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...