1. The relationship between trust, HRM practices and firm performance Dr. Shay S. Tzafrir University of Haifa, Israel

2.  The Problem 1.Many researchers have begun to examine organizational trust and its influence on the workforce. 2.Little empirical research has focused on the conditions that cause organizational trust. 3.The major objective of this study is to develop a framework for examining the impact that managerial trust in employees has on human resource management practices as well as on organization performance. 1.Many researchers have begun to examine organizational trust and its influence on the workforce. 2.Little empirical research has focused on the conditions that cause organizational trust. 3.The major objective of this study is to develop a framework for examining the impact that managerial trust in employees has on human resource management practices as well as on organization performance.

3.  Review of literature 1.Trust represents a significant variable that influences organizational productivity. (Kramer and Tyler, 1996) 1.Trust represents a significant variable that influences organizational productivity. (Kramer and Tyler, 1996) 2.Positive managerial expectations may translate into managerial behaviours such as providing training, and permitting participation in decision-making. (Liden et al., 1993) 2.Positive managerial expectations may translate into managerial behaviours such as providing training, and permitting participation in decision-making. (Liden et al., 1993) 3.Extensive research has begun to examine organizational trust and its influence on the 3.Extensive research has begun to examine organizational trust and its influence on the workforce. (Mayer and Davis, 1999; Spreitzer and Mishra, 1999) workforce. (Mayer and Davis, 1999; Spreitzer and Mishra, 1999)

4.  Theory and hypotheses 1. Trust in this study is defined as the willingness to increase the resources invested in another party, based on positive expectations resulting from past 1. Trust in this study is defined as the willingness to increase the resources invested in another party, based on positive expectations resulting from past positive mutual interactions. positive mutual interactions.

5. 2. Social exchange theory– the norm of reciprocity 2. Social exchange theory– the norm of reciprocity This norm establishes the expectations that recognition, empowerment, investment in human assets, and other favours will be returned. The norm of reciprocity has a negative side as well, which includes the expectation that hostilities, fear, insincerity, and other distrusting acts will be dealt with in the same way. This norm establishes the expectations that recognition, empowerment, investment in human assets, and other favours will be returned. The norm of reciprocity has a negative side as well, which includes the expectation that hostilities, fear, insincerity, and other distrusting acts will be dealt with in the same way.

6. Theory and hypotheses (continued) Theory and hypotheses (continued) 3. Hypothesis 3. Hypothesis Hypothesis1: Managers are more likely to offer incentive compensation plans when trust is high. Hypothesis1: Managers are more likely to offer incentive compensation plans when trust is high. Hypothesis 2: Managers are more likely to allow employees to participate in decision making when trust is high. Hypothesis 2: Managers are more likely to allow employees to participate in decision making when trust is high. Hypothesis 3: Managers are more likely to use internal promotion (ILM) when trust is high. Hypothesis 3: Managers are more likely to use internal promotion (ILM) when trust is high.

7. Hypothesis 4: Trust will be positively related to training; therefore, the higher the level of trust, the larger the number of employees who receive training activities. Hypothesis 4: Trust will be positively related to training; therefore, the higher the level of trust, the larger the number of employees who receive training activities. Hypothesis 5: HRM practices will be positively related to perceived organizational performance. Hypothesis 5: HRM practices will be positively related to perceived organizational performance.

8.  Method 1.sample---275 organizations were selected from both the public and private sectors, each employing 200 or more workers. 104 of the 275 designated companies completed the questionnaires. Ninety-five per cent of the respondents(99) were vice-presidents or HR managers. 1.sample---275 organizations were selected from both the public and private sectors, each employing 200 or more workers. 104 of the 275 designated companies completed the questionnaires. Ninety-five per cent of the respondents(99) were vice-presidents or HR managers.

9. 2.Measurement of variables—correlation research design using chi-square test and AMOS structural equation modelling software. 2.Measurement of variables—correlation research design using chi-square test and AMOS structural equation modelling software. Four sets of measures were used to assess Four sets of measures were used to assess a. HRM characteristics and practices a. HRM characteristics and practices b. organizational infrastructure data b. organizational infrastructure data c. organizational and employee performance indicators c. organizational and employee performance indicators d. HR managers’ trust in their employees d. HR managers’ trust in their employees

10. (1) Dependent variables-- (1) Dependent variables-- a. organizational performance--quality of the product/service, new product development, employees’ retention, customer satisfaction, etc. a. organizational performance--quality of the product/service, new product development, employees’ retention, customer satisfaction, etc. b. market performance--product price, sales increase, profitability, and so forth. b. market performance--product price, sales increase, profitability, and so forth.

11. (2) Independent variables— (2) Independent variables— a. Trust-- reliability, harmony,and concern a. Trust-- reliability, harmony,and concern b. HRM practices– compensation, participation, internal labour market and training b. HRM practices– compensation, participation, internal labour market and training

12. (3)Control variables (3)Control variables a. initial trust a. initial trust b. sector b. sector *c. organizational size *c. organizational size d. union density d. union density

13.  Results 1. Hypotheses 1 to 4 concern the relationships between HRM practices and managers’ trust in their employees. The results of the study indicate that organizations that exhibited high managerial trust in employees based their compensation systems on performance encouraged employee participation, used the internal labour market for employee recruitment and mobility and invested more in training than did non-trusting firms. 1. Hypotheses 1 to 4 concern the relationships between HRM practices and managers’ trust in their employees. The results of the study indicate that organizations that exhibited high managerial trust in employees based their compensation systems on performance encouraged employee participation, used the internal labour market for employee recruitment and mobility and invested more in training than did non-trusting firms.

14. Results(continued) Results(continued) 2. Hypothesis 5 concerns the relationship between HRM practices and performance. 2. Hypothesis 5 concerns the relationship between HRM practices and performance. Results indicate that organizations that invested more in training,encouraged employee participation and used the internal labour market for employee recruitment and mobility demonstrated significantly higher organizational performance. Results indicate that organizations that invested more in training,encouraged employee participation and used the internal labour market for employee recruitment and mobility demonstrated significantly higher organizational performance.

15. Results(continued) Results(continued) 3. The results of the bivariate correlation analysis show that perceived organizational and market performance were positively associated with dimensions of trust. 3. The results of the bivariate correlation analysis show that perceived organizational and market performance were positively associated with dimensions of trust.

16. Results(continued) Results(continued) 4. The research also suggests that managers’ trust in their employees has a considerable impact on shaping an HRM system of ‘high performance work practices’. 4. The research also suggests that managers’ trust in their employees has a considerable impact on shaping an HRM system of ‘high performance work practices’.

17. Results(continued) Results(continued) 5.AMOS displays a squared multiple correlation for each variable. (1)HRM practices and trust variables together explain 62 per cent of the variance in perceived organizational performance. (2)The trust variables together explain 36 per cent of the variance in employee participation, 28 per cent of the variance in internal labour market, and 19 per cent of the variance in employee evaluation. 5.AMOS displays a squared multiple correlation for each variable. (1)HRM practices and trust variables together explain 62 per cent of the variance in perceived organizational performance. (2)The trust variables together explain 36 per cent of the variance in employee participation, 28 per cent of the variance in internal labour market, and 19 per cent of the variance in employee evaluation. (3) reliability and evaluation together explain 30 per cent of the variance incentive compensation. (4)Harmony, concern, and employee participation together explain 45 per cent of the variance in training. (3) reliability and evaluation together explain 30 per cent of the variance incentive compensation. (4)Harmony, concern, and employee participation together explain 45 per cent of the variance in training.

18.  The reliability and validity 1. reliability--- Cronbach’s alpha as estimates of internal-consistency reliability for these tests were almost greater than 0.8. 1. reliability--- Cronbach’s alpha as estimates of internal-consistency reliability for these tests were almost greater than 0.8.

19. 2. validity---- The validity of the results may be hampered by the fact that organizational and market performance mutually influence both trust and HRM practices. Future research should try to collect data with time lags between predictor and outcome measures in order to enable 2. validity---- The validity of the results may be hampered by the fact that organizational and market performance mutually influence both trust and HRM practices. Future research should try to collect data with time lags between predictor and outcome measures in order to enable longitudinal analysis. longitudinal analysis.

20.  Research Evaluation 1.The criterion of utility--- (1)This study uses a multidimensional conception of trust and integrates it with several HRM practices and organizational performance. (2)This study is the first to explore the broader effects of trust in the workplace. (3)It also makes a unique contribution to explore the combined impact of trust on HRM practices and organizational performance. 1.The criterion of utility--- (1)This study uses a multidimensional conception of trust and integrates it with several HRM practices and organizational performance. (2)This study is the first to explore the broader effects of trust in the workplace. (3)It also makes a unique contribution to explore the combined impact of trust on HRM practices and organizational performance.

21. 2.The criterion of replication---The other researcher can utilize the same procedure to engender the other research. 2.The criterion of replication---The other researcher can utilize the same procedure to engender the other research.

22. 3.The criterion of generalization--- (1) Its sample transcends industrial and sectorial analysis and thus provides a global picture. (2) Data collected within a single national system with its unique national culture may cause some doubt on whether it can be generalized to other countries. However, it depend on whether the Israeli environment provides researchers and practitioners with a convenient laboratory for studying and analyzing managerial practices.