Trust in Boss-subordinate relationship

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Unformatted text preview: builESE lizlfwlil'l')‘ I : University of Navarra DFON-1 Z-E 0-404-022 Trust int Boss-Su bordinate Relationships 1. Introduction Many managers attest that trust among the members of an organization is an essential ingredient for organizational success. High—performance teams are characterized by mutual trust among group members. Leaders cannot transform or adapt an organization unless their followers trust them. A climate of trust among the members of an organization fosters cooperation and collaboration. and makes it possible for employees to express their ideas and share resources and knowledge with others. And that translates into greater satisfaction, greater organizational commitment. and better performance. Conversely, if trust is lacking among the members of an organization, or if there is distrust, people adopt a defensive attitude, which is detrimental to the working climate in the organization and to organizational performance. And yet, although it is widely acknowledged that tmst is important, actually creating trust seems to be difficult. In today's world of constant re- engineering and mergers, downsizing and temporary employment, employees' trust in their bosses has been seriously undermined. A recent __-—-—-—H— This technical note was prepared by Professor Pablo Cardona and Aitziber Elola. Doctoral Student. February 2004. Copyright 0 2004, IESE To order copies or request pcnnission to reproduce materials. call IESE PUBLISHING 34 932 534 200. send a fax to 34 932 534 343. or write Juan de A165. 43 — 08034 Barcelona. Spain. or [email protected] No part of this publication may be reproduced. stored in a retrieval system, used in a spreadsheet. or transmitted in any form or by any means - electronic, mechanical. photocopying. recording, or otherwise - without the permission of IESE Last edited: 9:20:04 DPON-12tE El Trust int Boss-Subordinate Relationships survey by a Chicago— —based company, for example. revealed that 40% of employees agreed with the statemenfi'“6ften+donlt-believe‘wharmy‘bossesteitme”l. r...“ m __.... m“. .. .- . In this note we shall try to elucidate the factors that determine the level of trust in boss- subordinate relations, and the trust- building process itself. We begin by explaining the different meanings of trust. We then establish a definition of trust based on the psychological perspective. We describe the determining factors for the existence of trust and, in terms of these antecedents, explain the different types of trust and introduce the trust matrix. After that. we examine the process by which trust and distrust develop. Lastly, we distinguish between power and authority as possible consequences of trust in the boss— subordinate relationship. 2. Different Perspectives on Trust Trust has been studied in different disciplines, including economics, sociology and psychology. In this section we give an overview of how trust has been studied in different social sciences. 2. 1. Economic View When economists relaxed the basic assumptions of the classical model [unbounded rationality and complete information], the problem of uncertainty in interactions among economic agents came to the fore. The study of tmmmfipafise to that uncertainty. In economics, trust is studied from two different perspectives: transaction cost theory, and game theory. a] Trams-my: According to this theory. organizations are more efficient mechanis than the market when: 1] there are specific assets with their respective sunk costs, 2) there are limits to agents' ability to anticipate contingencies and process information (bounded rationality), and 3) there is the possibility of obtaining benefits at the expense of others lopportunism]. It is in relation to this last point that trust can play an important role in economic relations: transaction costs will be considerably reduced if each party is able to trust the other not to behave opportunistically. However, according to some proponents of transaction cost theory, opportunistic behavior by the parties can only be controlled by means of structural guarantees (hierarchical structure and legal mechanismslz. If that is the case. trust is simply a rational calculation that. once the above-mentioned structural guarantees are taken into account, the benefits of not acting opportunistically in an interaction outweigh the benefits of acting opportunistically. 1 Cf. Robbins. S.P. [2001], Organizational Behavior. [9th ed.], New Jersey. Prentlchall. 2 Williamson. 0.1-; [1993], "Caielflafiveuess. trust and economic organization“. Journal :1wa and Economics. 30. pp. 131-145. IESE Business School-University of Navarre Trust int Boss-Subordinate Relationships b] Game Theory: This‘theory studies trust based on the well-known-E’risoner's Dilemma. Two individuals are faced, in conditions of uncertainty, with the H—deeisiorr'whether or not to cooperate. The best individual outcome is obtained when one of the two does not cooperate and the other does. The worst possible outcome is obtained if neither party cooperates. And the best joint outcome is obtained when both cooperate. If the game is repeated only once, both individuals have incentives not to cooperate, even though this may lead to the worst possible result. If the game is repeated several times, however, the outcome is best if the interactiOn is based on trust and both parties are willing to cooperate. Both in transaction cost theory and in game theory. trust is studied in terms of a rational choice. an orientation toward risk based on rational calculation. This view of trust based on rational calculation comprises a number of elements. First the ’.—-—-""-"'—-~—-—___——-—" infomatiormtmihat ,makeLJLpossible for one person to trust another. Second, the incentives _f_'_or_ .the- W011 to do what is expected, to honor that trust. These models ovenestimate 9W, the degree to which they ordered preferences. This conceptualization of trust leaves a very limited role for social and emotional influences in the development of trust. 2.2. Sociological View Sociologists study trust in terms of a general attitude toward other people and society as a whole. They seetirgsifijniflherenuharacterisfioofirelatinnshetflfifinspersons or institutions, and believe that it can be developed in contexts in which the parties have shared values or rules. Social rules determine both parties‘ behavior and their beliefs wan-n- n—hmfl—mm ........ about the behavior and intentians 9.29.5955 and institutious either pmmit trust—based ramps Where there are shared values or rules and trust, there is solidarity, and personal interests are subordinated to the attainment of the common good? This leads sociologists to suggest that for there to be trust, there must be some kind of social affinity, often in opposition to other groups: one ethnic group versus another. managers versus workers, women versus men, veterans versus new employees, etc. Although it is true that social factors facilitate trust (particularly the first steps in the trust-building process}, experience shows that it is possible for trust to develop between people from very different cultures and backgrounds, provided there is the right context for them to get to know one another. 2.3. Psychological View Psychology analyzes trust in terms of the characteristics of the people involved in the relationship and the gradual accumulation of knowledge about the other party’s 3 See. for example. Fukuyama, F. [1995], Trust: The soda! virtues and the creation ofpmpefiry. New York. Free Press. IESE Business School-University of Havana hi DPON—‘lZ—E ifl' DPON-‘lZ-E El Trust int Boss-Subordinate Relationships behavior. As we shall see in more detail later on, from the psychological perspective trust is seen as the outcome of certain characteristics of the person who trusts (such as \ her propensity to trust others] and her perceptions regarding the person whom she l trusts [professional competence, style of communication, consideration, etc.). These Perceptions may be tbs. }!i.t.51f__dirsst_o_r indirect experience...of..thc_._9th_€.£.PartY’ that is: interactions between the two in the past, or observation of the trusted person's behavior toward other people. 3. Definition of Trust There is no generally accepted definition of trust. Nevertheless, regardless which view we adopt (economic, sociological or psychological), most definitions understand trust as a relationship that includes a certain vulnerability and positivejxgectations with respecgtomr-people‘rtrehavion We therefore define trust as a willingness to be vulnerable to the action of another person, based on positive expectations about the \orher person 's intentions and behavior‘. From this definition it follows that trust is not a type of behavior (unlike, say, cooperation], nor a choice [such as taking a risk], but an attitude toward a particular person which may be the cause or consequence of such behavior or choices. More specifically, we can distinguish three principal elements in this definition: Trust is relati "hat is, it exists only in interaction with others. Moreover, the degree of interdependence between two individuals will make it more or less necessary for them trust one another in order to be able to perform their tasks. For example, trust is more necessary for teamwork than it is for production line work. The same applies to the relationship between a boss and a subordinate. For instance, if the subordinate needs to work closely with her boss in order to do her job well, it will be more important to have a relationship of trust than if she works largely independently of the boss. Trust includes vulnerability, w_hn1c_h :5th risk inherent in any mlafionmple. This vulnerability is due to the fact that it is impossible to control the actions of others. In the case of a subordinate‘s trust in her boss, the uncertainty derives from the possibility that the boss will behave oppbrtunistically, in which case the subordinate will suffer the damaging consequences of her boss's actions. For instance. if an employee discloses private information to her boss, she faces the possibility that the boss will use that information against her. Therefore, if a subordinate trusts her boss, she effectively accepts a situation in which the damage she will suffer if the boss takes advantage of her vulnerability is greater than the benefit she may obtain if the boss does not exploit the vulnerability. Otherwise, it would not really be trust, but a “calculated risk“. 4 Rousseau. DJVL. Sillu'n. 5.8.. Bun. R5. at Camerer. C. [1993}. “Not so different after all: A cross-discipline view of trust," Academy of Management Review. 23. pp. 3934114. IESE Business School-University of Navarra a) b] C) Trust int Boss-Subordinate Relationships A subordinate‘s trust in her boss is also founded on positive expectations regarding the boss‘s intentions and/or behavior. In the case of intentions, the expectations derive from the belief that the boss will Ms needs into account in her decisions. In the case of behavior the expectations meTased‘nmmenain consistency in the boss' 5 behavior over time. Determining Factors for Trust Besides understanding what we mean by trust. it is also important to identify the faCIOIS that promotewm among the people in an organization, as they are the levers we may be able to operate in order to increase the level of trust in a relationship. The most recent studies of the subject from the psychological perspective distinguish two types of characteristics that determine the level of trust in boss- subordinate relationships: personal factors and the boss‘s behavior. 3.1. Personal Factors Under the heading of personal factors comes a series of characteristics of boss and subordinate that affect the extent of the subordinate‘s trust in her boss. We shall distinguish three types of characteristics: Demographic characteristics Various researchers have found that similarities M- bethen Boss and subordinate are positively correlated with the subordinate's trust in her boss. According to these authors, when two people are demographically similar (in age, sex, racelethnic group], they find it easier to understand one another. which facilitates the development of trust. PersgnaLLha-metefisfiesr People differ' in their propensity to trust. Depending on past experience, personality and cultural background, some people are more predisposed than others to trust people. For instance, a person who has had unpleasant experiences in the past will tend to adopt a more defensive attitude when starting a new exchange relationship, as will a person from a more individualistic culture. This predisposition will affect an individual‘s initial perceptions of and first interactions with any other person. All the same, a person has different experiences in her interactions with different individuals, so once a given relationship has established itself, the unique experiences of that relationship will tend to outweigh the effects of this personal characteristic. frofissignal competence of the boss. B competence we mean the knowledge . and skills 0 ave in order to do her job. Subordinates will judge iwhether or not a boss is qualified to do her job well and will either trust or idistrust her accordingly. This judgment may initially be based on formal qualifications, or reputation acquired in other contexts. After a time, however, personal experience gained in day-to-day interaction with the boss becomes more important. IBE Business School-University of Havana DPDN-12-E DPON-IZ-E Trust int Boss-Subordinate Relationships 74 3.2. Boss's Behavior Apart from the personal factors, subordinates will judge a boss‘s trustworthiness based on the way the boss behaves in interactions with them. In a Specific study on this subject, Whitener, Brodt, Kotsgaard and Werner pinpoint five types of behavior by bosses that foster trust in subordinates5: a) consistency, b) integrity, c] communication, d) delegation, and e] consideration. a] Consistency. This refers to predictable behavior. If the boss's behavior is ctfh‘siste—nt- over time and in different circumstances, the subordinate will find it easier to predict how her boss will behave in the future and so will be more Willing to take l’lSkS. Consrstency does not mean that the boss automatically acts in the same way when faced with the same situation, but that she acts logically in every situation and that the subordinate understands her logic. b} IWS an antecedent of trust, integrity encompasses two factors. First, the subordinate perceives that the boss adheres to a series ofimciples and practices that the subordinate accepts. Second, the subordinate perceives a coherence beMeeLtlre...hossls%fwerds and actions. Specifically, the subordinate expects her boss to tell the truthdteephpr erest. Although consistency and integrity appear quite similar, they are in fact different. Both refer to a certain predictability in the boss's behavior that reduces the perceived risk for the employee. Consistency, however, refers to predictability based on coherence of past actions, whereas integrity refers to predictability based on coherence between words and deeds. c] Communication. Subordinates tend to be more willing to trust the type of boss W‘Who is willing to listen and accept other people's ideas ktottom—up communication). Transparency in the boss's communication with the subordinate (top-down communication) is also important: subordinates will trust their boss more if she shares information that affects them, provides detailed and timely information, and explains to them any decisions that have been taken. d} Deiegafi The degree to which employees are involved in the organization‘s flaking also influences the way trust develops. Thus, delegation of amee participation in decision making, and employees‘ autonomy to make their own decisions are also antecedents of trust. Participation does not necessarily mean that decisions are taken jointly or by consensus, but that the parties affected by the decisions are involved in some way in the decision— making process. For instance, the subordinates may not actually make the decisions that affect them, but the managers may take the subordinates‘ opinions into account when making them. 5 Whitener. EM. S.E. Bmdt, MA. Korsgaard and JM. Werner [1993), “Managers as initiators of rust: An exchange relationship framework for understanding managerial trustworthy behavior," Academy ofMonogmm Rev-inn. 23, pp. 513-530. E IESE Business School-University of Navarre Trust int Boss-Subordinate Relationships Delegation of authority and employee participation in decision-making give employees greater control over the situation and so reduce the risk of opportunistic behavior by the boss. And the boss demonstrates, through her behavior, that she trusts and respects her subordinates. which in turn — as we shall see further on - encourages them to trust the boss. e) Consideration. A boss‘vcigeates trust among her subordinates by showing an interest in and respect for individuals. Bosses show interest in employees through three types of behavior: 1] by showing consideration and being sensitive to the employees‘ needs and interests. 2] by acting in such a way that the employees' interests are protected, rather than encouraging selfishness and opportunism, and 3) by abstaining from exploiting others and going against their interests for selfish gain. In other words, the boss‘s behavior suggests a genuine interest for the employees' well—being and implies a certain “attachment” to the employees. 5. Trust Matrix Personal factors and the boss’s behavior are the two dimensions that we find in every inmen a boss and’if'sfibo inate. e personal factors correspond to the characteristics of the participants in the interaction, and the boss‘s behavior reflects the dynamic between boss and subordinate. For a complete diagnosis of the relationship of trust between the two, both the personal factors and the boss’s behavior must be taken into account. as both contribute to the development of interpersonal trust. Based on these dimensions, then, we have drawn up the following matrix, which distinguishes four basic categories in the trust relationship. Figure 1 Matrix of trust Personal factors Favorable personal factors are a necessary condition for trust in interpersonal relationships. Although demographic similarity and a general propensity to trust may become less important as time goes by, it seems obvious that nobody will trust an incompetent boss. If a boss lacks the necessary professional competence, there are two possible scenarios. Either the boss is incompetent but displays a minimum level of the five basic trustworthy behaviors described earlier, in which case the subordinates may IESE Business School-University of Navarre hi DPON-‘l 2-E DPO N-‘I Z-E Trust int Boss-Subordinate Relationships respect the boss as a person but will be unlikely to trust her as a professional. as her incompetence may lead her to make decisions that are detrimental to them. Or else the boss is incompetent and her behavior is unacceptable as well, in which case the subordinates will tend to distrust her. Apart from the personal factors, the boss must also demonstrate a minimum level of the five basic trustworthy behaviors. If she does, her subordinates will acquire positive expectations about her behavior and will be more willing to accept a certain level of vulnerability in the relationship. if the boss does not reach the minimum level of trustworthy behavior, there are again two possible scenarios. Either the boss displays favorable personal qualities, such as professional competence or demographic afi'inity with her subordinates, in which case the subordinates will tend to respect her [above all in her decisions), without necessarily trusting her. Or the boss not only lacks trustworthy behavior. but also lacks favorable personal qualifies, in which case the logical outcome is ...
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