Building Trust
 

W. Chan Kim and Renée Mauborgne

Be fair, then you can be tough

Flying across the Atlantic, we recently found ourselves watching a film call The Fifth Element.  Space ships zoomed by.  The future had arrived.  The information age as we know it today looked antiquated and naive.  But for all the progress in science and technology portrayed in the film, its fundamental insight is thousands of years old. 

The fifth element, the one that could save the world and make the other four elements of wind, fire, water and earth unite to form a formidable force, was not technology or science.  It was a person.  This person was perfect not only because she had brilliance and strength, but because she had empathy and respect for others.  Yet, although she possessed the power to save the world she herself could only find the strength to continue when she received empathy and respect from a fellow human being. 

We may be entering the digital age and the knowledge economy, but, fundamentally, as in The Fifth Element, no matter how far we advance in technology, it is people and the strength of our humanity that drive our companies and our societies. 

We set out nearly a decade ago to understand what it will mean for companies to manage effectively in the "knowledge economy."  What will it take for us to unlock the ideas and creativity of individuals on whom our organizations depend?  How can we inspire people to trust each other and co-operate as companies transform themselves to meet the demands of the future? 

The central idea that emerges from our research is this:  individuals are most likely to trust and co-operate freely in sharing their ideas when they feel recognized for their intellectual and emotional worth through what we call "fair process."  Fair process -- fairness in the process of making and executing decisions -- is at the heart of building trust and unlocking ideas. 

Without fair process, even outcomes that employees might approve can be difficult to accomplish.  But with fair process, the most painful and difficult goals can be achieved while gaining the voluntary co-operation of the employees affected. 

Consider the case of Siemens-Nixdorf Informationssysteme (SNI), the largest European supplier of information technology.  Created in 1990 when Siemens acquired the troubled Nixdorf Computer Company, SNI had cut head count from 52,000 to 35,000 by 1994.  Anxiety and fear were rampant in the company. 

Yet, Gerhard Schulmeyer, the newly appointed chief executive in 1994, was able to earn the trust and voluntary co-operation of the company during this extremely tumultuous time.  He accomplished this by means of the three bedrock principles of fair process:  continuously engaging people in the process, explaining to them the logic of the actions being taken and why they were essential and setting clear expectations of what employees could expect on the road ahead. 

Mr. Schulmeyer went out to talk to as many employees as he could.  In a series of meetings large and small with a total of more than 11,000 people, he began by painting a stark picture of SNI's position.  The company was losing money despite recent efforts to cut costs.  Deeper cuts were needed and every business would have to demonstrate its viability or be eliminated.  He set clear but tough rules about how decisions would be made.  People may not have like what they heard, but they understood.  He then asked for volunteers to come up with ideas. 

Within three months the initial group of 30 volunteers grew to an additional 75 executives and 300 employees.  Through these agents of change, the group swelled to 9,000 as others were recruited to help save the company. 

Ideas were solicited from managers and employees alike and they all understood how decisions affecting them would be made.  Ideas would be auctioned off to executives willing to back them with a budget.  If no executives bought a proposal on its merits, the idea would not be pursued.  Although 20-30 per cent of their proposals were rejected, employees thought the process was fair. 

Despite accumulated losses of DM2bn (£690m), by 1995 SNI was back in the black.  Employee satisfaction doubled over two years in spite of the difficult changes. 

Contrast this understanding of fair process with the recent closure of Renault's Belgian plant.  Many workers first heard on the radio that their plant would be shut down, even though it was one of the most productive in the Renault group.  With no engagement in the process, explanation of why it was necessary or clear set of expectations expressed, employees felt disrespected, betrayed and vulnerable.  In the absence of fair process, the ensuing strike supported by union members across Europe was not surprising. 

Fair process responds to a basic human need.  We all want to be valued as people, not as "labor," "personnel" or "human resources."  We want to be respected for our intelligence.  We want our ideas to be taken seriously.  And we want to understand the rationale behind decisions. 

To put fair process to work in your company, begin by asking these questions.  Do we engage individuals in decisions that affect them by not only asking for their input, but allowing them to challenge the merit of others' ideas and assumptions?  Do we provide a sound explanation that allows everyone involved and affected by a decision to understand why final decisions are made as they are and why people's opinions may ultimately have been overridden? 

Finally, once a decision is made, do we state clearly the new rules of the game?  Although the expectations may be demanding, employees should know by what standards they will be judged and the penalties for failure.  What are the new targets and milestones?  Who is responsible for what? 

For people to invest their mind and emotion in their organizations, they need to be treated as though they matter.  Fair process does that.