Clarity, Communication and Trust in Teams: Evidence from an Agile Organization

Abstract: This paper studies the importance of clarity, communication and trust between members of an organization in driving organizational performance. Gibbons and Henderson (2010, 2012) argue that Clarity (that which allows for the mutual understanding of actions and expectations within an organization) is as important as credibility/trust (the belief that others will honor their promises within and organization) to sustain performance in the context of a repeated game with moral hazard. But these two dimensions have not been measured systematically to assess their individual and also their relative importance empirically to explain performance. I study this in the context of the product development section of a large bank that is structured a following the Agile model i.e. around self-managed teams, with few interdependencies among them. I ran 5 surveys to about 300 teams between October 2015 and February 2017 that capture the main drivers of sustained cooperating relationships within teams proposed by theorists. Exploiting within team variation over time, I show how these features correlate with team efficiency, employee engagement and the extent to which there is learning. I also show to what extent there is learning over time within teams. The importance of the measured features which are “soft” in nature and dependent on interaction highlights the difficulty in copying organizational practices across firms.