TRUST: Two Perspectives

Dr. Anil K. Maheshwari


The contents of this paper may be reproduced freely only for non-commercial purposes, upon giving due credit to the author.


Trust is an essential part of everyday life. We trust people and institutions in their everydayness, or else we could go neurotic worrying about, say the neighbor kidnapping our child or the failure of the automobiles on the roads. Trust is an essential lubricant of moral, social and economic relations. Trust among leaders and managers, within and across organizations, is a valuable source of managing relationships and reducing uncertainty in a rapidly evolving environment. However, the recent convictions of Bernard Madoff and Raju Ramalingam for swindling their investors and Raj Rajaratnam for insider trading, for example, have highlighted the lack of integrity and trust-worthiness in financial matters in many highly placed leaders. Warren Buffet has stated that integrity is the first thing he looks for in a prospective relationship, because without that a smart employee or partner can be very dangerous. The meltdown of the financial markets in the US and the corruption scandals in India, are large scale examples of widespread breakdown in trust in public spheres as well. Breakdown in the efficacy of regulatory institutions has also contributed to this terrible sense of loss.

What is trust?

Trust is an elusive affect-oriented concept that is hard to measure. We all know it when it touches us, even though we may not be able to say precisely what it is. The notion of open and free communication in a reciprocal, interdependent way is central to the concept of trust. Trust is related to a feeling of risk of and vulnerability to a loss of material as well as non- material things such as reputation or love. Trust is fragile in that it develops gradually over time and interactions, but can be destroyed in a single moment or transaction. We tend to economize on trust, i.e. we trust only when needed, to keep our risks within limits.

Trust is different from confidence in a significant way. Trust is involved in situation of active choice, where the actor has an option to take a risk and trust an actor. For example, one can put oneself at risk by trusting one’s investment broker with control over the management of one’s assets. One can however change one’s broker at any time. Confidence, on the other hand, relates to situations where the actors have no choice. For example, a dangerous financial fiscal situation may lead to a lack of confidence in the management of the organization. A lack of confidence would not lead to any specific risk, but would lead to a general feeling of alienation.

There are fundamentally two kinds of trust: social-psychological and techno-economic. Socio-psychological trust is a subjective feeling. It develops as a reflexive process within the trusting parties and communities. Techno-economic trust is a necessary institutional lubricant for transactions among economic actors. It is embedded in technologies of production and organizing. This trust is a commodity which can be produced, and is valued and freely traded like other goods and services in the marketplace.

These two types of trust can at best be partially substituted for each other. This has implications for developing new processes and systems for creating both kinds of trust to promote organizational effectiveness.

Socio-psychological trust

In our everyday social actions, we act out ‘roles’ in relation to others, i.e. we act in accordance with our shared understandings with others. The shared understandings are a part of tacit knowledge and are a constitutive element of the self itself. Any disruption of the shared understandings, leads to a breakdown in social communication at the inter-personal levels. The breach of this tacit knowledge leads to ‘abnormal’ behavior, such as an actor acting ignorant of the shared understandings, and can result in complete breakdown of communication.

Creating Trust

Shared understandings are created over a period of repeated interactions, which leads to the tacitly accepted notion of the ‘normal’ interaction, and the reasonable range of deviation from normal. These cumulative sets of shared understandings lead to the creation of social roles, and every actor is assigned one or more of those roles in different contexts. A normal social interaction is made possible by each actor playing the appropriate role in the normally accepted way. We trust others to play their normal roles, and are trusted by others to play our own roles in a normal way. Every such normal role-playing confirms our trust in others. Thus trust enables social interaction among actors, and new social interaction produces more trust. Trust therefore stands in a reflexive, reciprocal relationship with social interaction. Trust can become a self-fulfilling prophesy: if one actor approaches another from a trusting attitude, the other actor is likely to reciprocate, which would lead to a further trusting interaction between the two.

A stable social pattern is always desirable for creating conditions for the development of trust. A suitable trusting environment allows the person to reveal him or her-self, and approach others freely for an exchange of true desires and fears, without feeling apprehensive about the revealed information being misinterpreted or misused to one’s own detriment. Trust enables people and other social entities to cooperate and collaborate with one another and to achieve their own goals while helping others achieve theirs. The mutual sharing of information in trusting environments creates interdependencies among actors without anyone feeling threatened or being dominated by the others. This helps joining of forces and creation of larger communities among inter-dependent actors.

Motivation to Trust

The motivations to trust exist within an actor at a macro-level as well as at a micro-level. The macro-level motivation is a general personality orientation towards trust. People have high or low tendencies to inter-personal trust. These tendencies are relatively stable over time and can be considered a personality trait. The micro-level motivations relate to the situation, i.e. the context within which an actor may choose to trust the other interactant. The actor is guided by his/her own assessment of benefits and costs and makes the decision on a case-by-case basis. The micro-level, i.e. the situational or contextual motivations, are usually more important than the macro-level motivations in creating conditions of trust among interacting parties.

Role of Trust in leadership and teamwork

In political situations, actors aim to win the confidence and trust of the electorate. Trust leads to power, which is an enabling force which leads the power-holder to get his/her way of doing things accepted by the others. Appropriate actions by the power-holder, in turn, reinforce that trust and confidence. Trust and power are therefore in a reflexive relationship with each other.

Teamwork requires trust. The members of a team trust one another by sharing their new ideas and apprehensions in an open, interactive way. Team members also trust their leader to be a person of integrity, putting the team goals above personal goals. The value of trust in groups and teams, however, depends upon the power-holder’s perspective. Trust may be good for the members of a group by enhancing their collective strength and ability to accomplish greater tasks. However, trust and cooperation among a ‘group of thieves’ may not be desirable from the larger society’s perspective, since it would be detrimental to the sense of well-being in the society.

Components of trust

Trust has been known to have many dimensions. In interpersonal situations, these dimensions include availability, competence, consistency, discreteness, fairness, integrity, loyalty, openness, promise-fulfillment and receptivity. The relative importance of the dimensions depends upon the specific context of the situation in which one needs to trust. In an organizational context, three major dimensions of trust are key: openness/congruity, shared values, and autonomy/feedback.

Techno-Economic Trust

Transaction theory suggests that there are certain costs and risks associated with every economic transaction, and therefore economic actors need some sources of trust to protect themselves from the risks. Contracts between interacting economic actors are made in a certain institutional context which provides the framework for interpreting the terms of the contract. This form of trust is a commodity which can be freely traded in a marketplace, and is also needed for the free trade of other things in the marketplace.

Production of trust

This trust can be produced in multiple ways. Stable hierarchical relationships among buyers and suppliers, and between superiors and subordinates, can provide the level of trust and comfort in dealing with other parties. Stability and frequency of interaction produces process- based trust. Trust can also be produced when certain economic actors are well-known over a large space-time horizon. The fame may be owing to their economic or political strength (like brand image) or for any other reasons including ethnicity, lineage etc or other characteristic- based trust. Process-based and characteristic-based trust can however be produced only in small amounts. As the level of economic activity through market structures increases, reliance on the process-based and characteristic-based modes of trust production is inadequate, and institutional-based modes of production of trust are required.

Institutions are abstract socio-economic and legal entities which help produce trust through two kinds of social intervention activities (1) testing and certification of economic entities, goods and services such as those by professional associations and bodies, and (2) guaranteeing activities such as those by regulatory bodies, banks and insurance institutions. These large, powerful, socio-economic institutions embody various technologies of production and organizing. They are meant to be opaque, monolithic black-boxes to the outside world, and their sole task is to act as trustworthy reference points for economic interactions among less powerful economic agents. These institutions invest regularly in image- and confidence- building exercises to continue producing trust. This trust is largely a commodity and can be purchased by other economic agents in small quantities for small fees such as certification fees, insurance premia, etc.


The emasculation of many institutions by corruption or ideology or greed has led to a crisis of institutional trust in societies across the world. There is an urgent need to reverse the general collapse of trust in society. Human dignity has been temporarily devalued. Mahatma Gandhi said that there is enough in this world for everyone’s need but not for everyone’s greed. Human and moral aspirations should be restored to a role of primacy and a key determinant of value creation. Many countries around the world are discarding old corrupt institutions and are building new ones, even though the process is uncertain and non-linear.

Information and communication technologies also have a role to play. What is required is the will to use technology in this humane way and not in the avaricious way of usurping greater control over other human beings through breach of privacy and trust. Social media are helping people overcome the disruptive effects of extensive personal mobility in society. Through collapsing distance and making available rapid anytime-anywhere communication, they are enabling the repairing of the ruptured social fabric by maintaining seamless and stable communication patterns across space and time. Information technologies can also assist in unlayering, representation and interchange of tacit knowledge and shared understandings and expectations among autonomous actors in an interactive, reciprocal way. This can help manage, understand and share perspectives of others in complex domains. Finally, economic institutions can also benefit enormously from information technology by collaborating through the communication and sharing of information over the internet.

Waves of technological and geo-political changes are presenting ever-new opportunities and challenges for organizations. We need trustworthy and capable leaders, who can take advantage of the opportunities and make the world a better place. We need leaders like Mahatma Gandhi who became trustworthy leaders in moral, social, political and economic matters through the path of sacrifice, truth and non-violence.

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