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High engagement is difficult to generate in a low-trust environment

August used to be the height of the newspaper ‘silly season’. Nothing of note happened. Important people were in Tuscany, skateboarding dogs and ice cream sales filled the tabloids. But August 2011 has been different. Jittery financial markets and riots have made for a gloomy summer, journalists and politicians more introspective and sober than in previous years.

Unsurprisingly, the riots generated a great deal of indignation, prompting some to liken the opportunism displayed by rioters in taking advantage of a broken shop window to the behaviour exhibited by some bankers and MPs in the past few years. The argument went like this: MPs who fiddled expenses and bankers who distorted business models to maximise bonuses had lost their 'moral compass' and, crucially, didn't expect to be caught; with these role models, is it any wonder ordinary folk were prepared to risk anonymous looting? Moral decline, they argued, knows no social boundaries.

While I don't have any evidence there is a link between big bonuses and casual looting in Clapham or Salford, concern being expressed about the effects of opportunism and greed at the top of major institutions such as the City or Parliament is worth considering.

When Will Hutton published his review, Fair Pay in the Public Sector, this March, he looked at the impact of widening pay dispersion between the top and bottom of public bodies and private companies. He explored what effect a growing pay gap between top and bottom might have on the morale and engagement of those employees on average salaries. He found two effects.

The first was that a big pay gap between the CEO and the lowest paid worker - if this is not felt to be justified - can have a corrosive effect on staff consent and engagement at a time when employers are trying 'to do more with less'.

The second was if staff don't think their pay, or the pay of their colleagues, is set in a way that is transparent and 'fair', then this can seriously damage engagement and willingness to give 'discretionary effort'. Surveys show engagement is higher among employees who say their managers make fair decisions on pay. This is why so many of Hutton's recommendations focus on making pay determination more transparent.

Wider pay dispersion might be tolerated if the climate of trust in organisations were healthier and if more were posting bumper profits or were demonstrably successful in other ways. But during a period of austerity, pay freezes and higher-than-normal inflation, the only thing being shared around is the pain of belt-tightening.

Perhaps 'trust' is really where more of our attention should be focused. In a survey for the Good Work Commission, published in July, we found that only four in 10 workers felt their senior leaders 'act with integrity' and 40% reported the levels of trust between management and employees had worsened in the past year. These are troubling findings which suggest that CEOs, HR professionals and line managers have a challenge on their hands in the coming year, because high engagement is difficult to generate in a low-trust environment.

The themes of fairness, greed, justice and transparency are getting more airtime than usual in this climate. It seems clear that organisations which are serious about reconnecting their employees to a compelling sense of corporate purpose have to start by rebuilding some of the trust that has been eroded in recent times.

Stephen Bevan is director of the workforce effectiveness centre at The Work Foundation