matching their words with actions. 

While all elements are necessary, he says, when it comes to performance outcomes, nothing beats trust in others’ competence.

“Dependability is the most important form of trust in predicting team effectiveness and market performance in the metrics we’ve looked at. Trust accounts for about 30 per cent of variation in performance. Dependability was a little over two times as important as benevolence-based trust.”

This recent finding – yet to be published – overturns some existing wisdom. Team cohesion and interpersonal relationships have long been considered the pinnacles of team effectiveness, he says. However, given changes to remote work and rapidly forming and changing teams, the priority has become trust in competence.

“We have all these teams being formed in an ad hoc way, very rapidly and with very little structure,” he says. “You build [trust] by putting structure into the work and holding people accountable for their deliverables.” 

This could involve guidelines for team communication and feedback, as well as processes for accountability that are followed consistently, he says.

It could also be a good idea to set up knowledge-sharing activities to further the positive effects of demonstrating competence.

This could involve show-and-tell-style presentations where employees present successful projects they’ve worked on, or setting up opportunities for colleagues to shadow each other for a short period of time.

How to respond when trust is broken

Organisational trust can be volatile. While there are myriad benefits to a business’s performance when trust levels are strong, it only takes one misstep to lose decades worth of trust deposits.

With strong leaders at the helm, trust can slowly be rebuilt. But with laissez-faire or absent leadership, employees can lose trust in the entire organisation.

A 2016 study of engineers who were deemed to have laissez-faire leaders, published in the Journal of Economics Finance and Accounting, found that, when a supervisor did not meet their subordinates’ expectations for presence and involvement, it significantly eroded the employees’ feelings of trust – not only in the boss, but also in their organisation.

“Performance in today’s environment of uncertainty and interdependence is very much dependent on psychological safety and trust.” – Amy Edmonsdon, Novartis Professor of Leadership and Management, Harvard Business School

The authors said that, because a leader was the representative of the organisation, the supervisors’ lack of consideration seemed to be “regarded by employees as a reflection of the organisation’s indifferent approach to themselves”. 

Rebuilding trust requires a strong and unwavering commitment from leaders and their teams, who have to buy into its importance, says Gauri Maini FCPHR, Founder of The Culture Advantage.

“A checkpoint for me is, ‘How often do we review performance against revenue and profit targets?’ We need the same disciplined protocols to review trust and lead indicators such as advocacy, brand health, stakeholder experience and reputation.” 

Even if a company or team is hitting its revenue or performance targets, they may still be dysfunctional and distrusting, she says.

“It’s more important than ever to have a robust metric to gauge our progress on the societal and planetary impacts of any activity we have stewardship of.”

HR as enablers of high-performance teams

Processes and cultures that support both accountability and trust must be established quickly once teams are created. This is where HR’s coaching and leadership development work is worth its weight in gold.

Edmondson suggests coaching managers to learn the skills needed to create transparency and clarity about the nature of the work or any challenges, such as active listening, accountability and clear communication. 

“HR’s job is to ensure growth and development opportunities for everyone, especially managers,” she says. “If there have been events or situations that have led to a climate of distrust, you need to talk about the elephant in the room.

“Often you will need help from a facilitator in the organisation, or outside the organisation – someone to come in and lead a fresh start and help people have difficult conversations,” she says. “You can’t do it for them. You have to help people get the skills they need to do it themselves.”

Teams with poor levels of trust and engagement will often require interventions.

Maini recalls a former client where previous toxic leaders had left a vacuum of communication and trust deficits. Rebuilding trust began with a discovery process to determine executives’ strengths, values and aspirations.

“We were aiding the communication because uncertainty and ambiguity are the enemies of trust,” she says. 

“The previous leader was someone who didn’t really encourage people to have dialogue with each other. So the executive team had got into a pattern of having meetings after the meetings, or meetings before the meetings, but never speaking up in the meetings.

“So, whether it was mistrust or just habit, people didn’t feel safe enough to talk to each other about things that are important for the organisation to move forward and perform.”

She says deep-discovery meetings – held over the course of a year – revealed the team was aligned on their aspirations, but diverged in their methods. That realisation was a
game-changer.

“For them to understand each other’s aspirations and values, it was just mind-blowing. Their engagement scores improved in a year,” she says. 

Other techniques included creating a buddy system to build shared investment in another team member, and creating safe environments for people to raise issues.

Overall, Maini says high-performing and high-trust environments deliver stronger outcomes because there is a culture of speaking up.

“It’s not that there are fewer mistakes… But people are calling them out and doing something differently,” she says. 

“For leaders who care about social impact and who want to contribute to the creation of an inclusive, equitable and just society, [organisational] trust is a critical enabler.”

A longer version of this article first appeared in the April/May 2024 edition of HRM Magazine.

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