Leadership & Trust

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[LEADERSHIP & TRUST] CRITICALLY ANALYSE AND DISCUSS WHY TRUST IS THE KEY TO EFFECTIVE LEADERSHIP IN AN ORGANIZATIONAL CONTEXT 2008 MANAGEMENT OF CONTEMPORARY ORGANISATION S Mr. FRANKIE YEE

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A report prepared as a mandatory part of the module "Leadership in Organisations" as a MBA student in James Cook University.

Transcript of Leadership & Trust

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[ ]CRITICALLY ANALYSE AND DISCUSS WHY TRUST IS THE KEY TO EFFECTIVE LEADERSHIP IN AN ORGANIZATIONAL CONTEXT

2008MANAGEMENT OF CONTEMPORARY ORGANISATIONS

Mr. FRANKIE YEE

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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

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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.

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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

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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

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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

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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.

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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’)

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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

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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.

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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

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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.

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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

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TRUST

- TMG

- Organisation

- Inter-organisation

Decentralization

Communication

Collaboration

Adequacy

Of

Resources

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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.

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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

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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.

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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.

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