Academic journal article SAM Advanced Management Journal

Developing Trust in Leaders: An Antecedent of Firm Performance

Academic journal article SAM Advanced Management Journal

Developing Trust in Leaders: An Antecedent of Firm Performance

Article excerpt

[ILLUSTRATION OMITTED]

Research on leadership has identified trust as a critical element of both leader effectiveness (Hosmer, 1995; Shamir et. al, 1998) and firm performance (Davis, Schoorman, Mayer, and Tan, 2000). The link between employees' trust in leadership and firm performance is quite clear; as trust increases, firm performance rises. Less obvious is how managerial leaders can generate trust among their subordinates. In fact, many forces seem to be counter to the process of trust-building. Emphasis on efficiency, resource conservation, flat organizational structures, and reliance on technologically-mediated communication all contribute to relatively large spans of control and limited interaction with subordinates. In the face of these trends, today's leaders are still expected to contribute to firm performance by developing effective, productive relationships with employees. Given the seemingly contradictory demands understanding how leaders build trust among their subordinates is very important.

The purpose of this study is to investigate factors that may contribute to the development of employee trust in leadership and thereby increase firm performance. Our investigation is guided by social influence theory, which supports our argument that the influence process is central to the development of trust between subordinates and managers. Specifically, we focus on a manager's use of rational influence tactics, the provision of autonomy to subordinates, and the quality of the leader-member exchange relationship as processes by which managers may attempt to develop trust with their subordinates. We then consider the importance of trust on the firm's performance through a measure of restaurant unit sales.

Theory and Hypotheses

Social influence and the development of trust

Social influence theories focus on the processes used to form, maintain, or change social norms (Turner, 1991). In an organizational setting, social influence refers to the different ways organizational members choose to influence the behavior and attitudes of other members. Given that the current organizational environment is centered on team-based relationships, managers are often expected to achieve the highest level of performance through the creation of relationships characterized by trust, partnering, coaching, and self-responsibility. To be trusted, managers must go beyond the expected modes of behavior (Kelman, 1961); as trust is established employees are more willing to accept management's judgments and decisions (Tyler and Degoey, 1996). With ever increasing demands on managerial time and resources, going beyond follower expectations in today's business climate is clearly a formidable challenge. Managers may meet this challenge through the use of jointly designed responsibilities, action plans, and performance goals (Randolph, 2000). The competent use of social influence is a way to persuade employees to formulate team-based attitudes and practice collaborative behaviors consistent with this new management model. Command and control tactics are outdated in most organizations today, and managers may find that social influence helps to generate desired performance outcomes. Three social influence tactics that managers may use to inspire employee trust are rational influence, the provision of autonomy, and the development of high-quality leader-member exchange relationships.

* Rational influence tactics. These are specific types of proactive behavior used to exercise social influence (Yukl, 2002). A manager's choice of influence tactics directly affects team development (Douglas and Gardner, 2004) and subordinate attitudes and behaviors (Yukl, 2002). Rational influence tactics include using logical reasoning and factual knowledge to influence others (Kipnis and Schmidt, 1982, Yukl and Tracey, 1992). Studies suggest that managers use rational tactics to communicate respect, to recognize that a subordinate understands managerial objectives and has technical knowledge, and to strengthen relational ties (Farmer, Maslyn, Fedor, and Goodman, 1997; Tepper et al. …

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