Building and Maintaining Trust

The ―encapsulated-interest account of trust‖ developed by Russell Hardin (Hardin, 2001) and others explains the process of building trust in acquaintances. The first half of his theory explains this with logic similar to that of the game theory. Firstly, the interacting parties make transactions repeatedly, during which both parties may behave in a trustworthy manner. In this stage, trust may be based on calculation, but is not real trust. With the number of games growing, however (say, the two parties have made twenty transactions), long-term trust can be built since their interests have encapsulated in each other's cooperation. Both parties may gradually develop mental inertia when the other party's behavior is always trustworthy. In other words, they begin to believe that the other party will not deceive them, though this judgment is not sufficiently grounded. It is by this time that real trust begins. Trust in this context is indeed an instrument for reducing transaction costs.

What then is trustworthy behavior? Aneil Mishra (Mishra, 1996) pointed out that one's trust in another is based upon the trustworthiness of both parties, which includes four factors – competence, honesty, consistency and mutual benefit.

Competence refers to that a person should first of all have the ability to do a particular thing so as to avoid the scenario where he or she is unable to finish it though he or she really wants to.

Honesty refers to that either party will not intentionally conceal facts from, or deceive, the other.

Consistency refers to that a persons' attitude and exhibition are continuous and consistent

rather than be changeable, inconsistent or different from time to time.

Mutual benevolence is the thing that Chinese care most about. It comprises a lot of elements, of which mutual loyalty is the most important. In reality, Chinese are inclined to overemphasize mutual benefit, as they typically will favor anyone as long as he or she is within their guanxi circles and even to the extent that they think about nothing but his or her concerns about guanxi, with no attention to whether he or she is right or not. Which of the four factors, then, is the most important in guanxi management? There are some primary principles of the trust theory. Firstly, you cannot control others' trust on you and the only thing you can operate is your own trustworthiness. To establish good relationships with others and win their trust, you have no choice but to keep improving yourself till all the four factors listed above become available. There tend to be people who believe that they can win trust simply through some underhand tactics. Unfortunately, however, not all the people are fools, but so many people think they can fool all the others. One may deceive others with his underhand tactics for some time, but his wrongdoing will almost always be detected in the end, because it lacks in trustworthy behavior that is based on fairness, consistency and honesty.

Secondly, trust is built slowly but collapses rapidly. Such is a quality within any network-like structure. Building trust is similar to building a tower in that it is built bit by bit, but collapses suddenly because of several lies or betrayal, like removing bricks from the tower. There will be no obvious change in trust at the first couple of times, but a collapse will occur at the third or fourth time of betrayal.

Lastly, Chinese management always comes with interactions between power and trust, of which the latter is more important than the former. Unfortunately, there are now a large number of managers who overemphasize power and underhand tactics while neglecting a more important thing – the building of trust.

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