NATIONAL LAW UNIVERSITY ODISHA

ORGANIZATIONAL BEHAVIOUR

PROJECT REPORT ON: TRUST AND LEADERSHIP

Submitted By:

Kushagra Gupta

2013 BA LLB 022

TABLE OF CONTENTS

Critical analysis...........................................................................................................................2

Practical Applicability.........................................................................................................4

Mayer’s Model Of Trust......................................................................................................7

Practical Application...........................................................................................................8

Limitation..................................................................................................................................11

Conclusion.................................................................................................................................12

CRITICAL ANALYSIS

This article examines trust in leadership by looking at trustful or distrustful leader behaviour

towards employees. The objective of the article is to increase leaders’ awareness and knowledge

of the importance building interpersonal trust within work relationships, particularly between

leader and follower. The article looks at trust in a relational context, which means that trust

develops and evolves in interactions and relationships between organizational actors (Mayer et

al., 1995). Trustworthiness is examined through leader behaviour and in the context of intra-

organizational, inter-personal work relationships. The main question is how leaders show

trustworthiness by building and sustaining or violating trust. The consequences of trust and lack

of trust for collaboration activity, commitment, and mental work well-being are discussed.

There is no doubt that studying the topic of trust is highly timely, relevant and meaningful. This

is grounded in the recently increasing awareness that existing bases for social co-operation,

solidarity, and consensus have been eroded and new alternatives are needed. Because

organizational change is a frequent threat to trust, better understanding is needed of ways of

enacting on trust in inter-personal work relationships within organizations. However, the

consequences of intra-organizational trust spread far beyond the organizational boundaries. In

trustful leader behaviour, competence (ability) is seen one of the main dimensions of

trustworthiness, together with three other factors: integrity, benevolence, and predictability.

Distrust is associated with negative expectations and a lack of confidence in the other party.

Distrust also involves the belief that one party may not care about the other’s welfare and may

act harmfully (Lewicki et.al, 2006; Gillespie & Dietz, 2009). Mutual trust and perceptions of trust

play a crucial role in trustworthiness pertaining to cooperation and interpersonal and inter-group

relationships in organizations (Ferring et. al., 2008). Personality is also a strong facet of trusting

(Ben-Ner & Halldorsson, 2010).

Trust and Trustworthiness

Trust influences organizational processes such as communication, cooperation, and information

sharing, and it affects productivity. Accordingly, trust is one of the most frequently examined

constructs in recent organizational literature. Following the well- known definitions of Deutsch

and Rotter (1962 and 1967), trust comprises a person’s beliefs and expectations on how the

trustee will behave. Interpersonal trust is defined as the individual’s or group’s expectation that

the word or promise – verbal or written – of another individual or group can be relied upon.

Human resources management has become more and more competence-oriented in the

knowledge-intensive society. Organizations focus on offering career opportunities for personnel

and fulfill their motivational needs in order to build commitment. An employee’s commitment to

their work and the organization is related to mental well-being, and both affect the success of the

organization. Trust appears at many levels, organizational or managerial, and is manifested in the

way, frequency, and quality of interaction between employees and managers.

Trust is a basic element of functioning relationships in organizations. Employees in

organizations create trustworthiness by their daily behaviour and actions. Feelings of insecurity

appearing in workplaces may be often a reason for atmosphere- related problems such as teasing,

conflicts, and disputes. All of them affect the level of trust. Mental well-being is largely

sustained by emotional support such as appreciation, respect, openness, and feedback. A

commitment to the work and the organization is reflected in employees’ work motivation and

satisfaction (i.e., work welfare).

Employees that trust their leader work effectively and have a high level of commitment. In

addition, they share ideas and knowledge, tacit knowledge in particular. Trust in the behaviour of

other people grows when cooperation is reciprocated. Psychologically, trust declines most often

when positive expectations are disconfirmed (Lewicki et al., 2006). Respect and appreciation

stimulate the development of trust, while poor leadership underestimates employees’ personal

competences and this eventually results in declining work and company performance.

Building trust is considered an essential activity in managerial leadership. However, the task of

building and maintaining trust is complex. A leader’s traits, behaviour, leadership style, and

skills all matter in building trust and creating an impression of trustworthiness. By implication, a

leader’s mundane behaviour plays a key role; trust is built and maintained by a leader’s “daily

deeds.”

In addition to leader behaviour, organizational culture plays a key role in the development of

trust and distrust in an organization. Culture is largely influenced by leaders’ actions. In the case

of a very authoritarian management style, for example, employees become socialized by the

actions of their leaders and adopt the style. As managers act as role models to subordinates,

leaders who fail to behave in the expected ways earn disrespect and may block promotions in

management careers. This has consequences to the entire organization. Further, subcultures

within organizations play a role in employee socialization and commitment. Subculture may be

even more strongly related to work commitment than the overall organizational culture.

Practical Applicability

Two Cases of Leader Trust

In this article, we present two cases of leader trust, which are based on an inductive, qualitative

empirical study made in two manufacturing companies. Both companies are SMEs and are well

recognized in their own business fields.

The primary data were gathered from several actors and sources: the leaders, employees, and

human resources manager. The data consist of narrative material, collected through informal,

open discussions (i.e., storytelling) with employees and the general manager. The themes of the

interviews focused on trust, leadership style, and leader behaviour.

The secondary data is based on an empirical study which formed the second author’s graduate

thesis. Empirical material consists of three different kinds of data: i) 75 employee questionnaires;

ii) open interview questions with the human resources manager of the case company following

analysis of the questionnaires; and iii) a participant observation diary and notes written and

analyzed by the researcher during the process.

Case Company A

Company A manufactures and sells valves and pumps, and it operates worldwide. The

company’s headquarters are in Finland. At the time the research was done, 43 people worked in

the company. Four of them were middle managers and one was a general manager. Half of the

employees worked in the manufacturing department and the rest were office workers in

marketing, purchasing, sales, and financial administration. Some of the functions, such as

cleaning and maintenance, were outsourced. The company has sales representatives all over the

world.

The leadership style in company A was fairly authentic and the organization structure was quite

hierarchical. Middle managers had formal responsibility, but this was not actualized; the general

manager made all the decisions. Also, the behaviour of the general manager was neither

predictable nor equal toward employees. Open dialogue between managers and subordinates did

not occur. Fear and suspicion were prevalent reactions to the general manager’s attitude. Thus,

co-operation and co-creation could not develop between employees and management in the

organization.

Case Company B

Company B is a vegetable supplier with customers who are predominantly professionals in the

food industry (e.g., restaurants and catering companies) in Finland. The company’s 25 staff

members include a general manager, a financial manager, and a sales and marketing manager;

the rest of the employees work in production.

The leadership style in company B was democratic and participative. The atmosphere in the

organization encouraged open communication and debate. The company has a flat organizational

structure with flexible job descriptions; authority, responsibilities, and liabilities are more

dispersed and shared, which lead to a more diverse division of daily work. Collaboration was

successful between employees and managers and it was found important.

Key Findings from the Cases

In these cases, it seemed that employee trust or distrust towards the organization and leader

develop as a result of appreciation or undervaluation of people by skilful or unskilful

management, and authentic (democratic) or authoritarian leadership styles.

In company B, as an indication of the trustful atmosphere and a demonstration of

trustworthiness, spontaneous sociality emerges between organization members (Fairholm &

Fairholm, 1999). In company A, a distrustful atmosphere prevails, which hinders communication

and interaction. Poor leadership underestimates employee competences. As a result, trust does

not develop, and disputes and conflicts occur. Eventually, such situations show declines in

employee and company performance.

Low leader trustworthiness in company A was associated with the development of subcultures.

Employees did not trust managers, particularly the top management (i.e., the owner-manager).

This manager lacked business knowledge and knowledge of the industry, and did not possess the

necessary leadership and management skills. As a result, leader behaviour by top management

was perceived as untrustworthy due to incompetence in business and leading people. This was

reflected in the leader’s actions, which aroused suspicions and mistrust among employees.

Incompetence and unethical behaviour by the leadership of company A lead to emerging distrust

in the organization. In the course of time, distrust permeated the organization and resulted in

declining well-being and a low level of commitment to the organization.

An interesting finding in company A is that, despite the lack of trust, the employees were still

confident with their own competencies and skills, but felt that the organization was not worthy of

them. They still had faith in themselves and trust in a future outside the organization. It is also

somewhat contradictory that people were highly confident with the continuity of work and felt

physically well, despite evidently low levels of mental well-being. Trustworthiness and

untrustworthiness of general managers is represented by the leadership style. In contrast to

company A, the leadership style in company B is very democratic and participative, thus

stimulating interactions and co-creation with employees. Internal communication is flowing and

frequent; this is supported by the flat organizational structure. The structure also enables open

communication and high morality in the treatment co-workers.

In the case studies presented here, the behaviours of the two leaders clearly demonstrate the

difference between trustworthy and untrustworthy leader behaviour and their consequences to

employees. In these cases, there are a few important lessons to be learned. Firstly, you can

favourably influence the workplace atmosphere by showing trustworthiness through competence,

integrity, benevolence, and predictability. In case company B, a trustful climate prevails, along

with evidence of enthusiasm, high commitment levels, effective communication, and knowledge

sharing. In contrast, case company A reveals a distrustful atmosphere, fear, low commitment

levels, and a lack of willingness to collaborate and share knowledge. Secondly, employees

become socialized by a leader’s good or bad habits and the action style of their trustworthy or

untrustworthy leader. As culture develops by unwritten, enacted daily manners strictly

influenced by the leader, a lack of respect and appreciation stimulates feeling of distrust

(Fairholm & Fairholm, 1999).

Mayer’s Model Of Trust.

Mayer et al. (1995) proposed one of the most influential and well-known models of

organizational trust. This model focused on trust in an organizational setting involving two

specific parties: a trusting party (the trustor) and the party to be trusted (the trustee). This model

built upon previous work, which considered only characteristics of the trustee, by also

incorporating characteristics of the trustor: the propensity to trust, a stable trait that affects the

likelihood that an individual will trust another party. Propensity to trust is an individual

difference that determines the base level of trust at the beginning of a relationship. Nevertheless,

even when a trustor has a high propensity to trust, in Mayer et al.’s (1995) model, trust within a

relationship depends on the trustee’s “trustworthiness.” Mayer et al. proposed three factors that

compose trustworthiness: ability, benevolence, and integrity. First, they define ability as the

"group of skills, competencies, and characteristics that enable a party to have influence within

some specific domain" (Mayer et al. 1995, p. 717). Next, benevolence is the degree to which the

trustee is believed to care about the best interests of the trustor, based on the trustee’s

friendliness, engagement with the community, and personal rapport with the trustor. And the

third component of trustworthiness, integrity, is the extent to which the trustor believes the

trustee adheres to those values the trustor finds acceptable, such as consistency, honesty, and

predictability. According to this model, the trustor assesses the ability, benevolence, and integrity

of the trustee when deciding whether to trust. This model is limited, however, because it does not

explore how trust develops or whether a trustor’s individual differences influence trust in the

relationship. Further, this model yields only one outcome of trust, risk-taking in the relationship,

and it does not specify the more distal outcomes of trust. Still, this model has consistently

underpinned later models of organizational trust and trust in leadership. Mayer et al.’s (1995)

model contributes to the literature by separating trust from trustworthiness, with three

characteristics of the trustee (ability, benevolence, and integrity) appearing as antecedents of

trust.

Leader behaviors such as setting a compelling direction or creating an enabling structure indicate

ability. Setting a compelling direction requires leaders to ensure that employees perceive their

tasks and goals as challenging, clear, and consequential (Hackman, 2002). Leaders create an

enabling structure when they allocate resources, establish the norms of behavior within the team,

and recruit, select, and form the team (Hackman, 2002; Fleishman et al., 1991). The economic

turmoil can sometimes hamper these processes. Leaders show benevolence by coaching

subordinates (as by interacting directly with a team to help it appropriately use its collective

resources) or by creating a supportive environment (Hackman & Wageman, 2005), During tough

economic times or rough organizational transitions, leaders may lack time for behaviors such as

coaching and supporting, however, as this research shows, these are essential for developing

trust. Integrity is composed of accountability and perceptions of justice (Burke et al., 2007).

Followers who perceive that their leaders hold themselves personally accountable for their

actions are more likely see their leaders as having integrity. Accountability is not only important

for trust in leadership, but also for receiving government funding or improving public relations.

The second component of integrity, perceptions of justice, is also particularly relevant during

challenging economic situations. When policies and procedures are administered consistently

(procedural justice), rewards and promotions are disseminated consistently (distributive justice),

and people are treated with respect (interactional justice, Skarlicki, Barclay, & Pugh; 2008).

Under these circumstances, followers are more likely to perceive their leaders as fair and just.

This is especially true in times of scarce rewards, growing terminations, and pay reductions

(Skarlicki et al., 2008; Williams, 2009; Zoogah, 2010). Leaders should concentrate on increasing

perceptions of ability, benevolence, and integrity at the beginning of relationships or when there

would be an immediate impact on work quality if trust were absent.

Practical Application

The trustworthiness factors could be implemented throughout various coaching models. Zeus and

Skiffington’s (2003) four stages of coaching process will be used to illustrate how to implement

the trustworthiness factors throughout each stage of the process.

At the first phase with a client the coach could demonstrate the:

• Ability factor by clarifying the role of a coach in the process and explaining the logistics of the

coaching program.

• Benevolence factor through openly asking the client how he or she may feel about the process

and also be familiar with the client’s cultural background.

At the second phase when working with a client, the coach could demonstrate:

• Ability while introducing issues of trust and discussing the confidentiality agreement.

• Benevolence through inquiring about potential concerns and what trust means to the client.

• Integrity while sharing an established summary of professional values with a client.

At the third phase when working with a client, the coach could demonstrate:

• Benevolence while listening to a client’s reports about successes and failures and addressing

identified obstacles and difficulties with empathy and a non- judgmental approach.

At the fourth phase when working with a client the coach could demonstrate:

• Integrity while reflecting on everything that has been done in the previous phases and

developing a specific strategy that would allow a client to stay on track maintaining what has

been learned throughout the coaching process.

This categorization of antecedents of trust is partially relevant, but not a sufficient explanation

for the formation of swift trust. Situations that arise that would require a form of swift trust may

be unable to foster the antecedents necessary for traditional trust formation. Integrity and ability

would not have adequate time to establish themselves in a swift starting group setting. However,

benevolence as an antecedent may be helpful in the explanation of swift trust in that it is a more

affective acknowledgment of mutual concern inherent in the relationship. Additionally, higher

levels of trust propensity might foster greater levels of trust in a situation that would require swift

trust.

Burke et al. (2007) propose that leadership behaviors used to build a supportive context fall into

one of three leadership styles (i.e., transformational, consultative, transactional). In a

transformational leadership approach, leaders facilitate followers' efforts to solve complex

problems (Bass, Avolio, Jung, & Berson, 2003). Transformational leaders focus on moving

followers motivational states to higher level needs, such as self-actualization (Burns, 1978) and

typical behaviors that fall within this style of leadership (e.g., charisma, intellectual stimulation,

62 inspiration, individualized consideration, Bass, 1999) may be viewed by followers as

indicators of leader's benevolence. Consultative leadership has also shown a positive relationship

to trust in leadership (Korsgaard, Schweiger, & Sapienza, 1995). Leaders gain trust from their

followers by consulting with them on decisions and valuing their opinions (Podsakoff,

MacKenzie, Moorman, & Fetter, 1990). Consultative leadership cultivates trust because it allows

followers to have autonomy and provides opportunities to voice opinions and concerns. Because

consultative leadership looks to followers for input, they feel valued, influencing the trust

between them and their leaders. The third leadership style proposed to influence benevolence is

transactional leadership.

Some suggest that transactional leadership behaviors do not inspire levels of trust in the leader

(Bass, 1985; Jung & Avolio, 2000). It may be that while transactional leadership styles promote

consistency, perceptions of justice, and reduce ambiguity within the leader-member relationship

needed to develop trust, it does not inspire the subordinate to go above and beyond the tasks laid

out by the leader.

LIMITATION

The first limitation is that due to the nature of this study, only managers and executive leaders

were eligible to participate and therefore the study still remains incomplete as to what the

employees feel about all these steps taken to build trust.

The second limitation is that there is no mechanism beyond statistical analysis for governing the

accuracy of the participants’ responses.

The third limitation is that the language of the article is little difficult to understand as the

researcher has used too many jargons which makes it difficult for the layman to understand.

CONCLUSION

This study was one of the first to test some of the theoretical propositions of the leadership

categorization approach in relation to trust. This research shows that ability, benevolence, and

integrity all relate to trust in leadership.

Our may have a few practical implications, especially in light of recent economic turbulence.

This economic instability has left many wary of trusting governments, corporations, and banks

(Sorkin, 2010); job insecurity probably also encourages people to distrust their leaders. Mulki,

Jaramillo, and Locander (2006) found that the ethical climate is an important predictor of trust in

leadership. Employees who are unsure of their work climate are more distrustful of their leaders.

Reductions in force, reallocations of workloads, outsourcing, and insecurity can all cause

employees to lose trust in their leaders. When workers who have had negative experiences with

previous leaders begin new jobs, they may enter their new jobs.