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There’s a hefty price to pay when a company doesn’t trust its employees, and employees don’t trust their company.

David Packard of Hewlett-Packard made this concept clear with his famous story of a company’s locked tool bins that goaded employees into stealing. 

Stephen M.R. Covey, son of the 7 Habits author, argues that if you don’t have a high-trust organization, you’re actually paying taxes on everybody’s suspicions.

Here’s what he identifies as low-trust taxes:

This is the extra hierarchy and overlapping accounting structures to ensure control. More audits and computer security leap to mind; there are other measures.

Complex procedures arise when senior managers don’t trust employees to show integrity or common sense.

Office politics.
Lack of trust usually accompanies a vacuum in leadership. When that happens, everybody in the organization begins jockeying for advantage. The very term “office politics” means the opposite of trust.

Disengagement. When people don’t trust their leaders, one of the least disruptive things they can do is mentally check out.

This creates huge hidden costs: one to two times the departing employee’s annual salary for rehiring, retraining, operational disruption and lost productivity. And even with a new person on board, nothing is solved.

Churn. Like turnover but applied to other stakeholders than employees. Example: A restaurant patron recently asked a waiter what he recommended. He replied: “I recommend going to another restaurant.”

In 2004, the Association of Certified Fraud Examiners estimated that the average U.S. company lost 6% of revenues to fraudulent behavior. In Enron’s case, it hit 100%.

It’s possible to restore trust after it’s lost, but the process requires a high degree of patience and consistency. Consider Wall Street trying to woo back the average investor. Better to keep your operations on the up and up, and to police yourself early if you suspect anything is wrong.

— Adapted from The Speed of Trust, Stephen M.R. Covey with Rebecca Merrill, Free Press.

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