Organizational trustworthiness: An international perspective

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By: Cam Caldwell, Stephen E Clapham. Journal of Business Ethics. Dordrecht: Nov 2003. Vol. 47, Iss. 4; pg. 349 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 model 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 encompassing 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

Introduction
The recent events surrounding the collapse of the seventh largest company in the U.S., along with the dismantling 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 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 network1. 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 dealing.

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 define 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 trustworthiness.

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 defining 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 will 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 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 reflecting 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). Similarly, "the context of the relationship will affect both the need for trust and the evaluation of trustworthliness" (Mayer et al., 1995, p. 727).

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 frameworks or principles as the lenses through which 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 Beliefs 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).

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 with 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 generalized "obligations" 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 - Quality 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.