Worker trust and the water

Worker trust and the watercooler: business in a post-COVID world

With the move to work from home, Professor Andrew Wait uncovers some surprising research behind employee trust in delegating tasks and how important water cooler chats are to organisational innovation.

2020 was a year like no other. The pandemic has seemingly affected every aspect of our lives, and the workplace is no exception. While the dramatic move to online work following from COVID-19 restrictions has been seismic and unexpected, there has been a long-run trend of companies allowing – and encouraging – employees to work from home.

Moreover, it has been suggested that this movement to work-from-home will be a permanent one. A recent study by the Centre for the Future of Work suggests that a significant proportion of the Australians – particularly office workers – could do their jobs at home.

This change in the way we work raises questions about how the shift to an online workplace should be handled; it also has implications for how we will work in the future. There are many issues about privacy, occupational health and safety and the oftentouted work/life balance. But in addition, it raises questions about the very nature of production as well. The future success of Australian businesses requires that they be both innovative and responsive to the needs of their customers. This requires effective decision making and a collaborative team effort from all staff.

Some of my recent research sheds some light on these issues.

Effective delegation

It seems kind of obvious that if a boss is going to delegate decision-making powers to a subordinate that she really needs to trust them. Without it, she might fear that the employee will take advantage of his delegated authority, making choices that suit himself, not the business. This is true for big decisions about hiring, large purchases or the choice of a new strategic direction; it is also true for smaller decisions, like what to work on first amongst completing tasks, or the approach taken to finish a job.

My paper with Kieron Meagher (Australian National University) in the Journal of Law, Economics and Organization turns this whole dynamic on its head. We show that for successful delegation whether an employee trusts their boss could be just as important as the boss’s trust of her subordinate – that is, if a boss

wants to delegate, it is crucial that the employee also trusts them.

To see this, let’s assume that a boss would like to delegate a particular decision to an employee because the employee understand what’s going on and they know what to do. Often these decisions are nuanced and multifaceted – it would take too long for the boss to get on top of this issue, so delegation makes sense. Often there are too many decisions to be made, and the boss cannot do everything.

When delegating decision authority to an employee, the boss will often make some undertaking or promise of a ‘reward’ – be it a bonus, a future promotion, or even something more mundane (but valuable) like some time off after the project is finished. The understanding could be that if the employee fulfils their obligations, using their delegated authority appropriately, the boss reward them in the future for it. Given the nature of business, however, these promises are typically not formal legally enforceable contracts – rather, they just having to be taken on faith.

This means that without trust, the employee will not believe the boss will actually follow through on what was promised. If this is what they believe, will have little incentive to fulfil their obligations, rendering delegation untenable. In this way, employee trust of their managers is crucial for delegation.

On the other hand, delegation works if the employee trust their boss and can take them at their word; the worker will have an incentive to not take advantage of their delegated decision authority as they expect that their boss will do the same. In this way, trust needs to be a two-way street; the boss needs to trust the worker, but the worker also needs to be able to trust their boss.

Examining workplaces in Australia in our study, we find exactly this – accounting for all the other relevant factors, delegation of decision-making rights to a worker is more likely when the worker trusts management. Moreover, worker trust matters a lot; trust has a larger positive impact on delegation than either a worker’s occupation or education level.

This is important because effective decision making is essential for success in business. Often it is the workers lower down in the organisation who have a profitable new idea, or who understand the needs of clients. Afterall, those at the coalface often see the problems – and the potential solutions – firsthand. Delegation allows these ideas to be implemented. Research suggests that the ability to delegate explains the success of some firms over their otherwise similar rivals. As well as accessing knowledge and expertise of subordinates in a business, delegation also allows for quicker decisions. This can provide a firm with an allimportant jump on its rivals.

Effective delegation is even more important in a post-COVID world, in which many of us are working remotely. The old means of monitoring workers are very much diminished, as is the effectiveness of a one-size-fitsall top-down approach. This means that bosses need to be able to trust their employees, but it also means that employees need to be able to trust the promises and undertakings that their managers make. Trust flowing both up and down in an organisation will provide the most fertile environment for effective decision making, and productive firms. This means that a good manager will spend at least as much time considering whether they themselves elicit trust as they spend thinking about the trustworthiness of others.

Collaboration in teams

Good and services, particularly in knowledge-based industries, are often produced in teams. Drawing insights from biologists, in a related study published in Games and Economic Behavior coauthored with Jonathan Newton (Kyoto University) and Simon Angus (Monash University), I analyse how teams function best. People instinctively want to collaborate, and it is informal interactions with one another that allows this to happen.

When working in a team, it is important that everyone (or at least most people in the group) are on the same page. The team needs to work together. The need to coordinate their actions and collaborate. But how can this be done?

Informal interactions allow workers an opportunity to discuss their work and what they plan to do. Workers chatting in the over coffee, around the watercooler or in the lunchroom can talk about many things, but invariably their conversation will come back to work. In these unplanned chats, workers can share their ideas and intentions. Rather than just idle time, these social interactions can have positive benefits for firms. These informal discussions facilitate collaboration amongst team members, often in a way that a directive from higher management could not achieve.

Collaboration is important because it allows workers to start working on new projects and to be innovative. This in turn allows firms to be more productive and profitable. For many firms, innovation is the crucial to their

success. These informal interactions are particularly for innovative firms. Casual encounters and discussions with colleagues are when ideas can be bounced around; it is when sparks can fly. Afterall, many people still meet their partners at work.

In the work-from-home world, how can firms facilitate these informal connections? The research shows that small teams are more conducive to informal sharing of intentions and collaboration. There is a limit to how many people can have a conversation in the team room. Likewise, there will be a limit to how many workers will actively be engaged in any online forum. This accords with the famed two-pizza team rule at Amazon; a team should be no larger than one that can be fed by two pizzas on its own. To be most effective, communication should involve the whole team.

Managers also need to create fora in which informal interactions can flourish. Regular coffee catchup times is one option. Other social groups – book and movie clubs – is another way of facilitating informal links between team members. To foster unfettered free flowing discussion, senior managers should opt not to be part of these social meets. Building social connections can have many positive outcomes – less social isolation and depression for one – but it can have a direct impact on the collaboration in a team.

The benefits of these informal meetings were realized by Alfred P. Sloan, the famous president, chairman and CEO at General Motors, who established the General Technical Committee that had no formal agenda, but provided an opportunity for engineers from different parts of the company to come under amicable circumstances for the exchange of information and the ironing out of differences’. Familiarity builds links and trust between team members. This means that established teams are likely to be able to continue to communicate effective with one another following the sudden shift online. This is far less likely to be the case for new teams, as the online world is one in which it is hard to build strong rapport. If new team members are required, management should try to add just an additional one or two new members to existing teams so that the existing work culture can be transferred to the newcomer. This is also not the time for a restructure and the formation

of new workgroups as this will likely reduce informal communication networks, harming productivity.

As travel restrictions and social distancing requirements are lifted, what does this mean for the workplace of the future? Many businesses will be tempted to keep working – at least partially – online. Some of the cost savings are obvious; business can reduce the size of their offices, getting employees to hot desk it if they do come in. But such moves should be made with caution. Businesses need to be mindful of how people actually work together. Humans are social animals and they crave interaction. We are evolutionarily programmed to collaborate. Online work creates barriers to informal interactions that impedes casual serendipitous encounters. Particularly for firms for which innovation is important, the traditional workplace with its lunchroom and coffee breaks has many advantages, even in these days of online hangouts and Zoom meetings.