The Role of Trust and Perceived Equity in ‎Effective Performance Management

Hosein Gharavi
26 minutes ago
3 min read

Trust and perceived equity are foundational elements of effective performance management systems, as they directly influence employee engagement, motivation, and perceptions of fairness, which ultimately determine organisational performance outcomes. Research consistently shows that organisations fostering high-trust cultures with equitable practices experience higher productivity, better employee retention, and stronger financial results.

The Impact of Trust on Performance Management

Trust between employees and management creates the foundation for an effective Performance Management System (PMS). When trust is present, the administrative costs and inefficiencies typically associated with performance management decrease significantly.

Key Benefits of Trust in Performance Management:

Enhanced Productivity and Engagement: Organisations with high-trust cultures experience substantially higher productivity compared to those with low trust. Trust empowers employees to exceed basic expectations and make meaningful contributions to organisational goals. [1] [2]
Open Communication and Feedback: Trust enables candid, ongoing feedback and coaching—essential components of effective performance management. Employees who trust their managers are less defensive, more open to dialogue, and more receptive to development discussions.[3]
Reduced Workplace Stress: Employees in high-trust environments report 74% less stress, 40% less burnout, and increased energy at work, directly enhancing performance and retention rates. [3] [4]
Psychological Safety: Trust fosters an environment where employees feel supported and respected, encouraging collaboration, calculated risk-taking, and effective problem-solving that enhances both individual and team performance. [2]
Measurable Economic Impact: Trust functions as a tangible economic driver, with high-trust organisations consistently outperforming market benchmarks by 30-50% and being more likely to achieve higher revenue targets. [2] [4]
Confidence in Performance Systems: When employees trust in the fairness, transparency, and utility of performance management processes, they engage more deeply with these systems. Conversely, distrust leads to disengagement, decreased productivity, and higher turnover.[4]

The Influence of Perceived Equity on Performance Management

Perceived equity—the belief that organisational policies and practices are fair and objective—directly affects the efficiency and effectiveness of performance management systems.

Key Aspects of Perceived Equity include:

Motivation Through Fairness: Employees' perceptions of equity in recognition, rewards, advancement opportunities, compensation, and working conditions strongly correlate with their performance levels. When employees perceive their treatment as equitable, their motivation and commitment increase significantly. [5]
The Primacy of Recognition: Among various equity factors, fairness in recognition has the most potent positive effect on employee performance, followed closely by perceptions of salary equity. [5]
Individual Equity Sensitivity: People differ in how they perceive equity based on their sensitivity thresholds. Some experience distress when under-rewarded, while others may feel discomfort if over-rewarded. These individual differences influence satisfaction and performance outcomes.[5]

Creating an Effective Performance Management Environment

Trust and perceived equity work together to create a performance management environment where employees feel:

Valued for their contributions
Fairly assessed against clear standards
Motivated to deliver their best work
Committed to organisational success

Organisations that prioritise building trust and ensuring equity in their performance management practices create sustainable foundations for both individual and organisational excellence.