Trust Factor: The Science of Creating High-Performance Companies
by Paul J. Zak
Stewarding the organization’s culture and operating environment are among the most important leadership functions. And trust is one of the most crucial factors in that environment. Trust profoundly influences everything from employee retention to the organization’s ability to achieve its most crucial goals.
In the Trust Factor, neuroscientist Paul Zak uses his original research to reveal insights for building high-trust organizations. He explains how brain chemicals affect people’s behavior, how trust is undermined, and how you can stimulate it.
Zak is the founding director of the Center for Neuroeconomics Studies and a professor of economics, psychology, and management at Claremont Graduate University. He says, “Trust is an essential part of a high-performance culture because it impacts a triple bottom line: it is good for employees, increases profits, and builds stronger communities. A culture of trust and purpose resonates with the social nature of human beings and creates engagement, joy, and profits.”
The book is organized into eleven chapters covering the science behind organizational culture, eight trust-building management practices, and the critical role of purpose and trust in high-performance organizations. Each chapter ends with a “Monday Morning List” of things to do and try. The book concludes with a discussion about performance in business, nonprofits, and government. (He points out that businesses can learn something about organizational culture from nonprofits.)
Zak’s research behind this book involved surveys (the “Ofactor” survey developed by him and his team), physiological measures, and hormone analysis based on blood samples. He references other research as well.
This summary reflects my takeaways from a useful book I recommend to others. Reading a summary isn’t a substitute for reading the book. There’s much more than I can cover here. Plus, this is my interpretation. If these ideas resonate with you, I encourage you to get a copy from your favorite bookseller. Here are the Amazon links: e-book | Audiobook | Print
Unless otherwise noted, all quotes should be attributed to the book’s author.
Here are my top-line takeaways from the book:
- People, organization, and purpose affect an organization’s performance. It boils down to the right people working in a high-trust culture (organization) with a vital, clear, widely understood, transcendent purpose. Most of the book focuses on the organization, showing you how to design a highly engaging organizational culture.
- Trust plays a crucial role in organizational performance. It has played an essential role throughout our evolution as social beings and is crucial to our ability to cooperate and form organizations.
- The brain hormone oxytocin is essential in the formation of trust. The release of oxytocin in the brain is critical in fostering feelings of empathy and trust. But, high stress and an excess of the hormone testosterone inhibit oxytocin and lead to aggressive and trust-busting behavior.
- Purpose and trust work together synergistically in forming bonds and group performance. Science shows that a clear sense of transcendent purpose encourages groups of people to form strong bonds and perform well. Both trust and purpose stimulate areas of the brain that encourage people to work together toward a common goal.
- Trust and purpose must be intentionally fostered as crucial elements of the operating environment and ingrained in the culture to create high-performance organizations.
- The evidence for paying attention to trust and purpose is compelling.
The Impact of Trust on Performance
People who work for organizations in the top quartile of trust (in Zak’s “Ofactor” survey) as compared to those at employers in the bottom quartile:
- They are 50 percent more productive,
- Have 106 percent more energy, and
- Are 76 percent more engaged at work.
People who work in high-trust versus low-trust organizations:
- They experience more joy at work and are 40% less likely to burn out.
- They feel closer to their teammates, have more empathy for others, and are less likely to depersonalize their colleagues.
- They align more with their organization’s purpose and report a 41 percent higher sense of personal achievement.
- They plan to stay with their employer longer, and 88 percent would recommend their employer to family and friends as a place to work.
Trust decreases stress. People working in high-trust organizations recover faster from the stress of work and have lower levels of chronic stress.
Working in a high-trust culture increased overall life satisfaction by 29 percent. People working in high-trust organizations display greater empathy, build stronger emotional connections with others, and they feel more connected to “something bigger than themselves.”
The Science of Trust
Oxytocin just might be the molecule that makes us human. At least it is the molecule that creates our humanity. By understanding a little about the neuroscience of oxytocin, you can harness humanity at work.
Zak calls oxytocin the “moral molecule” and the “biological basis for the Golden Rule.” He explains that trust generates oxytocin in our brains, which generates trustworthiness. If you treat me well, my brain produces oxytocin, signaling that you are someone I want to be around, so I treat you nicely in return. Moreover, oxytocin and the brain circuits it activates function as a moral compass, guiding our behavior.
Because of oxytocin, being part of an organization makes us feel good. Our brains reward us when we cooperate, treat others well, and are trustworthy. Trust generates trust. Oxytocin and the neurochemicals that interact with it can help us enhance teamwork in the workplace.
Oxytocin also increases forgiveness. When we’re working together intensively, forgiveness for past failings comes easier.
High stress and high levels of testosterone are potent oxytocin inhibitors. Zak says that in his experiments, he identified more than a dozen ways to increase oxytocin production. All that is required is healthy social interaction free of excess stress or testosterone.
Eight Building Blocks of Organizational Trust
The eight factors that neuroscience says form the building blocks of organizational trust can be represented by the acronym OXYTOCIN, which stands for Ovation, eXpectation, Yield, Transfer, Openness, Caring, Invest, and Natural. Together these factors account for 100 percent of organizational trust variation.
The Culture-to-Performance Model
Adapted from the book.
The model shows how the eight factors plus purpose boost organizational performance: The eight factors build trust, which, together with the organization’s transcendent purpose, creates a culture of high engagement, resulting in enthusiastic colleagues who provide extraordinary service, receive positive feedback, and experience joy, which sustains high performance.
Ovation recognizes people for their positive contributions to the organization’s success. Ovation has a positive impact on employee performance and turnover reduction.
Ovation works best when it’s public, timely, unexpected, and tied to meeting eXpectations. Public ovation from peers or customers strengthens the bonds between team members and makes their jobs more enjoyable. Social ovation is especially powerful when friends and family are included in the celebrations.
Ovation should be coupled with meeting eXpectations. Ovations only improve performance when people are recognized for completing a task instead of simply showing up. Psychologist Carol Dweck says that “you are great” ovations are disincentivizing and stressful. Providing colleagues with high expectations and the ability to achieve them is what marshals the neural foundations of intrinsic motivation.
Ovation is a platform for exchanging ideas about what works well, especially when it’s from the viewpoint of coworkers rather than management. Ovation activates the brain’s learning circuit. As part of the ovation debrief, ask the team to explain how they achieved it.
Ovation is low- or no-cost. Colleagues can be recognized for free. In general, effective ovation avoids giving people money.
eXpectation involves people working toward a difficult but achievable challenge as a group, which activates the brain’s reward system. When they’re further provided with consistent and regular feedback, it creates neural pathways that will help them perform better in the future.
Feedback must be frequent. People hate surprises (unless they are ovations). But two out of three employees are surprised by the feedback in their annual performance reviews. Those who get more frequent feedback are rarely surprised.
Teamwork contributes to prosocial behavior. Teamwork, including expectation stress, releases oxytocin, which boosts workplace empathy. Organizations that promote caring harness this robust response. Oxytocin-induced empathy underpins ethical behavior, eliminating the need for lengthy employee conduct rules.
Yield involves giving people autonomy over completing projects, allowing them to draw on their own experiences and knowledge while also allowing them to make mistakes from which they can learn.
Yield encourages employees to go above and beyond by letting them take responsibility for their work when they have the knowledge and skills. Supervisors need to effectively yield control over the execution of projects but set and reinforce clear eXpectations.
Yield encourages creativity by drawing on the insights of those who do the work. Choice is a critical component of innovation because it gives people agency.
Transfer empowers people to craft their own jobs, enabling self-management. A 5% increase in empowerment (a proxy for Transfer) increased performance by 28%.
Openness involves sharing information broadly and transparently, soliciting input, and valuing other people’s perspectives. Openness reduces uncertainty-related stress. Our brains seek patterns. The absence of patterns leads to stress because of an inability to make sense of the world.
Openness facilitates cooperation among team members. It can flatten hierarchies, eliminate silos, and ensure everyone is working toward the same organization-wide performance targets. Organizations with high levels of Openness have flat management structures and clear lines of communication.
Caring fosters empathy and relationships among people. It involves recognizing in accepting that emotions are part of our humanity.
Leaders must pay particular attention to their own expression of Caring because of the neurological changes that occur when one becomes the boss. Both men and women experience increased testosterone levels as they ascend to leadership positions, which inhibits the brain’s synthesis of oxytocin.
We all want to work in a Caring environment. Neuroanatomy says humans need meaningful relationships to survive. Oxytocin receptors are located in the human brain’s oldest regions. Those who work with caring leaders are 67% more engaged.
Physical and psychological safety are musts for a Caring culture. High expectations for colleagues drive engagement, but supervisors must also demonstrate empathy. When things get tough, caring colleagues are there for each other.
Organizations Invest in people when they enable whole-person growth and pay attention to work-life integration.
Annual reviews rarely improve performance because the brain needs faster feedback loops to learn. Realizing that annual reviews are ineffective, organizations are adopting rapid-feedback coaching. And they’ve stopped asking supervisors to rate direct reports annually because ratings are subjective, inconsistent, and often biased.
Consider “Whole Person” Reviews, which involve three questions: 1) Are you growing professionally? 2) Are you growing personally? and 3) Are you growing spiritually (in terms of who you are, who you want to be, and how you’re living your life)? To get people to engage at work fully, we must consider how their professional, personal, and spiritual development interacts. We’re challenged most in the workplace, often with teammates who help us overcome. But that’s only half the Invest equation. The other half is maintaining family life and being able to reflect on where we are going in life.
[CAUTIONARY NOTE: The book’s proposal for “whole person reviews” and “whole person development” should be approached with caution. Despite its logic, it seems fraught with landmines unless handled extremely deftly.–DT]
Achieving lofty expectations combined with Ovation (followed by rest and quality sleep) promotes neurogenesis, in which new brain cells form mainly in areas associated with learning, memory, and emotions.
If managers are setting eXpectations and having Ovations when goals are met, empowering colleagues with Yield and Transfer, [and practicing] Caring for those around them, the annual review is not necessary.
Leadership that is honest and vulnerable is what makes an organization Natural. Natural leaders accept responsibility for mistakes and include others in victories. They know their organization at every level, from the front lines to the executive suite. 70% of followers’ engagement can be attributed to a leader’s qualities.
Leaders of high-trust organizations must exemplify trust. Trust can only be sustained with trustworthy leaders.
Vulnerability builds trust. Natural leaders show their vulnerability and embrace it, signaling teamwork rather than dominance. When a leader is vulnerable, oxytocin is released in observers, which motivates them to work harder.
Asking for help is a simple way to demonstrate vulnerability and tap into people’s evolutionary instinct to cooperate. Admitting you don’t know something is engaging (except in times of crisis). Asking for help relieves leaders of the burden of omniscience. In the case of failure, Natural leaders take responsibility and try again.
Natural leaders accept their imperfections. The “pratfall effect” increases likability after a mistake.
Natural leaders are authentic. Trust is reinforced when leaders bring their passion, strengths, and weaknesses to work every day.
Recognize the impact of biology on Natural leadership. Leaders of both sexes have high testosterone levels, increasing selfishness and decreasing empathy. To fight this, it is essential to be aware of the impact and to observe and modify one’s reflexive behaviors.
Shared leadership empowers leadership at all levels. Everyone assumes leadership roles at different times and places in organizations that practice Transfer.
A Natural leader is a servant leader who strives to help members of the organization succeed and thrive. Servant leaders are more trusted.
Joy = Trust × Purpose
Joy = Trust × Purpose is a succinct statement of how to create a culture of high engagement. When colleagues regularly experience Joy at work, you have a great culture.
Joy comes from working with trusted colleagues toward a transcendent purpose. Striving leads to a sense of accomplishment, and OXYTOCIN factors encourage colleagues to achieve important goals. Joy naturally arises when people want to be at work and are recognized for their efforts.
Trust combined with purpose results in joy at work. Oxytocin and dopamine make it feel good to be around trusted team members. Trust also reduces chronic stress levels, enhancing Joy. But understanding the organization’s transcendent purpose–how the organization and the work create value for society–is another strong oxytocin stimulant. Helping others is a powerful oxytocin booster.
Even struggles can enhance joy when people have a strong sense of purpose and work alongside trusted teammates.
Purpose increases productivity. In their study of Zappos employees, Zak’s team found that hiring the right people accounted for 55% of productivity; the other 45% came from the company’s strong purpose narrative. Putting the right people in a high-trust culture and giving it a purpose produces the best results.
Creating a culture of Purpose requires two actions: (1) Clearly and succinctly identify your organization’s purpose. (2) Ensure colleagues understand and embrace the Purpose. The Purpose narrative must be repeated until it permeates every corner of the organization.
Building Purpose narratives. “[Think] of purpose as a verb: The organization has to do something about it.”
- The best Purpose narratives use human-scale stories to follow a hero’s journey featuring ordinary people doing extraordinary things. They feature passion and turmoil rather than just facts.
- To find the plot points in a Purpose narrative, ask five “whys,” e.g., Why do you offer this service? Why do you operate this way? Why do clients come to you? Why should you keep doing this? Why is this important? Etc.
Observations About Nonprofits
- “Most nonprofits have fairly good cultures” compared to the businesses.
- They do a pretty good job on “Transfer.”
- They score low on “Invest.” “Caring,” “eXpectation,” and “Ovation” scored low in another sample.
- People working for nonprofits reported 5 percent more Joy and 10 percent more Purpose than than those working in businesses.
Businesses that want to create engaging cultures should emulate what nonprofits are doing. …culture at nonprofits is, on average, better than in businesses, and self-management is a key component that builds trust in social sector organizations. The data show that part of the culture advantage of nonprofits is the combination of high trust with high purpose. As predicted by neuroscience studies, this produces more joy for nonprofit colleagues than is experienced by those in business.
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