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Trust and Ownership

Chris Mackin, Loren Rodgers, and Adria Scharf

December 2001

While trust is important in any organization, employee ownership companies are a breed apart. A strong foundation of trust is essential for building a workforce culture in which employees think and act as owners.

Types of Trust

The Ownership Culture Survey^TM of employees in employee-ownership companies uncovers two distinct types of trust: trust in management and trust in ownership. The survey data (based on 19 companies as of November 2001) suggest that trust is not a unitary concept, and that different types of trust need to be managed in different ways.

Trust in Management

Employees have different degrees of trust in different levels of management. Our data look at employee trust in three distinct levels of management: supervisors, middle managers, and senior managers. At most companies, people have the highest degree of trust in their supervisors, and the level of trust tends to decline as one moves up the organizational chart. The three levels of trust-in-management are very highly correlated, however, suggesting that actions by one level of management affect employees' trust in all levels.

Trust in Ownership

The second type of trust that is relevant to building an ownership culture is trust in ownership. Trust in ownership is the belief that the ownership plan is legitimate and in a participant's interest. The fact that employees will share in the benefits of company success is not sufficient to motivate employees. Employees must believe that they will benefit. In other words, having a plan in place will not necessarily motivate people unless they trust in, or believe in, the plan. Companies can maximize their chances of attaining the performance benefits of employee ownership by learning about the psychological dynamics of trust in ownership, some of which we highlight below.

The Effects of Trust

The two types of trust are associated with overlapping but distinct organizational outcomes, summarized in the table below:

Trust-in-Management is positively related to:	Trust-in-Ownership is positively related to:
job satisfaction commitment perceived fairness in job evaluations perceived pay fairness willingness to work hard willingness to work extra when needed	job satisfaction commitment access to company information opportunities to learn seeing oneself as an owner perceived importance of ownership

Trust and Understanding

According to the survey data, one of the most important factors affecting trust-in-ownership specifically is the understanding of the employee ownership plan. People will not be motivated by employee ownership until they trust it, and they will not trust it until they understand it. (Employee ownership plans, by virtue of involving deferred compensation instead of immediate cash, require an unusually high degree of trust on the part of participants.)

Management Implications

The survey findings on trust suggest the following rules of thumb for managers in employee-ownership companies:

Manage the different types of trust. Based on your company's circumstances and goals, it may be more effective to focus on trust of management or on trust of ownership.
Never neglect managers. Take care to bring all levels of managers, including supervisors, "on board"-one weak link diminishes the entire management team and the effectiveness of the ownership plan.
Trust is intimately connected with understanding. Misconceptions and rumors are the source of much mistrust. If employees understand the plan, they are more likely to trust it and more likely to think and act like owners.
Managers should be visible. People should know their managers and understand their jobs. The data indicate that people trust the managers with whom they have the most contact.

Adapted by Ownership Associates from their article Ownership and Trust, The Ownership Culture Report vol. 1, no. 1 (spring/summer 1998).

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