Management by Trust in an Organization

Management by Trust in an Organization

Trust is considered as an important component for the effective organizational performance since it ensures cooperation between two entities. In fact, trust is important in all spheres of social life. It binds friendships, facilitates bargaining and negotiations, reduces transaction costs in inter organizational exchanges, and even resolves conflicts. Trust also affects investment decisions. It is a fundamental component in any positive, productive, and social process. In an organization management trust significantly and positively contributes to organizational trust and organizational trust significantly and positively contributes to organizational performance (Fig 1).

Fig 1 Relationship between trust and organizational performance

For an organization, trust is also important for the positive outcome of the cooperative behaviour of the employees, the organizational commitment, and employee loyalty. In fact, the management’s prime and challenging objective in an organization is to be to build employees’ trust in the organization.

There are two types of trust, one of which is exchange-based or relational in nature and the other character-based or cognitive in nature. Further, three factors can be identified which make it difficult to build trust. The first factor is that the trust building is an interactive process which involves (at least) two individuals learning about each other’s trustworthiness. The second factor is that the underlying systems dynamics of both trust and distrust are based on positive feedbacks, reinforcing the initial behaviour but with an important asymmetry. While the trust is built up gradually and incrementally, reinforced by previous trusting behaviour and previous positive experiences, the distrust is disastrous and instantaneous. The third factor is that there is no absolute certainty that the trust is going to be honoured. However, there is no satisfactory explanation available to account for these factors in the process of trust-building or of the possibility of trust management.

It is essential to note that (i) the trust-building works as an interactive process, (ii) trust is built up in a background of problems and adversity, and (iii) organizational policies and settings affect the generation and maintenance of trust.

Definitions of trust

Trust is a subject which belongs to many disciplines. Since many years, the topic of trust is being discussed in the fields of philosophy, sociology, psychology, management, marketing, ergonomics, human relations, human-computer interaction, industrial psychology, and electronic commerce. Hence, considering these multiple disciplines together, the subject of the trust is very extensive. However, each of these multiple disciplines has produced its own concepts, definitions.

Most define trust as a state, belief or positive expectation. Trust is defined as one party’s confidence in that the other party in the exchange relationship is not going to exploit its vulnerabilities. A similar definition notes interpersonal trust as a psychological state comprising the intention to accept vulnerability to the actions of another party, based upon the expectation that the other is going to perform a particular action that is important to the trusting person.

Psychologists define trust in terms of the tendency to hold positive expectations of the intentions or behaviour of others, sociologists view trust as either having to do with the socially embedded properties of relationships among people or with the characteristics of the institutional environment. The economic approach to trust is often calculative, emphasizing its risk-decreasing nature, and enhancing the prediction or expectations of the other person’s future behaviour.

Trust is often defined as ‘faith in the trustworthy intentions of others’ and as ‘confidence in the ability of others’. It is usually connected with positive expectations of the other side. It is seen as the belief that another party (i) will not act in a way that is harmful to the trusting party, (ii) will act in such a way that it is beneficial to the trusting person, (iii) will act reliably, and (iv) will behave or respond in a predictable and mutually acceptable manner. Trust is often viewed as a bridge between past experiences and anticipated future.

Many definitions of trust treat trust as a state, belief or positive expectation. In one of the definition, trust, as the expectation that other people, or groups or organizations with whom people get into contact, interact, and cooperate, will act in ways conductive to the people’s well-being. Since in most cases, people cannot be sure of that, as others are free agents, trust is a sort of gamble involving some risk. It is a bet on the future, contingent actions of others.

In one of the definition, interpersonal trust is a psychological state comprising the intention to accept vulnerability to the actions of another party, based upon the expectation that the other is going to perform a particular action which is important to the person who is trusting.

Another definition of trust defines trust as the willingness of a party to be vulnerable to the actions of another party based on the expectation that the other will perform a particular action important to the party who trusts, irrespective of the ability to monitor or control that other party.

Trust is also considered as a psychological state comprising the intention to accept vulnerability based upon positive expectations of the intentions or behaviour of another. Trust is also considered in one of the definition as the degree to which the person trusting holds a positive attitude toward the trusted person’s goodwill and reliability in a risky exchange situation. Trust is often explained as one’s expectations, assumptions, or beliefs about the likelihood that another’s future actions are going to be beneficial, favourable, or at least not detrimental to one’s interests.

Generally there are two principal forms of trust. The first is the ‘cognition based trust’ which is centered on individual thinking about and confidence in the other and based on ‘good reasons’ as evidence of trustworthiness. The second form is ‘affect based trust’ which is grounded in the emotional bonds between individuals involving mutual care and concern.

The two key dimensions of trust distinguish between ‘benevolence type’ which has a large affective component, and ‘competence type’which places emphasis on the cognitive component. Also, trust is often being recognized as faith in the trustworthy intentions of others as well as confidence in the ability of others.

Trust is also considered as a basic element not only for an organization but also for the economy in general, affirming that trust is a lubricant to economic exchange. One can also find different models of trust, a large number of which are static or take the perspective of the trusting person only. Very few are truly interactive models for trust. An interactive model for trust is described below

Let P1 denote one person and P2 denote the other person. If P1 lacks trust, he will disclose little relevant or accurate information, be unwilling to share influence, and will attempt to control P2. If it is assumed that P2 also lacks trust, he perceives P1’s initial behaviour as actually untrusting, and concludes he was right to expect P1 to be untrustworthy, and then he will feel justified in his mistrust of P1. Since P1 sees P2’s behaviour as untrusting, he will be confirmed in his initial expectation that P2 would not be trustworthy and P1 will behave with even lesser trust than earlier.

In an another definition of trust, it is considered as a simple function, with the amount of trust varying as the result of some combination of characteristic similarity and positive relational experience, with broad societal norms and expectations setting a baseline or intercept with the initial expectations of general trustworthiness.

In one of the definition, trust is explained by the equation ‘Trust = f (embedded predisposition to trust, characteristic similarity, experiences of reciprocity)’. This function presumes that trust can be influenced by increasing perceived similarities and the number of positive exchanges. Clearly, many of the human development programs designed to enhance acceptance of diversity aim at improving trust by reducing the barrier of characteristic dissimilarity. Similarly, efforts are normally made to build relational experiences with the intent of improving trust.

Taking above into considerations, some of the features of the concept of trust can be summarized as below.

  • It is interpersonal and is between concrete individuals and connected with communication.
  • It is situational rather than global. It is placed in one particular person.
  • It is voluntary. It must spring from choice and cannot be compulsory, sometimes it is experimental.
  • It has commitment built in it, since each person depends on the other (without being able to control him).
  • It is done with conscious mind. Each party is aware of the other party’s trust.
  • It has relevance, in the sense that the consequences of breach of trust by one of the parties cannot be considered insignificant by the other.
  • It is dynamic or temporal, since it evolves over time. Trust is established, grows, diminishes and dies.
  • It is action oriented, implicit in the goal of the relationship.
  • It is not a linear process. If damage to the relationship is suffered then trust is likely to decline. Trust can evolve through a process, but it can also devolve.

In short, trust is considered as the belief that another party (i) will not act in a way that is harmful to the trusting organization, (ii) will act in such a way that it is beneficial to the trusting organization, (iii) will act reliably, and (iv) will behave or respond in a predictable and mutually acceptable manner. It can be seen as a bridge between past experiences and anticipated future.

Trust in the organization

Trust in an organization is normally focused on trust among members of an organization, such as trust between employees and their superiors or between peers, or between employees and the management. Trust in an organization is also been considered as a system. In fact, organizational trust is considered as the organization’s willingness, based upon its culture and communication behaviours in relationships and transactions, to be appropriately vulnerable, created on the belief that another individual, group or organization is competent, open and honest, concerned, reliable and identified with common goals, norms, and values.

Trust in the organization takes its roots from the management’s personality or from strongly centralized decision structure and organizational culture, which makes the organization to function regularly interact in a particular, ‘trusting’ way. The organization’s values and beliefs are supported by internal reward and compensation systems, together with decision-making systems reflecting culture. This organizational trust can also be called routine trust, and it comes up especially in connection with long term, institutionalized relationships. Trust in an organization can also be general trust at the organizational level, which is based on the organizational good reputation or resources.

The employees’ trust in the management affects the job performance of the employees. It has been noticed that the ideas of fairness and being human-oriented based on the organizational strategies and regulations all have an important impact upon an employees’ job satisfaction and organizational commitment. When management has concern for the employees’ well-being, help them with career development, and value their work, it signals to the employees that the management is interested in a close and social exchange relationship. To equalize or ensure a balance in the exchanges, employees feel obligated to reciprocate the good deeds and goodwill of the management. By discharging the obligations for services provided, the employees demonstrate their trustworthiness and the gradual expansion of mutual services. With high levels of trust in the management, employees typically exert stronger efforts to finish their work tasks on time and are more likely to engage in behaviours which help the organization even when it is not their specified role to engage in those behaviours.

Trust between organizational members leads higher cooperation in work teams, and results into increased social capital. In this regards, temporary employees score low on trust than the permanent employees. This difference is because of the differential work status.

Trust in an organization involves employees’ willingness to be vulnerable to their organization’s actions. This willingness can be rendered only when an organization clearly communicates its actions to its employees through informal and formal networks. An important source of information is the employee’s immediate social environment, which largely comprises co-employees.

If information from formal channels is absent or ambiguous in an organization, then employees start to rely on the social environment to derive interpretations. Hence, individual impressions of the employees can be influenced by the attitudes and behaviours of those co-employees whom they perceive as similar to themselves. Then, the individual employees regard the attitudes of co-employees as socially acceptable and modify their beliefs according to those of their co-employees. Hence, the employees’ trust for their co-employees influences trust in the organization, because employees who trust their co-employees are likely to regard their co-employees’ perceptions as relevant and socially acceptable. Thus, when these trusted co-employees observe that the organization’s actions are beneficial, the employees are likely to be influenced by this same belief and subsequently construct similar perceptions that the organization is trustworthy.

It is seen that the employees who communicate with one another frequently share similar interpretations of organizational issues. It is also seen that trust in an organization is very important both for the employees and the management, since it influences the organizational performance and the working atmosphere in the organization. Interpersonal trust is considered as an important mechanism to stimulate satisfaction and commitment of the employees and hence enhance the organizational effectiveness.

Building of interpersonal trust within the organization

Interpersonal trust building is an interactive process in which individual employees learn or unlearn to establish and maintain trustworthiness, under given organizational (related and structural) settings, and subject themselves to policies directly or indirectly, positively or negatively sanctioning the building of interpersonal trust. Stable intentions for behaviour can be stimulated by durable policies, structures and background settings.

Trust is highly relevant when the trusting employee depends on the trusted employee’s future actions to achieve his own goals and objectives. For trust to develop, it is required that the trusted employee does not indulge in opportunistic behaviour, so that the trusting employee can put himself in a vulnerable position with regard to the actions of the trusted employee. This requires a stable normative frame. In other words, for trust to be possible, the trusting employee needs to believe that the trusted employee wishes to continue the relationship into the future.

The three behaviours which inspire the trust in the organization (Fig 2) are (i) positive relationship, (ii) good judgement/expertise, and (iii) consistency. Management is better able to elevate the level of trust which employees and various other groups feel towards it.

Positive relationship -Trust is in part based on the extent to which the management is able to create positive relationship with the employees and various groups. To instill trust the management is to (i) stay in touch on the issues and concerns of employees and various groups, (ii) balance results with concerns, (iii) generate cooperation, (iv) resolve conflict, and (v) give honest feedback in a helpful way.

Good judgement/expertise – Another factor is that whether employees and various groups trust the management is the extent to which the management is well-informed and knowledgeable. The employees and various groups are to understand the technical aspects of the work as well as have a depth of experience. This means (i) management uses good judgement when making decisions, (ii) employees and various groups trust the ideas and opinions of the management, (iii) employees and various groups seek the management opinions, (iv) the knowledge and expertise of the management make an important contribution to achieving results, and (v) management can anticipate and respond quickly to problems.

Consistency – The final element of trust is the extent to which the management walks its talk and does what it says it will do. Employees and various groups rate the management high in trust if it (i) is a role model and set a good example, (ii) walks the talk, (iii) honours commitments and keep promises, (iv) follows through on commitments, and (v) is willing to go above and beyond what needs to be done.

Fig 2 Behaviours inspiring trust in the organization

Normally, trust in the organization increases when employees are considered as competent. If employees believe that they can depend on their co-employees to produce a quality piece of work which can affect their position in a positive way, they are willing to trust the judgment of those competent co-employees.

For interpersonal trust to be built in long-term work relations, employees need to have their actions guided by a stable normative frame. Normally, there are four operative conditions which play an essential role in stabilizing normative frames. These conditions are (i) the suspension of opportunistic behaviour, or the removal of distrust, (ii) exchange of positive relational signals, (iii) avoiding negative relational signals, i.e., dealing with trouble, and (iv) the stimulation of frame resonance, or the introduction of trust enhancing organizational policies.

The organization needs to ensure all the four conditions, but depending on the particular environment it operates in, the stress can differ. The more an organization meets all the four conditions, the more likely it is that interpersonal trust can be built successfully in the work relations within the organization.

Further, if the management desires to promote interpersonal trust-building in the organization, then a combination of three types of organizational policies can be effective. These are (i) by creating a culture in which relationships are important and in which showing care and concern for the other person’s needs is valued (relationship-oriented culture), (ii) through normative control rather than bureaucratic control, because acting appropriately is the goal in normative control, and (iii) through explicit socialization to make new employees understand the values and principles of the organization and how the things are done in the organization.

Trust in the organization can be based on different sources. The management can contract and establish a foundation for developing trust, where ethics provides rules and values for the employees to behave in different circumstances. The role of time and experience is important since trust increases with the number of transactions made by the employees while familiarity relates to the employees knowing each other before a transaction.

Trust in the organization can also be considered as a coordinating mechanism which can make dealings easier, in the sense that, once trust has been established, contracts are not to be needed between participants.

Trust is not static. Instead it is a dynamic process which evolves according to the development of the relationship. There is generally a system of trust at three levels in the organization linked in a sequence where, once trust has been established at one level, it moves to the next level. These levels of trust are (i) reason-based, (ii) knowledge-based, and (iii) identification-based.

At the reason-based level, employees fear punishment, but also anticipate the rewards from preserving trust. In other words, trust is based on a reasoning of costs and benefits. Knowledge-based trust develops over time in the permanent contact between participants. It is rooted in the other employee’s predictability-knowing the other sufficiently well so that the other employee’s behaviour is anticipatable. Knowledge-based trust relies on information rather than discouragement. Identification-based trust is ‘based on identification with the other employee’s desires and intentions’. At this stage, employees know each other and can anticipate the reactions of the other employee and thus, they can act for the other. Ultimately, high trust implies an expectation that a relationship is going to continue in the future.

There is significant overlap between the stages of development of organizational trust. Each stage precipitates the next through action typically of its nature. Reason-based trust is driven by the gathering of knowledge to make a decision as to how to act. This knowledge lays the foundation for knowledge-based trust. In knowledge based trust, employees continuously strive to learn about the other. As this learning increase, so does the identification with the other party increases. When this identification becomes the basis of the relationship, then the transition to identification-based trust has been made. The change from one stage to the next is characterized by a paradigm shift. As an example, the change from knowledge-based trust to identification-based trust is located in a shift ‘from extending one’s knowledge about the other to a more personal identification with the other’.

In order to place trust in a potential partner, a person is to first establish his trustworthiness (and, in the case of organization, the trustworthiness of the management and of the organization). However, this is essential but not an adequate condition in granting the person’s trust. Ultimately, the trust is to be based on a series of personal characteristics of the potential partner, such as (i) loyalty, (ii) predictability, (iii) accessibility, (iv) availability, (v) integrity, (vi) consistency of behaviour, (vii) openness, (viii) competence, (Ix) fairness, and (x) the ability to keep promises etc. To these characteristics sometimes benevolence and history of interaction are added.

Within the organization, management obviously plays a crucial role in determining both the overall level of trust and the specific expectations within the organization. Management initiates mostly vertical exchanges and thus, whatever level of trust or mistrust is evident in its actions can well be reciprocated. Moreover, management designs rewards and control systems which are visible display of base levels of trust or mistrust within departments or the organization as a whole. In addition, management controls the flow of certain types of information and the opportunities to share or not share key information in ways that influence the level of trust between or across the organizational level. Also, management is the primary designer of the total organizational form used which is consisting of the combination of strategy, structure, and internal mechanisms which provide the overall operating logic and resource allocation and governance mechanisms of the organization.

Management affects trust levels in several ways which work along the lines of the three factors namely (i) economics, (ii) from a position of distrust, and (iii) emphasizing the likelihood and/or potential for opportunistic behaviour.

As per one study, effective management uses a number of behaviours to build and maintain trust. These are  (i) talk straight, (ii) show respect, (iii) create transparency, (iv) right wrongs, (v) show loyalty, (vi) deliver results, (vii) get better, (viii) confront reality, (ix) clarify expectations, (x) practice accountability, (xi) listen first, (xii)  keep commitments, and (xiii) extend trust first. However, these behaviours need to be balanced (for example, talk straight needs to be balanced by show respect). Any behaviour, pushed to the extreme, becomes a liability.

Even though trust in the management has been found to correlate with organizational trust, the experiences of trust in the organization are different from those of trust in the management. It has been found that the insecure future of the organization, inadequate working conditions, poor treatment, and or job insecurity can lead to the employees’ distrust in the organization. It has been noticed that organizational factors such as structure, human resource policies and procedures, and organizational culture affects employees’ perceptions of trust.

A trust enhancing organizational environment inspires and guides behaviour which helps in buildig trust, but cannot guarantee such behaviour. There are actions which help in building interpersonal action. These actions are (i) be open, (ii) share influence, (iii) delegate, and (iv) manage mutual expectations.

Be open – It involves (i) disclose information in an accurate and timely fashion, (ii) give both positive and negative feedback, (iii) be open and direct about task problems, (iv) be honest and open about one’s motives.

Share influence – It involves (i) initiate and accept changes to one’s decisions,(ii) seek and accept the counsel of other people, (iii) give and receive help and assistance, (iv) recognize the legitimacy of each other’s interests, (v) show a bias to see the other’s actions as generously intended, and (vi) show care and concern for the other.

Delegate – It involves (i) make one dependent on the other person’s action, (ii) delegate tasks, (iii) give responsibility to other people, and (iv) take responsibility rather than make excuses.

Manage mutual expectations – It involves (i) clarify general expectations early on and explore specific expectations in detail, (ii) surface and negotiate differences in expectations, and (iii) process and evaluate how effectively one is working together with other person.

There are three organizational managerial processes which motivate trust in the organization. These processes are (i) how information is disclosed, (ii) how influence is shared, and how control is exercised. An employee increases his vulnerability to another employee when he reveals information about his goals, alternatives and intentions and when he discusses problems, since the information is power. The other employee can use this information to block or undermine the first employee’s plans. As an example, giving feedback to another employee implies discussing the assessment of the other with him. Positive feedback increases the wellbeing of the other individual and critical feedback given constructively is also aimed at helping the other, but is more difficult to execute properly. Giving negative feedback constructively implies that one show respect and regard for the other person and truly intend to help him while expressing displeasure about a particular behaviour that the other employee can influence. By being open in these ways, the first employee increases the other one, while increasing his own vulnerability towards that person.

Influence refers to sources of information and how that information alters the first employee’s behaviour. When employees seek and accept the counsel of others, initiate and accept changes to their decisions, or receive help and assistance, they increase their vulnerability in several ways. They can be seen as weak because they consulted others. They can be misled by their advisors who may be misinformed or have poor ideas or who may be deliberately misdirecting them. Recognizing the legitimacy of each other’s interests also implies that a person let the other person’s interests influence one’s behaviour, which can demand a sacrifice on one’s part and increases the well-being of the other person. Finally, showing a bias to see the other person’s actions as well intended and showing care and concern for the other person both show regard for the other person and imply accepting influence on one’s behaviour. Individuals increase their vulnerability when they delegate and choose not to control another’s behaviour in order to protect their own interests. They can do this by making themselves dependent on the other person’s actions, for example, by delegating tasks to that person or when giving responsibility to him.

There is also a fourth category of trust-building actions which are known as ‘managing mutual expectations’. These actions imply that the behaviours of both the individuals involved can be influenced. Actions in this category are to clarify general expectations early on and explore specific expectations in detail, to reveal and negotiate differences in expectations, and to process and evaluate how effectively a person is working together. These actions imply both the disclosure of information and the sharing of influence and thus make the first person vulnerable while increasing the well-being of the second person.

An effective management frames trust in economic terms. In an organization with low culture, management can expect negative economic results. Everything takes longer and costs more because of the steps people need to take to compensate for the low trust. When these costs are added, then the management realizes that how low trust becomes an economic matter. The dividends of high trust can also be quantified, enabling the management to make a compelling case for building trust, even making the building of trust an explicit objective. Like any other goal, building trust needs to be focused on, measured, and tracked for improvement.

In a performing organization, trust matters to the management, and it believes that it is the right thing to do, and the smart economic thing to do. One way to do this is to make an initial baseline measurement of trust, and then to track improvements over time. For building of the interpersonal trust in the organization, management is to ensure that (i) distrust situations are removed, (ii) both persons, i.e. trusting and trusted are regularly performing actions which convey positive relational signals, (iii) both the persons involved in a trouble situation are at least to act in ways which are not perceived as negative relational signals, and (iv) organizational policies are to stimulate frame resonance.

Employees need to take several steps to strengthen another’s trust in them. These steps include (i) to continuously strive to demonstrate proficiency in carrying out their obligations, (ii) to enhance the degree to which others regard them as trustworthy when they behave in consistent and predictable ways, (iii) to share so that trust is given and returned, (iv) to delegate control so that when control is hoarded and others feel that they are not trusted (such as with monitoring and surveillance systems), they are more likely to act out against this with behaviours that reinforce a distrustful image, (v) to share and delegate responsibility, (vi) to communicate accurately, openly and transparently since these actions help the other person to calculate first person’s trustworthiness accurately. (vii) to show concerns for others so that help and assistance can be given and received, and (viii) to manage mutual expectations and negotiate if there are differences in expectations.

It is noticed that employees’ distrust in the organization builds up when they find that there is insecure future of the organization, inadequate working conditions, wrong human resources policies and procedures, poor treatment, or job insecurity.