At a time when business revenues are declining and corporate staffs are being dramatically cut in many countries, it is important to curb the growth of distrustful work environments that can affect the bottom line. Understanding how to build and communicate trust to employees is crucial for managers, say IESE professors Pablo Cardona and Helen Wilkinson in a recent study titled, “How to Create a Virtuous Cycle of Trust.”

For their research, the professors drew from their experiences as business coaches, and an empirical study of 741 managers and 2,111 subordinates in 18 countries that was developed by IESE’s Cross Cultural Management Network. That institution’s goal is to promote intercultural research in the realm of human behavior in organizations. The study analyzed 2,848 responses and a series of qualitative interviews with managers in six different cultural regions: English-speaking countries, Western Europe, Eastern Europe, Latin America, Asia and Southeast Asia. The results of their research were presented at the 2009 Annual Conference of the Academy of Management.

In an interview with Universia Knowledge at Wharton, the authors analyze the keys for developing relationships between managers and subordinates that are based on trust and understanding. Healthy rapport between employees and their supervisors leads to a virtuous cycle: When a manager exhibits behavior that is deserving of trust, his or her employees not only feel more confidence in their superior, but also believe more strongly in their work and in the company as a whole. The strengthened bond between boss and subordinate makes it easier for the manager to maintain an attitude that is worthy of employees’ trust.

Universia Knowledge at Wharton: What does trust involve within the business context?

Pablo Cardona: We have done several empirical studies that asked workers what trust means to them, [what it means] when they [really] trust someone. We obtained answers like these:

“I trust the sort of person who always responds to my expectations at work; someone loyal to his [or her] commitments. When he [or she] says that he [or she] is going to do something, he [or she] does it. And when he [or she] thinks that he [or she] is not going to be able to do something, he [or she] says that and explains why.” [Comment from a 37-year old woman in the educational business sector.]

“I trust the sort of person who always responds to my messages, and who establishes a fluid exchange of information, and who is sincere in that exchange.” [Comment from a 35-year old woman in the communications sector.]

“Trust is the feeling of security you have when you are sharing everything with a person who you know is going to respond to your expectations because he or she can take on commitments and fulfill them.” [Comment from a 42-year old man in the consulting sector.]

Reciprocity, transparency, loyalty, responsibility and professionalism are the common denominators. These are the behavioral patterns that appear in our virtuous cycle of trust.

Universia Knowledge at Wharton: What are the behavioral patterns and characteristics that generate trust internally?

Helen Wilkinson: The behavioral patterns that generate trust are the following: Consistency and predictability, [or] not contradicting yourself and arguing about opinions; integrity based on ethical principles; open and fluid communication with collaborators — lying is never a good option; sharing and delegating (which leads to greater motivation and personal involvement); concern about subordinates — empathy is one of the competencies that help the most — and loyalty. Trust is based on the interconnection of these components.

Universia Knowledge at Wharton: Where does trust come from? Who originates it? How is it transmitted within the organization?

Cardona: Everyone in the company can begin to create trust, but managers play the main role. If they generate trust, it is easier for trust to spread to different levels within the organization. If they don’t, workers can maintain trust in one another, but that is not necessarily something positive; it can be counterproductive because it can generate a defensive system “against” management.

How do you communicate trust? In the first place, you do that by setting an example, [such as] when managers do what they demand others to do, and when they do what they say they will do, and sustain behavioral patterns that they have previously laid out. Second, you need to enact policies of really evaluating workers: If managers assert values that they do not absolutely uphold when they evaluate other people, then there is no consistency in their real policies. Third, [managers are judged] by the decisions they make, day by day, within the company. Once again, people will realize the degree of consistency in these decisions. And, finally, [managers build trust] by communicating effectively the intentions and decisions of your company and the policies that it adopts to all levels of your organization.

Universia Knowledge at Wharton: What are the principal benefits of trust for the organization?

Wilkinson: People and departments can cooperate with one another like an integrated team. If you do not create trust, everyone devotes himself or herself to their own activities, not to the common good or the overall interest of the company or organization. When there is trust, there is fluidity, an exchange of ideas and pro-activity. Each worker thinks for himself [or herself] without waiting for instructions. They become the owners of their own work and they contribute initiatives that bring added value. They are not afraid that they might be penalized if they make mistakes, or that someone else is going to steal their ideas and contributions. These factors help the organization move forward, rather than get bogged down in behavioral patterns inherited from the past, which involve inertia. And, of course, this always has an influence on the development of the worker.

Universia Knowledge at Wharton: What are the warning signs of a working environment where distrust reigns?

Cardona: Depression, anxiety, medical leaves caused by stress, excessive mobility, team leaders who rule different areas within the company and the fact that information doesn’t move easily.

Universia Knowledge at Wharton: Are there ways to measure the level of distrust in companies?

Wilkinson: Distrust is [something that takes place] between people. As far as the company as a whole is concerned, you have to measure the degree of unity and identification within the company, which is exemplified by the managers, their evaluation policies and the examples noted earlier. There are studies about how to measure business culture, such as, “Business Culture: An Empirical Study of Spanish and Portuguese Companies,” [published by] IESE-IRCO in 2007. This study involves measuring the degree of unity, not just the labor climate.

Universia Knowledge at Wharton: Do companies get involved in measuring the level of trust, in some way?

Cardona: We are still very far from doing that. It is not enough that [companies] only do studies that measure the labor climate. Generally speaking, these sorts of studies measure the degree of satisfaction, not [the degree of] unity. They measure complaints. Nevertheless, some companies are already including questions directed at measuring unity, which is something tied to satisfaction. One example of this sort of question would be: “Do I feel proud that I belong to this company?”

Universia Knowledge at Wharton: Some factors that create trust are things we can barely influence. What are they and how can they be changed?

Wilkinson: Age, sex and race are factors that cannot be changed. In contrast, prestige and credibility can be [changed]. We can always increase trust through knowledge, networking and honesty – and we can therefore gain prestige and credibility. That has an indirect impact on those factors that we cannot modify. In China, for example, from the outset, a female manager finds it harder to generate trust merely because she is a woman. But she can lessen the negative handicap that stems from her sex – something that cannot be changed – through her knowledge and her professional prestige.

Another example involves age. You can compensate for age with the passage of time. It isn’t always a negative handicap if you are [someone who is] younger. For example, in Eastern Europe, people immediately have less confidence in an older boss, rather than in a younger boss.

Universia Knowledge at Wharton: Do the dynamics of trust work the same way in Spain and Latin America?

Cardona: The basic dynamics, yes.

Universia Knowledge at Wharton: How do Spain and Latin America differ in that regard? How do the differences influence trust there?

Cardona: In Latin America, it is harder for managers to trust their subordinates. Managers there take it for granted that all workers must be completely devoted to their work. In Latin America, functions that have to be developed are not clearly outlined. In contrast, in the United States each job description is very rigorous and specific in such a way that when a worker excels, it is very easy to detect and it is easy for the boss to appreciate. It is easier to notice when someone excels than when someone is devoted [to his or her work].

UKnowledge at Wharton: What are the practical implications of the results of this study?

Wilkinson: In the first place, generating ideas. Ideas can flow in an environment of trust. When distrust reigns, there are silos ruled by separate leaders; information is not exchanged and ideas are not generated [throughout the company]. There is stagnation and inertia. When there is no trust, there is no real commitment. Without trust, you can’t be surprised by mercenary reactions, and you should be prepared to accept that the worker is not going to be concerned about the overall good of the company.

Second, trust is something that takes time to build and strengthen, but it can be destroyed very easily. Be careful about permitting certain kinds of attitudes during a crisis. You can create an atmosphere in which it becomes very hard to rebuild trust. The decisions that must be [made] must be [carried out] with consistency and integrity, by sharing information at the right moment and by maintaining genuine concern for people. Of course, the same holds at times when there is no crisis.