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ABSTRACT Employee satisfaction is considered to be one of the most important drivers of quality,
customer satisfaction and productivity. In this study we investigate an important driver of employee
satisfaction. We argue that interpersonal trust (trust in management and trust in peers) strongly
influences employee satisfaction and, as a consequence, employee loyalty. To test the
relationships between these constructs we measured trust in management and trust in peers,
satisfaction and loyalty of employees of an Austrian company in the energy sector (N ¼ 131). The
results of the statistical analysis using structural equation modeling with Partial Least Squares
(PLS) confirm a strong link between trust, employee satisfaction and employee loyalty.
KEY WORDS : Interpersonal trust, employee satisfaction, employee loyalty, Partial Least Squares
(PLS)
Introduction
Numerous studies show that satisfied employees are highly motivated, have good morale
at work, and work more effectively and efficiently (e.g. Eskildsen & Dahlgaard, 2000).
They are also more committed to continuous improvement and to quality. Employee
satisfaction, therefore, directly influences process quality. Process quality, in turn, deter-
mines quality costs and customer satisfaction. From a theoretical and managerial perspec-
tive, therefore, it is crucial to identify the drivers of employee satisfaction, to monitor
satisfaction continuously and to take the right measures to foster satisfaction and
loyalty. These questions are the focus of many studies in the TQM literature
(Eskildsen & Dahlgaard, 2000; Eskildsen & Nüssler, 2000; Martensen & Gronholdt, 2001;
Matzler et al., 2004; Westlund & Löthgren, 2001). In this study we argue that interpersonal
Correspondence Address: Birgit Renzl, Unit for Strategic Management & Leadership, Innsbruck University
School of Management, Universitaetsstrasse 15, A-6020 Innsbruck, Austria. Email: birgit.renzl@uibk.ac.at
trust is a strong driver of employee satisfaction. Previous studies have investigated the role
of trust in the formation of employee satisfaction (for a review see for example Dirks &
Ferrin, 2001), but have focused mainly on trust in management (e.g. Rich, 1997) or trust in
leadership (for a review see Dirks & Ferrin, 2002). We argue that, especially in team-
based organizations, trust in peers also plays a major role. In the following section of the
paper we briefly review the literature on trust and on employee satisfaction and we
develop three hypotheses regarding the trust–satisfaction–loyalty relationship. We then
report the results of an empirical study that investigates the impact of trust in management
and trust in peers on employee satisfaction and loyalty.
and so on. Rich argues that salespeople will be more satisfied with their job when they
have honest, competent, and reliable sales managers that can be trusted. He confirmed
this hypothesis in a study with 183 salesperson-manager dyads. In a study on selling
alliances that are formed in order to cooperatively develop and maintain customer
relationships, Smith & Barclay (1997) demonstrate that trusting behaviors have an effect
on perceived task performance and mutual satisfaction (defined as the extent to which
both partners in a relationship are satisfied) and mutual perceived trustworthiness had
both a direct and indirect (via trusting behaviors) effect on satisfaction. Pillai et al. (1999)
tested a comprehensive model of relationship between transformational and transactional
leadership, procedural and distributive justice, trust, job satisfaction, organizational commit-
ment, and organizational citizenship behaviors in two quantitative studies. Their
results reveal that trust in a leader mediates the relationship between leader behavior and
job satisfaction. Flaherty & Pappas (2000) study the salesperson–manager relationship
and report that trust has a strong impact on job satisfaction. Goris et al. (2003) report findings
from an empirical study in two companies that provide justification for trust in superiors
and influence on superiors as predictors of performance and satisfaction. Brashear et al.
(2003) found that interpersonal trust is most strongly related to shared values and
respect. In their empirical study, trust was directly related to job satisfaction and relation-
alism, and indirectly related to organizational commitment and turnover intention.
Overall, the empirical evidence strongly supports the effect of trust on employee satis-
faction. From the brief review of the most important studies reported here, it becomes
evident that most of the studies focus on the impact of trust on satisfaction in a subordi-
nate –manager –relationship.
As the architecture of modern organizations has strongly moved towards team-based
organizations in the last years – especially in Total Quality Management (Robbins,
2003) – we argue that not only trust in management but also trust in peers plays a major
role in the formation of employee satisfaction. The three facets of trust mentioned above
are also relevant for work teams. Trust in a team member reflects the expectation that
the team member will act benevolently, it involves the willingness to be vulnerable and
risk that the other team member may not fulfill the expectations, and it involves depen-
dency, as a trustee will be affected by the team member’s behavior. Thus, we expect that
employee satisfaction in team-based organizations is strongly affected by trust in manage-
ment and trust in peers:
2003a). Several empirical studies have found that employee satisfaction is a strong deter-
minant of organizational commitment and loyalty (e.g. Mak & Sockel, 2001; Martensen &
Gronholdt, 2001), it is negatively related to turnover (e.g. Tekleab et al., 2005;
Ward, 1988) and absenteeism (e.g. Muchinsky, 1977). In their meta-analysis of the
antecedents and correlates of employee turnover, Griffeth et al. (2000) find that overall
job satisfaction and facet satisfaction are strong predictors of turnover. Thus, we argue that
The relationships between these constructs (trust in management, trust in peers, employee
satisfaction and employee loyalty) are shown in Figure 1. In the next section we describe
the empirical study and the results of testing of our hypotheses.
Study
Sample
To test the relationship between trust, employee satisfaction and loyalty, we collected data
from an Austrian company in the utility sector. A standardized self-administered question-
naire was sent to 665 employees of that company. All the employees selected for this study
were part of project teams. The employees received an e-mail from the research team
explaining the scope of the study. The questionnaire was attached, and the employees
were asked to complete the questionnaire, which they then dropped in one of the boxes
that were placed in a central location in the building and were picked up one week later
by a member of the research team. Anonymity and confidential treatment of the
answers were guaranteed. 131 fully completed and usable questionnaires were returned
within one week, this corresponds to a return rate of approximately 20%.
Measures
All constructs were measured using existing and tested scales. Trust in management and
trust in colleagues were measured using Cook & Wall’s (1980) interpersonal trust at work
scale. This scale was chosen for three reasons. First, it was developed in order to measure
trust in management and trust in colleagues, and is therefore most appropriate for the
purpose of our study. Second, it was one of the first scales, and is still the most widely
used, for measuring interpersonal trust. Third, this scale has been extensively tested and
shows good psychometric properties. From the questionnaire, the subscales capturing
faith in intentions of peers and faith in intentions of management were chosen, measuring
the items on a five-point Likert scale (from ‘strong approval’ to ‘strong disapproval’).
Cook & Wall’s scale to measure faith in the trustworthy intentions of others corresponds
closely to Mayer et al.’s (1995) definition of benevolence (‘You care about me and take an
interest in my well-being and goals’) (Abrams et al., 2003) which is defined as the extent
to which a trustee is believed to want to do good to the trustor, aside from an egocentric
profit motive, which demonstrates a concern for the welfare of others (McAllister, 1995).
Benevolence has been identified as a central condition of trust. Benevolence is part of
trustworthy behavior
Employee satisfaction was measured against a six-item scale that reflects overall satis-
faction rather than any specific dimension of employee satisfaction (Homburg & Stock,
2004, 2005). Employee loyalty has been measured with a five-item scale adapted from
Homburg & Stock (2000) using a five-point Likert scale (from ‘strong approval’ to
‘strong disapproval’).
a minimum sample size of 30 and a minimum sample size that is 10 times greater than (1)
the number of items comprising the most formative constructs or (2) the number of inde-
pendent constructs directly influencing a dependent construct (Wixom & Watson, 2001).
With a sample size of 131 in this study, these requirements are met. The software used was
SmartPLS (Hansmann & Ringle, 2004). A PLS model is usually analyzed and interpreted
in two stages (Hulland, 1999). In the first stage, the measurement model was tested by
performing validity and reliability analyses on each of the measurements obtained using
the model. In the second stage, the structural model was tested by estimating the paths
between the constructs in the model, determining their significance as well as the predic-
tive ability of the model. This sequence was followed to ensure that reliable and valid
measurements of the constructs are used before conclusions about the nature of the
relationships between the various constructs are drawn (Hulland, 1999).
Discussion
In this study we have shown that trust in colleagues and trust in management are strong
predictors of employee satisfaction, and employee satisfaction, in turn, influences
employee loyalty. Thus, our hypotheses have been supported (see Table 3).
It is interesting to note that trust in peers (b ¼ 0.42) has a much stronger impact on
employee satisfaction than trust in management (b ¼ 0.28). This result underlines the
importance of measuring not only trust in management, but also trust in peers. This, in
our view, is an important finding, as most previous studies focused only on the
superior-subordinate relationship when analyzing the antecedents and consequences of
trust in organizations and neglected the peer-to-peer-relationship. The findings of our
study also have important implications for management. Employee satisfaction is a
central topic in Total Quality Management. In an effort to increase satisfaction and
1268 K. Matzler & B. Renzl
between word and deed, ensure frequent and rich communication, engage in collaborative
communication, ensure that decisions are fair and transparent). Second, on an organi-
zational level, holding people accountable for trust and, especially, a shared vision and
language, seem to be important drivers of trust. Third, on a relational level, creating per-
sonal connections and giving away something of value (e.g. be willing to offer others
one’s own personal network of contacts when appropriate) are central elements of trust
building. Fourth, on the individual level, the disclosure of expertise and one’s own limitations
increase trust.
Finally, we would also like to underline that trust not only influences workplace atti-
tudes such as employee satisfaction, but it is also an important driver of workplace
behavior, such as knowledge sharing (Mooradian et al., forthcoming 2007; von Krogh,
2002; von Krogh et al., 2000). Managers who are cognizant of the processes that lead
to trust or distrust in an organization, and who are aware of the effect of trust on attitudes
and behavior, are able to take adequate measures to intervene in trust building processes at
a team level and at the superior-subordinate level, and thus improve the performance of
organizations.
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