This chapter provides a comprehensive review of literature that is relevant to the research topic. This chapter was arranged in different sections in an effort to provide a more thorough understanding of pertinent issues regarding the subject under study. First it provides foundations of trust which looks at the social exchange theory, theory X and Y, and agency theory. The chapter continues with various definitions on trust which includes a table with quotes and references. The importance of trust in the organization, and the importance of managerial trust in their subordinates are also mentioned. The chapter further looks at the effect of trust on job attitudes and varying dimensions of trust. A table is also included providing the different measurements on trust.
Since the study is also focused on employees’ job attitudes, this section also discusses job attitudes which are job satisfaction, organizational commitment (organization affective commitment), and job involvement. The section also looks the effect of trust on job attitudes.
Finally this chapter provides a brief introduction to the financial sector in St. Lucia.
Trust Foundations of Trust
In examining the concept of trust in the organizational setting, particularly trust of management in their subordinates, the researcher thought to first review literature on three different theories that would add depth to the study. The three theories are namely: Social exchange theory, X and Y theory, and the Agency Theory. Several studies conducted on trust (Tzafrir, 2005; Whitener et al., 1998; Shapiro, 1987; Colquitt et al., 2007) also dimmed it necessary to mention the social exchange theory and agency theory in their research. Although the agency theory is largely viewed as an economic theory and little emphasis is placed on trust, it gives some enlightenment on what motivates management to behave in a certain way including monitoring and controlling of employees (Whitener et al., 1998). The researcher thought to mention the X and Y theory in this research, because it refers to managers assumptions about their employees that would influence them to exhibit certain behaviours towards their employees
10
including that of trust and lack of trust. The X theory style of management is indicative of low levels of trust in employees while the Y theory indicates higher levels of trust. The three theories mentioned above would have some effect on employees’ perception of trust particularly their perception on whether or not their managers trust them to do their work. This section will look at each of these three theories separately.
Social exchange theory
Theories of trust are said to be grounded in the social exchange theory (Blau, 1964, as cited in Whitener et al., 1998). Social exchange theory is thought to be one of the most significant theoretical models of understanding behaviour in the workplace. Though there are different views on this theory, most scholars agree that the theory is inclusive of different interactions which leads to some form of obligations by the parties involved (Emmerson, 1976).
One basic principle of social exchange theory is that relationships would grow into trusting, loyal, and mutual commitments over time (Cropazano & Mitchel, 2005).
The social exchange theory is based on the norm of reciprocity which suggests as an exchange rule that we would help those who help us (Gouldner, 1960). This norm suggests that both parties have and are willing to provide the resources that are of value to both; reciprocating valued resources strengthens the exchange relationship over time (Aselage & Elsenberger, 2003).
Lewis and Weigert (1985 p.971 as cited in Tzafrir, 2005) held that “when we see others acting in ways that implies that they trust us, we become more disposed to reciprocate by trusting in them more. Conversely, we come to distrust those whose actions appear to violate our trust or to distrust us.” Managers then could develop trust in their organization by showing trust to their employees and being the initiator of trust (Prusak & Cohen, 2001; Whitener et al., 1998).
Theory X and Y
Early research of workplace dynamics, particularly that of the Hawthorne Works of the Western Electric Company revealed that there were many factors affecting the performance of employees than what was initially expected. One of the key findings in the research revealed that the managers’ personal behaviour and their leadership method had an effect on employees’
performance. The Hawthorne effect is findings which suggest that managers’ behaviour and their leadership method can have some effect on the performance of employees (Jones & George, 2008). The findings of this research prompted many more research on managerial behaviour and leadership. One such study is that of the X and Y theory which was first posited by Douglas
11
McGregor, a social psychologist who studied human behaviour underlined by managerial actions.
Douglas McGregor suggested two assumptions on how employee work attitudes and behaviours control how managers think and behave (Jones & George, 2008).
Theory X is based on the assumption that people dislike work and has to be forced to work; as a result control and direction should be utilized to achieve organization goals (MacGregor 1960, as cited in Sager, 2008). This theory is based on the assumption that 1. The average person has an aversion to work and would avoid doing it they can; and 2. Because of this aversion for work people have to be under stringent supervision where they are controlled and directed even by means of punishment and rewards to do their work (Jones & George, 2008).
Douglas himself cautioned that theory X also referred to as the carrot and stick theory of motivation may work under certain circumstances, but may not work at all when man’s motivation is influenced by higher needs. The author further states that if the assumptions of theory X continue to influence the strategies used by management then they would have failed to make use of the full potentials of employees. Theory Y holds the opposing view; hence this provides employees with the opportunity to take their own initiative, to play a more participative role, and to be more self-directed. This theory suggests that the needs of both parties will be met, that is the needs of the organization and that of employees (Sapru, 2006). Haldar (2009) suggest that Theory X managers trust their employees, and in return get trust and respect from them.
Agency theory
Agency theory also known as the principal agent theory has to do with “delegation relationships in which the principal delegates certain tasks and decisions to an agent on the basis of an explicit or implicit contract.” (Morschette, Scramm-Klein & Zentes, 2009 p.168). The agency theory starts with the supposition that agents acts in their own self-interest in that they make decisions that are beneficial to them and these decisions may not be beneficial for the principal. Although the agency theory has mostly been applied to relationships where the principals are typically owners of the business and the employees are the agents. Typically managers are seen as the agents relative to business owners. They can also be seen as principals relative to their subordinates because of the role that they play on behalf of the owners (Jensen &
Meckling, 1976). The agency theory is based on risked management in an effort to minimize risk for the principal.
12
Definitions of Trust
Different literature gives varying definitions to the concept of trust however there is general consensus that it involves some degree of vulnerability. Mayer, Davis and Schoorman (1995) conceptualized trust as “the willingness of a party to be vulnerable to the actions of another party based upon the expectations that the other party will perform a particular action important to the trustor” (p.712). Luhman (1979) described trust as the level of confidence that one person has towards another that he/she would act in a manner that is reasonable and predictable. , Rousseau et al. (1998 as cited in Saunders et al., 2010) defined trust as a psychological state which includes the intentions to accept vulnerability because the trustor expects positive actions from the trustee. McAllister (1995) describes trust as “the extent to which a person is confident in, and willing to act on the basis of, the words, actions, and decisions of another. The author further suggest that there are two different forms of interpersonal trust which are namely: 1) Cognitive-based this is grounded in the individual’s belief that their peers are reliable and dependable and 2) affect-based trust which is grounded in the idea that interpersonal care and concern should be reciprocated. Rotter (1967 as cited in Travica, 1999) defines trust as expectancy held by an individual or a group that the promise of another individual whether written or verbal could be perceived as reliable.
Table 2.1
Definitions of Trust
Authors Definitions
Carnevale and Wechsler (1992 p. 473) “faith or confidence in the intentions or actions of a person or a group, the expectation of ethical, fair, and non-threatening behavior, and concerns for the rights of others.”
Luhmann (1979) The level of confidence one has in another party to act fairly, ethical, and predictably.
Mayer, Davis & Schoorman (1995, p.712) “Trust is the willingness of a party to be vulnerable to the actions of another party based upon the expectations that the other party will perform a particular action important to the trustor.”
(continued)
13
Table 2.1 (continued)
Authors Definitions
Rousseau et al. (1998) A psychological state which includes the intentions to accept vulnerability because the trustor expects positive actions from the trustee.
Note. Source: This paper
Importance of Trust in the Organization
Trust is important in instances where there is high uncertainty, ambiguity and complexity (Shapiro, 1987) this is particularly true when one looks at the concept of the agency theory which supposes that the agent will act in their own self-interest creating an environment of uncertainty. Trust will then be necessary to reduce the need for high monitoring and help with governance issues (Shaw, 1997 as cited in Six, 2005) which is one of methods suggested by the agency theory to help reduce the risk of agents acting in their own self- interest. Trust allows people to take risks “where there is trust there is the feeling that others will not take advantage of me" (Porter et al., 1975 p. 497 as cited in McAllister, 1995). Six (2005) cited research saying that trust also helps in nurturing an attitude of cooperation because it encourages the sharing of information, enhances relationships, helps increase openness and acceptance of each other, and aids in managing conflict and problem solving.
Importance of Managers Trust in Subordinates
Kouzes and Posner (1995) identified trust as the most important factor in leadership and listed it as one of the key factors in leader and followers relationships. Kouzes and Posner (2010) states 10 truths about leadership and listed trust as the sixth rule. The authors posits that trust is the social glue that will bind individual and groups together if the leader cannot do something alone then it means that he or she has to rely on someone else to do it. The leader has to give trust to get trust. Managers’ behaviours can provide a platform for trust and that managers hold the obligation in initiating trusting relationships (Whitener et al., 1998). Trust is a mutual transaction between subordinates and their leaders; leaders should trust their subordinates more
14
than the subordinates trust their leaders is because of greater dominance (Lendenmann &
Rapaport, 1980 as cited in Butler, 1983). Supervisors who trust their subordinates and maintain a good relationship with them will be able to spend more time in doing their own work and focus on self-development instead of spending majority of the time monitoring employees (Bradach &
Eccles 1989; Mayer, Davis, & Schoorman, 1995 as cited in Straiter, 2005) although the article mentions supervisors, in some cases supervisors can be managers according to Bittel and Newstrom (1990) supervisors are managers who reports to middle managers. According to Bromiley and Cummings (1993 as cited in Straiter, 2005) if supervisors trust their subordinates more and believe that employees are treating them fairly then the supervisor will have a more positive affect on employees. Lester and Brower (2003) suggest that when an individual perceives that his or her leader thinks that the employee is worthy of trust, the employee will respond positively. For this reason a subordinate’s perception of his or her leader trust in him or her will have a positive effect on the employee’s job satisfaction. The authors further states that the social exchange theory could apply in this regard and that if subordinates feel that their leaders trust them then they will reciprocated by performing citizenship behaviours that would go beyond what is expected from their employment contract.
Dimensions of Trust
Trust in another party is considered to rely on three factors. First, trust relies on the belief that the other party will behave benevolently; second, one party cannot force the other to carry out the expectation because trust involves the willingness to be vulnerable, which creates the risk that the other party may not fulfil that expectation. Third, some level of dependency is needed;
the outcomes of one party are influenced by the actions of another (Whitener, Brodt, Korsgaard,
& Werner, 1998). Reynolds (1997) proposed four main principles which are at the core of the trust relationship. The four principles are namely: Competence, openness, reliability and equity.
The International Association of Business Communicators Research Foundation (IABC, 2000) suggested five dimensions in creating trust in organizations which is called the Organization Trust Model (QT). Competence, openness and honesty, concern for employees, reliability, and identification are the five dimensions in the QT Model. Tzafir and Dolan (2004) found that trust in the work relationships were three dimensional; it consists of harmony, reliability, and concern.
15
Their instrument on trust measures management trust in subordinates. Schoorman, Mayer and Davies (1996) model on trust consisted of three dimensions ability, benevolence, and integrity.
Mishra's (1996) trust in Management Scale consists of four dimensions: reliability, openness/
honesty, competence, and concern.
Trust Measurements
Table 2.2 shows various measurements on trust from different authors.
Table 2.2
Trust Measurement
Authors Source No. of items Coefficient α
Cook & Wall, 1980 (as
Jung & Avolio, 2000 Journal of Organizational
Tzafrir & Dolan, 2004 Management Research 16 (5 reliability, 5 harmony, and 6 concern)
16
Table 2.2 (continued)
Authors Source No. of items Coefficient α
Cummings & Bromiley,
Nyhan & Marlowe, 1997 Evaluation Review 12 (8 trust in supervisor and 4 trust in
Organization)
Mayer & Davis, 1999 Journal of Applied Psychology and Dolan. 2004, Management Research, 2(2), p.121.
Copyright M. E. Sharpe, Inc.
Job Attitudes
The manager’s job involves the ability to recognize, forecast employees’ behaviours to create a productive environment for the organization. Carpenter, Bauer, and Erdogan (2010) refers to attitude as a person’s opinions, beliefs, and feelings about different facets of his/her environment. Hellriegel and Slocum (2007) posits that attitudes consists of three different components 1) An affective component which refers to one’s feelings, moods, sentiments etc. 2) A cognitive component which refers to one’s thoughts, opinions etc. and 3) A behavioural component which refers to one’s tendency to act in a favourable or unfavourable manner based on one’s evaluation of something. The authors further states that all three components work together and does not exist separately; hence one’s attitude will be a reflection of affective, cognitive and behavioural inclinations with regards to something. Luthans (2006 as cited in Haldar, 2009) states that there are three major job attitudes which are Job satisfaction, organizational commitment, and job involvement. Many studies carried out on the relationship between job attitudes and productivity has bought about mix and inconsistent results (Herzberg, Mausner, and Snyderman, 2009). Harrison, Newman and Roth (2006) in their study claim that
17
Overall job attitude is important in understanding behaviours at work. Based on their findings, the researchers reason that workers with a general positive job attitude will lead them to contribute positive work outputs in their jobs.
Job Satisfaction
Job satisfaction has been used in numerous researches and is said to be the most widely used construct in organizational behavioural research; the concept is also seen by researchers as an attitudinal variable (Spector, 1997). Spector defines job satisfaction as the feelings people have towards their jobs or certain parts of their jobs. The author further states that job satisfaction is crucial to the organization for many reasons. On a humanitarian level people deserves to be treated justly and the construct to a certain extent is a reflection of fair treatment.
On the humanitarian outlook, job satisfaction can have an effect on employees’ behaviours that can affect organizational functions. Locke (1969 as cited in Locke, 1970) argues that
“satisfaction, dissatisfaction, and other emotional reactions are value responses.' They are the form in which an individual experiences his appraisal of an objector situation against the standard of what he considers good or beneficial.” Wagner and Hollenbeck (2005, p. 138) define job satisfaction as “the pleasurable feeling that results from the perception that one’s job fulfils or allows for the fulfilment of one’s important job values.” The authors further states that job satisfaction consist of three important components they are namely: values, the importance of values, and perception. Job satisfaction is measured in many researches along with commitment but Mowday, Steers, and Porter (1979) states that there is a difference between job satisfaction and commitment. The authors argue that commitment relates to the general emotional response to the every aspect of the organization, whereas job satisfaction is concerned with one’s job or particular facets of one’s job.
Organizational Commitment
Haldar (2009) describes organizational commitment as “A state in which employees identifies with a particular organization, its mission, policies, objectives, goals, and wishes to maintain membership of the organization.” (p.36). Mowday, Steers and Porter (1979) characterized organizational commitment as having three factors: 1) having a strong confidence
18
and accepting the goals of the organization; 2) having a willingness to use extra effort for the good of the organization; and 3) having strong desire to remain with the organization. The authors further states that commitment goes beyond just having loyalty to the organization but is focused on individuals having an active relationship with the organization and are ready to contribute to the organizations’ wellbeing. Commitments do not just about beliefs but also based on the actions of the individual.
According to Allen and Meyer (1991 as cited in Haldar, 2009) model, Organizational commitment is said to exist in three separate dimensions namely: Affective commitment, continuance commitment, and normative commitment. Affective commitment refers to an individual’s emotional attachment to an organization, continuance commitment is based on perceived economic value, and normative commitment refers to the individual wanting to remain with an organization for moral and ethical reasons.
Organizational commitment is important in research on organizations particularly in understanding the behaviours of employees in the work environment (Zain & Gill, 1999). Work attitudes including job satisfaction and organizational commitment are vital in determining whether employees decide to leave or stay in the organization (Lambert & Hogan, 2008). This is consistent with Mowday, Porter and Steers (1979) who states that employees with a high level of commitment have loyalty, shares values, and they identify with organization’s goals. Kanter (1972 as cited in Lee & Jamil, 2003) found that there was a positive association between trust and organizational commitment. Other research (Diffie-Couch 1984 as cited in Nyhan &
Marlowe, 1997) supposes that mistrust leads to lowered commitment.
Affective organizational commitment
Employees feel identified with his/her organization and its policies and form an emotional attachment to the organization (Haldar, 2009). Affective commitment is further described as an emotional bond that employees have to their organization (Rhoades, Eisenberger,
& Armeli, 2001). Employees who are affectively committed to their organizations are seen as being able to identify with organizational activities, and have receptiveness in meeting organizational goals (Meyer & Allen 1997, Mowday, Porter & Steers, 1979). Affective organizational commitment has also been considered as critical antecedents in turnover (Balfour
& Wechsler, 1996; Mowday, Porter, & Steers, 1979 as cited in Lee & Kim, 2010). In the three