Organizational Trustworthiness: An International Perspective.

Organizational Trustworthiness; An International Perspective

ABSTRACT. Although trust has been widely recognized as a vital component of relationships and a critical element to the success of organizations, the literature describing trust and trustworthiness is known for its varying perspectives and its inconsistencies. Trustworthiness has been identified as a condition precedent to the development of trust. Building upon the established constructs of interpersonal trustworthiness, we propose a related mode! containing the seven constructs of Competence, Legal Compliance, Responsibility to Inform, Quality Assurance, Procedural Fairness, Interactional Courtesy, and Financial Balance. Citing evidence from trust-related literature, we identify the utility of these seven constructs in encompassmg organizational trustworthiness as a subjectively perceived aspect of organizational effectiveness. We analyzed questionnaire data and conducted comparative world-region analyses. KEY WORDS: international, interpersonal trust, organizational trust, organizations, trust

Caw Caldwell is an assistant professor of manaj^cmenf al the University of Houston-Victoria. He is a Thomas H. Foley Fellow at Washington State University. His research interests are in the area of ethical leadership, stewardship, theory, trustworthiness, and justice. Stephen Clapham is an associate professor in the Department of Management and International Business at Drake University. His research interests are in the area of impression management, organizational voice, turnarounds, and organizational trust.

Introduction

Cam Caldwell Stephen E. Clapham

: .

The recent events surrounding the collapse of the seventh largest company in the U.S., along with the dismanthng of the fifth largest U.S. accounting firm suggests that we are in need of understanding how organizational trust is formed. Many Enron employees trusted the company they worked for so much that they had their entire life savings invested in it. As Enron's stock price plummeted from a high of $85 to $0.25 many individuals and institutional investors lost billions of dollars. The Justice Department has opened a criminal investigation into Enron, whose bankruptcy has put thousands of people out of work, devastated many investors and wiped out the pension plans of thousands of employees. In addition, it has been alleged that Enron management was involved in market manipulation, during the California energy crisis, in order to increase profits. Stakeholders trusted not only that Enron was providing accurate information regarding its operations, but also trusted in the checks and balances of nationally established audit standards for insuring accurate reporting and interpreting of data. Despite the fact that trust is considered to be fundamental to the understanding of interpersonal and group behavior (Hosmer, 1995; Hirsch, 1978) and the foundation upon which societies are founded (Bok, 1978), some scholars suggest that trust is at an all time low and is needed now more than ever in interpersonal relationships and in organizations (Reina and Reina, 1999). This decline in trust should come as no surprise as we hear about cases such as Enron, the Ford Explorer/Bridgestone-Firestone tires

Journal of Business Ethics 47: 349-364, 2003. © 2003 Kluwer Academic Publishers. Printed in the Netherlands.

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Cam Caldwell and Stephen E. Clapham

roll-over problems, nicotine spiking of cigarettes, and other examples that are becoming increasingly common. Who do individuals trust and why do individuals trust them? This question is important not only for American business leaders to understand, but for leaders in a global economy. The interactions of individuals and groups creates social relationships. Social relationships are constantly shifting as a result of adaptation to individuals' perceptual experiences within the milieu of human interactions. Trust is an essential aspect of the adaptive process; indeed, trust is the very fabric which holds our society together. The adaptive process involves the assessment of trustworthiness of individuals, institutions, and organizations that are a part of the social network. The perception of trustworthiness is based upon the observed behaviors of others (Mayer et al., 1995; Caldwell and Jeffries, 2001; Caldwell et al., 2001). The assessment of trustworthiness often occurs through repetitive interactions where individuals form opinions and adjust not only their own behaviors but, where possible, the nature of the relationships network\ It is intuitively obvious that interactions occur among individuals, yet we form trustworthiness opinions about institutions and organizations as well. While an individual may not be fully aware of the dynamics involved in an interaction with another individual, at the very least, there is a recognizable entity with which one is deahng. How so for an organization? Barnard (1938) defines an organization as "a system of consciously coordinated activities or forces of two or more persons" (p. 81). While an organization may be recognized as distinct and unique, we cannot touch or see it. As Barnard (1938) describes, "sometimes physical things, persons, statements, etc., serve to define or locate an organization, just as magnets and affected metals defme or locate magnetic fields" (p. 76). In other words, individuals form their perceptions about organizations based upon information about the organization and experiences with the organization that might include such things as interactions with employees and product/ service purchases. Within the context of

Barnard's definition and description of organizations we can begin to explore organizational trustwôrthiness. The purpose of this paper is to build upon the current literature to present a model of organizational trustworthiness that offers testable criteria upon which to measure this important construct. Given the recent history of the Enron case, with its accompanying embarrassing impact upon Arthur Andersen and the entire investment community, perhaps there is no more important time for organizational leaders to understand the factors that make up organizational trustworthiness. In this paper Section one will provide a brief overview of the definitions of trust and trustworthiness and will provide a context in which organizational trustworthiness logically fits. Section two will then present a seven factor model for organizational trustworthiness, briefly defming how this model relates to the classic three factor model of interpersonal trustworthiness established by Mayer et al. (1995). Section three will return to the academic literature to demonstrate that our seven factor model has a sound theoretical footing. Section four will briefly discuss Hofstede's cross-cultural perspective and develop hypotheses. Section five and six wîll identify the data and discuss analyses and results. Section seven discusses the findings and the final section presents limitations and future research.

Definitions of trust and trustworthiness The academic literature about trust has historically been described as "a paradox" (Golembiewski and McConkie, 1975, p. 131), "a confusing pot pourri of definitions" (Shapiro, 1987, p. 624), and limited by "a lack of conceptual clarity" (Bluhm, 1987, p. 334). Trust and trustworthiness are constructs that are commonly interchanged as if they were the same concept (Caldwell and Jeffries, 2001), and a multitude of definitions and approaches from a diversity of perspectives have been offered to provide insight into the field (Hosmer, 1995). The interchange of trust and trustworthiness is most likely due to

Organizational Trustworthiness

the cheek-by-jowl relationship of the constructs. While it is difficult to imagine one without the other, we will attempt to define each and discuss their interrelatedness. "Trust is an expression of faith and confidence that a person or an institution will be fair, reliable, ethical, competent, and nonthreatening" (Carnevale, 1995, p. xi). If you close your eyes and fall backward into another's arms, you trust that individual has the desire to catch you, they have the strength to catch you and they will not move away from your fall. Certainly, the act of closing one's eyes and falling is a risk; it is giving up control of where and how you land. Two soldiers walking down a trail in enemy territory, each carefully scanning one side of the trail and putting their life in the hands of the other. Soldiers trust that their comrades have the ability to spot the enemy, have the fire-power to divert an attack, and will make the right response if an enemy is encountered. These examples illustrate that "the context of the relationship will affect both the need for trust and the evaluation of trustworthiness" (Mayer et al., 1995, p. 727). The act of trusting is a temporal phenomenon since it is based on experiences, interactions, and perceptions of others, organizations and institutions. Trust is an attitude refiecting a willingness to assume a risk and relinquish control in the hope of receiving a desired benefit. As Mayer et al. noted, ability, benevolence, and integrity are each important to trust, "and each may vary independently of the others" (Mayer et al., 1995, p. 720). Caldwell and Jeffries (2001) noted that the three elements in the Mayer et al. model are subjectively perceived by each individual — and that each person's individual lens contains an ethical filter and a set of core beliefs that form the basis of one's frame of reference and unique perceptual paradigm. As a dyadic relationship, interpersonal trust is "determined by contextual factors such as the stakes involved, the balance of power in the relationship, the perception of the level of risk, and the alternatives available to the trustor" (Mayer et al., 1995, pp. 726-727). Smiilarly, "the context of the relationship will affect both the need for trust and the evaluation of trustworthliness" (Mayer et al., 1995, p. 727).

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Carnevale et al. (1982, p. 13) affirmed the ethical nature of the individual lens, described by Caldwell and Jeffries in describing trust as "a concomitant expectation that the other (in a relationship) will reciprocate". Hosmer also emphasized the ethical elements of trust and identified ten ethical principles as the decision rules that impact the trust decision (Hosmer, 1995). Similarly, Caroll (1996) listed fourteen ethical framewôrks or principles as the lenses through w^hich individuals interpret the world. The elements of one's ethical lens are derived from the set of core beliefs - about self, others, the past, current reality, and the future - that Caldwell et al. (2000) called the Five Behefs Model (cf. Senge, 1990; Sehein, 1985). Trustworthiness is the antecedent accumulated perceptual experiences that lead one to trust another person, institution, or organization. Caldwell and Jeffries (2001, p. 6) defined interpersonal trustworthiness as "the subjectively perceived point on a continuum at which an individual's behaviors are perceived as complying with the ethical duties considered to be owed to the person who is making the decision to trust." Interpersonal trustworthiness is individually determined and based upon each individual's ethical perceptions regarding the duties to which he or she is owed by the person whose objective behaviors are being observed. As noted by Caldwell and Jeffries (2001), the subjective nature of the interpersonal trustworthiness process helps to explain why two people may differ in interpreting whether or not the observed person is one to trust. Describing trust in terms of one's ethical perceptions, Hosmer (1995, p. 389) defined trust as "the result of a given decision or action that recognizes and protects the rights and interests of other people through an application of the ethical principles of analysis." We suggest that the trust decision described by Hosmer is based upon the subjective perceptions of each individual, and that it is a product of their individual lens. Figure 1 illustrates the relationships between the objective behavior, the perceptual lens, perceived trustworthiness, and the decision or attitude to trust (Caldwell and Jeffries, 2001). . .

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Behaviors of Ability Benevolence Integrity

Lens

Perception of Trustworthiness

Trust Attitude

Figure 1. Trustworthiness and the mediating lens. Organizational trustworthiness Trustworthiness as an organizational construct is closely related to interpersonal trustworthiness. Hosmer defined trust as "the exception by one person, group, or firm of ethically justifiable behavior — that is, morally correct decisions and actions based upon ethical principles of analysis — on the part of the other person, group, or firm in a joint endeavor or economic exchange" (1995, p. 399). Though Scott (1987) would contend that organization members - not organizations — are the ones who trust, we concur wîth Hosmer that trust can be extended to individuals, to groups, and to organizations of various types - and that many organization types can possess express or implied duties and be expected to be trustworthy. Just as interpersonal trustworthiness involves a set of personal and ethical duties perceived as owed to another person, organizational trustworthiness incorporates a related but uniquely different set of duties. In describing the nature of duties, Solomon (1993) noted that duties are defined by one's role and carry a moral weight, even when they are not explicitly articulated. Duties, according to Solomon (1993, p. 163) are more specific than generaHzed "obhgations" or "responsibilities" but are "ground-level, rolespecific aspects of one's position" that carry the burden of honoring both specific and general ethical imperatives. At the organizational level, duties require the ability to serve a multitude of stakeholders while balancing each duty within the larger organizational and community setting.

Caldwell et al. (2001) have identified a set of seven duties that are commonly owed in the human resource management selection process that represented a model of organizational level trustworthiness. The duties that they listed in their study of public sector assessment centers include the following seven elements: Competence — Competence includes the level of knowledge and ability to achieve results associated with the purposes of an organization. Quality Assurance - Quahty assurance addresses the extent to which standards of quality are understood and adhered to on a continuous basis to achieve desired outcomes. Interactional Courtesy — Interactional courtesy encompasses the degree of respect and courtesy shown to others in performing organizational duties. Procedural Fairness — Procedural fairness includes the extent to which stakeholders are given the opportunity to participate in fair processes and systems associated with the formal and informal practices of the organization. Responsibility to Inform - Responsibility to inform incorporates the level of communication provided to stakeholders who have an interest in organization objectives and outcomes. Legal Compliance — Legal compliance refers to the degree to which applicable laws are understood and followed. Financial Balance - Financial balance includes


the ability of the organization to achieve both efficiency and effectiveness in accomplishing organizational results. Although Caldwell et al. (2001) defined these seven duties in terms of the human resource profession, we suggest that these duties make up a comprehensive model of the elements of organizational trustworthiness - and that they are directly comparable to the Mayer et al. (1995) model of interpersonal trustworthiness. Table I briefly summarizes the relationships that we suggest are similar in the seven elements of organizational trustworthiness with the three factors of interpersonal trustworthiness: ,, As noted by this table, the seven elements in the Caldwell et al. (2001) set of organizational duties parallel the three factors of ability, benevolence, and integrity of interpersonal trustworthiness.

Theoretical and conceptual connections Affective

component

'

. • • - . .

Several scholars have presented key ideas that reinforce the theoretical and conceptual connections betwêen interpersonal and organizational trustworthiness. McAllister (1995) noted that interpersonal trust contains both an afFective and

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a cognitive component, and that these components are closely related. Williams (2001) noted that people s perceptions about their interdependence with other groups influence their beliefs about group members' trustworthiness and their affect for group members. Fiske and Taylor (1991) confirmed that developing trust and cooperation across organization boundaries can be difficult because differing organizations typically have conflicting goals. Williams (2001, p. 378) noted that trust development is affected by group association between two diverse groups because people are "likely to hold positive perceptions of fellow group members' trustworthiness and exhibit cooperative behavior toward them" (c.f. Brewer and Kramer, 1995). Brewer and Miller (1996) noted, however that people w^ho have Uttle common association experience "out-group effects" in w^hich members of low contact groups are perceived as less trustworthy than their own members. Some studies note that dissimilar groups - including culturally diverse as well as functionally or demographically different categories — view members of contrasting groups with distrust and suspicion (Thilbeault and Kelly, 1991). Other research suggests that dissimilar professional groups can develop rapid trust when working on joint projects (Meyerson el al., 1996). However, Williams (2001) noted that confidence, associated with professional certification, can generate positive beliefs about another

TABLE I Comparison of interpersonal and organizational trustworthiness Interpersonal trustworthiness factor

Key

Ability

SkiUs,

elements of factor

competencies. expertise

Organizational trustworthiness elements

Similarities with interpersonal trustworthiness

Competence financial balance quality assurance

Focuses on task excellence and outcomes

Benevolence ••

Benevolence, intentions, "desire to do good"

Interactional courtesy responsibility to inform

Demonstrating respect. courtesy, and involvement

Integrity

Character, integrity, fairness. credibility

Legal compliance procedural fairness

Honors ethical requirements and treats others fairly

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group's trustworthiness. Lewicki and Bunker (1996) confirm that the trustworthiness of others is increased by interacting with them over an extended period of time. Mayer and Davis (1999) determined that in the performance appraisal process that employees who felt treated by persons high in ability, benevolence, and integrity were equated with an increased propensity to trust. These findings suggest that trustworthiness has a highly affective component - a point emphasized by McAllister (1995). Pennings and Woiceshyn (1987) found that people make emotional investments in trust relationships, express genuine care and concern for the welfare of partners, believe in the value of such relationships, and believe that these sentiments are reciprocated. Ultimately, the emotional ties linking individuals can provide the basis for trust. The emphasis on benevolence by Mayer et al. (1995) at the individual level corresponds, of course, to this affective trust. Correspondingly, organizational level trustworthiness - typified by interactional courtesy, procedural fairness, and the responsibility to inform - also has a distinct affective element. Tyler et al. (1997) incorporate within their definition of procedural justice elements of trustworthiness, benevolence, and the sharing of information. Butler and Cantrell (1984) describe trustworthiness as demonstrating loyalty to the interests of another individual. Kouzes and Posner (1993) equated trustworthiness in organizations with the dedication to another's welfare, growth, and wholeness. They note that organizations that create systems that demonstrate dedication, receive a corresponding increase in trust from their employees, as well as higher performance and greater employee loyalty. Tepper et al. (2001) found that Organizational Citizenship Behavior (OCB) — behavior that reflects the highest level of personal commitment to organizations and their goals - was directly related to procedural justice conditions. Similarly, CoyleShapiro and Kessler (2000) found that employee commitment and a willingness to engage in OCB behaviors was reduced when procedural fairness decreased. From an affective trust standpoint, it seems

clear that the theoretical and conceptual literature strongly reinforces the relationship between organizational trustworthiness and the elements of procedural fairness, interactional courtesy, and the responsibility to inform that we propose in our model.

Cognitive component

Costigan et al. (1998) emphasized that trust and trustworthiness consist of a cognitive side that pertains to the rational decision to trust or to withhold trust. McAllister (1995) also noted that trust and trustworthiness have a strong cognitive element. McAllister stressed that "reliabihty and dependability" were the key elements of cognitive interpersonal trust. Relating that trust to the organizational setting, McAllister wrote that competence and responsibility were key elements. According to McAllister, the competence of an individual or an organizational made it possible for others to consider them trustworthy in terms of the abiHty to count on the performance of the person or group. In w^riting about the cognitive rationale of trust decisions, Lewis and Wiegert (1985, p. 970) explained "wê choose whom we wîll trust in which respects and under what circumstances, and we base the choice on what we take to be 'good reasons,' constituting evidence of trustworthiness." This contextually contingent approach to trustworthiness not only reinforces the importance of the cognitive nature of organizational trustworthiness but corresponds well with the Caldwell and Jeffries (2001) model of the individual perceptual lens. The cognitive-based elements of organizational trustworthiness that predict reliability and consistency are competence, quality assurance, financial balance, and legal compliance. Steel and Lloyd (1988) found that involvement in quality improvement programs tended to have a positive impact on interpersonal trust. A study of organizations in France by Hancke (1998) confirmed that companies that followed quality improvement practices also strengthened their trust relationship. Seiders and Berry (1998) noted that service quality was equated with organiza-


tional trustworthiness as well as the fairness of the organization. La Berge and Svendsen (2001) identified six features of quality improvement programs that strengthen organizational trust. Covey (1990) noted that competence was a foundation element of both interpersonal and organizational trustworthiness. Competence and reliability - fundamental factors in cognitivebased trust — are two of the five dimensions of a model for organizational trust recommended by Shockley-Zalabak et al (2001). Nooteboom (1999) noted that perceived competence not only lowered transaction costs but increased trust levels in inter-firm research projects. Madhavan and Grover (1998) found that companies that developed shared competence by co-locating and exchanging personnel on inter-firm projects increased mutual trust. Financial balance - or the combining of outcomes that are both efficient and effective was shown by Berman (1997) to increase resident trust in local governments. Collins and Porras (1994) and their study of outstanding businesses of the past fifty years, noted that a common quality of these businesses in creating both internal organizational trust and the trust of the general public was their abihty to balance profitability and a commitment to organizational core values — and that financial success was balanced wîth a commitment to those values. Pfeffer's (1998) extensive research also found that high performance organizations were both more profitable and more committed to the welfare of their employees than comparable organizations ~ reinforcing the importance of financial balance in creating not only trustworthiness but also greater organizational wealth. Legal compliance is related to integrity to the degree that individuals and organizations that adhere to prevailing laws avoid legal conflicts and demonstrate their technical understanding of societal demands (Caldwell et al., 2001). Carroll (1996) reviewed the importance of legal compliance as an indicator of ethical commitment and trustworthiness in his discussion of immoral, amoral, and moral management. Citing the example of Sears Roebuck & Co. in 1992, Carroll noted:

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In the face of declining revenues and a shrinking market share. Sears' executives put into place new goals, quotas, and incentives for auto center service personnel. Service employees were told to meet product-specific and service-specific quotas - sell so many brake jobs, batteries, and front-end alignments — or face consequences such as reduced working hours or transfers. Some employees spoke of the "pressure" they felt to generate business. Although Sears' executives did not set out to defraud customers, they put into place a commission system that led to Sears' employees feeling pressure to sell products and services that consumers did not need. Soon after the complaints against Sears occurred, CEO Edward Brennan acknowledged that management had created an environment in which mistakes were made, although no intent to deceive consumers had existed (Carroll, 1996, p. 127) The complaints resulted in attorney generals in 40 states accusing Sears Roebuck & Co. of misleading customers and seUing them unneeded parts and services. In describing the three perceptions of obligations to legal compliance of immoral, amoral, and moral companies, Carroll noted that a moral company would pursue obedience toward the letter and the spirit of the law and would view it as a minimal standard of ethical behavior - preferring to operate well above legal mandates. In contrasts, immoral companies would view the law as a barrier to overcome and amoral companies would ask, "What can we do legally?" (Carroll, 1996). In response to observed behaviors of commitment to legal compliance, both individuals and organizations would perceive the moral philosophy as most trustworthy. Factors that determine whether an individual or an organization are likely to be trusted based upon their reliability and predictability are largely related to ability at the interpersonal level. We posit that cognitive-based trustworthiness at the organization level is likely to be based upon the perception of competence, fmancial balance, and quality assurance. Our model of trustworthiness suggests that integrity at the interpersonal level equates with legal compliance. We argue that the elements of legal compliance and procedural fairness of organizational trustworthiness match well with the integrity of

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interpersonal trustworthiness identified by Mayer et al. (1995). Elements of cognitive-based and afFect-based trust identified as a key part of trust and trustworthiness (Jeffries and Reed, 2000; McAllister, 1995; WiUiams, 2001) are integrated with both organizational and interpersonal trustworthiness. We defined organizational trustworthiness as "the subjectively perceived point on a continuum at which a group or organization's behaviors are perceived as complying with the ethical duties considered to be owed to the person or organization who is making the decision to trust." The parallel of this definition with the previously provided definition of interpersonal trustworthiness is intentional. The following figure reflects our model of organizational trustworthiness. We suggest that the subjective individual lens identified by Caldwell and Jeffries (2001) at the individual level applies in interpreting the perceived trustworthiness of organizations and groups — based upon the seven elements of our model - just as ability, benevolence, and integrity are interpreted as part of the subjective lens in the Caldwell and Jeffries (2001) model.

Cross-cultural perspective There is considerable evidence of cross-cultural differences in values. Hofstede (1980, 1991, 1994, 2001) has written extensively about the impact of cultural factors on differences in values and individual perceptions. Hofstede investigated differences in values in fifty different countries between 1967 and 1978. Through his early studies he identified four interpersonal dimensions: power distance, uncertainty avoidance, individualism and masculinity (Hofstede, 1980). He has since added an additional dimension he refers to as "Confucian or tinie-oriented" (Hofstede, 2001). These five dimensions are useful to describe general differences in attitudes and values between different cultures: (1) Individualism-Collectivism: individualism and collectivism refer to the degree that members of a society give precedence to the individual or the group; (2) Power Distance: power distance has to do with the degree to which unequal distribution of power and wealth is accepted in society; (3) Uncertainty Avoidance: uncertainty avoidance reflects the way in which different societies deal with uncertainty about the future and the need for control; (4) Masculinity-Femininity: masculine cultures tend to focus on task achievement, goal-accomplishment, assertiveness, and self-interest. Feminine cultures are more likely to emphasize relationship development, preservation

Competence Legal Compliance Responsibility to Inform Quality Assurance

Lens

Perceived Organizational Trnstworthiness

Procedural Fairness Interactional Courtesy Financial Balance Figure 2. Organizational Trustworthiness.

Trust Attitude


of quality of life, and creating harmoniously functioning organizations; (5) Confucian or Time-Oriented: Confucian or time-oriented designations refer to the degree that organizations distinguish between a long-term and short-term orientation toward life and work. Hofstede notes that the dimensions are useful to characterize groups but should not be applied to the more micro individual level of analysis (Hofstede, 2001). Hofstede et al. (1990) concluded that organizational values are determined primarily by the larger societal culture. The value of Hofstede's model is that it provides insights that can be useful in inferring likelihoods or patterns of behavior that may aid understanding in attempts to bridge cultural paradigms. Hofstede's five-dimension framework can be conceptually useful to develop hypotheses regarding the seven dimensions we purport help determine organizational trustworthiness. We will examine differences among the seven theorized dimensions between North Americans and Asians. Previous research has found that North Americans are high in individualism, low in power distance, medium in uncertainty avoidance, high in masculine values, and short-term oriented. Asians are low in individualism (i.e., emphasize collectivism), high and low in power distance, high and low in uncertainty avoidance, masculine and feminine values, and long-term oriented (Hofstede, 2001), thus: Hypothesis 1 (Hi): North Americans will perceive "competence" as more important that East Asians in their perception of organizational trust. Hypothesis 2 (H2): There will be no difference between North Americans and East Asians in the perceived importance of "quality assurance" as it relates to the perception of organizational trust. Hypothesis 3 (H3): North Americans will perceive "interactional courtesy" as less important than East Asians in their perception of organizational trust. Hypothesis 4 (H4): North Americans will perceive "procedural fairness" as more important than will East Asians in their perception ot organizational trust.

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Hypothesis 5 (H5): North Americans will perceive "responsibility to inform" as more important than East Asians in their perception of organizational trust. Hypothesis 6 (H6): North Americans will perceive "legal compliance" as more important than East Asians in their perception of organizational trust. Hypothesis 7 (H7): There will be no difference between North Americans and East Asians in the perceived importance of "financial balance" as it relates to the perception of organizational trust.

Respondents and measures i As discussed in the theory section, we suggested that organizational trust can be measured with seven dimensions: competence, quality assurance, interactional courtesy, procedural fairness, responsibility to inform, legal compliance, and financial balance. A thirty-five item questionnaire was developed with these dimensions in mind. A seven-point Likert scale was used: very strongly agree (1), strongly agree (2), agree (3), neutral (4), disagree (5), strongly disagree (6), and very strongly disagree (7). Respondents were asked to think about the factors that they considered being important in a highly trustworthy organization (see appendix). Respondents were asked to indicate their opinions about each of the items by circling a number from 1 to 7. We conducted the survey at three different universities in the United States. Respondents were 339 part-time MBA students, 190 men and 149 women. Thirty-six per cent of the students were under twenty-five years of age while sixtyfour per cent were twenty-six years of age and older. Two respondents were from Africa; fortythree were from East Asia (Taiwân [70%], Thailand [4%], Hong Kong [4%], and People Republic of China [22%]); five were from Europe; four were from the Middle East & North Africa; 273 were from North America (United States [99.6%] and Canada [0.04%]); five were from Latin America & the Carribbean; and seven respondents did not indicate region of citizenship. 242 of the respondents had undergraduate

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degrees in business and ninety-seven had undergraduate degrees in other areas.

Results To evaluate the extent to which respondents grouped dimensions (factors) from the 35 item questionnaire (5 items per dimension), a factor analysis was conducted. Applying the minimum eigenvalue of 1.00 criterion, six factors were extracted. Factors were then rotated using the varimax (orthogonal) technique. A scree plot was also analyzed. The resulting factor structure coefficients are presented in Table IL Six factors accounted for 60.1 per cent of the variance. In interpreting the rotated factor pattern, an item was said to load on a given dimension if the factor loading was 0.40 or greater for that dimension, and was less than 0.40 for the others (Stevens, 1986). Since three items violated the preceding criteria, they wêre scratched from further analyses. Eleven items retained meaningful loadings on Factor 1, which we will refer to as the "honest communication" dimension. Four items loaded on factor 2, which we refer to as "interactional courtesy." Four items loaded on factor 3; we refer to that factor as the "quality assurance" dimension. Four items loaded on factor 4; we refer to that dimension as "task competence." Four items loaded on factor 5; we refer to that dimension as "financial balance." Five items loaded on factor 6; we refer to that dimension as "legal compliance." Dimension scores were then created for each respondent by adding together item scores that loaded on each of the six dimensions. Dimension reliability was assessed by calculating coefficient alphas (Cronbach, 1951) (see Table II). To examine differences in dimension scores across regions, a one-way between groups MANOVA was conducted. Because sample size for the world regions of Africa, Europe, Latin America & the Caribbean, and the Middle East & North Africa were too small, they were not included in the analyses. Therefore, the independent variable for these analyses included the world regions of North America and East Asia. The dependent variables include the six dimen-

sions identified through factor analysis. The MANOVA revealed significant multivariate effect for world region, Wilks' lambda = 0.95, F(6, 310) = 2.99; p = 0.008. Further analyses, using one-way analysis of variance (ANOVA), were conducted on each of the six dimensions. Mean dimension by region scores are presented in Table III. These analyses revealed significant effects for three dimensions: dimension 1, "honest communication," F(l, 317) = 12.77, p = 0.00; dimension 4, "task competence," F(l. 317) = 4.20, p = 0.02; and dimension 6, "financial balance," F(l, 317) = 4.21, p = 0.01. A summary ANOVA table is presented in Table IV

Discussion The factor structure found in the present study shows a remarkably close approximation of the theorized dimensions. While we theorized seven dimensions, this study has indicated six clearly identifiable dimensions: honest communication, task competence, quality assurance, interactional courtesy, legal compliance, and financial balance. Honest communication appears to be a melding of the procedural fairness and responsibility to inform dimensions. We defined procedural fairness in terms of stakeholders opportunities to participate in fair processes and systems of the organization, and we defined responsibility to inform in terms of the level of communication provided to stakeholders. As defined, procedural fairness and responsibility to inform could be conceptualized as one dimension. If stakeholders have the opportunity to participate in fair processes they are likely to perceive that they are being heard and that the organization cares about what they have to say. In addition, if participation is encouraged, it makes sense that individuals are informed for input to be meaningful. The responsibility to inform dimension could be viewed in terms of the extent to which stakeholders are given the opportunity for participation in the communication process. Hence, a confluence of the two dimensions. On the other hand, it could be that the questionnaire items are not yet crafted to capture the distinctions that


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TABLE 11 Rotated factors of organizational trustworthiness

Qi Q2 Q3 Q4 Q5

•

Q6 Q7 Q8 Q9 QIO Qll Q12 Q13 Q14 Q15 Q16 Q17 Q18 Q19 Q20 Q21 Q22 Q23 Q24 Q25 Q26 Q27 Q28 Q29 Q30 Q31 Q32 Q33 Q34 Q35

Factor 1

Factor 2

Factor 3

Factor 4

Factor 5

Factor 6

0.136 0.363 0.304 -0.035 0.274 0.151 0.364 0.094 0.356 0.498** 0.516** 0.326 0.157 , 0.393 0.607* 0.567* 0.687* 0.615* 0.340 0.605* 0.635* 0.350 0.668* 0.508* 0.582* 0.187 0.107 0.359 0.449* 0.171 0.231 0.292 0.387 0.205 0.609*

0.064 -0.018 0.238 0.293 0.202 0.221 0.185 0.142 0.202 0.260 0.518** 0.715* 0.702* 0.534* 0.284 0.375

0.114 0.116 0.321 0.255 -0.017 0.384 0.208 0.082 0.291 0.244 0.205 0.061 0.090 0.310 0.148 0.210 0.260 0.094 -0.193 0.036 0.230 0.301 0.268 0.389 0.201 0.307 0.227 0.357 0.336 0.121 0.578* 0.651* 0.550* 0.674* 0.111

0.001 0.270 0.226 0.120 0.403 0.499* 0.687* 0.685* 0.520* 0.468** 0.341 0.264 0.128 0.333 0.385 -0.092 0.142 0.262 0.015 0.249 0.279 0.119 0.141 0.097 0.169 0.062 0.241 0.073 0.223 0.070 0.152 0.185 0.201 0.212 0.395

0.141 -0.011 -0.032 0.150 0.298 0.246 0.030 0.347 0.026 0.087 -0.006

0.726* 0.646* 0.553* 0.616* 0.421* 0.127 0.128 0.179 0.081 0.106 0.033 0.087 0.122 0.108 0.189 0.156 0.147 0.282 0.359 0.305 0.094 0.187 0.051 0.085 0.148 0.032 0.077 0.201 0.226 0.186 0.112 0.198 0.273 0.168 0.317

0.208

•

0.261 0.318 0.170 0.191 0.251 0.154 0.221 0.300 0.052 0.097 0.132 0.203 0.513* 0.395 0.183 0.084

• •

-0.003 0.010

o.ni

0.081 -0.065 -0.013 0.219 0.077 0.166 0.446* 0.354 0.279 0.349 0.204 0.324 0.256 0.683* 0.755* 0.498* 0.323 0.261 0.249 0.188 0.199 0.282 0.395

% Variance

17

9

9

9

8.2

7.9

Eigenvalues

14.81

1.77

1.41

1.25

1.12

0.01

0.93

0.76

0.83

0.78

0.73

0.83

Alpha Note

'

'

•

•

•

•

'

* Indicates selected factor loadings. ** indicate large loading on more than one factor {item was dropped from further analyses).

360


TABLE III Mean scores: factor (dimension) by world region North America

East Asia

Factor Factor Factor Factor Factor Factor

1 2 3 4 5 6

N

Mean

SD

N

Mean

SD

41 41 41 41 41 41

2.76 2.97 2.74 2.73 2.92 2.64

0.77 0.79 0.80 0.93 0.73 0.71

266 266 266 266 266 266

2.27 2.77 2.51 2.39 2.72 2.31

0.86 0.93 0.85 0.87 0.83 0.81

TABLE IV ANOVA summary table

Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor 6

DF

F value

Pr >

1 1 1

12.77 1.73 2.94 4.20 1.61 4.21

0.00 0.19 0.09 0.02 0.12 0.01

1 1 1

may be present. Further work needs to be carried out to provide greater reliance on this instrument to measure the dimensions of organizational trust. This study has provided support for our model of organizational trust. Overall dimension mean scores indicate that each dimension is viewed as important in creating the perception of organizational trust. We hypothesized that North Americans would consider task competence, procedural fairness, responsibility to inform, and legal compliance to be more important in their perceptions of organizational trustworthiness than East Asians. We further hypothesized that North Americans would consider interpersonal courtesy as less important than East Asians in their perceptions of organizational trustworthiness. The findings suggest that North Americans do consider competence, honest communication {procedural fairness and responsibility to inform), and legal compliance to be more important than Bast Asians in forming their perceptions of trust. However, our findings suggest that North

Americans also consider interactional courtesy to be more important than East Asians. Research has found that North Americans are more comfortable with impersonal organizations that encourage individual initiative; are more likely to regard one another as equal in power; have a low preference for rules and regulations, more decentralized; are assertive with an intense motivation to achieve; and seek immediate outcomes and results {Hofstede, 2001). The findings in this study suggest that there is an overall higher threshold that organizations must meet in order to gain the trust of North Americans. In order to meet the higher expectations for immediate outcomes organizations must develop a high level of competency. If immediate outcomes are not in evidence, the findings suggest that North Americans lose trust in the organization. Recent events in the United States have cast a shadow of mistrust over the entire investment community. This has resulted from the failure to provide honest communication to stakeholders. Our findings suggest that organizations that provide access to accurate, honest information are more likely to be trusted. East Asians favor more personal organizations that encourage loyalty, duty, and group participation; are more likely to regard one another as equal in power; prefer written rules and regulations; feel more comfortable in an environment where interpersonal support and work are valued; and are patient with a lower expectation for immediate results {Hofstede, 2001). Collectivist societies value harmony with emotional dependence on belonging in tight social frameworks. Within this context we hypothesized that East Asians would expect a greater degree of interactional courtesy than North Americans. Our results did not find a significant difference between North Americans and East Asians and the direction was not as expected. This could indicate that East Asians have a higher level of tolerance for less courteous behavior. Loyalty, duty and the desire for interpersonal support could all contribute to this higher level of tolerance. This suggests the organizations are not likely to lose trust of East Asians simply because they are less courteous.


Since East Asians are more comfortable with rules and regulations, we hypothesized that legal compliance would be less important to them than to North Americans. Our results have found support for this hypothesis. Disputes are handled less formally in East Asia and often do not end up in the court system. In addition, more rules and regulations mean less uncertainty' and since most East Asians are comfortable living in a more rigid rule run society, where fewer disputes arise. Hence, less focus or concern about legal compliance. The North American society is a more litigious society with fewer rules. Ambiguity could lead to more disputes and a greater propensity to resolve in the court system. Hence, in North America, there is a greater focus and reliance on the legal system.

Limitations and future research

^

Some limitations of this study should be mentioned. First, respondents of the questionnaire were MBA students in the United States. We did not collect information regarding the length of time foreign students had been in the United States, nor did we gather information regarding their association with North American firms in their own country. A significant amount of time in North America or association with North American Firms prior to entry into the MBA program could have influenced their responses to the questionnaire. Second, because of small sample sizes we were only able to conduct a comparative analysis between two regions of the world. Hofstede's cultural dimensions are more country specific. The East Asian countries we have grouped together all fall within the same cultural dimension quadrants, identified by Hofstede, with one exception; on the masculine/feminine dimension. Hong Kong tends to be masculine with weak uncertainty avoidance, while the other countries tend to be feminine with strong uncertainty avoidance. Since a majority of our East Asian respondents were from Taiwan, we felt this one difference was not a large enough influence to skew our results. However, it is always risky to generalize even to small groups much less to

361

regions of the world. So, generalizability of these findings to other groups cannot be determined on the basis on one study. Nonetheless, we feel that the quantity and quality of the data are sufficiently high as to provide initial insight into a much needed area. Future research of individual countries, rather than regions, could help organizations understand the areas of emphasis that can best bring about an environment of trust.

Appendix: Questionnaire - perceptions about organizational trust 1. Legal questions about problem issues are addressed as those issues arise 2. Efforts are made to consistently comply with applicable laws 3. Information about legal issues is explained to parties who may be affected, including suppliers and customers. 4. Legal training is focused on avoiding violating others' rights. 5. Management is focused on "doing right" rather than just on complying with statutes. 6. Organization systems reinforce goal achievement. 7. Organization leaders are knowledgeable about their jobs. 8. Task outcomes measure what is truly important. 9. The organization clearly defines job tasks required of individuals. 10. Organization members strive to always deliver their best efforts. 11. People at all levels are given the opportunity to be heard on issues important to them. 12. Organizational programs demonstrate sensitivity to employee priorities. 13. Organizational resources are provided to respond to employees' personal needs. 14. Differences in opinions or values are respected. 15. Organizational commitments to people are honored. 16. Employees understand the reasoning for decisions. 17. Ground rules and policies are clearly defined.

362


18. The implementation of rules is consistent for similar situations. 19. Rules are appropriately flexible when necessary. 20. Procedures and rules focus on treating people with integrity. 21. Performance expectations are clearly communicated to all parties. 22. Employees keep track of information vital to their jobs. 23. Feedback is timely, especially for important issues. 24. Performance indicators are identified for all work units. 25. Key work related information is shared with employees. 26. Financial results are evaluated in terms of goal achievement. 27. Organizational decisions balance costs and benefits. 28. Accountability for organization results is an important value to employees. 29. Resources are provided so that outcomes can be realistically accomplished. 30. Financial decisions are made based upon what is best for all parties. 31. Employees understand principles of quality improvement. 32. Employees are involved in analyzing system improvements in their work units. 33. Organizational systems reinforce established goals. 34. Performance analysis is used to evaluate whether formalized goals are being achieved. 35. The organization honors its commitments.

Note ' In this article we are mostly concerned about social networks. We recognize that there are those occa.sions where the decision to trust must be made immediately without prior interactions (e.g., if you are hanging from a cliff and an unknown person extends their hand to pull you off). Meyerson et al. (1996) refer to this aspect of trust as "swift trust".

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Cam Caldwell Department of Management, School of Businesss Administration, University of Houston, Victoria 77901, U.S.A. E-mail: [email protected] Stephen E. Clapham Department of Management and International Business, Drake University, Des Moines lA 30311-4505, U.S.A. E-mail: [email protected]