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Managing Business Relationships

Trust

Dr. Vesselin Blagoev

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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

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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?

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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”

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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

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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

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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?

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Game theory and the prisoner’s dilemma

6 years

6 years

10 years

1 year

1 year

10 years

3 years

3 years

Confess Don’t confess

Confess

Don’t confess

Criminal A

Criminal B

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Game theory and the prisoner’s dilemma

Death

Death

10 years

Death

Death

10 years

3 years

3 years

Confess Don’t confess

Confess

Don’t confess

Criminal A

Criminal B

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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.”

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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

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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