Master Thesis Management Control & Trust

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Master Thesis

Management Control & Trust

The influence of different kinds of control on trust

within a team in intra-organizational setting

By Eline Brantsma

S1873423

University of Groningen Faculty of Economics and Business

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Abstract: In today’s organizations reaching organizational goals is very important. To reach these goals working in teams is a key element, just like controlling the employees. This research is about the relationship between controlling mechanisms and trust within a team. Different kinds of control mechanisms (formal control, informal control, behaviour control and output control) are explored and their relationship to trust is being researched. A case study within Shell took place and interviews with team leaders were done. Based on these interviews it can be said that different kinds of control have different effects on trust.

Key words: Trust, Management control, Team

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1. Introduction

If organizations want to achieve their organizational goals it is important that the employees of organizations work together and trust each other (Turaga, 2013). In the current

organizational studies, the topic of trust is getting more and more attention (Mayer, Davis & Schoorman, 1995). There are many areas in which trust is important, like communication (Giffin, 1967), leadership (Atwater, 1988), negotiation (Bazerman, 1994), game theory (Milgrom & Roberts, 1992) and management by objectives (Schot, 1980). Working together within organizations often involves interdependence, and people must therefore depend on others in various ways to accomplish their personal and organizational goals. Several theories have emerged that describe mechanisms for minimizing the risk inherent in working

relationships (Mayer, Davis & Schoorman, 1995). Because working together is very important for organizations, it is important to know how trust works. Although there is a growing body of literature in social psychology that examines trust in personal relationships between people (e.g., Larzelere & Huston, 1980), the nature and bases of such relationships may be different from those in organizations (Mayer, Davis & Schoorman, 1995).

Current trends in the workforce composition suggest that the importance of trust is likely to increase during the coming years (Mayer, Davis & Schoorman, 1995). In the upcoming years there will be more diversity in the workplace. A diverse workforce is less able to rely on interpersonal similarity and common background and experience to contribute to mutual attraction and enhance the willingness to work together (Berscheid & Walster, 1978; Newcomb, 1956). This means that working together will be more and more based on trust.

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behavior controls (Ouchi, 1977) market, bureaucracy and clan controls (Ouchi, 1979)

administrative and social controls (Hopwood, 1976) and results, action and personnel controls (Merchant, 1985a). Furthermore, Brown (2005) created a conceptual typology of an MCS package. All these kinds of control influences employees in the organizations in different ways.

There has also been a lot of research done about the relationship between control mechanisms and trust. Van der Meer-Kooistra (2000) found that more control leads to less trust. However, Tomkins (2001) found that more control leads to more trust. So, there is some confusion about the relationship between control and trust. If an organization wants to achieve its organizational goals it will be important to know how this relationship works. Furthermore, there has been no research done about these different kinds of controls and how these can differently affect trust. The aim of this research is to find an answer to these different views on the relationship between control and trust. This research will explore the relationship between control mechanisms and trust within an organization and it will look if different kinds of controls influences trust in a different way. This may be an explanation for the fact that there is no consensus about how the relationship between trust and control works. The research question of this research is:

How do different kinds of control influence trust in different ways within a team in an organization?

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2. Theoretical Framework

In this part of the research the most important concepts of the research will be considered and explored. To be able to answer the research question, it will be important to have a

comprehensive overview of the current literature of the most important concepts. First of all, the concept of trust will be considered. After that the concept of control will be reviewed, together with different kinds of control. The last part of this section consists of a review of the relationship between control and trust.

2. 1 Trust

There has been many research done about trust in different settings. Some research is done about trust in interpersonal settings (e.g., between peers, between subordinate and manager), in interfirm settings and in personal-firm settings (Atuaheme-Gima & Li, 2006). Trust can be seen in relationships between two or more people, or in relationships between two or more collective, such as among subteams or subgroups (Knoll & Jarvepaa, 1995). There are many definitions of trust used in the literature. Ferrin, Dirks & Shah (2006) defined trust as a belief about how a person or an organization will act on some future occasion based upon previous interactions with the person or organization. It is a psychological state, a state that becomes increasingly powerful as uncertainty and risk increase (Kramer, 1999). Mayer, Davis and Schoorman (1995) defined trust as the willingness of a party to be vulnerable to the actions of another party based on the expectation that the other will perform a particular action

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to the actions of the other party. Then there is the trustee, who is assessed by the trustor (Becerra and Gupta, 2003).

2.1.1 Team Trust

In today’s organizations people often work in teams (Turaga, 2013). Empirical evidence has shown that trust between employees is important in organizations and that it influences the behavior and performance of the employee positively (McAllister, 1995). The attitude and ability to trust one another in a team is considered one of the most critical elements that help team members bond with each other and work together seamlessly towards their common goals (Turaga, 2013). So if organizations want to reach their organizational goals they need their team to work together and trust each other. The worst thing that can happen to an organization is that there is a lack of trust between employees of a certain organization (Turaga, 2013). If there is no trust between the employees, they will not work together in the most efficiently way and will not reach the organizational goals in the best way for the organization.

2.1.2 Trustworthiness

The question than is how is trust created within a team? What makes somebody trustworthy? Mayer, Davis and Schoorman (1995) talk about the three factors that influence the

trustworthiness of the trustee: ability, benevolence and integrity. This research defines trustworthiness as an innate personal characteristic reflecting one’s preference for upholding some social norm of behavior, regardless of economic incentives (Coletti, Sedatole & Towry, 2004). Ability is that group of skills, competencies and characteristics that enable a party to have influence within some specific domain. Ability is an essential element of trust (Cook & Wall, 1980; Deutsch, 1960; Jones, James & Bruni, 1975; Sitkin & Roth, 1993). If a certain person has knowledge and a group of skills of a specific domain, it is more easy to trust that person if he/she has to make certain decisions in this domain. For example, a mathematics teacher will be more trustworthy if he has to answer a mathematic question than when he has to answer a question about history. Because he is a mathematics teacher, he will have the knowledge and the skills to answer the mathematic question (Mayer, Davis & Schoorman, 1995). Benevolence is the extent to which a trustee is believed to want to do good to the trustor, aside from an egocentric profit motive (Mayer, Davis & Schoorman, 1995).

Benevolence means that the perception of the trustee is positive towards the trustor. The last factor that influence the trustworthiness of the trustee according to Mayer, Davis &

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set of principles that is acceptable to the trustor. According to Mayer, Davis & Schoorman (1995) these three factors are important to trust, but they are separable. This means that to be trustworthy you don’t have to have all three factors at the highest amount possible. There may be situations in which one factor is more important than the other.

Trustworthiness

Trust

Figure 1: creation of trust (Mayer, Davis & Schoorman, 1995)

2.2 Management Control Systems

Bachmann (2011) claims that trust reduces uncertainty and complexity, but is produces risk. Control mechanisms try to reduce this risk within organizations. In the current literature, there are much deﬁnitions and descriptions of management control systems (MCS), some are very much the same and others are quite different from another (Abernethy & Chua, 1996;

Alvesson & Karreman, 2004; Anthony, 1965; Chenhall, 2003; Emmanuel et al., 1990; Fisher, 1998; Flamholtz et al., 1985; Green and Welsh, 1988; Langﬁeld-Smith, 1997; Merchant & Van der Stede, 2007; Otley & Berry, 1980; Ouchi, 1979; Simons, 1995). Some researches defined management control systems very broad. For example, management control was defined by Anthony (1965) as “the process by which managers ensure that resources are obtained and used effectively and efficiently in the accomplishment of the organization’s objectives.” Furthermore, Chenhall (2003) discussed management accounting (MA) which is a “collection of practices such as budgeting or product costing”, management accounting systems (MAS) which is the “systematic use of MA to achieve some goal” and MCS which “is a broader term that encompasses MAS and also includes other controls such as personal and clan controls”. Other researchers used a more narrow definition for management control systems. Merchant and Van der Stede (2007) separate management control from strategic control and deﬁne management control as dealing with employees’ behavior. This research will look at management control systems that influences trust within a team. Because of this, management control systems will be defined with the definition of Anthony (1965).

Ability

Integrity

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Controls have been categorized in many ways (Langfield-Smith, 1997). For example, formal and informal controls (Anthony et al., 1989) output and behavior controls (Ouchi, 1977) market, bureaucracy and clan controls (Ouchi, 1979) planning, cybernetic, reward & compensation, administrative and culture controls (Brown, 2005) and results, action and personnel controls (Merchant, 1985a). Is some cases, there is some similarity in these

categories of controls, while in other cases these categories really differ from each other. This research is about the influence of different kinds of controls on trust. To get a clear view and understanding of these different kinds of controls and how they influences trust four controls will be explored. There has been chosen for formal and informal controls and for output and behavioral controls. This is done because these four kinds of controls are very different from each other so distinctions can be made within the organization. Furthermore, these controls are all used in organizations so it is important to know the effects of these kinds of controls. 2.2.1 Formal and Informal controls

Within the management control literature, Martinez and Jarillo (1991) noted that many companies have traditionally relied on formal mechanisms such as centralization, standardization en planning. This has been done to coordinate and control the human

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vis-à-vis formal control mechanisms. Both these perspectives claim that informal and formal

control are substitutes, but this hasn’t yet be confirmed by empirical research (Tiwana, 2010).

2.2.2 Output and behavioral controls

In controlling the work of people and of technologies, there are only two phenomena which can be observed, monitored and counted: behavior and the outputs which result from behavior (Ouchi, 1977). Behavioral controls refers to the extent to which a manager emphasizes

procedures and behavioral activities in monitoring, evaluating and rewarding employees. Examples of behavioral controls include the specification of work assignments, project plans, performance evaluations and the articulation of rules and procedures (Henderson & Lee, 1992; Kirsh, 1997; Ouchi 1997; Piccoli & Ives, 2003; Pinto et al., 1993). In order to apply behavior control, the organization must possess at least agreement, if not true knowledge, about means-ends relationships. The process through which inputs are transformed into outputs must be felt to be known before supervisors can rationally achieve control by

watching and guiding behavior of the subordinates (Ouchi, 1977). In contrast, output controls refers to the extent to which a manager places emphasis on results when monitoring,

evaluating and rewarding employees (Anderson & Oliver, 1987). For the use of output control, the transformation process need not to be known at all, but a reliable and valid measure of the desired output must be available (Ouchi, 1977). According to Ouchi (1977), behavioral control (such as standardized operating procedures) is appropriate when the output itself may be ambiguous but the behavior required for the desired result is clear. In contrast, output control (such as performance goals) is appropriate when the output itself is highly measurable.

2.3 Relationship between Control and Trust

There has been a lot of research done about the relationship between control and trust. These studies take a rationalist approach, a constructivist approach or a combination of the two (Vosselman & Van der Meer-Kooistra, 2009). Rationalist approaches to accounting and control in interfirm transactional relationships theorize and examine the instrumental

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control and trust are seen substitutes, so more control leads to less trust and less control leads to more trust. Van der Meer-Kooistra (2000) found that in interfirm relationships trust

replaces control. Furthermore, social scientists often interpreted a control mechanisms in conflict with trust (Woolthuis, Hillebrand & Nooteboom, 2005), because control mechanisms can be interpreted as a sign of distrust. The complementarity perspective perceives control and trust as two different concepts which reinforce each other. So more control leads to more trust (Vosselman & Van der Meer-Kooistra, 2009). Tomkins (2001) found, in his research, that at an earlier stage of the relationship the accounting information exchange that follows from the use of controls may produce more positive expectations about future contributions to the relationship. So, control would lead to trust. In a constructivist approach, control and trust are viewed as active forces in a relationship or network, where they help to mediate, shape and construct that very relationship or network (Vosselman & Van der Meer-Kooistra, 2009). 2.3.1 Relationship between formal control and trust

Sitkin (1995) suggests that legalization, in terms of reliance on formal rules and standardized procedures can facilitate the development, diffusion and constructive institutionalization of trust in organizational settings. According to Das & Teng (1998) formal control may create stress and thereby affecting mutual trust. The use of formal controls influences the behavior of people because it creates boundaries. If formal controls are used, people cannot have full autonomy in deciding what is best for the organization (Das & Teng, 1998). This will lead to a feeling of lack of belief in one’s goodwill, reliability or competence (Das & Teng, 1998). Sitkin & Roth (1993) also found that the use of legalistic remedies (i.e. formal rules) are not effective for trust building. So the use of formal controls mechanisms will not create a trusting environment. According to Das and Teng (1998) there is a negative relationship between formal control and trust level. In this research will be looked at the relationship between formal control and trust within a team, so the first subquestion of this research will be:

Subquestion 1: How do formal control mechanisms influences the level of trust within a team? 2.3.2 Relationship between informal control and trust

Informal controls are social and cultural controls which are unwritten and typically represent a worker-initiated system that influences their behaviors (Jaworski, 1988). The relational

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implementation costs vis-à-vis formal control mechanisms. Informal control mechanisms are important for controlling the behavior in uncertain, ambiguous and unexpected situations. The informal control system should help to create an environment and control situation that could take in hand the individual, grasp his attention and direct his choices (Chtioui & Thiery-Dubuisson, 2011). The relationship between informal control and trust within a team will be explored in this research and this lead to the second subquestion:

Subquestion 2: How do informal control mechanisms influences the level of trust within a team?

2.3.3 Relationship between behavioral control and trust

Although trust and behavioral controls are two mechanisms that can have similar affects within teams, their relationship is not fully understand (Bijlsma-Frankema & Costa, 2005; Emsley & Kidon, 2007). There’s no research that has found a consistent pattern of theory or empirical evidence about the impact of behavioral control on trust. Some research argues that behavioral controls reduce trust because they highlight poor behavior (Langred, 2004). Other researchers argue that behavioral controls increase trust by providing a ‘track record for those who perform well’ (Das & Teng, 1998). Because everybody depends on each other in a team, it is important that everybody does the things they need to do and they need to do it good. That’s why it is important to have behavioral control mechanisms. Keeping a track record of good performance creates trust within a team. Because of this contradiction it will be

interested to look at the relationship between behavioral control and trust within a team. That’s the reason for the third subquestion:

Subquestion 3: How do behavioral control mechanisms influences the level of trust within a team?

2.3.4 Relationship between output control and trust

Output control mechanisms gives employees a lot of autonomy and independence in doing their tasks (Atuahene-Gima & Li, 2006). Output control may give a lot performance risk with the employees because they are reviewed on it and other environmental and company factors that are outside of their control may influences the output (Oliver & Anderson, 1994).

According to Atuahene-Gima and Li (2006) this may lead to less supervisee trust. So with using output controls people will only be reviewed on their results, but to get those results they need their team members. Because there is not much research done about this relation, the fourth subquestion of this research will be:

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3. Method

In this part the method that is used to do the research is discussed. It described how the research is done and how the sample is selected. It starts with what kind of research this is, then a description of the setting in which the research will take place. After that follows a part about how the data is collected, then a part about how the constructs that are used are going to be measured and it ends with a part about how the data will be analyzed.

3.1 Kind of research

This research is a qualitative research. Qualitative research can give us compelling

descriptions of the qualitative human world and qualitative interviewing can provide us with well-founded knowledge about our conversational reality (Kvale & Brinkmann, 2009). The purpose of this research is to explain how different controls influences trust within a team in a different way. Because not much research is done about the different influences of different kinds of controls, a case study is needed. Yin (1989) says that the case study method is very suitable for the description and explanation of a complex phenomenon in the real world. Through case studies, researches can gain in-depth understanding of situations and meaning for those involved (Hancock & Algozzine, 2011).

3.2 Setting

To come up with an answer to the main question of this research there had to be research done within an organization that works with teams. The company Shell is chosen for this research. Shell is a group energy- and petrochemical companies who work worldwide. The objectives of the Shell group are to engage efficiently, responsibly and profitably in oil, oil products gas, chemicals and other selected businesses and to participate in the search for and development of other sources of energy to meet evolving customer needs and the world’s growing demand for energy. Shell consist of three parts, the upstream, the downstream and the projects and technology part. The upstream part explores for and extracts crude oil and natural gas. The downstream part refines, supplies, trades and ships crude worldwide, manufactures and markets a range of products, and produces petrochemicals for industrial customers. Projects and technology manages delivery of Shell’s major projects and drives the research and innovation to create technology solutions. Right now there are working around 92.000 people for Shell in 70 different countries.

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manager. This is important because only with a manager it will be possible to measure

supervisee trust. Furthermore, to be able to do this research, an big organization is needed. An organization who has multiple teams and there’s not one person who controls all the teams. Because not one person can control a big organization, there will be controlling systems to control the employees. Lastly, it is also important that the organization is a profit

organization. Because the goal of a profit organization is to make profit, it will be important to control the employees so that the employees will do everything to make profit. Shell fulfills all those conditions and that’s why the research is done at Shell.

Shell is has a lot of different departments, like finance, human resource, IT etc. The research is done at the IT department of Shell. This department is divided in subdepartments. One of that subdepartments is the subservice department. De subservice departments supports the applications that are used within Shell. One of the respondents of the interviews described this department as followed:

We are a bit the outsiders of the IT department. We are more at the side of the business. We guide the processes. We have to know all the applications and we have to train the IT people.

Because this department is responsible for the applications that are used within Shell, they have a lot of users that rely on them. If an application is not working as it should, a lot of people are not able to do their work. To make sure that doesn’t happen they need to a good control system. That is the reason why this department is very suitable for this research.

The subservice department consist of six teams. Those teams vary in size. All the teams have their own focus within the subservice.

3.3 Data Collection

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For this research five interviews took place with five different team leaders from the subservice department of Shell, see table 1. This way it is possible to look at five different teams. All those team leaders work in Assen. Four of those interviews were face-to-face meetings and one took place over the phone. All those team leaders have a team below them in which they are responsible for the trust within an team en they all have a manager above them by whom they get controlled by.

Name Function Date Length interview How

Respondent I Teamleader IT services

29-04-2014 50 minutes Face-to-face

Respondent II Portfolio manager & teamleader quality assurance support

29-04-2014 45 minutes Face-to-face

Respondent III Teamleader project team 08-05-2014 60 minutes Face-to-face Respondent IV Teamleader Technical data management & Geometic workflow 08-05-2014 70 minutes Face-to-face Respondent V Teamleader datamanagement Europe

15-05-2014 45 minutes Over the phone

Table 1: Overview of the interviews

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3.4 Measurement

All the concepts that are spoken about in the theoretical part need to be operationalized so that they can be measured. Different scales of different researchers are used, which can be found in appendix II. These scales have been used before so they already have been tested if they are correct to work with.

Supervisee Trust This research will look at whether team members trust their managers. This

is called supervisee trust. Supervisee trust is the belief of an employee that the manager genuinely cares and is concerned for his or her welfare within the work environment (Atuahene-Gima & Li, 2006). Supervisee trust will be measured using 5 items created by McAllister (1995).

TrustworthinessTrustworthiness is an innate personal characteristic reflecting one’s preference for upholding some social norm of behavior, regardless of economic incentives (Coletti, Sedatole & Towry, 2004). Trustworthiness will be measured by the three items of Mayer, Davis & Schoorman (1995): ability, integrity and benevolence.

Formal and informal control To be able to measure formal control, the six-item index of

Glick et al. (1990) was used. For informal control, the four-item index of Price and Mueller (1986) was used.

Output and behavior control To measure output control and behavioral control the scale of

Kirsch et al. (2002) is used. He created three items that are important for these kinds of controls.

3.5 Data Analysis

After the data is collected, the interviews will be transcripted. Based on quotes said by the interviewee and the measurement scales, the analysis will find place. This will be done by coding the based on the measurement scales in appendix II. Based on those coding matches can be found between the answers of the respondents and the concepts. If these matches are found, so if multiple respondents talk about it, there can be something said about the

construct and the relationships between those constructs. In the end this will lead to an answer to the main question of this research.

3.6 Reliability & Validity

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four potential sources of bias: the researcher, the instrument, the respondents and the situation (Van Aken, Berends & Van Bij, 2012). First of all, the researcher should be independent. This is done is this research by interviewing people the researcher never met before. The reliability of the instrument is guaranteed by using semi-interview questions together with textual data. This research can be repeated using the same interview questions which will lead to the same results. The reliability of the respondents is guaranteed because there are multiple respondents and their interviews are anonymous. It should be guaranteed that they information from the interviews will only be used for this research. Lastly, the reliability of the situation is guaranteed because the interviews took place at different moments. Others research should repeat the study to improve the reliability of this research.

Validity refers to the relationship between the results of a research and the way the research is done. Research results are valid when they are justified by the way they are generated. The way it is generated should provide good reasons to believe that the research result is true or adequate (Van Aken, Berends & Van Bij, 2012). Validity consists of three kinds of validity, construct, internal and external validity (Van Aken, Berends & Van Bij, 2012). There are two sides to construct validity: (1) the concept should be covered completely, and (2) the

measurement should have no components that do not fit the meaning of the concept (Van Aken, Berends & Van Bij, 2012). This is guaranteed in this research by the measurements that are discussed in section 3.4. The concepts in this research are measured by measurement that are tested in other research. Internal validity is concerned about conclusions about the relationship between phenomena (Van Aken, Berends & Van Bij, 2012). Internal validity is taken into account in this research by looking at different perspectives about relationships between concepts in the literature. So, even contradictions within the current literature are discussed to get a comprehensive overview of the possible relationships between the concepts. External validity refers to the generalizability or transfer of research results and conclusions to other people, organizations, countries, and situations (Van Aken, Berends & Van Bij, 2012). This research has taken external validity into account by being aware that the

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4. Results

In this part of this paper the results of the interviews will be explored. The measurement items that were discussed in section 3.4 were made into codes. The interviews were then analyzed by using those codes to look at how many times the respondents talked about certain

concepts. The more the respondents referred to those quotes en the more number of

respondents talked about it created more reliability. Examples of the quotes of the interviews will be used to give an overview of the results of the interviews. This part starts with the results of the concepts trust and the management control mechanisms. After that, the relationship between trust and different control mechanisms will be explored.

4.1 Trust

The attitude and ability to trust one another in a team is considered one of the most critical elements that help team members bond with each other and work together seamlessly towards their common goals (Turaga, 2013). Team trust is the belief that an individual or group make good-faith efforts to behave in accordance with any commitment both explicit and implicit, is honest in whatever negotiations preceded such commitment and does not take excessive advantage of another even when the opportunity is available (Cummings & Bromley, 1996). So also within Shell it is important to create trust within their teams. The respondents of the interviews also talked a lot about trust within their teams. This is discussed in the next parts. 4.1.1 Trustworthiness

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Items Number quotes Example Ability: person has

knowledge and a group of skills of a specific domain

10 quotes, Mentioned by 5 respondents

Respondent IV:

I trust my team because they have experiences, motivation, skills Integrity: trustee has a set of

principles that is acceptable to the trustor.

Respondent V:

I trust my team members because they are positive, creative and be open for other opinions

Benevolence: the

perception of the trustee is positive towards the trustor.

5 quotes, Mentioned by 4 respondents.

Respondent III:

It is important that they are respectful and open to me

Table 3: Measurement trustworthiness

Based on these items and quotes it can be said that the team managers find their team

members trustworthy if they have the skills, motivation and knowledge which can be seen as ability. Furthermore, four respondents mentioned integrity as being part of trustworthiness of team members. Also, all five of the respondents said that trustworthiness is also influenced by benevolence. This corresponds, with the items of Mayer, Davis and Schoorman (1995).So it can be concluded that the team leaders find their team members trustworthy if they comply with the three items of Mayer, Davis and Schoornam (1995). Furthermore, it can be

concluded that the team leaders believe their team members are trustworthy because they mentioned that their team members have the ability, integrity and benevolence.

4.1.2 Supervisee trust

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Items Number quotes Example My supervisor and I have

a sharing relationship; we freely share our ideas, feelings and hopes about the work we do.

12 quotes, mentioned by 5 respondents

Respondent IV:

Yes, that are formal moments. I start the conversation by asking them what they want to talk about. They can tell me everything

I can talk freely to him about difficulties I am having at work and know that he/she wants to listen.

Respondent V:

We have daily contact with each other at the same level, so I’m not pretending to be better than them, and in a Dutch way. If I shared my problems

with my supervisor, I know he/she would respond constructively and caringly. 10 quotes, mentioned by 5 respondents Respondent II:

Yes, definitely I have the feeling I can go to my manager with my problems.

I believe my manager wants the best for me.

Respondent III:

And I think he wants the best for me. I trust him.

I would have to say my supervisor and I have made considerable emotional investments in our working relationship.

Respondent III:

Last week I had two lunch meetings with him and we talked about how I’m doing.

Table 4: Measurement Supervisee trust

These quotes goes two ways. First of all the respondents talk about their relationship with their managers Based on the above quotes of the respondents is can be concluded that the team leaders trust their managers. They all stated that they can go to their manager with problems and that they talk about what is going on in their work and private environment. So there is supervisee trust within Shell from the team leaders to their managers.

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sure team members come to them with problems, they help them and they also talk about their private situation. There is open communication between the team leader and their team

members. This means that the team leaders do everything they can to create supervisee trust within their teams.

4.2 Management Control

Based on the interviews it can be said that within Shell different management control mechanisms are used. The team managers told about different mechanisms they use to deal with the behavior of their team members. Some of these mechanisms are used through all of Shell and others are only used by some team managers. In the next part the different kind of control mechanisms are explored.

4.2.1 Formal Control

Formal controls are written management-initiated mechanisms implemented to increase the probability that employees will behave in ways that support the objectives of the firm

(Jaworski et al., 1993). In the method part of this research is discussed how formal control is measured. To be able to say that formal control takes place within the teams at Shell, this measurement is needed. This measurement is During the interviews all respondents talk about the Global Performance Agreement (GPA)

Respondent I said the following:

(…)the beginning of the year we make a contract (GPA) together which contains my tasks for the upcoming year. Those are distracted from his tasks. The contract contains 3 parts, a part training for myself, a part safety and production. Those targets need to be reached (…)

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Items Number quotes Example There are written rules

concerning many organizational activities 7 quotes, Mentioned by 5 respondents Respondent II:

The tasks everybody has and rules we need to follow are documented in a document (GPA) that I made with my team

Written rules are strictly enforced.

Respondent I:

Those are distracted from my boss tasks

Rules and procedures are written .

Respondent IV:

The GPA is written in the end of January.

Written rules and

procedures are familiar to organizational members .

Respondent I:

In the beginning of the year we make a contract (GPA) together, which

contains my tasks for the upcoming year so I know what I have to do

Written rules and

procedures are generally followed

Respondent II:

Well, for certain things we have a process that they need to follow

Violations of written rules and procedures are

punished

Respondent II:

If somebody doesn’t reach their goals that can have multiple reasons. (…) Somebody just isn’t right for the job. In that case (…) it may be better that that person leaves the team.

Table 5: Measurement formal control

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which could mean you have to leave the team like respondent II said. It can be concluded that the GPA obtain to all the six items of the measurement scale and so the GPA is a formal control mechanism.

4.2.2 Informal Control

Informal controls are social and cultural controls which are unwritten and typically represent a worker-initiated system that influences their behaviors (Jaworski, 1988). To measure informal control, the four-item index of Price and Mueller (1986) was used. These four items and quotes about those items can be found in table 6:

Items Number quotes Example

Unwritten norms about how things are to be done are generally followed.

Respondent II:

Everybody knows they need to be respectful and honest.

Unwritten norms about how things are to be done are familiar to organizational members. 6 quotes, Mentioned by 5 respondents Respondent I:

Everybody knows those rules, but they are not written down somewhere.

Peer pressure or informal supervision intervention is used to correct the

situation when norms are violated.

Respondent V:

If I think certain behavior is inappropriate I talk to somebody about it and want to see changes.

Violations of unwritten norms and procedures are punished

Respondent IV:

I told him that that isn’t the way to behave. I also told his boss that and that will influences his review.

Table 6: Measurement informal control

It can be said that within Shell there is an informal control mechanisms to control the

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behavior (peer pressure) and this can have consequences like talking to somebody’s boss which respondent IV did.

4.2.3 Output Control

Output controls refers to the extent to which a manager places emphasis on results when monitoring, evaluating and rewarding employees (Anderson & Oliver, 1987). To measure output control the scale of Kirsch et al. (2002) is used. In table 7, those items and quotes of the respondents can be found:

The manager places significant weigh on timely completion of work. 6 quotes, Mentioned by 5 respondents Respondent IV:

At the end of the year you have an end conversation in which we look if the targets are being reached.

The manager places significant weigh on completion of the work that needs to be done within the budget.

Respondent III:

It is important to reach our goal within the time and the budget we received (…)

The manager places significant weigh on accomplishing the goals of the job.

Respondent I:

It doesn’t matter how it is achieved, it just has to be achieved.

Table 7: Measurement output control

So based on the data it can be concluded that within these teams of Shell there is a output control mechanisms. It is very important to reach your goals (output) within the targets, like time and budget, that are set in the GPA. This is all mentioned by the respondent of the interviews.

4.2.4 Behavior Control

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is measured in the research by the three-items scale of Kirsch et al. (2002). This three items can be found in table eight.

The manager expects the employee to follow and understandable, written sequence of steps toward accomplishing goals of the job.

Respondent II:

Well, for certain things we have a process that they need to follow. For other things, we don’t have a process, and then I ask them what they think is the best way to get to the result.

The manager expects the employee to follow and understandable, written sequence of steps to ensure the system met the requirements of managers expectations. 2 quotes, mentioned by 1 respondent (respondent 3) Respondent III:

No, that’s being discussed before anything happens. We create goals and subgoals and we divide the tasks. And then we discuss how we’re going to do everything and everybody needs to follow those steps

The manager expects the employee to follow and understandable, written sequence of steps to ensure success of the job.

4 quotes, Mentioned by 1 respondent (respondent 3)

Respondent III:

The team members need to follow those steps to reach our goals successful

Table 8: Measurement behavior control

There are some contradictions in what the respondents say about controlling the behavior of their team members. As it can be seen in table eight, two of the three items that measures behavior control are only recognized by respondent III. Even though all the respondents acknowledge that there are certain procedures for certain tasks, they find it more important that their employees get the freedom to explore their own way in reaching their targets. According to them, this freedom will create creativity within the employees.

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goals of the job. The team leaders thinks that writing the procedure down and following the procedure will lead to success. So within this team there is a behavioral control mechanism.

. For the other teams it is harder to make a conclusion. If there are procedures for certain tasks, the team leaders find it important that their team members obtain to those procedures. Those procedure are written down and are needed for successful fulfilling the tasks. On the other hand, if there are no existing procedures these will not be made before the task is done. The team members have the freedom to find their own path to reach their goal.

4.3 Relationship control mechanisms and trust 4.3.1 Formal control and trust

The use of the Global Performance Agreement (GPA) is a formal control mechanism. All the respondents of the interviews said that the GPA is a good system because it makes sure that everybody in the team knows what they need to do. Furthermore, everybody in the team is knows what that their other team members are working on and they work to the same goal. Examples of these quotes can be found in table nine:

Respondent Quote

Respondent II The GPA makes sure that everybody know what they have to do and we all work to on the same goal.(…) It creates trust because as a total team we are responsible for some things and with the GPA everybody knows from each other that they are working on the same goal.

Respondent IV The GPA makes sure everybody knows what they have to do. Other team members don’t need to worry about it because they all work towards the same goal but what everybody have to do is written down. Table 9: positive relationship between formal control mechanism and trust within a team

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Respondent II Do you think you need more formal control systems within your team? No, more formal control is definitely not needed. The GPA is just enough. If there would be more formal control systems I would be controlling everybody all day andthat would lead to distrust. (…) A lot of control will lead to less trust and it will also lead to less selfesteem. What I see, when you delegate and you give people the trust to do their own tasks those people will grow.

Respondent IV No, not really. But I don’t think more formal control mechanisms are needed. With the GPA we all know what we have to do and that makes is easy to trust each other. (…)I’m afraid that more formal control mechanisms would lead to less trust because that everybody always have to tell what they are doing, a lot more then now and then people do not have any freedom anymore.

Table 10: negative relationship between formal control mechanism and trust within a team

To conclude, based on this data it can be said that the relationship between formal control and trust within a team is positive up to a certain point. After that point more formal control will not lead to more trust.

4.3.2 Informal control and trust

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Respondent I Because behavior creates interaction between people. In the end we have to work together to reach our goals so we have to treat each other right. There are no rules for that, but everybody knows it.

Respondent II Well, that is also a part of welfare. Controlling how somebody acts, feels etc. Those two things work with each other and create trust. Respondent V It determines the relative proportions within a team. (…)Yes, you have

to know that your team members show good behavior because you are one team. Furthermore, you have to show good behavior to each other to create trust.

Table 11: positive relationship between informal control mechanism and trust within a team

It can be concluded that this informal control mechanism will lead to more trust within a team because all the team members obtain to the same norms. Those norms aren’t written down, but everybody knows them and has to follow them. It creates trust, so the relationship between informal control and trust within a team is positive.

4.3.3 Behavior control and trust

There is a behavioral control mechanisms within Shell within the project teams. Team

managers of project teams control the procedures team members use to reach their goal. They control this by talking with their team members about it during the one-to-one conversations and by creating procedures. Respondent III is a team leader of a project team and talked about this behavior control mechanism. His quotes can be found in table twelve.

Respondent III No, everything being discussed before anything happens. We create goals and subgoals and we divide the tasks. And then we discuss how we’re going to do everything.

Respondent III Well, we start with a team that doesn’t know each other but we need each other to reach our goal so as a team leader I have to create trust within the team. I think by discussing how everything happens will lead to more trust. Everybody knows what they have to do and what others have to do.

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So based on these quotes it can be said that within project team behavioral control will lead to trust. The other teams are no project teams and almost do not use a behavioral control

mechanisms so it’s not possible to say anything about those teams. .

4.3.4 Output control and trust

Within Shell there is a form of output control, namely the review conversations of the GPA. In June and December a review conversations finds place between the team member and the team leader. In this conversations the performance of the tasks of the team members is

discussed. They look if whether the team member reached their goals that are written down in the GPA. All the respondents talked about the relationship between the output control and trust within a team. Examples of the quotes can be found in table thirteen.

Respondent IV Well, I think it is important to rank each other because you do get motivated from it and it rewards the people that work hard. However, I do also think that people not only should get rewarded for the results, but also for other things. So I think the GPA misses some things. I don’t think it will create trust.

Respondent V Well, that’s hard to say. I think that because you get ranked based on your GPA, it is a lot about the results you got. I believe that there is more than only the results. Furthermore creates the ranking a lot of competition. So I don’t think it creates trust if only output controls are used. It needs to be a combination

Table 13: negative relationship between output control mechanism and trust within a team

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5. Discussion

In this part of the research the results from the fourth section will be discussed. This will be done by comparing the results with the theoretical framework from the second section. 5.1 Trust

Team trust is defined as the belief that an individual or group make good-faith efforts to behave in accordance with any commitment both explicit and implicit, is honest in whatever negotiations preceded such commitment and does not take excessive advantage of another even when the opportunity is available (Cummings & Bromley, 1996). Based on the definitions of trust above it can be said that the statements about trust always concern two parties. First there is the trustor, the one who holds certain expectations about another party, and, as a result may or may not be willing to be vulnerable to the actions of the other party. Then there is the trustee, who is assessed by the trustor (Becerra and Gupta, 2003). This research looked at trust within a team. Everybody within a team can be the trustor because everybody has to trust the other team members. This also means that everybody within the team can also be the trustee. Mayer, Davis and Schoorman (1995) talk about the three factors that influence the trustworthiness of the trustee: ability, benevolence and integrity. Based on the interviews, team leaders talked about these three elements in their own way. It can be concluded that these tree elements creates trustworthiness within a team.

5.2 Management control mechanisms

Control mechanisms try to reduce this risk within organizations. Management control was defined by Anthony (1965) as “the process by which managers ensure that resources are obtained and used effectively and efficiently in the accomplishment of the organization’s objectives.” Controls have been categorized in many ways (Langfield-Smith, 1997). For example, formal and informal controls (Anthony et al., 1989) output and behavior controls (Ouchi, 1977) market, bureaucracy and clan controls (Ouchi, 1979) planning, cybernetic, reward & compensation, administrative and culture controls (Brown, 2005) and results, action and personnel controls (Merchant, 1985a). This research looked at formal, informal, output and behavior control. This researched found that these four controls are different from each other and it is important that researchers know this. If researchers want to explore control mechanisms they have to know about what kind of control they are talking about. 5.3 Relations control mechanisms and trust

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boundaries for employees because employees have limited autonomy in deciding what to do This researched found that formal control is positively related to trust within a team up to a certain point. After this point, formal control creates distrust within a team. This is partly consistent with the literature form the theoretical framework. Based on the results of this research it can be said that formal control takes away the autonomy of the employees and thereby the creativity of the team members. The team members will feel more appreciated if they have the feeling the can really contribute something to their organization. However, team members expiences more trust if they know that everybody within the team is doing what they should be doing. This can be guaranteed with formal control. So a balance of formal control needs to be found.

According to the theoretical framework of section two of this research informal control will lead to more trust. Informal control mechanisms are important for controlling the behavior in uncertain, ambiguous and unexpected situations (Chtioui & Thiery-Dubuisson, 2011). The informal control system should help to create an environment and control situation that could take in hand the individual, grasp his attention and direct his choices (Chtioui & Thiery-Dubuisson, 2011). This is the same as the results that were found in section four of this research. These results said that informal control mechanisms takes care of inappropriate behavior of team members. Because team members work together, it is important that they show appropriate behavior towards each other. The informal control mechanism takes care of this and creates trust within the team.

Formal control consists of two parts, output control and behavior control (Ouchi, 1977). This research found that output control has a negative relation with trust within a team. Because team managers put a lot of weight on reaching the goals within the time and budget that is given, team members feel a lot of pressure to reach those goals. Team members will get rewarded and punished based on those performance. According to the current literature this will not lead to trust because output control may give a lot performance risk with the

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Although trust and behavioral controls are two mechanisms that can have similar affects within teams, their relationship is not fully understand in the current literature (Bijlsma-Frankema & Costa, 2005; Emsley & Kidon, 2007). This researched has tried to find an answer to this contradiction. This research found a positive relationship between behavior control and trust within a project team. For other teams no conclusion could be made because within Shell there were no behavior control mechanisms in ‘normal’ teams. Because within project teams it is important to create trust very fast, it is important that everybody knows what everybody is doing. This can be done by discussing the procedures for reaching goals.

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6. Conclusion

In this part a conclusion of this research will be given. Furthermore the limitations of this research will be mentioned and suggestions for future research will be given.

6.1 Conclusion

Within the current literature there was no consensus about how the relationship between control and trust works even though there has been a lot of research done about the relationship between control and trust. These studies take a rationalist approach, a

constructivist approach or a combination of the two (Vosselman & Van der Meer-Kooistra, 2009). Some say that more control will lead to more trust (Tomkins, 2001) while other researchers say that more control will lead to less trust (Van der Meer-Kooistra, 2000). It is interesting to look if those differences may come from the fact that there are multiple ways to control. Controls have been categorized in many ways (Langfield-Smith, 1997). For example, formal and informal controls (Anthony et al., 1989) output and behavior controls (Ouchi, 1977) market, bureaucracy and clan controls (Ouchi, 1979) administrative and social controls (Hopwood, 1976) and results, action and personnel controls (Merchant, 1985a). This research looked at formal control, informal control, output control and behavioral control. The main question of this research was:

How do different kinds of control influence trust in different ways within a team in an organization?

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The conclusion of this research is that different kinds of control mechanisms influences trust in a different way. Formal control creates trust, but up to a certain point. Too much formal control will lead to distrust because people are then only controlling each other instead of working together. The use of informal mechanisms will lead to more trust within a team because it means that everybody obtain with the same unwritten norms. The use of behavioral controls within project teams will also lead to more trust because they have to create trust in a very short time and by knowing exactly what everybody is doing that trust is created.

However, the use of only output control mechanisms will not lead to more trust within a team. It is thus very important to know what kind of controls managers use within a team because they all have different effects.

6.2 Managerial Implications

This research profited some implications for managers to create trust within their team. First of all it is important for team leaders

6.3 Limitations

This research has a couple of limitations. First of all this research is limited because of the time that was available to do this research. If more time had been available, more interviews could have taken place and the analyses could have been more in depth. Second of all, this study is limited because it consists of multiple cases but within one company. Even though there has been looked at five different teams, all those teams were a part of the same company and even the same department. It can be possible that controlling systems have different effects in different organizations and different departments. Furthermore, because there was only one interview with a project manager, it was hard to say something about behavioural control. More research will be needed to draw conclusions about the relationship between behavioural control and trust within a team. Lastly, the interviews were done in Dutch and translated to English. This may have led to different interpretation of things that are said. 6.4 Future research

This research has contributed to the explanation of the relationship between control and trust. However, to really draw a conclusion about this relationship more research will be needed. Future research should research more teams to look at how different kinds of control influences trust within a team. This research only looked into one company so only with future research it will be possible to generalize this results. Furthermore, it would be

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Master Thesis Management Control & Trust

Master Thesis

Management Control & Trust

The influence of different kinds of control on trust

within a team in intra-organizational setting

Table of Contents

1. Introduction

2. Theoretical Framework

3. Method

4. Results

5. Discussion

6. Conclusion

7. References