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11/05/03
Can
You Trust the Concept of Trust
in Supply Chain Relationships?
Part I
What Does It Mean to Trust?
by Rob Handfield
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One
of the most misunderstood and ripe areas
for research in the area of supply chain
relationships is in the area of trust.
Trust (and its cousin, Collaboration)
seems to be the single most discussed
element in making supply chains function
effectively and efficiently.
One academic noted that:
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“In
both serious social thought and everyday
discourse, it is assumed that the
meaning of trust and of its many apparent
synonyms is so well known that it
can be left undefined or to contextual
implications.” Barber (1983:7)
Hosmer (op cit 380) |
This
observation is corroborated by the evolution
of trust in the fields of industrial economics,
organizational behavior, marketing, and
organizational theory. Of all the elements
critical to managing supply chains, trust
is one of the most commonly cited elements,
yet one of the most difficult to measure.
A comparison of the various definitions
of trust across research disciplines shows
that trust can be grouped into six conceptual
paradigms shown in the table below.
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Body
of Theory
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Definition
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Authors
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| 1.
Reliability |
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Time
and experience are critical elements
in evaluating trust |
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Rossiter
and Pearch 1975
Deutsch 1958
Rotter 1967
Gambetta 1988
Fairholm 1994
Lorenz 1988
Zucker 1995
Lewis 1990
Gulati 1995
Good 1988 |
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| 2.
Competence |
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Experience
and wisdom displayed by partner |
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Ghoshal
and Bartlett 1994
Luhmann 1988
Butler 1991 |
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| 3A.
Goodwill (openness) |
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Confidence
you can share information or problems
with the other party |
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Pennings
and Woiceshyn 1987
Granovetter 1985
Johnson Georges & Swap 1982
Ring and Van de Ven 1994 |
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| 3B.
Goodwill (Benevolence) |
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Accepted
duty to protect the rights of your
partner |
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Farris
et al.. 1973
Hart et al.. 1986
Mayer et al... 1995
Barber 1983
Rempel & Holmes 1986
Butler 1991
Hosmer 1995 |
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| 4.
Vulnerability |
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Being
unprotected or exposed while including
an element of uncertainty or risk |
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Deutsch
1958
Akerlof 1970
Barney & Hansen 1994
Klein, Crawford & Alchian 1978
Zand 1972
Holmstrom 1979
Sabel 1993
Lorenz 1988
Gambetta 1988 |
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| 5.
Loyalty |
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A
partner is not just reliable but performs
well in extraordinary situations |
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Rempel
& Holmes 1986
Larson 1990
Friedland 1990 |
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| 6.
Multiple Forms of Trust |
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There
are more than one type of trust |
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McAllister
1993
Mishra 1996
Gabarro 1979
Bromiley & Cummings 1996
Rempel & Holmes 1986
Ghoshal & Bartlett 1995 |
In
paradigm one, authors posit that trust
is a cognitive predictability or reliability
of another party. The second paradigm
addresses the competence of a party as
a component of trust. In the third paradigm,
a recognition of trust as an altruistic
faith or goodwill felt toward another
party is proposed. The fourth paradigm
relates the concept of vulnerability to
trust. Paradigm number five specifies
that loyalty-based trust exists when a
partner consistently goes beyond the call
of duty. The sixth conceptual paradigm
realizes that multiple components of trust
exist, which are defined by cognitive
(reliability or task) trust and affective
(altruistic) faith trust. Through
this three-part series, we will identify
and discuss each of these representative
paradigms that are drawn from the marketing,
organization theory, sourcing, and organization
behavior literature streams.
Reliability
Reliability can be broken down into several
elements. Reliability is dependent on
prior contact with a party or experience.
Repeated interaction and time leads to
levels of confidence, consistency and
finally trust. Reliability then leads
to predictability which is confidence
in future actions. While reliability is
important, what motivates reliability
is often more important. Reliability must
be based on integrity or honesty to be
effective. Reliability based coercion
or stress eventually creates a suboptimal
relationship or total breakdown.
A series of definitions define trust in
terms of a firm or person’s reliability
or expectation of performance. Deutsch
(1958) created one of the first definitions
of trust which accepted the extreme position
that for trust to be present, expected
loss must be greater than expected gain.
Authors after Deutsch extended trust as
an expectation to include situations where
expected gain are greater than loss. Reliability
can often be confused with predictability.
Reliability primarily addresses a party’s
past behavior while predictability actually
takes past behavior and other information
to address probabilities of future performance.
Reliability and predictability are closely
related terms and definitions addressing
either term fall into this body of theory.
Firms or people who meet a threshold level
of predictability can by definition be
trusted. This paradigm is best described
by the following definition:
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Trust
is a range of observable behaviors
and a cognitive state that encompasses
predictability (Rossiter and Pearch
1975). |
What
this means in simple terms is that trust
is not something that occurs overnight,
but is built up over time through repeated
interactions and acts of good faith. For
example, a long-term customer relationship
may be based on a continuous discussion
of problems that occur and are resolved
over time. I recall at a meeting between
a senior VP of purchasing and a senior
VP of marketing from two companies with
a ten year history of a solid business
relationship. The VP of marketing noted
that the reason the relationship worked,
is that “Whenever there was a problem
or conflict, I was able to march over
to his office, shut the door, lay it out
on the table, and work it out! Sometimes
it took a few hours, but when I came out,
we both felt better about the situation.”
Sincerely,
Rob Handfield
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