Human resource practices and organizational trust: an empirical study.

Narang, Leenu ; Kang, Lakhwinder Singh

INTRODUCTION

The business organizations are increasingly recognizing the worth of human resources and consider them as the most vital and dependable resource for their success. Not only the availability of competent people but also their willingness to contribute to achieve organizational objectives is necessary for organizational survival and growth. Griesinger (1990) proposed that material resources are claimed to be necessary but not sufficient to satisfy human aspirations for betterment. In addition to material resources the increased mutual trust and cooperation among employees can contribute to economic efficiency as well as the social and ethical betterment of the participants. Trust not only reduces governance costs but also improves productivity due to ongoing mutual cooperation between both parties. Not only does trust effect employee attitudes but also employee behaviour. Employees can not be expected to go beyond their defined roles due to their perceived lack of trust in organizational system. They focus only on those performance areas that can be objectively tabulated and defended (Culbert and McDonough, 1986; Gould-Williams, 2003). Promoting trust within organizations has been suggested to influence; affective and continuance commitment (Tan and Tan, 2000), favourable attitude towards change (Anderson and Bateman, 1997; Rousseau and Tijoriwala, 1999), good citizenship behavior (Robinson and Morrison, 1995), increased job satisfaction (Cunningham and MacGregor, 2000; Gould-Williams and Mohamed, 2010) and low intention to leave (Konovsky and Cropanzano, 1991; Mishra and Morrisey, 1990). It is also being recognized that trust in the workplace is a critical factor to improve organizational performance (Gould-Williams, 2003). Research has been carried out to assess the outcomes of trust to highlight its importance in business organizations. But hardly any study has been conducted to identify the various factors which create trust among employees. Schein, (1995) proposed that the organizations that practice the principle of trust building consistently outperform those who do not. He stated that we casually introduce management practices that undermine trust and then wonder later why our organizations are not more effective. The traditional psychological contract under which job security offered by an organization was reciprocated by employees by way of showing loyalty towards the same is believed to be dead (O'Reilly, 1994). Employees of the day are no more offered job security by the organizations but are still expected to work hard, make value additions and be loyal towards the organizations. This has led to emergence of a new psychological contract under which employees' expect an organization to adopt such practices that could minimize their loss of 'job security'. Employers while keeping into consideration changing psychological contract offer extrinsic and intrinsic rewards such as pay for performance, training, and generally pleasant working atmosphere. (Rousseau and Aquino, 1993). The organizations which do not fulfill the psychological contracts may have to face serious consequences such as loss of trust, anger and litigation. Therefore, it is highly desirable for the organizations to develop and follow HR policies and strategies that reinforce the transition to a new psychological contract. Such practices may include those ensuring justice like merit based selection, performance based pay, growth oriented training and development, individual oriented career development, development oriented performance appraisal, supervisory support and work-life balance (Tzafrir et al., 2003). This paper examines the role of such selected human resource practices in developing trust among employees.

Trust and its Antecedents

"Trust has been associated with the willingness to take a chance on behalf of the organization without fearing exploitation" (Eddy, 1981; Qtd. in Gould-Williams, 2003). Mayer, et. al. (1995, p. 712) has defined trust as "the willingness of a party to be vulnerable to the actions of another party based on expectations that the other will perform a particular action important to the trustor, irrespective of the ability to monitor or control that other party" (Qtd. in Patel, 2005). In the words of McAllister (1995, p. 25) organizational trust is "the extent to which a person is confident in, and willing to act on the basis of words, actions and decisions of another". Belief in management, assurance about the thoughts of the colleagues, honesty and positive expectations are common components among various constructs of organizational trust used by various researchers (Yilmaz and Atalay, 2009). Trust building is a long term and continuous process. Today's climate of mergers, restructurings, high employee turnover, leadership transitions, troubling team dynamics and frequently changing operational strategies strongly challenges the trust building process at the workplace. In order to develop the desired employee attitudes, like; trust, loyalty and commitment, etc., employers have felt the need to convey to their employees that 'they care for them'. Organizations aiming to portray themselves to be employee friendly try to identify ways to develop the required attitudes. Gould-Williams (2003) identified ways to develop and enhance trust among employees and results revealed that bundle of HR practices namely employment security, selective hiring, team-working, performance-related pay, training and development, egalitarianism and information sharing consistently predicted change in systems and interpersonal trust. However he did not study the individual impact of the HR practices. The present study proposes that each of the selected HR practices which include merit based selection, performance based pay, growth oriented training and development, individual oriented career development, development oriented performance appraisal, supervisory support and work-life balance is positively related to organizational trust. The hypothesis can be stated as:

H1: Each of the individual HR practices will have a positive effect on organizational trust.

Tzafrir and Gur (2007) investigated the impact of HRM practices on perceived service quality through employees' trust in their managers. Out of the five dimensions of HRM practices studied except training the other four practices including leadership and supervision, promotion and career development, compensation, and feedback and recognition have been found to be significantly related to trust in managers. These studies have been conducted on the basis of only single item constructs. No study could be found that has analysed the role of work life balance which has become highly significant in contemporary world. Existing research focuses on the impact of organizational trust on desired employee attitudes and behaviours, like; commitment, attitude towards change, job satisfaction, citizenship behaviours and intention to leave, but research on how trust is created is lacking. It is required to identify which HR practices influence trust. This study aims to contribute significantly to the SHRM literature in different ways. Firstly, the present study aims to identify HR practices which are vital for creating trust in the organization and reinforce the validity of the changing psychological contract. Secondly, the study has included in its purview HR practices like work life balance which are highly relevant in the face of changing demographic composition of the workforce. Thirdly, while most of the studies related to trust found till date have linked trust to its outcomes but this study aims to find out what precedes trust. Fourthly, a multiple item scale of adequate reliability has been used in order to ensure measurement of different dimensions of HR practices. This study would contribute significantly to the existing literature on trust as well as would help human resource managers to design new human resource policies and improve the existing ones.

Methodology

Sample Profile

The present study is an exploratory study and is based on primary data. A sample of 308 employees was selected from 28 organizations selected through snowball sampling technique, operating in different sectors including auto ancillary, ITES, and garments, all located in the National Capital Region (NCR). The respondents are the white collar employees who have been working in these organizations at least for the last one year. A total of 510 questionnaires were distributed in 34 organizations of which only 308 responses from 28 organizations were found useful, thus, yielding a response rate of 60 percent. Five of the respondents have been found to be outliers having significant impact on results hence deleted. Thus the final sample of 303 respondents is composed of 245 male respondents and 58 females, 222 married and 81 unmarried employees. The age of respondents varied from 20 years to 65 years and the average age of the respondents is 32.4 years with standard deviation 7.34. Tenure of the respondent employees within the organization varies from 1 year to 27 years with an average of 4.5 years and overall experience varies from 1 year to 34 year with an average of 9.17 years.

Human Resource Practices

A questionnaire exclusively designed for this study was used to collect data regarding employee perceptions about human resource practices being used by employer organizations. Seven human resource management practices; Selection and staffing, training and development, and performance appraisal, compensation management, career development, relations with supervisor, and work-life balance have been examined to assess their impact on employee trust. The reliability coefficients of all the seven HR practices subscales are; 0.72 for Selection and staffing (three items), 0.70 for training and development (five items), 0.81 for performance appraisal (six items), 0.88 for compensation management (ten items), 0.74 for career development (five items), 0.71 for supervisory support (five items), and 0.76 for work-life balance scale (four items). Summated score of all items under each HR practice has been used for further analysis.

Measurement of Trust

A nine item adapted version of Cook and Wall's (1980) organizational trust has been employed to assess the level of trust among employees of the organizations surveyed, a a measure of internal consistency of the scale has been found to be 0.77. Sum of the items as a single construct has been used for the purpose of analysis.

Data Analysis

The data has been analysed by employing correlation and multiple regression. An examination of correlation coefficients reported in table 1 and tolerance and VIF statistics reported in table 3 shows that independent variables being examined are not suffering from the problem of multicollinearity. When tolerance is close to 0 there is high multicollinearity of that variable with other independents and the b and beta coefficients will be unstable. VIF is the variance inflation factor, which is simply the reciprocal of tolerance. Therefore, when VIF is high there is high multicollinearity and instability of the b and beta coefficients. The tolerance for a variable is 1 Rsquared for the regression of that variable on all the other independents, ignoring the dependent (Hair et al., 1998). The statistics reported in table 3 indicate that none of the variables in the present study suffer from the problem of multicollinearity. Further multiple regression analysis has been used to identify which human resource practices among those selected for the study are the most significant predictors of organizational trust. The stepwise multiple regression is a method of selecting independent variables in order to construct the linear relation with the dependent variable. The present study uses forward selection method of step wise regression analysis, which involves starting with no variables in the model, testing the addition of each variable based solely on the f-statistics of their estimated coefficients, that improves the model and repeating this process until none improves the model.

Results and Discussion

Table 1 shows descriptive statistics (mean and standard deviation) and correlation coefficients of all the variables examined in this study. Correlation coefficients reveal that all the demographic variables are significantly and positively associated with trust. Similarly, all the HR practices examined have been found significantly and positively correlated with trust.

The results of regression analysis reveals that after controlling for the effect of age, experience and tenure of employees, Supervisory support ([beta] = .398, p < .01) has been found to be the first variable entering the regression model which explains 46.9 percent of the variance in trust. In the second regression model, Compensation ([beta] = .263, p [less than or equal to] .01) was the second variable which entered after supervisory support, thus explaining 58.7 percent of the variance in trust. Career development ([beta] = .242, p [less than or equal to] .01) was the third variable entering after supervisory support and compensation in the third regression model which explains 61 percent of the variance in trust. The fourth model with four variables including work experience ([beta] = 0.102, p [less than or equal to] .05) emerged as a best fit model which explains 61.8 percent of the variance in trust. The results of step wise regression analysis have been reported in table 2.

The present study tested the hypothesis under which each of the seven human resource management practices; Selection and staffing, Career Development, Compensation, Performance Appraisal, Supervisory Support, Training and Development and Work life balances, individually but not as a system were examined as antecedents of trust. The results could provide partial support only for the said hypothesis in the sense that not all but only three HR practices namely supervisory support, career development and compensation have been found to be significant predictors of trust. Among the demographic variables only work experience of the employees has been found as a significant predictor of trust. Table 3 reports certain other relevant statistics like t-values, tolerance and VIF. If the tolerance value is less than some cut off value, usually .10, the independent variable should be dropped from the analysis due to multicollinearity (Hair et al., 1998). Table 3 shows that among the significant predictors of trust the career development practice has the minimum tolerance value (i.e 0.458 > cut off value .10) indicating that multicollinearity statistics in the present study are within limits.

Exchange theory indicates that employees receiving fair treatment from their supervisors may reciprocate with higher performance and more positive attitudes like trust. Employees are always concerned with distributional and procedural justice and supervisors are usually reponsible to carry out procedures and distribute outcomes. Thus supervisors may play important role in changing employees' attitudes toward them and the organization. As supervisors communicate clearly and make fair decisions, employees trust them more. As trust in supervisor increases, their perception of the success, accuracy, and fairness of the system also increase (Whitener, 1997). Past research also shows that characteristics of compensation systems affect employees' trust in the organization (Pearce, et. al. 1994). Moreover, behaviours of organizations in terms of promotions, salary increases, rewards, benefits, appear to be interpreted by employees as marks of respect and consideration on the part of their employer, which in turn appears to increase their trust in and the quality of their relationship with the latter (Eisenberger, et. al. 1990, 2001). All the three significant predictors symbolize practices that carry more worth for individuals than for the organization directly. The practices of compensation, supervisory support and career development can also be related to fulfilment of the needs of existence, relatedness and growth of the employees. Any effort on the part of an employer to fulfil its employees' needs sends positive signals to employees that organizations not only bothers about its goals but also cares for employee needs and expectations. This in turn, instils a feeling among employeesthat they are not being exploited by their employer and hence can be trusted.

Conclusion

The present study have some limitations, such as; the data presented are based on self-completed questionnaires i.e both the parts of the questionnaire including perceptions about HR practices and organizational trust have been filled by same respondents and may suffer from common method variance (Podsakoff and Organ, 1986; Gould-Williams, 2003). Further, only subjective measures of HR practices have been used to assess the perception of employees rather than using policy documents as objective measure which have their own limitations; the results may not be generalizable being based on data collected from a sample of twenty eight companies only; there is a possibility of reverse causality between trust and HR practices, with former influencing employee perceptions about the latter which has not been taken care of in the present study. Despite of these limitations this paper makes a unique contribution to the trust literature by probing the relationship between seven progressive HR practices separately and identifying the most significant contributors (supervisory support, career development and compensation) to organizational trust in the present day context of hyper competition and changing psychological contracts.

The present study has important implications for practitioners. Changing demographic composition of today's workforce along with transforming psychological contract has brought substantial change in the expectations of employees. As employees of the day do not get job security they expect efforts on the part of employer to ensure employability. Organizations need to realize that, in order to survive and succeed they need to attract, motivate and retain competent employees. For this purpose organizations shall offer to their employees the opportunity to attain a sense of growth and contentment by adopting career development practices. Secondly, the compensation system must be designed and implemented carefully to maximize performance effects. Employees of the day very much believe in the principle of give and take where contributions are made in exchange of inducements. Thus they shall get adequate returns for consistently contributing towards organizational goals. But an organization today needs to be very cautious while designing its human resource system and must not be blindly copy practices from high performing organizations, they must be properly aligned to organizational needs and contingencies. There is a great need to balance the pure economic orientation of business organizations with employees who are both economic and social actors (Bhal, 2002). In other words along with well designed compensation system and growth oriented career development practices, organizations need to be supportive. One of the major sources of organizational support can be supervisors who are perceived to be representatives of an organization. Thus the results of the present study advocate use of these three practices in order to create high organizational trust among its employees. Future research should identify other antecedents of trust and the mediating role of trust in the relationship between these antecedents and employees' behaviour and attitudes. Research in future may also be extended to examine mediation effects of trust in HRM-firm performance relationship.

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Dr. Leenu Narang (1) Dr. Lakhwinder Singh Kang (2)

(1) Assistant Professor, Sri Aurobindo College of Commerce and Management, Ludhiana, leenu_22@yahoo.co.in,

(2) Reader, Department of Commerce and Business Management, Guru Nanak Dev University, Amritsar-143501, lakhwinder_gndu@yahoo.com

Table 1: Correlation between Independent Variables and
Organizational Trust.

Variables Mean SD 1 2

1. Age (Years) 32.38 7.33 1.000
2. Gender .8084 0.39 .305 ** 1.000
3. Marital Status .7305 0.44 .507 ** .142 *
4. Experience (months) 110 81 .833 ** .273 **
5. Tenure (months) 54 49 .539 ** .198 **
6. Selection and staffing 12.07 2.07 .153 ** .192 **
7. Training and development 18.29 3.29 .069 .158 **
8. Compensation 34.88 6.99 .224 ** .141 *
9. Performance appraisal 21.98 3.83 .096 .045
10. Career development 18.86 3.17 .041 .079
11. Work life balance 12.01 3.06 -.002 -.007
12. Supervisory support 19.13 2.89 .094 .090
13. Organizational trust 34.12 4.64 .182 ** .074

Variables 3 4 5 6

1. Age (Years)
2. Gender
3. Marital Status 1.000
4. Experience (months) .478 ** 1.000
5. Tenure (months) .355 ** .591 ** 1.000
6. Selection and staffing .076 .134 * .059 1.000
7. Training and development .048 .053 .039 .519 *
8. Compensation .224 ** .220 ** .170 ** .600 *
9. Performance appraisal .112 .135 * .090 .517 **
10. Career development .064 .063 .068 .506 *
11. Work life balance .009 .020 .035 .310 **
12. Supervisory support .190 ** .114 * .143 ** .442 **
13. Organizational trust .182 ** .221 ** .164 ** .502 **

Variables 7 8 9 10

1. Age (Years)
2. Gender
3. Marital Status
4. Experience (months)
5. Tenure (months)
6. Selection and staffing
7. Training and development 1.000 *
8. Compensation .474 ** 1.000
9. Performance appraisal .463 ** .697 ** 1.000
10. Career development .446 * .646 ** .746 ** 1.000
11. Work life balance .466 ** .371 ** .481 ** .435 **
12. Supervisory support .394 ** .485 ** .632 ** .613 **
13. Organizational trust .378 ** .635 ** .651 * .663 **

Variables 11 12 13

1. Age (Years)
2. Gender
3. Marital Status
4. Experience (months)
5. Tenure (months)
6. Selection and staffing
7. Training and development
8. Compensation
9. Performance appraisal
10. Career development
11. Work life balance 1.000
12. Supervisory support .427 ** 1.000
13. Organizational trust .374 ** .686 ** 1.000

** p < 0.01, * p < 0.05

Table 2: Predictors of Organizational Trust Step-wise
Multiple Regression

Variable Model 1 Model 2

Work experience -- --
Tenure -- --
Selection and staffing -- --
Career development -- --
Compensation -- .396 **
Performance appraisal -- --
Supervisory support .686 ** 494 **
Training and development -- --
Work life balance -- --
Adj. [R.sup.2] .469 .587
F 267.299 ** 215.962 **

Variable Model 3 Model 4

Work experience -- .102 **
Tenure -- --
Selection and staffing -- --
Career development .224 ** .242 **
Compensation .294 ** .263 **
Performance appraisal -- --
Supervisory support .406 ** .398 **
Training and development -- --
Work life balance -- --
Adj. [R.sup.2] .610 .618
F 158.205 ** 123.246 **

** P [less than or equal to] .01
* P [less than or equal to] .05

N = 303

Table 3: Other Relevant Statistics

Variables Standardized t-values
 coefficients (B)

Age -.033 -.511
Work experience .102 ** 2.777
Tenure -.023 -.517
Selection and staffing .053 1.164
Career development .242 ** 4.609
Compensation .263 ** 5.453
Performance appraisal .064 1.043
Supervisory support .398 ** 8.728
Training and development -.023 -.544
Work life balance -.002 -.047

Variables Tolerance Collinearity
 statistics-VIF

Age .301 3.320
Work experience .937 1.067
Tenure .645 1.551
Selection and staffing .603 1.660
Career development .458 2.183
Compensation .542 1.846
Performance appraisal .331 3.021
Supervisory support .608 1.645
Training and development .726 1.377
Work life balance .759 1.317

** P [less than or equal to] .01

* P [less than or equal to] .05