Here are three types of trust in organizational relationships deterrence based, knowledge based and identification based.
Deterrence based Trust: The most fragile relationships are contained in deterrence based trust. One violation or inconsistency can destroy the relationship. This form of trust is based on fear of reprisal if the trust is violated. Individuals who are in this type of relationship do what they say because they fear the consequences from not following through on their obligations.
Deterrence based trust will work only to the degree that punishment is possible, consequences are clear, and the punishment is actually imposed if the trust is violated. To be sustained the potential loss of future interaction with the other party must out weigh the profit potential that comes from violating expectations. Moreover, the potentially harmed party must be willing to introduce harm (for example, I have no qualms about speaking badly of you if you betray my trust) to the person acting with distrust.
Most new relationships begin on a base of deterrence. Take, as an illustration, a situation where you’re selling your car to a friend of a friend. You don’t know the buyer. You might be motivated to refrain from telling this buyer all the problems with the car that you know about. Such behavior would increase your chances of selling the car and securing the highest price. But you don’t withhold information. You openly share the car’s flaws. Why? Probably because of fear of reprisal. If the buyer later you deceived him, is likely to share this with your mutual friend. If you knew that the buyer would never say anything other mutual friend, you might be tempted take advantage of the opportunity. If it’s clear that the buyer would tell and that your mutual friend would think considerably less of you for taking advantage of this buyer friend your honesty could be explained in deterrence terms.
Knowledge Based Trust: Most organizational relationships are rooted in knowledge based trust. That is, trust is based on the behavioral predictability that comes from a history of interaction. It exists when you have adequate information about someone to understand them well enough to be able to accurately predict his or her behavior.
Knowledge based trust relies on information rather than deterrence. Knowledge of the other party and predictability of is or her behavior replaces the contracts, penalties and legal arrangements more typical of deterrence based trust. This knowledge develops over time largely as a function of experience that builds confidence of trustworthiness and predictability. The better you know someone, the more accuracy you can predict what he or she will do. Predictability enhances trust even If the other is predictably trustworthy because the ways that the other will violate the trust can be predicted. The more communication a regular interaction you have with someone else the more this form of trust can be developed and depended on. In an organizational context, most manager-employee relationship are knowledge based. Other parties have enough experience working with each other that they know what to expect. A long history of consistently open and honest interaction is for instance, is not likely to be permanently destroyed by a single violation.
Identification based Trust: The highest level of trust is achieved when there is an emotional connection between the parties. It allows one party to act as an agent for the other and substitute for that person in interpersonal transactions. This is called identification based trust. Trust exists because the parties understand each other’s intentions and appreciate the other’s wants and desires. This mutual understanding is developing to the point that can effectively act for the others. Controls are minimal at this level as you don’t need to monitor the other party because there exist unquestioned loyalty.
The best example of identification based trust is among the happily married couple. A husband comes to learn what’s important to his wife and anticipate those actions. She, in turn, trust that he will anticipate what’s important to each other without having to ask. Increased identification enables each to think like the other, feel like the other and respond like the others.
Broken promises have led to a breakdown in what was at one time, a bond if unquestioned loyalty. It’s likely to have been replaced with knowledge based trust