The Importance of Trust in Business

The Importance of Trust in Business by Amber Hanna

Trust in an organisation will be based on trust in the people who make up that organisation. Trust is necessary for effective communication and cooperation without which an organisation could not function. Trust can reduce complexities and costs of exchanges in a more efficient manner than alternative means of managing organisational life.

Corporate communication is the main mechanism for fostering this type of trust. Organisations can be the objects of their employees’ trust, as people generally trust an organisation to behave in a responsible manner and regulate the intentions of its employees to serve its interests.

Research has demonstrated that trust in an organisation can reduce the need for hierarchical controls and formal contracts, as well as reducing the occurrence of opportunistic behaviour. Trust in people and trust in organisations are connected by the functions and positions people have, and the roles people play within the organisation.

This view of trust has been strengthened by research findings indicating that trust and job design are complementary constructs in understanding important organisational outcomes such as job satisfaction and intention to quit.

Trusting and being trusted

Trustworthiness and trust are separate things, trustworthiness is a quality that the person we put our trust in (or trustee) has, while trusting is something that the trustor does. This suggests that characteristics of the trustee will lead to them being perceived by others as more or less trustworthy. The characteristics of the trustor that influence perceptions of their trustworthiness according to research are their ability, benevolence and integrity.

As a relationship progresses and trust develops, both parties gather experience, and a growing body of trust-relevant evidence on which to base their assumptions develops. As this happens different levels of trust may develop across the facets of trust, so within a relationship an individual may trust another with respect to some areas but not others.

An advantage of this approach to trust is that it can lead us to a better understanding of working relationships. In a business setting it is quite possible that a leader may be trusted according to their competence but not trusted in terms of their reliability or openness. This provides a useful tool for managers or leaders in organisations as it is possible to locate which aspect of trust they are deficient in and provides recourse to improve this.However as people we can never be fully sure of another’s motivations, intentions or even actions.

Often trust comes down to a decision to trust or distrust. The inherent vulnerability that we accept when we decide to trust someone causes us to constantly doubt whether our decision is right. Reducing this doubt can help us determine whether the decision we make regarding someone’s trustworthiness is the right one.

Roderick Kramer recently described in the Harvard Business Review (June 2009) seven concrete tips to reduce this doubt and achieve what he calls ‘temperate trust’

1. Know yourself

Think back on your experiences with people you have mistakenly trusted or distrusted, is there a pattern where you have trusted too easily? Or are you the type of person who guards their trust too closely, assuming the worst and holding back?

2. Start small

There is no avoiding the risk that is entailed in trusting, however if you are trying to develop an atmosphere of trust in your business start small. Give your employees opportunities to show they are trustworthy that entail little risk for you. If you begin to meet people halfway by reducing red tape you will foster trustworthy behaviours.

3. Write an escape clause

If people have a clear way out of a situation if things don’t go the way they planned they will be more likely to trust fully and give more commitment.

4. Send strong signals

Your own trustworthiness may be obvious to you but those around you may still need more evidence.  It is important to send strong signals regarding your own trustworthiness, at the same time react purposefully to breaches of your trust to show trust is an important value to you.

5. Recognize the other person’s dilemma

While you are struggling with the decision between trust and distrust the other person in the scenario may be experiencing the same thing. To build good relationships it is essential to assuage feelings of anxiety and concerns you colleague may have.

6. Look at roles as well as people

A given role may provide evidence of a person’s expertise and motivation. But be aware that a position does not automatically confer trustworthiness.

7. Be vigilant and question everything

When we engage in a relationship we think about a person’s trustworthiness, however after that decision has been made we often don’t question it again until our trust has been breached.

It may be psychologically uncomfortable to remain vigilant and question our decisions to trust but it may prevent abuses of trust occurring in the future.

________________________________________________________________________________________________________________________

To learn more about our services, please contact the office: +353-1-6688891 or info@davittcorporatepartners.com

Discover how DavittCorporatePartners can help you to:

Develop Leadership in Your Organisation

Win the War for Talent

Realise Individual Potential

Align Behaviour with Corporate Values

________________________________________________________________________________________________________________________

Amber Hanna is a trainee Organisational Psychologist at DavittCorporatePartners – Corporate Psychologists


A Window on an Alien World: Development Centres in the Context of Director Competencies

Andrew Harley Reports on the experiences drawn from the use of director level competencies in three different organisations

The body of literature relating to human resource management is replete with reports on the use of competency frameworks which are weighted heavily towards blue-collar, administrative and management roles within organisations. In the 1990s a body of work has emerged to establish director competencies. This article will report experiences drawn from the use of director level competencies in three different organisations.

A number of large-scale projects have been undertaken with clients in response to a common question: how can we identify in senior individuals the potential to contribute at board level or equivalent and, having done so, facilitate the development of that potential? This article will report findings from work in three client organisations; the National Health Service where the target level was chief executive of a trust, a large city legal practice where the target level was partner and a major building society where the target level was a supra-functional executive level.

Methodology

In each case an empirical approach was adopted to establish the competencies against which individuals would be measured. At this point it is appropriate to define the term “competency” as it will be used in the rest of this article.

A competency is defined as: “an underlying characteristic of an individual which is causally related to effective or superior performance in a job” [1]. This definition may be further expanded to:

Competencies can be motives, traits, self-concepts, attitudes or values, content knowledge or cognitive or behavioural skills — any individual characteristic that can be measured or counted reliably and that can be shown to differentiate significantly between superior and average performers, or between effective and ineffective performers[2].

With each client organisation competencies were developed using a combination of behavioural event interviews, repertory grid and expert panels. Experience would suggest that the adoption of a generic or externally developed model of director competencies is limited in scope as the definition and associated behavioural indicators critically need to reflect an organisation’s culture and values. The postulate that “values held by the individual should not be incompatible with the values held by the organisation” [3] becomes vitally important at board level where the exercise of personal competences transcends an individual’s functional or technical heritage.

The ensuing competency framework comprises a definition of the discrete competence together with associated behavioural indicators such that observed behaviour can have some meaning in terms of the underlying competences. The competency models range in scale from eight to 13 discrete competences. Although defined individually, evidence would suggest that there is a dynamic between the competences which leads to the whole being greater than the sum of the parts.

Having agreed the competency framework, a development centre design was adopted, generally comprising exercises and simulations allowing individuals the opportunity to evidence the competencies. The components of the development centre typically were: a leaderless group discussion, a role play, in-tray and analysis exercise. Additionally, a personality measure was included. In each case, exercise materials were designed and developed in close collaboration with the client, such that they had relevance to the client’s business and would have credibility for the participants. The development centre paradigm was based on external observation and assessment utilising the discipline of observe, record, classify and evaluate. Assessors were drawn from each client organisation’s boards, or in the case of the legal practice, from senior partners. The assessors underwent a period of training in the assessment process. In this way, the exercise materials were validated and appropriate standards set for evaluation of the competences.

In practice, the events were run over three consecutive days. Day one was devoted to participants engaging in exercises and the assessors observing and recording. Day two was devoted to explaining the background of the process to the participants, describing the competency framework and means of assessment. In addition, the participants undertook a number of self-assessed exercises in order that they could rate themselves against the competences. By the end of day two the assessors had completed their evaluations and given feedback to the participants. On day three the participants received feedback from the personality profile (which the assessors do not have access to) and worked individually to assimilate all the information which they had received and to evaluate this in the context of their own careers and the direction which they would wish to take. Syndicate work was also undertaken to elucidate avenues for addressing the development needs which had been identified.

Outcomes

The outcomes from the development centre fall into two broad domains. Sound evidence of individuals’ capability and potential is generated. From the individual’s perspective, they have a personal development plan which will identify the areas which need to be addressed to enhance the prospect of them being contributors at board (or partner) level.

While the above is a reasonably robust framework, it cannot and should not stand in isolation. The immediate benefits of the process to the organisation are clearly apparent and generally immediate. However, there is an acute need to be sensitive to the fact that the participants are people, rather than components going through a process, who by the very nature of the experience may have their values and priorities challenged. Thus, a development centre, while being a valuable vehicle for the release and encouragement of potential in outstanding individuals, may also be a source of cognitive dissonance and de-motivation to others. Demystification as a source of personal discomfort is not new and was reported as early as 1951 [4]. Again, at this point it is worth reinforcing that development centres targeted at director (or partner) level have differentiated substantially from those which may be available to more junior levels within an organization, as they pivot on personal competences rather than functional or process skills. It thus becomes imperative that the preparation of participants before the development centre and the support of them post-event, is given equal weight and managed with a high degree of sensitivity.

The premiss on which the development centre is based is one of exposing individuals to the demands and challenges of operating at director level and, from this, learning where their development needs lie. Given the context of the development centres it is inevitable that the participants come from a sub-director class and tend to be operational managers, functional heads or technical specialists. As a consequence, the main thrust of their current responsibilities lies in the management of processes and procedures directed towards clearly identified goals and outcomes. In the majority of organisations, and certainly the three cited in this article, the means of transition from function head to board level has been via an obscure process, the operation of which is opaque to the participants. The development centre itself clearly articulates a number of criteria which are essential for successful performance at director level and in doing so, informs the individuals both of the nature of the process but, more particularly, of the work which they themselves have to do in terms of development to stand a chance of promotion in the future. In this way the process is demystified and the responsibility burden tends to be transferred from the organisation to the individual.

Individuals could evaluate any potential personal cost involved

As an integral part of each development centre participants are asked to complete a feedback questionnaire at the close of the third day. This is an opportunity for them to give a rating of the event overall, its facilitation and component parts. Unexpectedly, one activity which is consistently rated highest is the feedback from the personality questionnaire. The personality measure used was the 16PF Form A and participants received feedback on a one-to-one basis after they had been given their feedback on the competences. The insight gained from the personality profile aided the participants by elucidating some of the temperament underpinnings of their evident behaviour. From this understanding, individuals could begin to evaluate any potential personal cost involved in changing their behaviour and the relative ease with which it might be achieved.

Through the process of defining the competencies, the organisation is allowed a vehicle for articulating the individual qualities which are of value. This is an important stage in determining those qualities which are of value to an organisation currently and, perhaps of greater importance, those which will be of value in allowing the organisation to position itself in anticipation of future demands. The distinction between standards for director level and the level at which participants are performing is most sharply differentiated in two broad areas.

The first of these pivots on the breadth of awareness of the environment in which the undertaking operates. Universally, participants display a strong grasp of the functional area in which they are resident and the segment of the outside environment which that interacts with. However, understanding the relationship between that area and other areas within the undertaking is not often that well developed. A lack of understanding of the breadth of the environment in which the undertaking operates and the complex nature of the operation of external factors is generally presented by participants as being symptomatic of an inability to synthesize problems and define strategic direction.

The second area commonly evidenced as a development need relates to the control of initiatives. Participants evidence a reluctance to relinquish immediate personal control of initiatives and do not have adequate mechanisms for determining that which should remain within their personal control and that which they can confidently delegate to others. There is little understanding and acknowledgement of the medium- and long-term impact of their personal actions in the context of the undertaking as a whole and the impact of this inhibitor is closely associated with the degree to which an individual can engage a sense of vision and strategic perspective.

These competence areas present consistently as being correlates of successful performance at director level and, for participants, they also present the greatest challenge in terms of development needs. This, in itself, should not be surprising, as a director who is performing at an outstanding level will not necessarily have intimate day-to-day contact with individuals at the participants’ level and consequently their mode of operation will be masked from casual view. It is reasonable to speculate that directors would not have the time or the will to articulate and communicate to those around them the complexity of their thought processes in the divining and development of strategy. Rather, the participants would have a clear view of a single strategy, short- and medium-term goals and outcomes which they and their departments were expected to achieve. By way of illustration, participants will frequently assume that every problem presented in an exercise is a legitimate problem and deal with it. In doing so they become swamped by detail. The competent director, however, will judge those items which are trivial and those which are critical and focus his or her energies on the critical issues, recognizing that the trivial aspects have little impact on the undertaking.

The nature of the exercises is such that the level of structure within the exercise and therefore the prescriptive nature of the exercise varies. In relative terms participants do better on the structured exercises and less well where there is a requirement for them to develop their own structure and impose their own priorities. They do feel less at ease with, and express more criticism of, those exercises that are less structured, while often still being inclined to concede that ambiguity may characterise the matters with which directors’ deal.

Broader issues

From the above it is a relatively simple task, within the context of the centre, to feedback to individuals where their development needs lie and the reasons for them. It is, however, less easy to establish a means by which these development needs can be adequately addressed.

The development centre represents a “rite of passage”

Participants arrive at a development centre with a variety of preconceived ideas and expectations. The commonly held belief is that the development centre represents a “rite of passage” which will open the door to the boardroom. The reality, however, is that it acts as a brief window from which the participant can view some of the complexities and priorities which prevail in a director’s role. Unless the event and the support of participants is carefully managed after the event, that window can become firmly shuttered for a long time.

The application of assessment centre technology as a tool to facilitate the development of individuals towards director level competences is a relatively new sphere of activity for practitioners and one where the body of research literature is relatively small. The experience reported in this article would suggest that there are substantial organizational benefits to derive from such an approach and also serve to highlight the distinction between director-level competences and those which prevail in other levels of an organization. An apposite observation may be that, while development centres have been utilized in other levels of organizations than the board, with degrees of success, it may be argued that this success has stemmed from the development needs being addressed by support being readily identified for the individual and put in place. At director level the development needs which are being clearly articulated and powerfully reinforced by evidence drawn from observation, are not as easily met by a prescriptive course of action to allow the individual to achieve the requisite standard. This is not to suggest that the task is one which cannot be achieved but one where its achievement will rest substantially on an organization allowing individuals more open access to board members and the freedom to learn from broadening their own base of experience.

Postscript

It is apparent that the future success of a number of organizations will depend on those organisations acknowledging that not all able individuals wish to have a career path which is linear and progressive. Able individuals can contribute to an organization in such a way that their performance will be substantially enhanced, if the organization allows them the opportunity for informed selfmanagement of their careers.

References

  1. Boyatzis, R.E., The Competent Manager. A Model for Effective Performance.~ Wiley-Interscience, New York, NY, 1982.
  2. Spencer, L.M., McClelland, D.C. and Spencer, SM., Competency Assessment Methods, Hay/McBer Research Press, Boston, MA, 1990.
  3. Smith, M., “A theory of the validity of predictors in selection”, Journal of Occupational and Organizational Psychology, Vol. 67 No. 1, 1994, pp. 13-31.
  4. Parry, 1.~ “The psychological advisors problems”, Occupational Psychology, Vol. 25, 1951, pp. 124-30.

________________________________________________________________________________________________________________________

To learn more about our services, please contact the office: +353-1-6688891 or info@davittcorporatepartners.com

Discover how DavittCorporatePartners can help you to:

Develop Leadership in Your Organisation

Win the War for Talent

Realise Individual Potential

Align Behaviour with Corporate Values

________________________________________________________________________________________________________________________

Andrew Harley is a Senior Consultant at DavittCorporatePartners – Corporate Psychologists