PERSPECTIVE
Alma Whiteley*
Abstract
Purpose - To introduce trust as related to organizational design and management within the broader domain of governance and report on case study research on trust carried out in a large Australian organization. Design/methodology/approach - This paper is in three parts. The first part reviews a selection of ideas and recent writers on trust; the second part describes the methodology of the case study research which focused on relationship management where trust emerged as an important element of relationships. This is followed by examples from the findings. The third part addresses insights and future research. Originality/Value - The study of trust has become an important topic for management and corporate governance during recent years. After discussing scholarly interpretations of trust, empirical research findings are used to provide insight into how employees actually understand and interpret trust.
Keywords: trust, relationship management, organizational governance
* Graduate School of Business, Curtin University, Perth, Australia
Introduction
Corporate governance is concerned with ensuring that managers run firms honestly and effectively so as to provide a fair and acceptable return to those who invest resources in them. This definition is compatible with both shareholder and stakeholder orientations…Trust refers to a person’s belief that others make sincere efforts to uphold commitments and do not take advantage of that person given the opportunity…If employees, suppliers customers or others having contractual relations with a firm believe that its managers intend to let them down or will do so because of incompetence, they have no grounds for trusting those managers (Child &
Rodrigues, 2004, p143).
The overall focus of this paper is trust as related to organizational design and management within the broader domain of governance. The paper has three aims: the first aim is to present a selection of ideas and writers on trust; the second is to present findings on the Dalrymple Bay Coal Terminal (DBCT) case study research which focused on relationship management where trust emerged as an important element of relationships. The third aim is to discuss and draw insights from the research.
Our interest in trust came serendipitously. In the course of collecting workshop data on core values for managing change (Whiteley, 1995), we asked employee groups over a broad range of industries and business types what they valued most from their managers. One finding repeated itself with almost 100% consistency. Trust was the most valued quality in employee/management relationship. Confusingly
though, almost every time trust was identified, honesty and integrity were also identified. There seemed to be a connection between these concepts such that they ‘went together’ in the minds of our respondents. We have since come to recognize that these two qualities represent the ‘worthiness’ that is a qualifying condition of endowing trust. As Handy (1993, p193) explained “Organizations who expect their people to trust them must first demonstrate trustworthiness…Individuals will not be trusted fully until they prove that they can deliver”. Governance and trust are connected in several ways and in this paper, trust as it relates to the reputation of those in a governing position plays a central role.
In addition to the study of relationship management at DBTC reported in this paper, we have an ongoing research which involves the use of the core values method (Whiteley 1995) to achieve cultural change in a international service organization operating throughout Australia. One of the hallmarks of scholarly writing is a definition of the subject matter, taking into account the various ideas and theories of those considered to be expert in the field. When writing about trust, a problem immediately presents itself. This is the problem of
‘knowledgeability’ (Giddens, 1984, p3). “It is the specifically reflexive form of the knowledgeability of human agents that is most deeply involved in the recursive ordering of social practices”. Another way to say this is that human beings ‘just know’ about certain elements of social life. We think that trust comes into this category. As such, one single definition of the concept of trust immediately runs into difficulties as trust is simultaneously a) socially
54
located, b) contextually situated and c) a part of the discursive flow of everyday life.
In light of the diversity of interpretations of trust we will present different views organized around definitional statements. We will pay particular attention to trust as a feature of governance and organizational design.
Definitional Statements
Traditionally, governance has been associated with organizational images of stability, however tenuous, regulation and reductionism. An alternative set of images comes from the management literature which addresses the metaphors of chaos and complexity theory. Youngblood (1997) talks about a new order which is essentially a rejection of what he and others call the machine view of the world (Stacey, 1995, 1998, 2005; Wheatley, 1992; Zohar & Marshall, 1994, 2004). Several themes emerge in his work such as: the world as a living web of relationships;
the space at the edge of chaos which is where creativity can flourish; the replacement of an
‘either/or’ scheme of organization with a ‘both/and’
notion that embraces paradox and dissent. His thesis is that life and organizational life is a holistic system, capable of self-organization. Enabling the system are concepts such as Prigogine’s (1996, p53) dissipative structures (which depicts loss of energy in closed systems until at last they reach equilibrium at which point “it is a static state, where there is no change, just stillness. Equilibrium, in fact, can be equated with death”. He, like Zohar & Marshall (1994) talks about quantum organization. He talks about openness and open systems where the intention to act in the best and highest interest of those affected by one’s actions, thus becomes trustworthy.
Some writers employ causal or other logic to various aspects of the trust construct. For example, Coleman (1990), Putnam (1993) and others express trust as social capital. By this they mean the predisposition for people to produce socially efficient outcomes, based on positive assumptions that allow economy in judgements and decision making; and in reverse, avoid inefficiencies due to non-cooperation. Implicit in such writings are expectations of fair or cooperative behavior from others, thus lowering transactional costs. McEvily, Perrone, & Zaheer (2003) draw attention to the fact that although trust has received much attention in the literature, a set of generalizable propositions has not been produced. An example of a generalizable proposition is trust as an organizing principle. They identify other organizing principles of authority, price and norms. They disperse several descriptions of trust throughout their article.
…trust has been conceptualized as an expectation which is perceptual or attitudinal, as a willingness to be vulnerable, which reflects volition or intentionality and has a risk-taking act which is a
behavioural manifestation (McEvily et al., 2003, p93).
McEvily et al (2003) go on to make some powerful statements about trust and its impact on organizational efficiency. Challenging the economic viewpoint (Williamson, 1985) that rational economic actors should not rely on trust when managing interdependencies and facing problems in resource allocation, McEvily et al. (2003, p99) assert that
“trust in fact is a basic necessity for virtually all forms of exchange”. They suggest that it is possible that in pursuing a rational economic model of organization, the import of social relations is not too well understood. Some of the early literature from an economics perspective would certainly support this.
From Mc Evily’s expression of trust as something that can be causally examined, we go on to Fineman (2003) who places trust firmly in the emotional domain.
Fineman (2003) presents a comprehensive definition of trust. His interest is in trust as an emotional element to organizational learning. He contends that organizational learning has failed to engage with emotion in organizations. He sees emotion at the core of learning and he sees trust as an indicator of the way one fits into the political and moral order. He says that what is trustworthy is essentially emotional. Fineman (2003) points to the many descriptions of trust based on power, structural relations, arguments of rhetoric and manipulation but he adds “Yet it appears, for whatever reason, some feelings of, or about, trust, however transient, are important if knowledge is to be exchanged for mutual benefit”
Trust, we can conclude is not something that is simply present or absent from a social relationship, but it is negotiative and contextually/structurally specific. Its texture is essentially emotional, involving feelings of, for example, ease, suspicion, fear, confidence, comfort or anxiety.
In such terms, trust both frames and flavours what knowledge means to different people. It shapes the worth or value of new (or old) knowledge and learning. This is sharply evident in organizational settings where trust is strained and injustice strongly felt…Instructions, rumours or organizational changes are likely to be received cautiously, defensively or cynically when authority figures work by creating fear, anxiety or hopelessness.. (Fineman, 2003, p565).
Monge and Contractor (2001) relate to trust in their work on the emergence of communication networks. They refer to the patterns of contact between communication partners that are created every time a message is transmitted from one to the other. Their approach is theoretical and includes the need for network analysis which they describe as the application of a set of relations to an identified set of entities. “Relations possess a number of important properties including the number of entities involved,
55
strength, symmetry, transitivity, reciprocity and multiplexity” (Monge & Contractor, 2001, p 441).
As one might imagine, the backbone theories connected to communication networks are self-interest; mutual self interest and collective action;
exchange and dependency theories; contagion theories; cognitive theories; homophily theories (social comparison and identity theories); theories of proximity; uncertainty reduction and contingency theories and theories of network evolution, which includes structuration theory. Importantly, as part of this theorizing, trust and ethical behavior are addressed. This brings us to Monge and Contractors definition which in turn quotes Burt and Knez (1996, p69).
Trust is committing to an exchange before you know how the other person will reciprocate…In a study of managers in a large high-technology form they found that the communication networks in which two individuals were embedded, predicted the probability of a trust relationship between them. In particular, the trust between two individuals in close contact was high if other members in the organization indirectly connected the two members to one another.
One writer in particular has shed much light on the construct of trust and distrust in organizations.
Kramer (1999) has suggested four important categories of trust:
- images of trust in organizational theory (trust as a psychological trait, trust as choice behavior, unresolved questions and enduring tensions);
- bases of mistrust (dispositional trust, history-based trust, third parties as conduits of trust, role-based trust, rule-role-based trust;
- benefits of trust (trust and transactional costs, trust and spontaneous sociability, trust and voluntary deference) and
- barriers to trust (dynamics of trust and suspicion, technologies that undermine trust, breach of the psychological contract fragility of trust judgments). In this section we talk about the first two categories of trust.
Kramer says “Despite divergence in such particulars [as definitions of trust] most trust theorists agree that, whatever else its essential features, trust is fundamentally a psychological state” (Kramer, 1999, p571).
Like McEvily et al. (2003) and Youngblood (1997), Kramer characterizes trust in terms of “…a state of vulnerability or risk that is derived from individuals’ uncertainty regarding the motives, intentions and prospective actions of others on whom they depend” (Kramer, 1999, p571).
Kramer adds to this, following Lewis &
Weigart's (1985) addition of expectations, that all persons in an interaction will act in a competent and dutiful manner.
Put a little more strongly, Robinson (1996) talks about these expectations as a psychological contract where people will have “expectations, assumptions, or beliefs about the likelihood that another’s future actions will be beneficial favourable or at least not detrimental to one’s interests” (Robinson, 1996, p576).
Governance is, we believe strongly connected to psychological issues and in particular the invisible but powerful psychological contract. Kramer resonates with this as he talks about the need to conceptualize trust as a “more complex, multidimensional psychological state that includes affective and cognitive components” citing several writers on trust including Bromiley & Cummings (1996) who write on transaction costs and Tyler &
Degoey (1996) who address motive attributions when accepting (or otherwise) decisions. The notion of feeling as well as thinking is recognized here also.
We briefly turn to Kramer’s bases for trust in organizations.
He suggests first that everyone is disposed differently, influenced by their early experiences with others. Consequences for this include the problem of making general assumptions for groups of people. This is especially the case when individuals have experienced different interactional histories. In our research we have found that individuals with strong and recent histories translate their experiences into what is almost a priori knowledge when entering new contexts. However, we have also found that in organizations that promulgate high-trust cultures, existing knowledge and dispositions are revised sometimes radically.
Kramer talks about third parties as conduits of trust and we have found that people do take short cuts of listening to others. However, like Burt and Knez (1996) we found that first people communicate from their own trust disposition and secondly, they communicate what they think the other party wants to hear. We found also that third party communication is often a holding mechanism until individuals can make their own judgments.
In describing the qualities of trust contributed from the literature, three types of trust were delineated. These were competence trust, intentional trust and behavioural trust. Competence trust concerns a person’s ability to perform to expectations. Intentional trust, the perception that the person intends to be trustworthy and not to defect from expectations. Behavioral trust is the willingness to increase one’s vulnerability to another when the other’s behavior is beyond one’s control. We propose that these types are melded together quite fluidly and form part of a complex understanding of trust where someone’s ability, perceived intention and actions are weighted as part of the social relationship.
56
Qualities of Trust
Based on contemporary scholarly literature and our own research we propose hat trust has the following facets:
Trust is a psychological state involving perceived risk, vulnerability and positive expectations;
Trust is emotional and perceptual in nature;
Trust is context specific;
Trust is linked in some way to fairness and justice;
Trust is associated with worthiness, qualities of which need to be ascertained;
Trust activities include awarding trust, managing risk, transforming trust and withdrawing trust;
Trust is a dialogue between motives, intentions and the actions of others;
Trust involves a cyclical process of perceived motives, anticipated outcomes, evaluation of actual outcomes and resulting need for either remedial action or a revision of the partner’s trustworthiness status.
As suggested by the many references to expectations of integrity, trustworthiness and positive assumptions about motives, trust is linked to principles that are not only moral in nature but also linked strongly to a sense of personhood. Also, it seems that trust is a ‘human given’ in the sense of relating conduct to deep philosophical issues about personhood and social and moral reasoning.
Reasoning, we propose, is at the heart of our mental activities. Our making sense of the actions and apparent motives and intentions of others will be heavily influenced by the reasoning processes that have developed over time. An acknowledged expert (although not without criticism) on developmental psychology is Lawrence Kohlberg. He developed a theory of the development of moral reasoning. As individuals develop, and we are especially interested in ages 10 – 20 and over 20, they internalize their own personal moral codes. These are shaped by society’s principles and social rules but with recognition that these are relative to a personal code of values.
In Figure 1, we produce an extract from Youngblood’s (1997, p.121) depiction of Kohlberg’s moral reasoning stages. [ See appendices, Figure 1] .
A point that is well made by Baumard (1999, p204) who writes on tacit knowledge is that attempts made to take concepts such as trust and try to explain them rationally and definitionally are tantamount to
“…an explicit engineering of the foundations of meaning in organizations”. Moral reasoning and the perceptions people make about the motives, intentions and integrity of others must, we think, remain at least to some extent, part of the tacit domain.
In the descriptions of principles of trust that follow, we propose that some of these principles are not provable or even necessarily observable. We begin with Handy (1997, p187) who presents what
he calls six cardinal principles of trust. These are:
Trust is not blind; Trust requires constant learning;
Trust is tough, Trust needs bonding; Trust needs touch; Trust has to be earned. To illustrate Handy's approach to trust we give three examples.
Trust not being blind - “It is unwise to trust people whom you do not know well, whom you have not observed in action over time and who are not committed to the same goals. One outcome of this is that organizations need to be designed in groupings small enough for people to get to know each other well enough to develop trust. Talking about his own experience he says “My title in one large organization was MKR/32. In this capacity I wrote memos to FIN/41 or PRO/23. I often knew no names and met no people behind those titles. I had no reason to trust them and frankly no desire to”(Handy, 1997, p188).
Trust needs boundaries – “Unlimited trust is, in practice, unrealistic. We trust friends in some areas of our lives but not all” (Handy, 1997, p188). In the organizational sense a boundary can be a goal “By trust organizations really mean confidence, a confidence in someone’s competence and in their commitment to a goal. Define that goal and the trusted individual or team can be left to get on with it. Control is then exercised after the event, by assessing results, rather than before the event, by granting permission” (Handy, 1997, p189. Handy advocates organizational designs where, within a holistic design, units can, within their boundaries, be trusted to “find our own means to some agreed results [then] we have the room to explore, to put our own signature on the work.
Trust requires constant learning – Handy reminds of the importance of personal moral reasoning when he says “Every individual has to be capable of self-renewal. The ability to search for oneself and to regard learning as a continuing part of life, which was the justification for trusting someone in the first place becomes one of the keys to its success …Learning, however, like trust can be squashed by fear” (Handy, 1997, p190). He also goes on to remind us that trust requires unconditional support and in one of the examples from the coal terminal study which we bring you later, we can see that effort is put in even to support breaches of trust.
Trust has to be earned – This is one of those statements made by employees and managers whenever trust is mentioned. As Handy says “This
Trust has to be earned – This is one of those statements made by employees and managers whenever trust is mentioned. As Handy says “This