Business of Trust, Essay Example

The Business of Trust: How Trust Affects Small Businesses

Over the past twenty years, there has been a growing realization that low employee trust in business organizations results in low productivity and it is being referred to as the “new core” of leadership. In the new core of leadership, trust is considered an essential activity in managerial and leadership roles. Givens (2008, p. 6) concludes that trust “is a central feature in the relationship that transformational leaders have with their followers”. Further, de Lima Rua & Araújo  (2013) highlight that within transformational leadership, one of the main determinants of organizational effectiveness is the relationship between those offering and receiving trust.

When employee trust is low, it is reported that absenteeism is high and productivity is reduced resulting in billions of dollars in lost revenue in the United States (Fukuyama, 1995). Much is known about trust and the large scale organization, however little is known about the impact to small businesses organizations (Fukuyama, 1995).  Small businesses frequently have only one direct supervisor, and this creates a large problem for small business. In cases of low employee trust in small businesses, employees may prefer to quit rather than get into an altercation with their supervisor. According to Jennings & Beaver (1997) small businesses are different from large organizations because of “the multiplicity of roles” and when trust is low, absenteeism is high leading to economic strain which the large scale organization can absorb (Jennings& Beaver 1997).  A possible cause of this problem is low employee trust (Fukuyama, 1995). A recent study completed by Araújo (2014) among Malaysian SME-s measured the impact of one particular element of transformational leadership on Malaysian SMEs’ performance: idealized influence.

A quantitative study investigating the impact of trust and transformational leadership style in small business performance will attempt to highlight this correlation and provide a framework for small and medium enterprises for increasing trust, which, in turn would improve follower commitment and performance (Podsakoff, Mackenzie & Bommer, 1996).

This correlational study will ask a narrow question and collect a sample of numerical data using two reliable survey questionnaires to observe the relationship between trust and follower behavior in the light of transformational leadership implementation.

References

Arham, A. F. (2014). Leadership and Performance: The Case of Malaysian SMEs in the Services Sector. International Journal of Asian Social Science, 4(3), 343-355.

Fukuyama, F. (1995). Trust: Social Virtues and the Creation of Prosperity. NY: Free Press.

Givens, R. J. (2008). Transformational leadership: The impact on organizational and personal outcomes. Emerging Leadership Journeys, 1(1), 4-24.

de Lima Rua, Martins Marques O. M., & Costa Araújo, J. M. (2013). The influence of the transformational leadership in the organizational trust. Harvard Deusto Business   Research, 2(1), 55-66.

Jennings, P., & Beaver, G. (1997). The performance and competitive advantage of small firms: a management perspective. International Small Business Journal, 15(2), 63-75.

Podsakoff, P. M., MacKenzie, S. B., & Bommer, W. H. (1996). Transformational leader behaviors and substitutes for leadership as determinants of employee satisfaction, commitment, trust, and organizational citizenship behaviors. Journal of management, 22(2), 259-298.