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Effects of trust in management

Effects of Trust in Management

Introduction

A few weeks ago, I was watching the evening news with a friend of mine. A breaking story came on announcing Arthur Anderson’s use of unethical accounting practices in the Enron scandal. I asked Shannon if she knew anything about the firm’s involvement, and she said in disbelief that she had not. The interesting fact here is that Shannon works for Anderson Consulting. In that moment, she lost all trust in the company and is now looking for a new job. Trust plays a pivotal role in every corporation’s daily activities; it can be a specific management tactic, or a mediating variable in a work team. Increased trust between managers and subordinates will lead to increased productivity and job commitment. However, this type of persuasive discourse is often very difficult to consciously achieve because of the numerous factors involved. This paper will address contemporary ideas on establishing trust in organizations, its effects and includes an informal study on the use of managerial trust.

Literature Review

Over the past few years, the topic of trust in management has received much scholarly attention. The fall of Enron and other such recent scandals where hundreds of employees lost their jobs may explain this. As Caudron (1996) explains it, "Management has lost all credibility, employees are scared, and organizational trust has hit rock bottom."

An article by Ellen Whitener et al. (1998) explores the many practices managers must engage in to gain employee trust. She begins by defining managerial trust in three facets. First, trust relies on the trustor’s belief that the trustee will act benevolently. Second, trust relies on the concept that risk is involved. Third, there is some degree of dependency in the relationship (Whitener, p. 513). Here, trust is viewed as an attitude the trustor has about the trustee.

Whitener uses two theories to analyze the motivation behind trust strategies, agency theory and social exchange theory. Agency theory involves a principal-agent relationship where the principal assigns some task for completion to an agent in exchange for compensation. Social exchange theory states that "In a social exchange one individual voluntarily provides a benefit to another, invoking an obligation of the other party to reciprocate by providing some benefit in return." (Whitener p. 515) Here, trust is generated by the exchange of these obligations, and by the gradual expansion of exchanges. In scholarly readings on trust, the issue of opportunism in subordinates is often addressed. In social exchange theory, opportunism is minimized because of the relationship that is formed over time, and perceived trust is usually greater in such relationships.

However, there is more to gaining trust than simple task assignments. Managers must consider five factors that influence subordinate’s perceived trust. First, behavioral consistency is important because consistency leads to predictability in behavior. Knowing that a manager will respond well to a new idea is important to an employee’s sense of importance and security. Next, behavioral integrity should be displayed through telling the truth and keeping one’s promises. Thirdly, the sharing and delegation of control is a direct demonstration of a manager’s trust in an employee, and may compel the employee to reciprocate that trust. This also affirms the employees importance in an organization. Next, the factor of communication involves three stipulations, that managers communicate accurate information, include their explanations for decisions, and express openness. Lastly, to establish perceived trust, a manager must demonstrate concern for employees. This is accomplished in three ways, firstly by showing sensitivity for employee needs, secondly by acting in a way that protects employees, and thirdly by refraining from exploiting others for one’s own benefit. (Whitener p. 516-518) The use of these influence tactics is a direct form of persuasion on the part of the manager. If all these behaviors are demonstrated by a manager, then it is likely the employee will develop a sense of perceived trust.

Study after study has concluded that perceived trust of managers by employees yields higher performance because with trust, employees experience greater job commitment and job security (Wicks p. 102). However, not every organization execute these tactics on a large scale. Certain organizational, policy, and individual factors mediate how often or if any of these tactics can be used. Organizational factors refer to the type of business one operates, from a signal person owned business to a large multinational corporation. Small, family owned companies have generally no opportunity to employ these strategies because of financial constraints, or impracticality due to a large employee turnover rate. Additionally, large formalized hierarchical companies with focuses on efficiency and profits may not employ them either. Finding suggest that open companies where employees share goals and have a large stake in whether the company succeeds are most successful with managerial trustworthiness (Whitener p. 519). Often, human resource policy may prevent or restrict such tactics. Finally, individual factors such as one’s propensity to trust, self-efficacy and personal values may hinder a manager’s ability to execute trust strategies. (Whitener p. 519-523)

Drawing upon Aristotle’s ethics, an article by Andrew Wicks et al. (1999) discusses the notion of optimal trust in business. This is the idea that there is a "golden mean" of trust, or a perfect combination of trust within business relationships, that should be moderated by the level of interdependence in the relationship (Wicks p. 99). This article focused on the correct amount of trust that should be established at each level of interdependence, and the role of a self fulfilling prophecy in relation to subordinate opportunism in arenas where distrust is high. That is, that the distrusted employee will become opportunistic because he does not think he is trusted. (Wicks, p. 113)

Wick’s theories of optimal trust predict that employee performance will rise when the right levels of trust are applied. Furthermore, he states that manager’s productivity will rise as well, because less time is spent monitoring employees. Finally, he predicts that an organization will save money, due to costs associated with monitoring employees. The importance of this article is that if a company is going to utilize management trustworthiness tactics, they should use their resources carefully, and not waste time developing needless relationships.

A study done by David Kipnis et al. (2001) sought to link trust to control and dependency within organizations. The goal of this study was to find "...the consequences of trust in terms of influence strategies used and the frequency of employee interaction." (Kipnis p. 593) This study focused on both employee trust and manager trust and was conducted through surveys. Surprisingly, there was a strong correlation between manager’s trust and their dependency on employees, but no correlation between employee trust and their dependency on management (for salary, benefits, etc...). (Kipnis p. 598)

The issue of control tactics was measured by the use of strong or weak influence tactics. Weak tactics were measured by appeals such as friendliness or liking, and strong tactics were measured by appeals such as to higher authority, or coalition. Surprisingly, in both managers and employees, there was a strong correlation between distrust and strong control tactics (Kipnis p. 598). As for the relationship between interaction and trust, it was found that the less employees trust their manager, the less they interact with them. No relation was found between manager distrust and interaction (Kipnis p. 598).

The reasons for not trusting in organizations was also studied. It was found that managers cite job-related criteria such as motivation and competence for trusting subordinates. However, most employees cited person qualities as reasons for trust, such as character and how friendly their boss is (Kipnis p. 599). There was no relation to the amount of time the employees knew their manager and their trust for them (Kipnis p. 596). These findings have strong negative consequences. If employees don’t trust their managers, they do not interact with them, they use strong influence strategies to control them, and they don’t like them. This does not make for a productive, or even comfortable workplace.

In an experiment by Dong Jung et al. (2000) trust was found to be a very important in leadership. This study involved two leaders who either established a trusting relationship with a group, or did not. It was found that the group with the trustworthy leader had greater productivity, a better quality of ideas, and the subjects reported liking the trustworthy leader more (Jung p. 960). This research suggests that trust should be actively and consciously pursued by management.

Discourse Analysis

It is not hard to see why so much scholarly attention has been given to managerial trust. Benefits of establishing this form of trust seem endless. However, it is a complex subject, very hard to establish, and a very difficult form of persuasive discourse. Furthermore, I question the extent to which organizations actually use this influence process. A study by Kipnis et al. (1980) found that while trust and rationality are preferred within organizations, in practice, most managers simply assert their authority to motivate employees.

In order to assess the extent to which this practice is used in business, I constructed a simple survey. The survey was distributed to 15 employees of local businesses and employees of Ohio State. The respondents were all college-aged. Most of the businesses that allowed the survey to be distributed were privately owned.

The survey (see back page) was based on the principals Whitener et al. (1998) laid out for establishing managerial trust. The important behaviors are that the manager must behave consistently, behave with integrity, delegate control, communicate well, and demonstrate concern. First, the employee was asked if they trust their manager, rating the response on a 1-5 scale, with 1 indicating no trust, and 5 indicating high trust. Each following question assessed the extent to which the employee felt that the manager engaged in the trust-building activities, rating agreement on a 1-5 scale. The employees were not asked how long they had been at their current job, because previous studies have found that to be irrelevant (Kipnis 2001). Inspiration for the form and design of the survey came from Kipnis (2001) and Kipnis (1980). It is hypothesized that managers who engage in these behaviors will receive a higher trust rating, while managers who do not will receive a lower trust rating.

Fourteen of the fifteen surveys were collected. Of the fourteen surveys, 8 respondents rated their manager as highly trustworthy with a score of four or five. Two respondents were neutral with a rating of 3, and four respondents reported low trustworthiness with a rating of 1 or 2. In response to the question of the importance of trusting a manager, 85% of the respondents did not think it was important.

Among the employees that felt their manager is trustworthy, relatively all of them responded to the rest of the questions with moderate to strong agreement. In response to the question of "My manager explains his decisions clearly," 100% of trusting employees responded with strong agreement. The same result is found in response to the question of "My manager attempts to interact with me personally." The response to questions four and five, relating to rewards and punishments, also yielded relatively high ratings (from 3-5). Surprisingly, two of the trusting employees felt their manager lies occasionally with a ratings of 2 and 3.

Among the four untrusting employees, responses to the managerial behaviors were highly negative, with ratings of 1 and 2 for each question. The two employees who had moderate trust for their managers responded neutrally to most of the other questions, and will not be considered here.

The results of this survey seem to support the hypothesis that managers who engage in trust building behaviors often gain employee trust. In this small sample, it seems as though explaining decisions and interacting with employees personally are very important factors for subordinates. The high response to interaction may be because most of the surveys were distributed in local businesses, where both the employees and managers are often in their early twenties. Being in the same age bracket may make it easier to communicate, as opposed to Kipnis’s study (2001) where the mean age of managers was 41.5, and the mean age of employees was 36. Explaining decisions might also be easier for managers, given the service-based nature of the companies where the survey was distributed (Adriatico’s Pizza, Nick’s Diner, Cop-ez etc...). In industries where more complicated tasks are to be completed, or if there is a complicated bureaucracy, explaining decisions may be harder.

The fact that trusting employees sometimes think their managers lie may be because the question was in reverse order from the others. Employees might also think lying is a necessary evil. The somewhat mixed response to the questions of rewards and punishments may be attributed to the inapplicable nature of the question (he/she may not have been working there long enough to be rewarded or punished, therefore he/she was neutral).

The four distrusting employees had very negative feelings towards their manager’s behavior. This is the natural opposite of the trusting employees’ behavior. It should be remembered from earlier discussion that perceived trust of managers by employees usually stems from personal disliking (Kipnis, 2001). Maybe these managers were perceived as cold, he gossips, or is secretive. Having 3 years of service-industry experience, I would argue that these managers simply yelled too much or ordered people around too much.

That these employees do not think trust is an important managerial element is very surprising. Again, this is probably because of the type of employees surveyed (students, young people) with little or no concern for job security. However, even if a business is small and employs mainly young people, it is still important to establish trust because of its motivational aspects (increased productivity, increased sense of importance, sense of commitment etc...).

This study, with a very small sample size and very few questions obviously has no potential for generalization. However, it did show to some small extent that the dimensions of trustworthy behavior (Whitener 1998) do lead to perceived trust among employees.

In conclusion, trust plays a pivotal role in efficiency of an organization. It is also very hard to establish and maintain. While interviewing Ryan Sykes, manager of Adriatico’s Pizza, I asked him the extent to which he engages in these trust-building activities. He stated that all these behaviors are "...common sense...I do them every day, I guess. Probably not to get trust, but just to – be a good manager and to get things done, I guess. And to look good in front of Greg (the owner)" While there is probably some acquiescence bias within the statement, Ryan has a point. If these influence processes are second nature to some, then they are natural born leaders. However, most of us are not natural born leaders, and managers should learn and practice these processes in order to keep employees happy. Increased managerial trust breeds high productivity, a sense of security for employees, and high company loyalty.

Bibliography:

Whitener, E., Brodt, S., Korsgaard, A., Werner, J. 1998. Managers as Initiators of Trust: An

Exchange Relationship Framework for Understanding Managerial Trustworthy Behavior. Academy of Management Review, 23: 513-530.

Wicks, A., Berman, Thomas. 1999. The structure of optimal trust: Moral and strategic

implications. Academy of Management Review, 24: 99-114.

Wells, C., Kipnis, D. 2001. Trust, Dependency and Control in the Contemporary Organization.

Journal of Business and Psychology, 15: 593-603.

Simmons, T., Peterson, R. 2000. Task Conflict and Relationship conflict in Top Management

Teams: The pivotal Role of Intragroup Trust. Journal of Applied Psychology, 85: 102-111.

Kipnis, D., Schmidt, S., Wilkinson, I. 1980. Intraorganizational Influence Tactics: Explorations

in Getting One’s Way. Journal of Applied Psychology, 65: 440-452.

Jung, D., Avolio, B. 2000. Opening the black box: an experimental investigation of the

mediating effects of trust and value congruence on trasformational and transactional leadership. Journal of Organized Behavior, 21: 949-964.



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