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Laissez-Faire leaders and organizations: how does Laissez-Faire leader erode the trust in organizations

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upervisors are known to play significant role in instilling trust within the organizations. Following this corollary, the aim of this study is to investigate the effect of laissez-faire leadership on employees’ trust in their organizations. Known as “absence of leadership”, laissez-faire leadership is one of the ineffective and destructive leadership styles, which is assumed to erode the trust both in supervisors and organizations. Data were collected mostly from engineers (sample size =129) working in a public organization, conducting scientific and technological research on mineral exploration and geology. The finding including both correlation coefficients and results of structural equation modeling revealed that the experience of laissez-faire leadership by an immediate supervisor was strongly associated with reduced level of trust in organizations. More specifically, when a supervisor fails to satisfy to the expectations of subordinates by lack of presence and involvement, those behaviors seem to erode the employees' feelings of trust toward their organizations. This finding could be explained with the premises of psychological contract breach. Employees perceiving their supervisors reluctant or incompetent to satisfy their needs seem to lose their confidence that the organization would abide by the initial promises had been made, which wears away the trust in organization as time passes.
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LAISSEZ-FAIRE LEADERS AND ORGANIZATIONS: HOW DOES LAISSEZ-FAIRE LEADER ERODE
THE TRUST IN ORGANIZATIONS?
DOI: 10.17261/Pressacademia.2016116538
Hande Tosunoglu1, Ozge Tayfur Ekmekci2
1Hacettep e University. handetosunoglu@gmail.com
2Hacettepe Univ ersity. otayfur@hacettepe.edu.tr
ABSTRACT
Supervisors are known to play significant role in instilling trust within the organizations. Following this corollary, the aim of this study is to
investigate the effect of laissez-fair e leadership on employe es’ trust in their organizations. Known as “absence of leadership”, lai ssez-faire
leadershi p is one of t he ineff ective an d destructive leadership styles, which i s assumed to erode t he trust both in supervisors and
organizations. Data were collected mostly from engineers (sample size =129) working in a public organizatio n, cond ucting scientific and
technological research on mineral expl oratio n and geology. The finding including both correlation coefficients and results of structural
equation model ing revealed that t he exp erienc e of laissez-faire l eadership by an immediate supervisor was strongly associated with
reduced level of trust in organizations. More specifically, when a supervisor fails to satisfy to the expectations of subordinates by lack of
presence and involvement, t hose behaviors seem to erode the em ployees ' feelings of trust toward t heir organizations. This finding could
be explai ned with the pr emises of psychological contract breach. Employees perceiving their supervisors r eluctant or inc ompete nt to
satisfy their needs seem to los e their confidence that the org anization woul d abid e by the initial promis es had been ma de, which wear s
away the trust in organization as time passes.
Key Words: Trust, organizational trust, lea dership, laissez-faire leadership, ineff ective leader ship.
JEL Classification: M10, M12, M54.
1.INTRODUCTION
Recent years have witnessed a surge of interest in the analysis of trust. Many studies tried to pinpoint the
antecedents and correlates of trust, especially in organizational settings. This increased attention could be
attributed to the impact of trust on gaining and sustaining competitive advantage. In a number of studies, trust
was found to increase profitability, reduce turnover rates (Davis, Schoorman, Mayer, & Tan, 2000), and
enhance cooperation (Dirks & Ferrin, 2001), commitment and motivation (Brockner, Daly, Martin, Siegel &
Tyler, 1997; Tyler, 2000). Despite these positive consequences and suggestions made to foster the trust, many
organizations still suffer from lack of trust. Lazarus and Salem (2005) claimed that four in five employees had
suspicions about the intentions of the organizations. Similarly, Reina and Reina (2007) reported that nine out of
every 10 employees have reported experiencing some sort of breach of trust in the workplace on a regular
basis. Given the fact that the feelings of distrust and cynicism could erode employee loyalty; thereby make
employee retention difficult, new studies are needed to understand how management, particularly managers /
leaders play a role in the development of trust.
The aim of this study is to investigate the effect of laissez-faire leadership on organizational trust using the data
obtained from engineers in a Turkish public organization. So far, researchers focused mostly on constructive
leadership styles such as authentic, ethical, transformational leadership style, although examples of destructive
leadership are more prevalent in work life. As Skogstad, Einarsen, Torsheim, Aasland and Hetland (2007) noted
empirical research on destructive leadership behaviors is relatively limited despite the plausible devastating
Journal of Economics, Finance and Accounting (JEFA), ISSN: 2148-6697
Year: 2016 Volume: 3 Issue: 1
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consequences for subordinates and organization. Known as “absence of leadership” (Bass & Avolio, 1990),
laissez-faire leadership could be regarded as a special type of destructive leadership since laissez-faire leaders
do not show interest in subordinates’ needs, take decisions and give feedback on time. These leaders are not
able to meet the legitimate expectations of their followers/ subordinates, therefore they are argued to create
role conflicts, role ambiguities (Kelloway, Sivanathan, Francis & Barling, 2005) and disagreements with
coworkers (Skogstad et al., 2007). Although the destructiveness and negative side of laissez-faire leadership has
been acknowledged by researchers, only limited number of studies (e.g., Kelloway et al., 2005; Skogstad et al.,
2007) addressed the negative consequences of laissez-faire leadership on subordinates and organizations. This
study aims to reveal whether experiencing laissez-faire leadership is associated with reduced levels of trust in
organizations. In particular, the study addresses the plausible effect of absence of leadership on employee’s
confidence to their organizations. As indicated before, extant literature (e.g., Joseph & Winston, 2005; Martins
Marques de Lima Rua, & Costa Araújo, 2013) has mostly focused on the effect of constructive leadership on
employee’s trust in supervisors and organizations. However, to our knowledge, only limited number of studies
(e.g., Gillespie & Mann, 2004) addressed the impact of destructive and passive leadership (including laissez-
faire leadership) on trust. As Gillespie & Mann (2004) noted, it is informative to understand common
leadership practices that may adversely affect trust. Therefore revealing the effect of laissez-faire leadership on
organizational trust could contribute to extant literature. This study could provide insights about how laissez-
faire leadership is perceived and how it influences the organizational trust in Turkey, which is argued to differ
from Western societies in terms of leadership practices accepted and enacted (see., Fikret-Pasa, Bodur &
Kabasakal, 2001). Turkish culture, characterized with high collectivism and power distance (Hofstede, 1980),
supports paternalistic leadership, in which leader acts a like a father to the followers (Kabasakal & Bodur,
1998). Studies investigating the leadership styles in Turkey reported that Turkish managers show parental
consideration toward their subordinates (e.g., Aycan & Fikret-Pasa, 2003), and exhibit nurturing and
authoritarian behaviors at the same time. As in other countries, much of the interest has been devoted to
investigate the prevalent leadership styles in Turkey; however less attention has been directed to the
investigation of ineffective and destructive leadership styles like laissez-faire leadership. In one study, Pasa et
al. (2001) found positive relationship between collectivist values and the prevalence of paternalistic and laissez-
faire leadership styles in Turkish organizations. The researchers noted that laissez-faire leadership was not
regarded as a desirable leadership style by Turkish employees. Following this corollary, it seems necessary to
investigate how employees react to laissez faire leadership. By investigating the effects of laissez faire
leadership on trust, this study aims to contribute existing literature.
In the following sections, firstly laissez-faire leadership and organizational trust will be explained, and then the
relationship between these concepts will be discussed using theories and the results of existing studies. After
this brief literature review, methodology and results of the study will be presented together with the
implications of the results.
2.LITERATURE REVIEW
2.1.Concept of Laissez-Faire Leadership
The French term “laissez-faire” is mostly used in economics and political sciences to define a policy of minimum
governmental interference in the economic affairs of individuals and society (Encyclopædia Brittannica, nd). In
leadership literature, laissez-faire refers to a “hands-off, let things-ride” approach (Northouse, 2010) to
influencing individuals in the workplace. Bass and Avolio (1990) describe laissez-faire leadership as “the
absence of leadership” and “the avoidance of intervention”. Laissez-faire leaders tend to behave as if they are
abdicated from the responsibilities and duties assigned to him /her (Lewin, Lippit & White, 1939). This
leadership style resembles “impoverished management” detailed by Blake and Mouton (1985) by describing a
leader exerting minimal effort to get required work done and showing minimal concern for subordinates
(Einarsen, Aasland & Skogstad, 2007). According to Lewin et al (1939), although laissez faire leaders have been
nominated to leadership positions and physically occupy these positions, they ignore the responsibilities and
duties assigned to them. Based on this, laissez-faire leadership should be regarded not only as “lack of
presence”, also as “zero leadership”.
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Although Schyns and Schilling (2013) disagree with this claim, Einarsen et al (2007) regards laissez-faire
leadership as a form of destructive leadership. Einarsen and colleagues (2007) argue that laissez-faire
leadership violates the legitimate interests of the organizations and their employees by undermining
organizational objectives and /or subordinates well-being. Bass and Avolio (1997) on the other hand, regards
laissez-faire leadership as an ineffective leadership style together with active corrective leadership (leading by
monitoring and focusing on mistakes) and passive corrective leadership (waiting for things to go wrong before
intervening).
2.2.Concept of Organizational Trust
The “trust” literature is plagued by an abundance of definitions, which seem to make the defining features and
dimensions of trust are still open to debate. So far, the concept of trust has been defined by different
disciplines such as sociology, psychology and administrative sciences. Most cited definitions of trust, however,
seem to share some conceptual and linguistic commonalities. Most conceptualizations of trust emphasize risk
or vulnerability (Rousseau, Sitkin, Burt, & Camerer, 1998). For example, Mayer, Davis and Schoorman (1995)
define trust as "the willingness of a person to be vulnerable to the actions of fellow coworkers whose behavior
and actions that person cannot control.” (p.709). Similarly, Doney, Cannon and Mullen (1998) conceptualize
trust as "willingness to rely on another party and to take action in circumstances where such action makes one
vulnerable to the other party"(p.604). Based on the discussions in the literature, one can assume that trust
exists when one party is willing to make themselves vulnerable to the discretionary behavior of other party
(Pirson & Malhotra, 2010).
In the early studies, trust has mostly been studied at a general level without acknowledging the different
referents. However as Dirks and Skarlicki (2004) point out, identification of the different referents of trust such
as organizational, supervisory or coworker trust enables organizations to better leverage the benefits of trust
given the fact each type of trust has its own unique antecedents and consequences. Acknowledging the
differences in referents of trust, researchers have started to analyze coworker, organizational and supervisor
trust separately. In this study, we will focus on organizational trust, which could argued to be different from
supervisor or coworker trust in terms of abstraction level. Like other referent of trust, many definitions of
organizational trust have been offered. For example, Schoorman, Mayer, and Davis (2007) conceptualize
organizational trust (i.e., trust in an organization) as “employees' willingness to be vulnerable to their
organization's actions or policies”. In a way, organizational trust represents employees' confidence and
expectations about the actions of their organization (Lin, 2010).
The existence of trust in organization has been reported to be associated with number of positive outcomes.
Conversely, the absence or loss of organizational trust usually results in the loss of highly qualified employees
to other organizations, a loss of interest among employees in the job and organization, and increased levels of
absenteeism and tardiness (Kowalski & Cangemi, 1993; cited in Hollander Vineburgh, 2010). Besides that as
Currall and Epstein (2003) argue, it is almost impossible for organizations to regain trust once it has been lost.
Trust has become a rare resource, which every organization should strive to obtain and maintain in today’s
business world. Therefore, understanding the development of trust within the organization has gained utmost
importance in the last decades.
2.3.Relationship between Laissez-Faire Leadership and Organizational Trust
Leaders or managers are believed to play primary role in establishing and developing trust in organizations
(e.g., Creed, Miles, Kramer & Tyler, 1996; Fairholm, 1994; McAllister, 1995). As Lewin (1999) pointed out
leaders / managers could create culture of trust by creating sense of credibility (i.e., doing what they say they
are going to do) and showing consistency (i.e., behave in a predictable way). It is also argued that some leader
behaviors such as clarifying shared purpose, direction and vision, providing frequent and timely communication
and ensuring high quality interpersonal relationships enable the development of culture of trust (Cufaude,
1999). Furthermore, leaders were found to build trust in organizations by making their positions clearly known,
supporting the employees and articulating and consistently implementing a particular direction (Northhouse,
2011).
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Although effective leadership enables the development of trust within the organizations, the other side of the
coin is also possible. Burris, Deter and Chiaburu (2008) claim that negative feelings toward the supervisor could
spill over to the feelings toward the organization, thereby make feelings and attitudes about organization
negative. This claim could be reasonable because employees perceive their supervisor as the representative of
their organization, which may lead them to generalize the negative feelings toward him/her to organization.
Besides that working with undesirable, incompetent or destructive supervisors could create perception among
employees that the organization does not intervene to protect themselves (Schyns & Schilling, 2013). Day by
day, such negative feelings could erode the trust in organizations. In line with above arguments, Gillespie and
Mann (2004) reported negative relationship between laissez-faire leadership and trust in supervisors, which is
argued to be closely associated with trust in organizations. The researchers claims that, through their
avoidance of taking an active leadership role, passive and laissez-faire leaders lose the opportunity to build
trust of their followers or even such a trust already exits, this ineffective leadership erodes that trust as the
time passes.
The concept of psychological contract (Rousseau, 1989) could explain the plausible relationship between
laissez-faire leadership and trust, including trust in organizations. Psychological contract reflects an individual’s
beliefs about the terms and conditions of a reciprocal exchange agreement between that person and another
party (Rousseau, 1989). If employees perceive that their organizations or supervisors fail to fulfill the promised
obligations, they experience a psychological contract breach (Rousseau, 1989; cited in Robinson, 1996), which
could adversely affect their job satisfaction and commitment. According to Rousseau (1989), psychological
contract breaches results in erosion of trust by undermining two important foundations of trust. Integrity,
which reflects perceived consistency of another’s actions and the extent to which another’s actions are
congruent with his /her word” (Mayer et al, 1995, p.719), constitutes one of the key elements of trust.
According to Robinson (1996), when employee perceives an inconsistency between the managers’ words and
actions, that is s/he thinks that manager is lack of integrity, s/he loses confidence that the contributions made
today will be reciprocated by the organization in the future. By failing to fulfill the promised obligations (i.e.,
not showing concern for employees, not providing guidance), laissez-faire leaders or managers could seem
inconsistent to employees, which would undermine judgments about their integrity and cause psychological
contract breaches. As a result, employees’ trust in both managers and organizations could erode. In addition to
perceived integrity, psychological contract breaches give damage to interpersonal relations by raising question
marks about perceived benevolence of supervisors or management. When leaders / supervisors violate
psychological contracts, they undermine “respect” and “concern for one’s welfare”, which constitute building
blocks of any trusting relations. By showing no benevolence and effort to enhance the welfare of their
subordinates, laissez-faire leaders/supervisors could violate the psychological contract between employees and
organizations; which could result in loss of trust in both themselves and organizations.
The arguments about psychological contract breach and its plausible effects on trust together with the
empirical findings showing leaders’ / managers’ play primary role in establishing and developing trust in
organizations (e.g., Creed, Miles, Kramer & Tyler, 1996; Fairholm, 1994; McAllister, 1995) lead us to
hypothesize:
Hypothesi s: Experiencing laissez-faire leadership by one’s immediate superior/supervisor is associated with
lower levels of trust in organizations.
3.METHOD
3.1.Participants and Procedure
In this study, data were collected from a Turkish public organization, conducting scientific and technological
research on mineral exploration and geology. Although the organization employs both white and blue collar
employees, only white collar employees, mostly engineers were included to the study. We preferred this
sample group because the participants were working at teams, having designated team leaders. We believe
that people working at team- based structure are in a better position to assess the leadership style of their
supervisors or leaders.
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Before data collection, aims of the study were introduced to participants. Confidentiality and anonymity of
their answers were ensured in order to eliminate the concerns about evaluating their supervisors. Employees
willing to give sincere responses were asked to take part in study; therefore no incentives were offered to
ensure higher participation. The data collection was based on convenience, meaning that people who were
present at the time of data collection took part in the study. Out of one hundred fifty questionnaires, one
hundred twenty nine questionnaires were returned (response rate: 86%). However, one questionnaire form
was excluded from the analyses because of the high number of missing answers.
Majority of the participants were male (n= 92; 72%), married (n= 93; 73%) and highly educated (having mostly
undergraduate: 63% and graduate degrees: 35%, only 2% high school degree). Approximately 36% of the
participants were between 26-35; 24% between 36- 45 and % 28 between 46-55 years old. They were working
in engineering and managerial positions (67%), while the remaining ones were working in other positions
(23%). Most participants stated that they were working with their current supervisors more than one year (82.8
%); therefore they were in a position to assess the leadership style of their supervisors.
3.2.Measures
In the self-report survey, we asked participants to evaluate items related to organizational trust, laissez-faire
leadership and demographics. Demographic information (i.e., marital status, gender, education level, tenure,
position, working time with supervisor) was asked to understand the participants’ profile and control for their
plausible effects on organizational trust.
Organizational Trust: In this study, organizational trust was measured with 12 item Organizational Trust
Inventory developed by Nyhan and Marlowe (1997) and 4-item inventory developed by Cummings and
Bromiley (1996). Items measure people's confidence to their organization about its willingness to act according
to their interests. Sample item was “I think people in this organization tell the truth in negotiations”.
Respondents rated 7-point Likert scale ranging from “strongly disagree (1)” to “strongly agree (7)” with higher
scores indicative of higher level of trust in organizations. As it can be seen from Table XXX, the reliability of the
scale (α = .91) was well above the criteria suggested by Nunnally (1978).
Laissez-Faire Leadership: Laissez faire leadership behavior was measured using 4-items from Multifactor
Leadership Questionnaire of Bass and Avolio (1990). Sample items were: “Has avoided telling me how to
perform my job”; “Has steered away from showing concern about results”. Responses to items are measured
on a 5-point scale (not at all, once in a while, sometimes, fairly often, frequently if not always) in which higher
scores are indicative of higher level of laissez-faire leadership. The reliability of the scale (α = .81) was found to
be satisfactory.
3.3.Analyses
In this study, full-structural equation modeling was used to analyze the structural relationship between
measured variables (i.e., questionnaire items) and latent constructs (organizational trust and laissez-faire
leadership). This modeling technique enables researchers to combine confirmatory factor analysis and multiple
regression analyses by testing measurement and structural models simultaneously. Through measurement
model, confirmatory factor analysis (CFA) was conducted to determine whether the number of factors (i.e.,
constructs) and the loadings of the items in the questionnaire were in line with the two-factor structure. After
examining the factor structure, hypothesized relation between trust and laissez-faire leadership was tested
through structural model. All analyses were conducted with AMOS 17 (Arbuckle, 2008), which provides
maximum likelihood parameter estimates of specified paths (relations) and several indices of fit (i.e., chi square
ratio, goodness of fit index-GFI, comparative fit index-CFI, root mean square approximation-RMSEA).
The significance of factor loadings and hypothesis was assessed by means of standardized estimates and t-
values. Degree of fit between model and data was examined with the robust statistics (i.e., chi square, chi
square ratio, CFI, GFI and RMSEA). Although insignificant chi-square 2 ) value is considered as a sign of good
fit, Bryne (1998) suggests researchers to accept small χ2 value (relative to its degrees of freedom) as an
indication of good fit, considering the sensitivity of χ2 value to sample size. Following the suggestion of
Schermeller, Moosbrugger, and Müller, (2003), χ2/df values between 0 and 2 were accepted as an indication of
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good fit; between 2 and 3 as an indication of acceptable fit. For CFI, values of greater than .90 were initially
regarded as indication of good fit (Bentler, 1990), however, recently a value exceeding this cut off was
suggested in order to prevent Type I error (i.e., ensure that mispecified models are not accepted) (Hu and
Bentler, 1999). For the other criterion, RMSEA, values of less than .05 were considered evidence of a good fit,
between .05 and .08 a fair fit, between .08 and .10 a mediocre fit, and greater than .10 a poor fit (MacCallum,
Browne, & Sugawara, 1996).
4.RESULTS
4.1.Results of Preliminary Analysis
Before proceeding to main analysis, organizational trust and laissez-faire leadership were examined for
accuracy of data entry, missing values and normality. Firstly, missing values were replaced with mean of
respective items. Secondly, univariate and multivariate normality were assessed with Kolmogorov Smirnov
and Mardina coefficient tests respectively and no severe violations of normality were detected.
After aforementioned data screening, we examined the reliability estimates. The internal consistency of the
items was found to be satisfactory for laissez-faire leadership (Cronbach’s α = .81). For organizational trust,
however, four items were found to decrease internal consistency. It was realized that these four items were all
negatively worded items. In order not to experience problems, these items were excluded from the further
analyses. With the remaining items (n=11), trust scale turned out to be highly reliable (Cronbach’s α = .91).
After reliability analysis, we computed the composite scores by taking the mean of the responses to trust and
laissez-faire items. By using these composite scores, we examined the correlations between study variables and
demographics (see Table 1 for correlations). Neither trust nor laissez-faire leadership was found to be
significantly related to demographic variables (i.e., gender, age, marital status, tenure and amount of years
working with current supervisor). Consistent with the expectation, laissez-faire leadership and organizational
trust was found to be negatively correlated (r = -.49, p < .01).
Table 1: Descriptive Statistics of Study Variables
Mean
SD
1
2
3
4
5
6
7
1. Gender
--
--
1
2.Age
--
--
.17*
1
3.M.Status
--
--
-.03
.28**
1
4.Tenure
--
--
.12
.67**
.23**
1
5.W.T.Sup
--
--
.08
.33**
.27**
.39**
1
6.L.F.Leader
1.45
3.84
.11
.02
-.08
.01
-.01
1
7.Trust
1.04
1.27
-.06
.03
.11
-.06
.06
-49**
1
Note. Gender: 1=Women; 2= Men; Age: 1= 18-25 years ; 2= 26-35 years; 3= 36-45 years; 4= 46-55 years; 5= 56 and above years. M. Status:
1= Single; 2= Married; T enure: 1= less tha n 1; 2= 1-3 years; 3= 4-7 years; 4= 8-12 y ears; 5= 13-18 years; 6= 19-25 years; 7= 26 and above.
Working Time with Supervisor (W.T.Sup): 1= less than 1; 2= 1-2 years; 3= 3-5 years; 4= more than 5 years. Laissez Fair e Leadership
(L.F.Leader): Measured with 5-point scale; Trust: M easured with 7-point sc ale. *: significant at .05 level; ** significant at .01 level.
4.2.Results of Main Analysis
As indicated before, we used full-latent modeling, which includes both measurement and structural models. In
measurement model part, two latent variables (i.e., laissez-faire leadership and trust) were hypothesized to be
measured with 15 items and these latent variables were not allowed to co-vary. Initial results indicated poor-
fitting model (χ2 (89) = 218.11, p <.05; χ2 /df = 2.45; CFI = .87; GFI =. 83, RMSEA =.11). The modification indices
suggest adding covariances between error terms of trust items. Since these items were supposed to measure
same construct (i.e., trust), six error covariances were added to the model. After this modification, the model
improved substantially as evidenced by significant chi-square change (Δ χ2 (6) = 88.14; p <.01). Revised model
had an acceptable level of fit to the data (χ2 (83) = 129.97, p <.05; χ2 /df = 1.57; CFI = .95; GFI =. 89, RMSEA
=.07).
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After assessing model fit, the pattern of factor loading was examined using parameter estimates As seen in
Table 2, all items loaded satisfactorily on their respective factors, meaning that the item and construct relations
turned out to be as expected. After assuring that items were able to measure organizational trust and laissez-
faire leadership, the significance of hypothesized relation was examined. As hypothesized, laissez-faire
leadership positively predicted the organizational trust (β = -.56; p<.01), rendering the study hypothesis
supported.
Table 2: Results of Full Latent Modeling
Path from _to ___
B
SE (b)
β
Trust to T1
.78
.14
.52**
Trust to T2
.92
.14
.63**
Trust to T3
.96
.13
.68**
Trust to T4
1.14
.15
.72**
Trust to T5
1.15
.13
.80**
Trust to T6
.67
.13
.48**
Trust to T7
1.12
.14
.75**
Trust to T8
1.16
.14
.76**
Trust to T9
1.20
.14
.80**
Trust to T10
.73
.12
.51**
Trust to T11
1.00
--
.72**
LFL to LFL1
1.39
.20
.78**
LFL to LFL2
1.20
.17
.80**
LFL to LFL3
1.04
.17
.66**
LFL to LFL4
1.00
--
.66**
L.F.Leadership >>Trust
-.83**
.18
-.56**
Note. LFL: Laissez-faire leadership. ** significant at .01 level.
Since the sample size was relatively small, we conducted bootstrapping analysis to verify aforementioned
results. The bootstrap estimates presented in Table 3, were based on 1000 bootstrap samples. As seen from
the table, none of the percentile confidence intervals included zero, which supported our conclusion that the
effect of laissez-faire leadership on organizational trust was significant at the .05 level. Besides confidence
intervals, AMOS reported significant p-values for the bias corrected bootstrap method. The bootstrapping
results confirmed the findings of path analysis mentioned above.
Table 3. Results of Bootstrapping
Bias Uncorrected 95 % CI
Bias Corrected 95 % CI
Path from __ to ___
Lower
Upper
p
Lower
Upper
P
LF leadership toTrust
-.70
-.39
.002
-.70
-.39
.002*
Trust to T1
.34
.65
.002
.35
.66
.001*
Trust toT2
.52
.74
.002
.52
.74
.002*
Trust toT3
.57
.77
.002
.57
.77
.003*
Trust toT4
.58
.82
.002
.59
.82
.001*
Trust toT5
.69
.88
.002
.69
.88
.003*
Trust toT6
.29
.64
.002
.29
.63
.003*
Trust toT7
.63
.84
.002
.62
.83
.003*
Trust toT8
.65
.85
.002
.64
.85
.003*
Trust toT9
.71
.88
.002
.70
.87
.004*
Trust toT10
.34
.65
.002
.35
.65
.001*
Trust toT11
.61
.82
.002
.61
.82
.002*
LFL to LFL1
.67
.89
.002
.66
.88
.003*
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LFL to LFL2
.68
.90
.002
.67
.90
.002*
LFL to LFL3
.49
.80
.002
.47
.80
.003*
LFL to LFL4
.49
.78
.002
.48
.77
.003*
Note: All values are standardi zed estimates. CI : confidence interval. * signif icant at .01 l evel based on 1000 bo otstrap sampl es
4.3.Discussion
The main aim of this study is to investigate the effect of laissez-faire leadership on organizational trust. To our
knowledge, empirical studies have not studied the relationship between laissez-faire leadership and
organizational trust so far. However, a number of empirical studies have reported relatively strong relationship
between constructive leadership styles (i.e., transformational leadership and ethical leadership) and trust in
organizations. Since the absence of constructive leadership and associated behaviors could suggest the
existence of laissez-faire leadership, we expected to obtain negative relation between laissez-faire leadership
and organizational trust. In line with this expectation, the experience of laissez-faire leadership by an
immediate supervisor was strongly associated with reduced level of trust in organizations. Both correlation
coefficients and results of structural equation modeling support the assumption that when a supervisor fails to
satisfy to the expectation of subordinates by lack of presence and involvement, these behaviors may erode the
trust employees feel toward their organizations. Being the representative of the organization, supervisorslack
of consideration seems to be regarded by employees as reflection of organizations’ indifferent approach to
themselves. Negative perceptions regarding the organizations, in turn, manifest itself as lack of trust in these
organizations. As Burris et al (2008) claim, negative feelings toward the supervisors seem to spill over to the
feelings toward the organizations, thereby erode the confidence in those organizations.
The negative effect of laissez-faire leadership on organizational trust seems to support the arguments of
Einarsen et al. (2007) about the destructiveness of laissez-faire leadership. As the researchers asserted, it
seems that leaders fail to support the legitimate interests of organizations and employees by ignoring the
responsibilities and duties assigned to them and showing little or no concern for employees’ wellbeing.
Employees seem to perceive this inactive, ignorant and ineffective leadership as a sign of psychological
contract breach, such that organization failed to fulfill the promised obligations. As Robinson (1998) argues, the
trust in management and organization erodes in response to contract breaches because employees question
the benevolence and integrity of management.
5. CONCLUSION
Shockley-Zalabak et al. (2000) argue that organizations with high levels of internal trust are more successful,
adaptive and innovative than organizations with low level of trust or characterized with distrust. Given the fact
that trust is mostly depended on supportive behaviors of leader or managers (Gimbel, 2001; Tschannen-Moran
& Hoy, 1998), leadership training and development programs should be designed to equip leaders with the
skills to follow more active leadership. In training programs, the leaders or managers should be informed about
the importance of satisfying legitimate interests of the organizations and its stakeholders, especially the
interests of employees. By giving timely feedback and decisions, using fair procedures and rewards, managers
could follow more active leadership and as a result gain the trust of the employees both for themselves and the
organization.
While interacting with employees and designing organizational procedures, giving special attention to three
primary antecedents of trust (i.e., ability, benevolence and integrity) could be a good starting point for
cultivating culture of trust. Managers could promote perceptions of “benevolence” by showing genuine
concern for employees’ concerns. For instance, rather than establishing reward structures characterized with
"zero sum games", managers could distribute monetary and non-monetary rewards based on collaboration and
performance, which would enhance perception of fairness and benevolence. Besides that by providing credible
and honest information regarding their intentions and abilities, managers could portray more positive image
regarding their proficiency and competency. Acting as the representative of the organization, reputable,
credible and competent managers are in a better position to instill trust in organizations. In addition to
establishing credibility and showing benevolence, managers are advised to be consistent in their words and
actions, keep their promises and create transparency within the organizations. By not violating psychological
Journal of Economics, Finance and Accounting JEFA (2016), Vol.3(1) Tosunoglu, Ekmekci
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97
contracts and being consistent, managers could evoke positive image regarding their integrity, which is argued
to be basis of any trusting relationship.
However, it should be acknowledged that the study has some conceptual and methodological limitations,
which cast doubt about the external and internal validity of the findings. Conceptually, the nature and number
of variables included in this study provided limited perspective regarding the development of organizational
trust. It should be acknowledged that our study focuses only on the influence of laissez-faire leadership
although trust-building could be associated with variety of organizational, relational, or individual factors
(Doney & Cannon, 1997; McAllister, 1995). In future studies, researchers are advised to investigate the effects
of individual (i.e., propensity to trust, agreeableness) and organizational level variables (i.e., organizational
culture) to provide more complete picture of organizational trust. For example future research may contribute
the existing literature by studying the moderating effects of “personality” and other individual difference
variables such as demographics and tenure. Addressing the moderations would be helpful for gaining deeper
understanding of trust formation within the organizations. Furthermore, this study focused only on
organizational trust; therefore the findings may not be generalized to supervisory or coworker trust, which are
argued to have different antecedents (Dirks & Skarlicki, 2004). Therefore we suggest researchers to examine
the same hypotheses for different referents of trust such as supervisor, organization and subordinate.
Other than aforementioned conceptual limitations, methodological limitations should also be acknowledged.
The first methodological limitation is related to research design. This study is a snapshot study that measure
trust and leadership perceptions at a single point in time. Although snapshot studies give important insights
about hypothesized relations, they provide limited knowledge about the development of a particular variable
over time. Unfortunately, in this study, we could not uncover how and why people feel trust toward their
organizations. Therefore, we suggest the researchers to use longitudinal designs to reveal how leadership style
influences trust development over time.
The second methodological limitation may stem from self-report data collection and cross sectional research
design. We collected the data from same employees at single point in time. Although Harman's one-factor test
and structural equation modeling demonstrated the distinctiveness of the constructs (i.e., variables), it is
impossible to preclude the possibility of common method variance problem arising from self-report data
collection and cross sectional research design. Common method variance problem could have inflated the
correlations between variables and erroneously lead to infer a substantive relationship (Podsakoff & Organ,
1986). Several remedies such as data collection from different sources at different times or escalating the unit
of analysis could have taken to rule out this problem and increase the validity of the results (See Podsakoff &
Organ, 1986; Podsakoff, MacKenzie, Lee & Possakoff, 2003, for details).
Despite its limitations, this study is a step towards a deeper understanding of how to build organizational trust
through effective leadership. The findings of the present study support the belief that ineffective leadership
erodes employee’s trust in organizations. We believe by using the findings of this study, managers/leaders
could cultivate culture of trust by using more active and employee-centered leadership.
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