PRACTICAL GUIDANCE

Now that we have discussed the factors that lead to trust, we proceed to build on this foundation to develop an understanding of how organizations can use this knowledge in practical ways. Specifically, we focus on how organizations can strategically capitalize on the development, maintenance, and (if needed) repair of trust. Furthermore, given that trust is a feature of relationships, we will consider how organizations should approach development, maintenance, and repair in their roles as trustor and trustee, respectively. That is, we propose that organizations should selectively and prudently manage who they trust under certain conditions, and seek to garner the trust of key stakeholders (such as employees, customers, and alliance partners).

Trust Development

Trust development is the first phase in the trust relationship, and is characterized by several inherent tensions. For one, both parties desire to manage how they are being perceived. However, if the parties are too careful in managing their impressions, they might be perceived as concealing their true nature and sabotage their own attempts to appear trustworthy. In addition, both parties are acutely aware of their own vulnerability and look for ways to minimize risk.28 Yet one party must risk engaging with the other to initiate the relationship. In this section, we will explore how organizations can work through these tensions and develop trust in both roles (i.e., as the trustor and the trustee).

Organization as Trustor

Two key stakeholder groups with whom organizations enter into trusting relationships are employees and strategic partners. One specific case where the organization and employees engage in trust initiation is during the new-hire process. Organizations want to hire employees that they believe will carry out the mission of the organization. In order for organizations to rely on employees they need to see their employees as trustworthy. Ideal candidates would be highly competent (ability), care for coworkers and the general welfare of the organization (benevolence), and demonstrate adherence to the organization's values (integrity). Obtaining this information about future employees is rather difficult. Resumes and cover letters offer initial data on ability (such as educational credentials, work accomplishments, and skill certifications), yet are unable to depict how applicants would behave at work on a daily basis. And although "reference checks" may reveal more information, many organizations have policies inhibiting the release of previous employment data. Organizations have therefore turned to integrity tests to help cull dishonest applicants from honest ones. Integrity tests are designed to evaluate applicants' honesty, conscientiousness, dependability, and reliability. Studies have found that these tests help predict employees' likelihood of engaging in theft and other counterproductive work behaviors.29 These tests clearly help with initial assessments of applicants' integrity. However, it is difficult for selection tests to establish applicants' benevolence since these perceptions tend to develop over time.

Once new employees have been hired, organizations can continue to facilitate the trust-development process to ensure the trust they are extending to employees is wisely placed. In an effort to minimize risk, managers often enact tight controls over employees to monitor and assess their actions. Overly restrictive monitoring limits the degree to which employees can establish their trustworthiness, and even reduce their willingness to be transparent. Although such controls may cut down on workplace inefficiencies, they may concurrently create distrust between employees and the organization. Alternatively, firms might construct policies and procedures that boost employee trustworthiness without negative ramifications. For instance, organizations can develop training programs that increase employee skill sets,30 thereby raising employee ability. Additionally, ethics training programs have been associated with enhanced employee integrity (i.e., rejection of unethical decisions) in situations that tested ethical prin-ciples.31 These training programs serve as another filter in which the organization can evaluate and even enhance employee ability and integrity.

Strategic alliances also present the organization with critical decisions to make in terms of whether and to what extent they should trust potential partners. For strategic partnerships to work effectively, firms must make decisions that mutually support the interests of both parties. This is especially difficult in the beginning of the relationship when both parties are uncertain of how self-interested and opportunistic the other party will be.32 "Structural assurances" have been identified as elements that help establish higher levels of trust early in the relationship.33 These safeguards include regulations, guarantees, and legal recourse. Regulations help by assuring the trustor that there are reliable standards within and between industries that companies obey. For example, a food wholesaler can feel comfortable entering into a business relationship with a meat processing plant because the plant obeys food safety codes set forth by the Food and Drug Administration.

Guarantees aid by reducing the amount of risk in the relationship; this occurs when one or both of the parties have financial backing.34 For example, a bank that wants to invest with a new firm can more readily establish an investing relationship if the new firm is backed by a guarantor. Such security allows the bank to enter into the relationship at a faster pace and reduced vulnerability.

Finally, legal recourse helps to initiate trust by ensuring the parties will fulfill their responsibilities as stated in a contract. If either party breaks the contract, the other party can take legal action to recoup the loss. In addition to financial and legal repercussions, a breach can lead to social consequences. For instance, an auto company that partners with a tire manufacturer can depend on a contract that stipulates that the tire company will produce high-quality tires. If the tire company tries to cut costs and produce tires with a rubber material that jeopardizes the safety of a vehicle, the tire company will have to pay legal costs and risk negative reactions from the media and public at large. Because of these major costs to the business, the auto company can rely on the tire company to uphold its side of the contract.

Although these structural elements serve as aids for faster trust development, they do not convey trustworthiness and therefore cannot take the place of trust. In fact, studies have found that the most successful partnerships do not rely on contracts and safeguards to reduce opportunism, but instead depend on a trusting relationship.35 Specifically, entrepreneurial firms that moved beyond contracts had increased confidence in their partners' performance, greater ability to protect private information, more patience with adapting to necessary changes, and more resolve to not exploit others.36

Thus, it is important for the trustor to seek out a partner that is known for having a trustworthy reputation. The vast amount of information online can help companies easily vet firms that are recognized for having high ability, benevolence, integrity, and transparency, as well as firms that are notorious for having a lack of ability, benevolence, integrity, and transparency. Reports of product recalls are good indicators of a lack of ability. For instance, the 2007 recall of Fisher-Price toys appears to have been caused by an oversight in their procedures to monitor manufacturing partners. Although parent company Mattel apologized and rectified the issue, Fisher-Price's reputation for producing quality toys was damaged nonetheless.37 Lawsuits that have established the guilt of a defendant are another signal of an untrustworthy partner. They can be indicators of failures of one or even all characteristics of trustworthiness. In the case of Countrywide, allegations were made that the company intentionally concealed the risky nature of its deals from investors.38 The allegation that Countrywide intentionally violated securities laws suggests the possibility of a breakdown of integrity, transparency, and benevolence. Fraudulent financial reporting signifies a lack of adherence to legal principles, inaccurate information, and harm to clients' well-being.

Although trustors should vigilantly watch for (un)trustworthy behavior of potential partners, they should also search for indicators of transparency. Investigating the communication methods of potential partners can glean a great deal of information. Companies should look for evidence of transparency in communications.39 This can be done by evaluating public statements and language in product materials and internal documents for clarity, accuracy, and disclosure. This type of inquiry can help companies make legitimate judgments of how transparent the potential partner is likely to be.

Organization as Trustee

In the trustee role, the organization should take steps to demonstrate trustworthiness to employees, customers, and partners. There are a few tactics organizations can employ to help form these impressions. First, organizations must ensure that they take steps to cultivate and communicate high ability in managing a successful enterprise. This entails both managerial competence (making effective strategic decisions and managing relationships) and technical competence (producing high-quality goods or services).40

Creating and enforcing structures that encourage fairness can demonstrate a company's integrity. If employees believe that the organization has a fair performance management system (where employees are evaluated and rewarded on the basis of job-relevant criteria in a manner that ensures accuracy, consistency, and the suppression of bias), they will be more likely to view the company as adhering to a set of admirable principles.

Investment in employee training programs is a strategy that organizations can employ to increase perceptions of benevolence. Specific policies such as tuition reimbursement illustrate that the company is willing to devote its financial resources to advance employees' knowledge and improve their careers. Employees may interpret this investment as a sign that the company cares about their personal development. This attribution is especially important because it can serve as a foundation for the development of positive emotional bonds between employees and the firm. When employees feel as though they are being cared for they will likely produce positive feelings toward the organization. To the extent that this leads employees to feel a sense of identification with the organization (as one that shares the same values and contributes to a mutually rewarding relationship), a strong emotional attachment to the organization might be formed.

When developing trust with strategic partners, the trustee has the responsibility of gaining the partner's trust. Organizations can begin to do this by proactively communicating, taking measures to ensure equity, and allowing for adaptation.41 Communication can serve two purposes in trust building. First, it helps form a shared understanding of common values, which is a critical aspect of trust.42 Shared values help organizations predict the other party's behaviors, which is important in minimizing risk. Second, communication is essential in forming perceptions of transparency. A key aspect of transparency is disclosure. In order for both firms to have an understanding of the other's position, business dealings and strategy, both firms need to disclose. It is especially important in the beginning of the relationship for the trustee to disclose information as that will establish precedent for future information exchange.

Organizations in the trustee role can also ensure fairness in their relationships with partner firms, in order to convey their integrity. For example, they should work to increase perceptions of equity, which is a crucial aspect of interfirm cooperation.43 Broadly speaking, equity refers to a belief that the amount of outcomes should be commensurate with the amount of inputs.44 Inequity between firms is associated with higher levels of suspicion, which results in partner distrust.45 In addition, using fair procedures to determine outcomes leads to greater cooperation46 and profitability,47 as well as deeper commitments.48 It is important that the trustee displays acts of fairness in the beginning of the relationship when initial judgments are formed and when practices are instituted. In certain situations, fair procedures may also indicate perceptions of transparency and benevolence. Take for example a company that explicitly communicates how the distribution of profits will match invested resources. In this example the outcome is commensurate with the inputs (integrity), there is advance disclosure of information regarding a transaction (transparency), and there is evidence that the trustee cares about the trustor's interests by rewarding their contributions (benevolence).

Trust development plays a critical role in effective relationships. During this phase, the organization should take specific steps to help form positive experiences with stakeholder groups. As the trustor, the organization should look for employees with integrity and create structures that increase their trustworthiness. Organizations should also select partners in strategic alliances with trustworthy reputations and take steps to reduce risk. In the trustee role, the organization has the responsibility of demonstrating trustworthy characteristics and transparency to employees and potential partners. This can be done through the development of training programs and increasing communication and fairness with partners.

 
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