Leadership & Trust
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Transcript of Leadership & Trust
[ ]CRITICALLY ANALYSE AND DISCUSS WHY TRUST IS THE KEY TO EFFECTIVE LEADERSHIP IN AN ORGANIZATIONAL CONTEXT
2008MANAGEMENT OF CONTEMPORARY ORGANISATIONS
Mr. FRANKIE YEE
SUBMITTED BY: SINGHANIA, SRIHARSH
JCU STUDENT ID NUMBER: 12305682
DECLARATION
Except where I have indicated, the work i am submitting in this assignment is
my own work and has not been submitted for assessment in another course
LEADERSHIP & TRUST Page 2
CONTENTS
Cover Page 1
Declaration 2
Contents 3
Contents Page for Tables & Illustartions 4
Executive Summary 5
Introduction 6
Discussion
What is Leadership 8
Importance of Leadership in an Organisation 9
General Qualities Of Effective Leadership 10
TRUST at Work 11
Qualities To Gain Trust In Leadership 13
Value Of Trust 15
Trust During Crisis 17
Trust During Management Of Change 19
Recommendations 20
Conclusion 21
References 22
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CONTENTS OF TABLES AND ILLUSTRATIONS
Dimensions Of Trust 12
Crisis Response Model 19
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EXECUTIVE SUMMARY
In the case study of leadership and trust, the various advantages of trust and the
high cost of low trust has been emphasized. Trust is the foundation on which
leadership stands. A person is a leader, when he has people to follow him, in
the path provided by him. An effective leader is one, whom people follow with
their own will, not with compliance or force (Robin S. Sharma,1999). This can
only done, if the followers have faith in their leader.
An organisation with strong relationships, will always withstand any crisis or
downsizing with ease. Relationships between the hierarchal levels of an
organisation, between supplier and the organisation, between customers and the
organisation, all has equal importance in running an organisation successfully.
Trust also affects the various organizational behaviour concepts such as
Motivation, Team management, Learning and communication if there is mutual
trust between the manager and the employees they will feel motivated to do
their job in high spirits along with an overall enhancement of learning
&communication skills and relationship in the team will also improve thereby
giving better results for the organization.
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INTRODUCTION
The Research Problem
The purpose of this report is to critically analyse the effects of leadership and
trust in an organisation. How an effective leader can change the future of an
organisation with various leadership skills. More emphasis is given on the value
and effects of high trust. After reading this report, one can point out the high
importance of trust in each and every department and phases of an
organisational life cycle.
The Report Organisation
There is an introduction followed by the discussion section, which outlines the
key headings that relate to the topic and case study. The report is then
concluded with four recommendations, conclusion and references to validate
the researcher’s points.
The Source and Methods Of Data Collection
All research material used has been sourced from accredited authors. The
Central National Library, Sembawang Community Library, and Woodlands
Regional Library of Singapore were utilized to source the material. A total of
seventeen references were used.
Limitations Of the Report
This report has been collaborated to highlight the meaning of effective
leadership and importance of trust in effective leadership and various
organisational aspects. There were more important topics to explain about trust
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and its effectiveness. But the research was to be limited, therefore only the
important points has been mentioned.
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DISCUSSION
WHAT IS LEADERSHIP?
Leadership theory is one of the most discussed areas of management, and many
different approaches are taken to the topic.
Some of the theories presented by great authors are: great man theory and trait
theory (Stogdill, R.M. , 1974), Behaviourist theories (Pfeffer J., 2003),
contingency theory (Fiedler, E. and Garicia, Joseph E., 1987), situational
theory(Hersey, P. and Blanchard, K. H, 2001), transactional (Hollander, E.,
1998), action-centred leadership (Roebuck, C., 1999), transformational,
attribution, and power and influence theories .
These many approaches and differences of opinion illustrate the complexity of
the leadership role and the intangibility of the essence of good leadership.
A common aspect was found out in all the above mentioned theories of
leadership - “Leadership can be defined as the process of influencing others
towards the attainment of certain pre-defined goals”. Leadership style refers to
the methodology adopted by the leader to carry out the roles and
responsibilities of the leadership process.
LEADERSHIP & TRUST Page 8
IMPORTANCE OF LEADERSHIP IN AN ORGANISATION
Harold S. Geneen, CEO of International Telephone & Telegraph Corp., 1959-
1972, has written in a book “Leadership through the Ages”, that “Leadership is
the very heart and soul of business management. No one really manages a
business by shuffling the numbers or rearranging organizational charts or
applying the latest business school formulas. What you manage in business is
people and Leadership, is nothing but the ability to inspire other people to work
together as a team, following your lead, in order to attain common objectives.”
Though it is true that analysing, planning, executing, operating, marketing, and
accounting are very important aspects to run a successful business, but at the
end, it is your staff or employees, who carry out all the above mentioned tasks
for you.
Effective Leadership can move organisations from current to future states,
create visions of potential opportunities, motivate employees for better
performance and instil them with commitment of change.
A good example of how an effective leadership can change a company’s
fortune is the leadership of Greenwald, Gerald in United Airlines from 1994 to
1999. In 1990s, no company had more internal strife than United Airlines. The
flight attendants had bitter relations with the pilots, the pilots hated the
mechanics, and the mechanics had nothing but contempt for the office
managers. The only thing that was common between each group was the
perception that the company’s leader, Stephen M. Wolf could not be trusted to
do what was best for them. Due to heavy losses in the year 1991, 1992 and
1993, United shareholders removed Wolf from leadership and appointed
Greenwald as their new leader in July 1994, who had no experience in the
airline industry. “He has a track record for good employee relations, and this
trust thing is the key to the whole future”, one of the directors said. These
LEADERSHIP & TRUST Page 9
words turned to be prophetic and in a little time of 2 years Greenwald led
United Airlines through one of the most dramatic turnarounds in USA business
history. Operating margins were up, cost were cut down, labour grievances had
almost vanished, and the company’s stock price had doubled.(The case study is
taken from the Book, Organisational Behaviour – Securing Competitive
Advantage, written by Wagner, John A. & Hollerbeck John R.)
TRUST AT WORK
“Trust is one party’s willingness to be vulnerable to another party based on the
belief that the latter party is (a) competent; (b) open; (c) concerned; and (d)
reliable.” (TRUST IN ORGANISATIONS, Frontiers of Theory & Research,
written by Kramer, Roderick M. & Tyler, Tom R., in 1996). Kramer and Tyler
has researched many theories, such as that of, Barber, 1983; Deutsch, 1973;
Luhmann, 1979; Moorman, 1992 and came up with the above definition. In the
above definition trust has been segmented into four dimensions, which
summarizes the literature in trust. The explanation of each dimension are as
follows:
TRUST
AT
WORK
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Competence
Communication/Openness Concern
Figure 4.1 Dimensions Of Trust
1. The Competence Dimension Of Trust – Within organizations, managers
develop relationships with their subordinates and with other managers
largely on the basis of trust, where trust is defined in part in terms of
competence. Leaders are also characterized by, how their followers trust
them to make competent decisions.
At the organisational and intra-organizational levels, the competence
dimension of trust is based on the exchange relations. For example, a
trading firm supplies a manufacturer’s product to its customers in time,
then the manufacturer will gain trust on the trading firm, and will always
opt for the same firm to transport its products in future.
2. The Openness Dimension Of Trust – Another key aspect of working
relationships between a manager and its subordinates is that of trust,
where trust is defined in terms of perception of openness and honesty.
Leaders who are honest, open-minded and trusted, are able to acquire
skills, retain and attract followers, and promote change and innovation.
3. The Concern Dimension Of Trust – This dimension of trust is that one
party believes it will not be taken unfair advantage of by another.
However, greater trust in another party in terms of concern, may result in
cheating by being opportunistic of unfair advantages. Therefore trust in
terms of concern should be balanced by self-interest and the welfare of
others.
4. The Reliability Dimension Of Trust – Trust in terms of reliability
emphasizes on the dependability or consistency of management or a
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Reliability
leader. Inconsistencies between words and action decrease trust. An
effective leader is one ‘who does what he says’.
QUALITIES TO GAIN TRUST IN LEADERSHIP
Trust is a key ingredient in successful leadership. It is the emotional glue that
binds a leader to his or her people. Trust Fosters commitment rather than
demanding compliance. Some of the characteristics, which a leader should
follow to gain trustworthiness ‘Shaw, Robert Bruce (1997) - Trust in The
Balance’:
1. Generosity - A commander commands people while a leader leads them. A
business leader may get his job done by developing fear in his employee’s
mind, but in the long run it will generate hatred for the leader. He should be
kind and general to every employee.
2. Open-minded - A leader who has conquered his ego problems listens to
criticism. He always try to learn from his mistakes. Only with such an
attitude the employees working under him will feel free to unleash their
imaginations and creative energies, gaining trust upon him.
3. Recognition - The person who heads a company should realize that his
people are really not working for him; they are working with him, for
themselves. They have their own dreams, and he has to help them to fill
their needs as much as they do his. He has to prove them that he is working
hard as they are, that he is competent in his own role as a leader.
4. Fairness – A leader should reward and encourage each employee’s work
appropriately. For example, bonuses should be provided for higher
performance. Such an attribute, will motivate a follower to trust and depend
upon his leader.
LEADERSHIP & TRUST Page 12
5. Honesty – It is very important for a leader to be true and honest (Reina,
Dennis S., 2006 – ‘Trust & Betrayal in Workplace’).
6. Communication – Effective communication by leadership in three critical
areas is the key to winning organizational trust and confidence:
a. Helping employees understand the company's overall business
strategy.
b. Helping employees understand how they contribute to achieving key
business objectives.
c. Sharing information with employees on both how the company is
doing and how an employee's own division is doing - relative to
strategic business objectives. (Shaw, Robert Bruce, 1997 – ‘Trust in
the Balance’)
LEADERSHIP & TRUST Page 13
VALUE OF TRUST
The new and improvised economy, filled with global competition and e-
business in all its forms, has changed the rules of the game, and the speed at
which the game is played. Trust has now become a central factor enhancing
organisation’s long-term success and survival. The uncertainty of the
environment can be swiftly dealt only if the firm can fall back upon the
uncertainty of relationships among people and among groups.
Trust is also a very important asset in terms of improvising various aspects of
organisational behaviour, such as:
Team Management – The efficiency of a group, as a unit, depends a lot on the
relationship of the members with their group leader. The team leader’s
behaviour should be as such that he can be trusted. For example, he should be
consistent with his words and actions, he should act responsibly, he should be
open-minded and honest, he should always recognise his each and every
colleague’s works and award them accordingly, he should be reliable and
dependable, and he should be fair (Pegg, Mike, 1997 – ‘Positive Leadership’).
Trust on a team leader his sub-ordinates, leads to fewer conflicts, promotion of
innovation and commitment towards work.
Motivation - People begin to believe in themselves if they are recognized and
trusted for their efforts in an organisation. Their self confidence boosts up.
They can expand their capacity and performance ability by being trusted to take
LEADERSHIP & TRUST Page 14
decisions, and not just receive orders (Hollerbeck, John R., 1998 –
‘Organizational Behavior’).
Communication – Trust among members of the organisation (inter-
organisational levels); and between the customers, suppliers, share holders and
the organisation (external levels), leads to honest, fluent and effective
communication.
This aspect is considered to be of high importance from an organisational point
of view. Regular communication leads to higher profits and a competitive
advantage. For example, communication with customers increases the
knowledge of their satisfaction or dissatisfaction with the product and further,
helps in improving customer relationship management.
Learning – An effective leader or an efficient employee is one who always try
to learn from his own mistakes and from other’s credibility. Trust helps
building faith and reliability on others. If an employee has faith upon his leader
and vice-versa, then both the party can learn a lot from each other’s knowledge.
LEADERSHIP & TRUST Page 15
TRUST DURING CRISIS
In the latter part of the 20th century and the start of the 21st century,
organisational crises have become almost routine. Crises may occur due to
various reasons, such as faulty decisions, technological complexities, conflicts
in the top management group, or successive low profits. All these factors lead
to adequacy of resources to some areas, while reduction in others, creating
imbalances and operational inequalities. “A Crisis is defined to be a major
threat to a system survival with little time to respond, involving an ill-structured
situation, and where resources are inadequate to cope with the situation”,
definition by “Aneil K. Mishra”, in the chapter “Organizational Response to
Crisis”, from the book “Trust in Organisations”.
It is very important for every organisation to learn to increase performance
rather than decrease, during a crisis. According to Mr. Mishra, there are three
key aspects of organisational behaviour after a sudden crisis in an organisation.
They are described as below with the importance of trust in each of them:
1. Decentralisation of Decision Making – The extent to which decision
making is dispersed to individuals at lower levels of an organization’s
hierarchy. This increases the flexibility and the speed with which
resources can be identified and reallocated to where they are most critical
to the organisation’s survival.
Trust may be a critical factor enhancing decentralized decision making
for several reasons. Delegating involves increasing dependence on others
LEADERSHIP & TRUST Page 16
and entailing greater risks. Accepting greater dependence or risk is at the
core of trusting behaviour, and trust as a belief facilitates trusting
behaviour.
2. Undistorted Communication – Higher-quality communication is also
expected to have a positive effect on the degree to which sufficient
resources are developed to deal with the crisis in a timely fashion.
Effective crisis management depends on open communication channels
among hierarchical levels. Members of an organisation will be able to
allocate scarce resources more efficiently, through honest and complete
information about where those resources exist and how they can be
employed for the optimal benefit of the entire organisation.
“Trust includes beliefs regarding the openness of another’s
communication” (mentioned above in this report, under Trust at Work).
Therefore it is expected, trust to increase the communication of
undistorted and truthful information.
Communication is more likely to be distorted, misleading, or deceptive
when there is existence of suspicion rather than trust.
3. Collaboration – It is the behaviour that attempts to satisfy completely the
needs of parties that are in conflict with one another. Managers
responding to crisis often attempt to minimize the competing resource
claims of affected employees, customers, or other stakeholders. Both
cross-functional and inter-organizational collaboration are expected to
enhance the speed and degree to which adequate resources are developed
during a crisis.
Trust is also a critical factor facilitating collaboration. Collaboration
requires trust in the other party – trust in the other’s information and trust
that the other will not exploit oneself.
LEADERSHIP & TRUST Page 17
Trust has been discussed as a salient leadership characteristic during crisis by
many authors like Kirkpatrick, Locke and Webber. There are three main
relationships based on trust which effects performance in organisation during a
crisis:
1. Trust within an organisation’s top management groups (TMG).
2. Between TNG members and their subordinates, such as font=line
employees.
3. Between members of that organisation and its customers and suppliers.
Crisis
Figure 7.1 Crisis Response Model
LEADERSHIP & TRUST Page 18
TRUST
- TMG
- Organisation
- Inter-organisation
Decentralization
Communication
Collaboration
Adequacy
Of
Resources
TRUST DURING MANAGEMENT OF CHANGE
Every organisation needs to go through radical changes from time-to-time, to
survive in such an intense competitive environment. Competition has driven the
need for downsizing such as cost reduction and technological development. In
both ways, it is the lower level employees who get effected, for example, cost
reduction done by reducing layers of supervision make employees responsible
not only for monitoring and process control but also for basic
maintenance(Brein, Rita O’, 2001). Under a radical technological development
people need to know more about the process tolerances and related products,
they need to be able to assess input supplies with more accuracy.
Therefore these changes results in added comprehensive tasks in job functions
and retaining people becomes difficult for the management. Rehiring is a
considerable cost.
Special meetings between management and a group of representatives of lower-
level employees should be held in order to learn about their problems and
suggestions. Through communication, change in job design can be
implemented according to the corporate strategy, keeping in view, the
aspirations of employees. This will make people feel valued, encouraging them
to make suggestions about processes and services and take initiatives.
Proper communication and creating mutual understanding based on trust is the
only positive way to face challenges of change and use it towards the
betterment of the organisation.
LEADERSHIP & TRUST Page 19
RECOMMENDATIONS ON HOW TO BUILD MUTUAL TRUST
1. Hope in the goodness of mankind : Without such hope people can
become emotionally stuck, reclusive, and isolated. Hope in goodness is a
change based on the willingness to take a risk that all people are not evil,
bad, or ill-willed.
2. Faith in the fairness of life : This faith in fairness is similar to the
``boomerang belief,'' that what you throw out to others will come back to
you eventually in life. So if people are fair, honest, or nurturing they will
eventually receive similar behaviour aimed back at them. Having faith in
fairness is an attitude that helps people be open to others and risk being
vulnerable. They believe that the person who treats them negatively will
eventually ``get it in the end!'' and be punished in some way later in this
life or in the next.
3. Self-disclosure of negative self-scripts : Your disclosing of your inability
to feel good about yourself and your perceived lack of healthy self-
esteem are essential in reducing miscommunication or misunderstanding
between you and the significant others in your life. This self-disclosure
reveals to the others your perspective on obstacles you believe you bring
to relationships. This sheds the mask of self-defensiveness and allows the
other to know you as you know yourself. It is easier to trust that which is
real than that which is unreal or hidden.
4. Taking a risk to be open to others : This enables you to become a real
person to others. It is an essential behaviour in trust-building between
LEADERSHIP & TRUST Page 20
two people because it is the establishing of the parameters of strengths
and weaknesses on which you have to draw as the relationship develops.
CONCLUSION
From the above researches, it can be known that, how important is for a leader
to build trust and confidence in an organization. First of all, he should adapt the
necessary leadership qualities and then utilise them in building trust upon the
employees. A leader should always remember that employees are the most
valuable asset in a firm, and are to be treated as human-beings. It is very
important for a management to build strong relationships and bonds among
individuals in an organisation. Utilisation of the creative energies of each and
every individual in an organisation, provides a lot more broader and healthier
future. Trust also enhances the speed at which an organisation of work, in crisis
situations, non-crisis situations and also during downsizing.
REFERENCES
BayLick, Marcia (1995) Its A Matter Of Trust: San Diego, Browndeer Press.
Wagner, John A. & Hollerbeck, John R. (2002) Organisational Behaviour – Securing Competitive Advantage: Fort Worth, Harcourt College Publishers.
McCauley, Cynthia D. & Velsoor, Ellen V. (2004) The Center For Creative Leaderdhip – Handbook Of Leadership Development: San Francisco, Josey-Bass.
Brinckerhoff, Peter (2001) Mision-Based Management: Hoboken, N.J., Wiley ©2003.
Caroselli, Marlene (2000) Leadership Skills For Managers: NY, McGraw Hill.
Giulani, Rudolph W. (2003) Leadership Through The Ages: NY, Miramax Books.
LEADERSHIP & TRUST Page 21
Pegg, Mike (1997) Positive Leadership – How to Build a Winning Team: Oxfordshire, Management Books Ltd.
Roebuck, Chris (1999) Effective Leadership: London, Marshall.
Brien,Rita O’ (2001) Trust – Releasing the Energy To succed: Cruise, Chiclester, Wiley.
Reina, Dennis S., & Reina, Michelle L. (2006) Trust and Betrayal in The Workplace: San Francisco, Berrett-Koehler Publishers
Shaw, Robert Bruce (1997) Trust in The Balance: San Francisco, Josey-Bass.
Stodgill, Ralph M. (1974) Handbook Of Leadership: NY, Free Press.
Pfeffer, J., & Salancik Gerald R. (1987) The external Control Of Organizations: Stanford Business Books ©2003.
Hersey, P., Blanchard Kenneth H., & Johnson, Dewey E. (2001) Management Of Organizational Behaviour: NJ, Pearson Printice Hall.
Fielder, Fred E. & Gracia, Joseph E. (1987) New Approaches to Effective Leadership: NY, Wiley.
Kramer, Roderick M., & Tyler, Tom R. (1996) Trust In Organisations – Frontiers Of Theory & Research: Thousand Oaks, Sage Publicaitons
King, Nigel & Anderson, Neil (1995) Innovation & Change in Management: London, NY, Routledge.
LEADERSHIP & TRUST Page 22