Leadership & Trust

2008MANAGEMENT OF CONTEMPORARY ORGANISATIONSMr. FRANKIE YEE[LEADERSHIP & TRUST]CRITICALLY ANALYSE AND DISCUSS WHY TRUST IS THE KEY TO EFFECTIVE LEADERSHIP IN AN ORGANIZATIONAL CONTEXT 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 CONTENTS Cover Page1 Declaration 2 Contents3 Contents Page for Tables & Illustartions4 Executive Summary5 Introduction6 Discussion ,[object Object]

Importance of Leadership in an Organisation9

General Qualities Of Effective Leadership10

Qualities To Gain Trust In Leadership13

Trust During Management Of Change19Recommendations20 Conclusion21 References22 CONTENTS OF TABLES AND ILLUSTRATIONS Dimensions Of Trust12 Crisis Response Model19 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. 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 and its effectiveness. But the research was to be limited, therefore only the important points has been mentioned. 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. 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 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: Competence ConcernCommunication/OpennessTRUST AT WORK Reliability Figure 4.1 Dimensions Of Trust ,[object Object]

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.

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.

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.

The Reliability Dimension Of Trust – Trust in terms of reliability emphasizes on the dependability or consistency of management or a 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’: ,[object Object]

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.

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.

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.

Honesty – It is very important for a leader to be true and honest (Reina, Dennis S., 2006 – ‘Trust & Betrayal in Workplace’).

Communication – Effective communication by leadership in three critical areas is the key to winning organizational trust and confidence: Helping employees understand the company's overall business strategy. Helping employees understand how they contribute to achieving key business objectives. 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’) 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 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. 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: ,[object Object]

Trust may be a critical factor enhancing decentralized decision making for several reasons. Delegating involves increasing dependence on others and entailing greater risks. Accepting greater dependence or risk is at the core of trusting behaviour, and trust as a belief facilitates trusting behaviour.

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.

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.

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