Managing Business Relationships Trust Dr. Vesselin Blagoev

Trust is Foundation of Leadership Trust: A positive expectation that the other will not act opportunistically Positive expectation assumes knowledge and familiarity about the other party Opportunistically refers to the inherent risk and vulnerability in any trusting relationship

Trust is Foundation of Leadership Jurgen Schrempp, while Daimler Chrysler’s Chairman, called the merger of Daimler Benz and Chrysler “a merger of equals” and later admitted he lied Can he be leader in Daimler Chrysler if he is not trusted there anymore?

Trust is Foundation of Leadership As D.Zand sais: “Part of the leader’s task has been, and continues to be, working with people to find and solve problems, … but whether …leaders solve problems depends on how much people trust them. Trust and trust-worthiness modulate the leader’s access to knowledge and cooperation”

Trust is Foundation of Leadership Three types of trust: Deterrence-based trust: based on fear of reprisal if the trust is violated Knowledge-based trust: based on behavioral predictability that comes from a history of interaction Identification-based trust: based on mutual understanding of each other’s intentions and appreciation on the other’s wants and desires

Trust is Foundation of Leadership 5 Key dimensions that underlie the concept of trust: Integrity – it refers to honesty and truthfulness Competence – technical and interpersonal knowledge and skills Consistency – individual’s reliability, predictability and good judgment in handling situations

Trust is Foundation of Leadership Loyalty – the willingness to protect and safe face for another person Openness – can you rely on the person to give the whole truth?

Game theory and the prisoner’s dilemma Criminal A Confess Don’t confess 6 years 10 years Confess 1 year 6 years Criminal B 3 years 1 year Don’t confess 10 years 3 years

Game theory and the prisoner’s dilemma Criminal A Confess Don’t confess Death 10 years Confess Death Death Criminal B 3 years Death Don’t confess 10 years 3 years

Attribution Theory of Leadership Leadership is merely an attribution that people make about other individuals Example: George H. Bush lost the second term elections after saying “Read my lips. No new taxes.”

Is Trust in Our Leaders in Decline? WordCom fakes about USD 4 billion Enron executives manipulate the financial statements Tyco Intl – cheating on sales taxes Merrill Lynch pays USD 100 million in fines for misleading investors Sofia Water – salary 60 K

Moral Leadership The means used by the leaders – paying to the participants in riots – good or bad ? Using leader’s charisma to benefit from follower’s full support – religious fights Leadership is not value free