Trust is the invisible currency that fuels successful leadership. When employees trust their leaders, they are more engaged, productive, and loyal – leading to stronger organisational performance.

Economist Yufei Ren’s research on China’s fast-paced restaurant industry provided compelling evidence for this. His study found that actively building trust reduces employee turnover and creates a more stable workforce.

Ren, who is an associate professor of economics at the University of Minnesota Duluth, explored the role of trust in leadership and organisational success.

Drawing from economic research, including his own, he highlighted how trust is particularly vital in cross-cultural business settings.

China’s fast-paced restaurant industry – the focus of Ren’s study – is one where high employee turnover and intense competition are the norm.

“While my study focuses on one sector, its lessons extend far beyond that,” Ren said. “It offers insights for leaders in any field, from corporate executives to community organisers.”

Ren found that managers who cultivate trust can significantly reduce staff churn and enhance organisational performance. The findings, however, have broader implications for leaders across industries.

To measure trust, Ren and his colleagues conducted a field experiment involving around 115 restaurant managers. They assessed managers’ willingness to financially invest in employees through an economic game.

The results were striking: for every 10% increase in trust-driven actions by managers, employee turnover decreased by 3.7 percentage points. This suggests how trust helps retain workers and stabilises teams.

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The advantage of leadership you can trust

Trustworthy managers inspire employee loyalty, engagement, and job satisfaction.

In fact, workers who perceive their leaders as trustworthy are more willing to go the extra mile, boosting overall productivity and performance.

Ren’s study also found that when employees trust each other, their managers receive better performance evaluations.

Trust, therefore, not only strengthens employer-employee relationships but also enhances teamwork, cooperation, and innovation within organisations.

In essence, trust operates as an invisible yet powerful currency in leadership.

That for every 10% increase in trust-driven actions turnover drops by 3.7 percentage points proves a crucial leadership lesson: trust isn’t just a nice-to-have; it’s a strategic asset that impacts the bottom line.

How to champion trustworthy leadership

But trust isn’t built overnight. It requires intentional actions from leaders. Fortunately, research, including Ren’s, offers insights into how managers can cultivate a high-trust environment.

First off, hand over the keys and “empower your team,” Ren advised.

Trust isn’t proven by micromanaging employees; it’s about handing over the keys and letting employees take the driver’s seat within their roles. When people feel a sense of ownership, they steer toward success rather than waiting for directions.

Another crucial piece of advice from Ren: “Be fair and transparent.”

Employees thrive when they know the rules of the game won’t change mid-play. Fairness, consistency, and clear communication create a level playing field where trust can grow.

While you’re ensuring transparency and fairness, remember to build bridges, not walls. “Promote collaboration,” Ren said.

A high-trust workplace isn’t a collection of silos but an interconnected network where ideas flow freely, and colleagues have each other’s backs.

When teams work together seamlessly, innovation and engagement follow.

And, lastly, put trust under the microscope. “Measure and manage trust,” Ren said.

“Implementing regular surveys or feedback sessions can help assess and manage trust levels within an organisation. Consider integrating trust metrics into performance evaluations to emphasise their importance,” he said.

More than workplace harmony

What gets measured gets managed, and regular trust check-ins help leaders fine-tune their approach and reinforce trust as a performance driver.

Ren’s research highlights that trust isn’t just about workplace harmony. It directly affects performance and retention, so much so that leaders who actively build trust can expect a more committed and high-performing workforce.