Developing a trust culture: to survive in the 1990s.

Developing a Trust Culture: To Survive In the 1990s

As the decade of the 1990s approaches, many managers express concern about the survival of their companies and, indeed, about their own survival as managers. Throughout the 1980s, Corporate America has been bombarded by buyouts, consolidations and mergers, and, in turn, managers have felt increasing anxiety and insecurity. As Walter Kiechel wrote in Fortune magazine, "An era in American capitalism is drawing to a close; another era is beginning. Call the eighties the decade of restructuring: Onto the scene rode the now familiar horsemen of the corporate apocalypse-global competition, deregulation, accelerating technological change and the threat of takeover. In response, company after company, including over half the Fortune 500, restructured-shedding businesses, laying off employees, cutting costs. The work of restructuring is not over. Indeed, one of the lessons of the new age is that such work is never over; can't be over as long as the four horsemen patrol the field. But enough of that work has been done to bring management face to face with the next big question: Where do we go from here?"

Is it any wonder that managers face the next decade beset by insecurity and apprehension about how they will manage successfully and survive in the 1990s?

How will the 1990s affect American businesses? What will be the impact of corporate culture on the success of companies operating in the next decade? Is it possible to develop a culture of trust as a method of surviving in the future? Are there examples of ventures where a positive corporate culture has been a key ingredient in the success of the business? We believe that only those companies that develop and maintain positive corporate culture will be successful and profitable in meeting the challenges of the future, and that the 1990s will witness a continuation of the corporate restructuring, reorganization, and down-sizing that characterized the 1980s. And certainly within this context, the concept of, as Michael Brody wrote in Fortune, "value-based planning which proceeds from the virtually inarguable premise that the purpose of a company is to increase shareholder wealth and corporate stock prices," will be a key principle in the 1990s, guiding the activities of corporate management.

Whether such motivation will enhance the overall economic outlook of the 1990s is less certain. Forecasts, for example, appearing in the Fortune issues of February 2, 1987 and September 26, 1988 offer a variety of possibilities. Within those forecasts, for example, Brody hypothesizes that "The century's last decade won't be a golden age, but it should be a silver one." Looking out to the year 2000, he predicts "steady growth, rising living standards, falling deficits, millions of new jobs, and a climate exceptionally congenial to enterprise." The earlier issue predicts that, "In an increasingly interconnected global economy the U.S. will export more services and import more capital, but beware of the newly and rapidly industrializing countries as competitors on the scene.

"The painful restructuring is not over, manufacturing jobs will continue to atrophy and not all the names over the plant doors will be American. But survivors in steel, autos, and other basic industries should emerge as low-cost, quality-driven winners." Fortune foresees a resurgence in manufacturing attributed mainly to restructured, reorganized, and more efficient domestic operations and manufacturing operations financed by foreign investment capital.

Additional forecast and hypotheses concerning expectations for the 1990s abound, especially those emphasizing the process of restructuring. Peter Nulty suggests, for example, that three great forces are drastically changing the structure and organization of industry: 1) rapid growth of the service sector; 2) advances in computer technology that make it possible for computers to perform many traditional management jobs more cheaply than people; and 3) extreme cost-consciousness on the part of managers and business. "Global competition is forcing whole layers of middle managers into oblivion, a process known as `downsizing' or `flattening the pyramid.' Management used to mean getting things done through others; now it means getting value added, and that's a revolution." According to Nulty, most of the reductions will be in staff positions. As a result, a manager's chances for survival are better in a line position than in a staff position. For Nulty, the 1990s will be the decade of the "value added" manager.

In "The Winning Organization," Jeremy Main also argues that the manager's job in the 1990s will continue to be high-pressured and under considerable stress. According to Main, middle management positions will significantly decrease and reorganization and restructuring will continue as "spans of control" are increased and yield to "spans of communication." In this environment, according to Main, companies will continue to flatten the organizational pyramid and trim staffs to stay competitive and viable.

Clearly, the restructuring of organizations has put added pressure on managers to think about their own survival at a time when many of them seem part of an endangered species. But if companies are to avoid incoherence and ultimate chaos, they must find the thread of continuity that runs through their culture and makes their environment more than simply a jungle where the fittest survive. As business change their methods of operation and restructure and reorganize, the corporate cultures associated with these businesses must also adjust to meet the needs of the corporate environment. Although these cultures are often intangible and invisible, they make up, we believe, the best chance for corporate success in the 1990s.

As R.H. Kilmann wrote in Psychology Today, "Success in business is not determined by an executive's skills alone; nor by the visible features - the strategy, structure and reward system - of the organization. Rather the organization itself has an invisible quality - a certain style, a character, a way of doing things - that may be more powerful than the dictates of any one person or any formal system. Culture provides meaning, direction and mobilization, a social energy that moves the corporation, into either productive action or destruction." But it seems obvious that if a culture is to be effective, it must have a past; a history that allows it to create its own substantive future.

Admittedly, "corporate culture" is a difficult term to define. Richard Pascale suggests, for example, "What corporate strategy was in the 70s, corporate culture is becoming in the 1980s." Ivancevech, Donnelly and Gibson use the term "organizational culture" and maintain that "the organizational culture refers to the impact of group norms and values and informal activities on the organizational environment." P.V. Lewis uses the term "organizational climate" to describe corporate culture and states that "The organizational climate consists of interpersonal and environmental factors that shape behavior and motivation. The organizational climate is that set of characteristics which describes an organization. The organizational climate distinguishes one organization from another, endures over a period of time, ad influences people's behavior." And to Bonoma and Zaltman, "Organizational climate refers to the personality of the organization resulting from the characteristics of the people who manage the organization and the way the organization is structured."

However one precisely defines "corporate culture," it seems obvious that this invisible force is a key ingredient in the success or failure of organizations. In fact, any changes in culture should be expected to reverberate throughout the organization and impact heavily on the organization's ability to meet the changing demands created by reorganization and restructuring. As a result, the authors argue that the organizations that will be most successful in meeting the challenges of the 1990s are those that are most successful at developing a positive organizational climate or culture, a culture described by some as a "trust culture."

Phillip Lewis is one who sees it from our angle. As Lewis describes the trust cycle: "In a trusting, supportive climate, employees respond positively to their supervisor's confidence in them. When the supervisor places trust in the employee, the employee attempts to justify the supervisor's faith by an acceptable response. Thus, a self-perpetuating cycle is started. In a non-trusting climate, the supervisor fails to provide a supportive relationship. The employee responds with minimal compliance and resentment. Low productivity reinforces low trust and this system likewise becomes self-perpetuating."

Part of the problem is that management has been drawn into old-fashioned styles of supervision. As Paul Bernstein suggests, management "has been trapped in the web of Taylorism and top-down management, resulting in a low level of trust on the part of employees and managers, an `us against them' outlook, poor productivity and low company loyalty." For Bernstein too, "The corporate culture must reflect an atmosphere of trust that will get employees to accept the identity of individual and organizational interested in improving productivity, cutting costs, and enlisting the commitment of their employees, the development of a trust culture offers substantial rewards." And the basic steps to developing this "trust culture" are simple: 1) training; 2) participation; 3) delegation; 4) communication; and 5) evaluation.

Current management literature abounds with examples that prove the main point: business success occurs with a positive trust culture and a supportive management style. Kenneth Labich relates, for example, how companies such as Chrysler, Abbot Laboratories, Apple Computers, Merck, and Johnson & Johnson - "America's most imaginative companies, are turning new ideas into big dollars," and cautions "as restructuring threatens to slow growth, more managers need to learn how to do it." Saporito discusses similar success obtained by a number of companies in "Cutting Costs Without Cutting People." And Nancy Perry discusses successes with new incentive and bonus pay plans introduced by progressive organizations to reward workers for high performance and meaningful contributions to corporate goals. Perry identifies the leaders in this new "trust culture" as Nucor Steel, Reebok, and Lincoln Electric Company. We all know there are many other companies as well.

Those companies that develop and maintain a positive corporate culture will be most successful in the 1990s. If companies are to be successful at meeting the challenges presented by the environment and the competition, they must shape 1) a positive corporate culture; 2) a democratic sense of trust among all employees; and 3) a supportive management style. Economic survival in an age when the European Common Market is gearing up for 1992 and when the domestic markets are highly competitive will not be easy. Companies with strong corporate cultures will be the fittest for such survival.

Managerial and employee morale has been devastated by the restructuring and reorganization of American corporations. Middle managers, in particular, have felt the brunt of these changes. The survivors are often shell-shocked, prey to distractions after the fact, disloyal and resentful. In many organizations, managers are actually working against programs that would ordinarily improve the companies' competitive edge. The authors suggest that organizations now need to focus their attention on the relationships between communication and organizational behavior in order to enhance their corporate cultures.

The business organization is in most ways a business communications system, a system that plans, organizes and controls information. For organizations to meet their goals, they must create a common system of signals, signs and behavior, an integrated pattern that will offer a common vision for everyone working within the organization's environment. A strong corporate culture is one marked with the human imprint,,, united by a common language that each member understands and accepts.

To help achieve this ambitious end, the authors suggest that each organization establish a communications committee consisting primarily of middle management and supervisors. This committee should be charged with the responsibility of making certain that the corporate vision, as well as the corporate history, is clear and precise and that all employees understand it and work by it. At the same time, the committee should serve as a clearing house for all suggestions and complaints related to the implementation of details related to the corporate vision. The committee should work with the executive officers of the organization and fellow employees by providing feedback regarding these suggestions and complaints on a continuous basis to all members of the organization. The members of this committee should have the authority and respect necessary to carry out this important responsibility. In the largest sense, this committee should facilitate activity that will make the organization into a trust culture.

We believe that the best hope for American companies in the 1990s is through a communications committee dedicated to the shaping and implementation of a corporate vision. This vision must be inclusive and it must be based on the principles of democratic participation and trust. As the European Community continues to develop its sense of economic and social integration, so too must each organization in corporate America build a culture of trust.