Only 20 per cent of the public think bosses tell the truth about their business. The recession is blamed for rising suspicion, but as economic conditions improve how can leaders rebuild trust and engage employees?

We may be emerging from the worst recession for 60 years, but UK plc has no grounds for complacency. Levels of both public trust in business and employee engagement with their companies are low, and months of industrial unrest may follow as public sector cuts take effect and private sector employees seek payback from employers for the sacrifices they made to help them weather the downturn.

In a recent essay, Will Hutton, executive vice chair at The Work Foundation, argued that recovery would depend on "reviving business purpose, committing to fair companies and engaging employees". Employees, customers and innovation were all forfeited for short-term financial success, he claimed, with the result that "managers became asset sweaters and target achievers instead of business builders and people engagers".

Where companies are trying to redress the balance, they seem to be latching on to engagement as a panacea. Indeed, the subject is a hot topic, not least as a result of the report produced for the government last year by David MacLeod. It provided robust evidence of the critical role engagement plays in building productivity and improving corporate performance.

The MacLeod Review identified four principal characteristics of engaged companies. They provide a clear strategic narrative to employees about where the organisation is going and why, in a way that gives them a context for their own job; managers treat people as individuals rather than human resources; there is a strong employee voice, which leads to a flow of ideas up and down and across the organisation; and values and behaviours are aligned, creating integrity and trust.

Such characteristics are motherhood and apple pie. But many companies see engagement too superficially. This approach is manifested in the obsessive focus of many human resources (HR) professionals on engagement surveys—which can only ever measure what employees say they feel about their employer—when the real hard work should be on making the organisation a more engaging place to work.

It is also evident in the failure of most engagement strategies to address the imbalance of power between employer and employee that is inherent in most organisations and makes so many workers feel like victims rather than participants in success.

As Roger Seifert, professor of industrial relations and human resources management with the University of Wolverhampton Business School, puts it: "Because labour supply exceeds demand, there is an inherent power imbalance even before you get into the labour market, and that inequality spills over into the employment relationship itself."

This power balance is tipping further in employers' favour with the gradual erosion of collective rights in favour of individual rights, which are largely unenforceable. No wonder the number of employment tribunals is rising, sickness absence is increasing, and trust and engagement levels are falling. With no institutional channel for airing their grievances, employees simply take their disaffection underground, where it is more damaging and far more costly.

Stephen Overell, associate director of The Work Foundation, believes that while it is important to think and talk about engagement, it should be as a route into conversations about the nature of work itself.

"The big flaw in the engagement argument is that it tends to focus on attitudes, and doesn't take into account the big issues of fairness and equality at work. True engagement is rooted in big, profound, connected issues such as relationships with colleagues, procedural justice, job security, control over jobs and the nature of the job itself. All those things come down to the quality of management, and whether leaders have the skills to manage in a more knowledge-oriented era."

There is, continues Overell, "an unrecognised job quality problem in the UK and we are just beginning to understand the nature of it".
The Work Foundation is addressing the problem with the Good Work Commission, which has brought together business and public sector leaders, trade unions and a bishop to discuss what good work—for employees, employers and society at large—looks like. It will publish a report on its conclusions in the summer.

Overell attributes the problem of poor work to weak leadership, but this is not the only area where a managerial deficit has contributed to low engagement, believes John Monks, general secretary of the European Trade Union Confederation and former TUC boss.

Superficial approaches to engagement will come to nothing, says Monks, unless boards demonstrate loyalty, vision and long-term commitment to building companies for the future rather than focusing on short-term shareholder value and their own pay packages. Nothing is more demotivating for employees, he believes, than seeing the gap between their own pay and that of executives widening inexorably, investment in research and development falling, and only mediocre corporate performance.

Such an approach is "irresponsible" and indicates what he calls "a lack of moral fibre" among chief executives. He adds: "Big fundamental issues such as executive pay, quality of leadership and how important you feel your job is are all crucial factors affecting individual morale."

Monks's comments are borne out in research by MORI among the general public, which believed executive pay and being able to speak out about company wrongdoing to be, respectively, the most important and fourth most vital aspects of organisational behaviour that need addressing. The same survey showed that caring for employees, investing for the future, providing more jobs and training the workforce were four of the top five areas that people think companies need to address over the next few years. Overall, just 20 per cent of the public trusted chief executives to tell the truth when talking about their business, with 52 per cent judging corporate profits to be too high.

The recession has revealed weaknesses in corporate structures and leadership that the years of plenty masked and unleashed public anger over the problems caused by the self-styled masters of the universe, says David Coats, associate director of policy at The Work Foundation.

But he and others reserve their most severe opprobrium for the HR profession which, claims Coats, "has forgotten about the reality of the employment relationship". With a favourable government, falling union interference and a plethora of tools and techniques, the profession has had "a free hand for 20 years or more". But still, according to the Chartered Institute of Personnel and Development, around one-third of employees are engaged, one-third are ambivalent and one-third are actively disengaged.

"Clearly something is wrong with the model HR has been pushing, because it hasn't delivered on its promise," concludes Coats.
Seifert agrees. "Managements, and HR in particular, have practised a shocking deception on ordinary people in saying 'we will look after you'," he says. "When it comes to the crunch employees are always at the bottom of the list, and redundancies are typically the first recourse of the cost-cutters. We have seen it most recently in the Cadbury takeover. HR is a modern sham, a fig leaf for ruthless modern management where workers are machines with no rights."

Most worryingly, it is enlightened HR practices that have helped remove the justification for workplace unions, and there is a growing belief in some quarters that aligning engagement strategies with industrial relations approaches may be the most effective way to nurture engagement, boost productivity and improve corporate performance.

At a basic level, says Monks, good unions "keep a check on pay and other differentials and help keep leadership honest". What's more, augmenting the direct relationship an employee has with their line manager and/or HR with the independent voice of a union representative helps redress the power imbalance in an organisation.

But the benefits of aligning engagement and industrial relations procedures are not just defensive. The strategy also builds a climate of trust and brings co-operation that can lead to improved management style and culture, and more effective organisational design, better training and development, and higher-quality jobs.

Joint research last year from the CBI, TUC and the Department for Business, Innovation & Skills showed that workplace union reps help reduce staff turnover, thereby lowering recruitment costs and preventing loss of skills; introduce employees to training; and improve companies' performance on equality and environmental issues. They also help reduce dismissals, employment tribunals, injuries and work-related illness.

Nita Clarke, vice-chair of the MacLeod Review, and director of the Involvement and Participation Association, suggests that one of the main reasons union membership has fallen over the past two decades is that too many unions remain stuck in the past.

"What's their offer to potential new members?" she asks. "These days people don't want unions to fight the class war on their behalf; they want them to help them get on at work and ensure the work environment is fair."

But Alex Lewis, HR director, employee relations, at the military aircraft services division of BAE Systems, believes the onus lies with management to forge a more constructive relationship with unions.
"Blaming the trade unions for their outdated approach is abdicating responsibility. In general, companies get the shop stewards they deserve," he says.

A recast relationship with the unions in his part of the business is helping BAE make the switch from a manufacturing to a service orientation, where the way it does things is just as important as project execution and financial performance. "That's a big statement for any business to make," admits Lewis, particularly when competitive pressures mean it has to be quicker, more agile and more cost-effective than in the past. The company has encapsulated the shift in an approach called Total Performance Leadership, launched at the start of this year. It requires changes in both culture and working methods.

In the past, says Lewis, unions and management would take entrenched positions in a largely adversarial relationship characterised by lack of trust. "But unions are no different from anyone else: they want to be listened to, communicated with and respected. If you exclude, marginalise or are dishonest with them, you get what you deserve."

One of the main benefits Lewis gains from the more constructive partnership with the union is that it acts as a source of dynamic, real-time employee information that would "cost a fortune" to procure through a traditional engagement survey. "One of the reasons I prefer working in unionised workplaces is that unions are skilled in organising employee opinion," he says.  "We see partnership as being the way we work together on a day-to-day basis. We cherish a long-established set of partnership behaviours that have developed over time and need constant nurture and maintenance," says Lewis. "That's how you build the trust essential to engagement."

When the company announced the closure last September of a major plant, after 18 months of dialogue with employees and unions about what was needed, employees quizzed by the media said they understood the decision and admired the way it had been taken.

Andrew Lambert, co-founder of the Corporate Research Forum, which specialises in organisational effectiveness, claims: "In a perfect world you wouldn't need unions. The more democratic organisations are and the more informed their employees, the less likely they are to need organised defensive mechanisms like unions. Management needs to recognise that if trade unions in their organisations have high allegiance, it reflects their own failure to connect with employees."

But Seifert believes that the notion of "a good employer" is fanciful. "Where are they?" he asks. "Most of them push down on their workers and their rights whenever they can."

Union representation is not the only way to keep workplaces fair, and Coats suggests that unions might serve the interests of their members better if they helped workplaces implement the collective rights embodied in information and consultation legislation. "The politics of employment relations get in the way of creative strategic thinking about how to improve engagement," he says. "We need more people making the case for rethinking how we manage the employment relationship."

That is undoubtedly so. But it is hard to escape the conclusion that if employers really want to create more engaged employees, one of the most obvious steps is to demonstrate their own engagement in what should be a shared endeavour. 

Directors who sell themselves or their company to the highest bidder at the earliest possible opportunity merely perpetuate the "them and us" mentality that still characterises many organisations and exposes so many engagement strategies as a sham.