Organizational Trust & The Productivity Predicament

Workforce productivity is waning worldwide, according to measures in multiple countries.
No one seems to know exactly why, but the theories are plentiful:

• Forced return-to-office made workers less productive
• Remote working arrangements induced “quiet quitting”
• Employees are burnt out
• Constant job churn has increased ramp-up time
• Retirements have increased and there’s not enough replacement workers
• Immigration has become more strict
• Inflation and interest rate hikes are to blame
• It’s cyclical—ups and downs in productivity are normal

A new study by the Institute for Corporate Productivity (i4cp) on the current state of workforce productivity bears this out—there’s no question that perceptions of productivity can be quite subjective, and in many organizations varies widely between the workforce and management.

An example of this was uncovered by i4cp member organization Microsoft, in its work trend report, “Hybrid Work is Just Work. Are We Doing It Wrong?” When Microsoft asked employees about their own productivity and in turn asked leaders if they believed their teams were productive, they received wildly different answers:

• 87% of employees report they are productive at work
• 12% of leaders say they have full confidence their team is productive

At i4cp, we were compelled to demystify this topic and recently surveyed hundreds of executives from organizations worldwide.

The result is a new report, aptly titled The Productivity Predicament, which explores some of the root causes for productivity decline and—more importantly—what organizations can do to improve it.

The report, available exclusively to i4cp members (non-members, download the executive brief), paints a picture of productivity as it stands today, with case examples, research-backed strategies, and data on what some of the best companies have already discovered.

As with all of i4cp’s major studies, we analyzed the survey data using our Market Performance Index®, which enables us to distinguish differences between high- and low-performance organizations based on revenue growth, profitability, market share, and customer satisfaction over the last five years.

We first wanted to see what the perception of productivity has been since the world began emerging from the pandemic. We asked companies a simple question: What has happened to productivity in your organization since March 2022? The answers somewhat predictably correlated to market performance:

While these correlations might seem easy to predict, several others were more surprising.

Return to office is not the magic solution to improve productivity

Most companies today have implemented policies requiring employees to work onsite. Our data shows that 64% require onsite attendance at least some of the time, while only 21% said they have flexible policies that give employees the freedom and autonomy to decide where they work.

CEOs and other senior executives typically cite very common reasons for returning to the office. Nearly half (47%) of respondents said current policies were designed to improve one of the following:

1. Collaboration
2. Culture
3. Productivity

While these may seem like reasonable explanations, they are not proven out in the data. In fact, in many companies these elements may be suffering from the RTO decision. Analysis found that selection of one of these three as the primary reason for the current work model was either very weakly or negatively correlated with both overall performance and productivity.

Productivity improvement is not about a mandated policy or magic technology. Instead, it’s primarily influenced by creating an environment where trust is pervasive throughout the organization.

The Importance of Trust

As it turns out, unilateral trust is one of the most critical ingredients to creating a productive workforce. The difference in trust between high- and low-performance organizations, as measured by i4cp’s Organizational Trust Index™, is rather startling. Respondents from high-performance companies strongly agreed with our five trust statements by a factor of 3.5 to 11x over those from low-performing companies.

In turn, lack of trust is at the root cause of poor workforce productivity; just 2% of survey respondents from low-performance organizations strongly agreed that their senior leaders trust employees, and 3% said that employees trust senior leaders.

Our analysis shows that agreement with these five elements of trust explains 18% of participating organizations’ increased productivity since the start of the pandemic.

While organizational trust is critical to improved productivity, there are other things companies can do to create a long-lasting productive culture. The full study—The Productivity Predicament—offers several additional strategies and ideas and is available to i4cp members, at this link.

If you’re not an i4cp member, download the executive brief or contact us to learn more about enterprise membership.

Want to see other related resources? View the full The Productivity Predicament series here (members only).