In business settings, the temptation to monitor and control human behavior via contracts, rules, handbooks, guidelines, audits, etc., is quite high. In fact it’s the standard way in which most companies are managed.
But what if companies emphasized trust over regulations and rules?
Everyone would be better off, assert a Stanford Professor and a researcher at Stanford, who together wrote a book called “A Real Look At Real World Corporate Governance“.
How would this work?
For starters, trust replaces the need for written contracts because the two parties commit in advance to abide by a set of actions and behaviors that are mutually beneficial. Both parties in a trusting relationship generally understand the limits of acceptable behavior even when these are not fully specified. And when trust is introduced into the environment, the motivations of each party are known and their behaviors are predictable. That means managers can spend less time monitoring employee actions, and employees can focus on their jobs rather than exerting additional effort simply to demonstrate they are compliant with the firm’s standards.
And they go on to list four specific ways in which this mindset and philosophy could have real world benefits before talking about a couple of companies that already treat their employees (and execs) as trust-worthy grown-ups:
Real estate company Keller Williams Realty Inc. maintains a strict “open books” policy. All agents within the company’s market centers have access to detailed information about the office’s revenues, commissions, and costs. This reduces the opportunity for theft, waste, or special dealings, and also the need for a robust internal-audit department.
Netflix Inc. is known for maintaining a high-performance culture rooted in the concept of “freedom and responsibility.” Employees are expected to work hard, take ownership, and put the company’s interests ahead of their own. In return, the company offers top-of-market salaries equivalent to the combined value of the salary and bonus offered by other firms. Netflix does not offer incentive bonuses, and equity compensation is granted only to employees who voluntarily request it as a portion of their compensation mix.
Of course, this approach comes with its own risks that companies should be mindful of…Further, like with anything, trust by itself, in isolation, is not a silver bullet. Wise companies must make other strategic HR and management decisions that can build a culture in which trust can flourish and yield benefits for all.