Trust in management in organizations

Kieron Meagher and Andrew Wait
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Andrew Wait: University of Sydney, Australia

IZA World of Labor, 2023, No 507, 507

Abstract: It is not possible for a formal employment contract to detail everything an employee should do and when. Informal relationships, in particular trust, allow managers to arrange a business in a more productive way; high-trust firms are both more profitable and faster growing. For example, if they are trusted, managers can delegate decisions to employees with confidence that employees will believe the promised rewards. This is important because employees are often better informed than their bosses. Consequently, firms that rely solely on formal contracts will miss profitable opportunities.

Keywords: management; trust; productivity; profitability (search for similar items in EconPapers)
JEL-codes: J24 J5 M12 M54 (search for similar items in EconPapers)
Date: 2023
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