The Dynamics of Public Trust in a Business Organisation:
Perspective from a Focus Group of Business C onsultants
Beth Louisa Powell
Lancaster University Management School, United Kingdom
beth. powell2@btintemet.com
Bhakti Stephan Onggo (corresponding author)
Lancaster University Management School, United Kingdom
s.onggo@lancaster.ac.uk
Abstract
Whilst trust is an increasingly popular subject amongst management scholars, very few
scholars have attempted to address the public-business trust relationship. However, it is the
loss of public trust in business (and the need to restore it) which appears to be of the most
concern in practice. This paper discusses the perspective of a group of experienced business
consultants on factors that drive public trust in a business organisation and examines the
causal structure of these drivers in order to determine public trust. The focus group design
was influenced by group model building practices. The key insights include how they perceive
the importance of competence over characters, how they identify trust drivers, and how they
perceive the interplays between trust drivers, trustworthiness dimensions and the moderating
factors. A causal loop diagramis used to map the key insights into a conceptual model.
Keywords: Trust, Trustworthiness, Public Trust, Business Organisation, Focus Group,
System Thinking
1. Introduction
Trust is an increasingly popular subject of investigation amongst management scholars,
primarily stemming from the increased appreciation of its importance in social and business
relations. This increased appreciation has occurred alongside high profile business scandals
that implode the public trust in business. Therefore organisations are increasingly faced with
the problem of trust being pivotal to their success.
There has been a lot of media attention and discussion surrounding the current declining
levels of trust in business. There has appeared a disparity between those organisations
supposed to embody trustworthiness and their actual actions: directors’ pay, LIBOR fixing,
phone-hacking, bribery accusations. Surveys such as Edelman Trust Barometer (ETB) and
Building Trust in Business have reported that levels of trust in business have reached
alarmingly low levels (Edelman, 2012; Interaction Associates, 2012). The results of the 2012
ETB survey showed that the public’s trust in business has fallen to 53% at a global level,
reduced to a mere 38% in the UK (Edelman, 2012).
The aforementioned statistics, coupled with the evidence for the importance of organisational
trustworthiness show that trust in business needs restoring. This restoration is necessary for,
not only business's long-term survival and success but the effective functioning of society as
a whole (EGOS, 2012). Such restoration can only be achieved by developing an appreciation
of the nature of trust between different stakeholders and hamessing the attained knowledge
which allows for actionable outcomes. There has been a great deal of literature published in
Proceedings of the 32" International Conference of the System Dynamics Society, Delft, Netherlands,
July 20-24, 2014
the last fifteen years discussing why trust matters in the context of business. Academic and
professional literature has referred to trust as a key enabler of organisational success (Davis et
al., 2000) and the lifeblood of any organisation (PwC, 2010). These statements are consistent
with empirical research showing the positive effects of higher levels of organisational
trustworthiness including: driving superior performance and employee motivation (Harter et
al., 2002), improving customer retention (Ang and Buttle, 2006), driving innovation (Clegg et
al., 2002), and reducing media scrutiny (Einwiller et al., 2010). It can subsequently be argued
that by increasing understanding of public trust in business organisations and through
businesses hamessing this acquired knowledge trust can serve as an organisational
competitive advantage (Bamey and Hansen, 1994).
The objective of our research is to understand factors that drive public trust in a business
organisation and to map the relationship between the trust drivers in a causal loop diagram.
This paper discusses the public-business trust dyad based on the perception of a group of
experienced business consultants. The data was collected from a focus group discussion. The
group discussion provides insights about how they pereive the dimensions of
trustworthiness, the evaluation of business trustworthiness by the public, and the role of trust
drivers used by the public in evaluating business trustworthiness. Based on the insights, using
the system thinking approach, we map the interplays between the trust drivers in a causal
loop diagram. System thinking is suitable when the focus of the work is more on the analysis
of the relationship between key variables in the model instead of the behaviour of the model.
A similar work done using system thinking is shown in the work by Martinez-Moyano and
Samsa (2008) who applied system thinking to develop a model based on a feedback-intensive
theory of trust and confidence in govemment. System Dynamics (SD) is another suitable
method to investigating trust as evident from examples of a number of trust researches. Luna
Reyes et al. (2004, 2008) adopted an SD method to present findings on interpersonal trust
dynamics and to investigate the role of knowledge sharing in building trust.
The remaining of this paper is organised as follows. Section two provides a review of
literature on the dimensions of trustworthiness and trust drivers. Section three presents the
findings from the focus-group and relates these to the theory. In Section four, we map the
findings from the focus group and literature review using causal loop diagram. Finally,
Section five delivers a conclusion of the paper, acknowledging its limitations and discusses
the scope for future research.
2. Literature Review
The literature on trust is abundance and has been done in various contexts and disciplines;
hence, disagreements among scholars are common even on core issues such as its definition
(Mayer et al., 1995). Therefore, we consciously avoid discussing the definitions of trust in
this paper. Instead, this paper posits trust as “a positive expectations about another party’s
behaviour or intentions based on the attributions placed on that party by the other party.” This
definition is largely based on the attribution theory in which individuals seek out information
that will allow them to draw inferences regarding the disposition and motivation of those ina
position to trust (Ferrin and Dirks, 2003) and the definition put forward by Butler (1991) that
trust is an evaluation of target’ s attributes. As described above, it is the drivers of public trust
in a business organisation, the drivers of these expectations and their dynamics which is the
fundamental enquiry of our research; therefore this definition appropriately serves this
particular research direction.
2.1 Dimensions of Trustworthiness
Based on the attribution theory adopted in this paper, understanding the attribution that the
public may attach to a business organisation is important. The attributions of a target which
the trustor evaluates to determine their judgement of the target’s trustworthiness is often
referred to as the dimensions of trustworthiness (Pirson and Malhotra, 2011). Deciding the
relevant trustworthiness dimensions within trust research has recently become a contested
issue amongst scholars with criticism that scholars are presuming trustworthiness dimensions
rather than investigating them (ibid).
Examining existent literature, scholars describe a diverse plethora of trustworthiness
dimensions. Some authors claim only a small number of characteristics are evaluated. Sitkin
and Roth (1993) identify just two aspects, ability and value congruence, as do Ring and Van
de Ven (1992) identify just moral integrity and goodwill. Others however identify as many as
ten characteristics (Butler, 1991). Mayer et al. (1995) attempted to make sense of the
overabundance of trustworthiness dimensions put forward in literature arguing that the vast
ranges of characteristics were synonymous, distinguished only by linguistic choice and
through breaking down dimensions as opposed to contributing unique concepts. Mayer et al.
(ibid, p.717) subsequently argued that characteristics could be grouped and subsumed.
summarising that, “Even though a number of factors have been proposed, three
characteristics of a trustee appear often in literature: ability, benevolence, and integrity. As a
set these three appear to explain a major portion of trustworthiness. Each contributes a unique
perceptual perspective from which [the trustor] considers the trustee.”
Post Mayer et al. (1995), the three dimensions (ability, benevolence, and integrity) became
highly cited by academics. The vast majority of literature, at the very least, used the three
dimensions as a point of departure for considering trustworthy dimensions (Mishra, 1996;
Lewicki and Bunker, 1996), whilst others simply took them as a given (Gillespie and Dietz,
2009; Gefen, 2002). This practice led to an entire segment of literature that, whilst
acknowledging trustworthiness to be multidimensional, failed to question whether the
dimensions were relevant to the particular trust relationship and context they sought to
investigate. Recently this common practice has been questioned. Pirson and Malhotra (2011,
p.1098) argued that “researchers... when studying trust, tend to presume, rather than examine,
which dimensions of trustworthiness are relevant to trust’, criticising prior research for not
“tigorously examining. ..the varying dimensions along which different stakeholders base their
trust” (ibid, p.1087). Through integration of stakeholder theory, they made the convincing
argument that “stakeholders differ greatly in their expectations and interests... [therefore]
different stakeholders will also look for different signals regarding trustworthiness” (ibid,
p.1088). They went on to produce a quadrant framework based on the axes of stakeholder
locus (intemal and extemal) and relationship depth (deep or shallow), demonstrating that
relevant dimensions of trustworthiness vary systemically across different stakeholder types.
Overall, whereas in the past there seemed a clear core to trustworthiness dimensions,
literature is increasingly questioning this prior consensus. Accordingly, we posit that the most
important message regarding trustworthiness dimensions is that trust is relationship and
context specific; therefore, first and foremost, any investigation into a particular trust
relationship should begin with an inquiry into the relevant dimensions. This is the first
objective of our focus group.
2.2 Trust Drivers
The second objective of the focus group is to identify factors that affect trustworthiness.
Kramer (1999) delineates information sources on which the assessment of organisational
trustworthiness could be based between direct experience and second-hand sources. He
argues that “personalised knowledge ... represents one possible foundation for trust... [but]
such knowledge is often hard to obtain ... [and] as a consequence proxies or substitutes for
direct personalised knowledge are often sought or utilised” (ibid, p.576). Furthermore, these
substitutes are “third parties... [who] diffuse trust-relevant information via gossip” (ibid,
p.576). This argument implies the importance of the word-of-mouth in the dissemination of
trust assessment.
Kramer (1999, p.577) refers to a study by Uzzi (1997) explaining the role of third-party
sources; “third parties acted as important go-betweeners in new relationships enabling
individuals to roll over their expectations from well established relationships to others in
which adequate knowledge or history was not yet available”. This suggests that the adoption
of information gained from second-hand sources relies on other trust relationships present
and also that third-party sources lay secondary to direct experience; serving to fill knowledge
gaps. McEvily et al. (2003) further support the use of third-party information to fill in
knowledge gaps and that the adoption of such information relies on other trust relationships
present. They introduce the concept of “trust transfer’, noting that “the basic premise of trust
transfer is that rather than being based on direct experience with the object of trust, initial
trust impressions are based on trust in a sourve other than the trustee such as another
individual or collectivity” (ibid, p.94). The theory of trust transfer supports the idea that the
trust relationship between the individual and the second-hand source will influence whether
or not, and the degree to which, the second-hand source’s opinion is adopted. Moreover,
another more recent study done in the context of risk perception suggests that as more
personal knowledge is obtained, if evidence sourced from third-parties contradicts direct
experience, the trustor would be likely to attempt to find reasons why and adjust their
attribution to the trustee (Busby and Onggo, 2013). This further supports the preferential
weighting of personal direct experience and the unlikelihood of second-hand sources
overriding personal views.
3. Insights from Focus Group
3.1 Focus Group Design
The main reason why we are interested in the perspective of business consultants is that they
have been working with various business organisations; hence, they are likely to have a
broader view of the topic. The focus-group was conducted in July 2012 and comprised eight
business consultants from various client experiences (Banking, Financial Services, Retail and
Media) and employment grades (Associates, Managers, Senior Managers and Directors). The
use of breadth of individuals was meant to minimise participant bias. However, there
remained awareness that the use of focus group, especially with a small number of people,
could limit conclusion generalizahility.
The focus group design was strongly influenced by group model building (Vennix, 1999)
Practices, especially the qualitative stages of a typical group model building process. The
focus-group lasted for two hours and was divided into three segments. Each segment was
started with a brief overview on the objective of the segment discussion and the relevant key
4
concepts. The first segment was designed to elicit and debate the trustworthiness dimensions
that are relevant to public trust in business. In the second segment, the participants identified
factors that drove and affected public trust in business. Finally, in the third segment,
participants discussed and debated the dynamics and behaviours of the factors by identifying
their causal relations using causal loop diagram. The participants worked in pair to produce
their causal loop diagram. The causal loop diagrams were presented at the plenary for
comments from other participants. The focus group agenda is given in the appendix.
3.2 Insight 1: Dimensions of Trustworthiness
We presented six common trustworthiness bases identified from the literature to the focus-
group. They are: ability (competence), benevolence, integrity, identification/value
congruence, openness/transparency and reliability. The participants were asked to discuss the
relevance of these trustworthiness dimensions in the context of public-business dyad and if
necessary they could add a new dimension. The argument quickly arose that ‘ability’ was the
primary criterion; claiming that if competence was demonstrated with regards to the function
expected from the organisation, an inherent trust would prevail and no other evaluation
criteria would be considered. However, the argument also arose that a compromise in ability
would not automatically result in a reduction of trust but instead in a ‘deeper evaluation of
trustworthiness’. This deeper evaluation involved the assessment of the organisation's
underlying character, which when discussed encapsulated both integrity and benevolence, not
readily differentiated from each other. In contrast to ability, if the underlying character of the
organisation was questioned, trust would be damaged.
There is a scarcity of literature explicitly discussing the public-business trust dyad, making it
hard to verify the particular dimensions posited in the focus-group. However, the focus-
group's prioritisation of ability, integrity and benevolence did match the commonly cited
characteristics from Mayer et al. (1995). However, the group deliberated over the term
benevolence, tending to combine it with integrity; referring to them collectively as “a deeper
evaluation criterion’. Potentially therefore, the group were implying that the relevant
dimensions were only ability and integrity, an argument supported by Poppo and Schepker
(2010) in some of the limited research specifically on the public-business trust dyad which
argues that benevolence is too inherently personal, relational and emotional to be considered
in this relationship.
3.3 Insight 2: Trust Drivers and Moderation Factors
The group were asked to identify the main factors which influence the assessment of the
trustworthiness dimensions. In contrast to the dimensions, a list of drivers was not
presupposed onto the group. The group deliberated many factors, ultimately deriving the six
factors: direct experience, personal background & knowledge (PB&K), personality traits
(PT), media-portrayal, friends and family opinions, and organisational reactions to problems.
The group argued that only two factors directly influence trustworthiness assessment; direct
experience and second-hand sources. PB&K and PT influence and mediate direct experience
and mediate use of second-hand sources. PB&K such as, employment, social background and
interests would influence what direct experiences an individual would have whilst mediating
any interpretations of organisational actions. PT influences the degree of an individual’s
aietion towards adopting the views and opinions of others. Some individuals are more
likely to take on the views of others or follow general societal opinion in trustworthiness
decisions, whereas some people are more likely to maintain their own opinion.
5
The focus-group’s delineation of information sources between direct experience and second-
hand sources is consistent with Kramer (1999) and McEvily et al. (2003). Lewis and Weigert
(1985) note that the decision of an individual to second hand sources for organisational
trustworthiness is influenced by the individual’s “particular psychological make-up”,
supporting the mediating/moderating role of PT suggested. Similarly, Mayer et al. (1995)
note the moderating effect of individual’ s propensity to trust in assessing trustworthiness.
3.4 Insight 3: How Trust Drivers Affect Public Trust on Business
Direct experience is more dominant than second-hand sources
The group argued that if an individual does not have direct experience then the opinions of
trusted others, media or general society are likely to be used. However, if an individual does
have direct experience, regardless of what the media or other sourve indicates, an individual
is likely to retain their own perception. This shows the group prioritise direct experience over
second-hand sources as an influential factor. The group also alluded that people use media for
confirmatory purposes; if a publication disputed an individual’s personal view/experience, it
is likely the individual would boycott the paper rather than believe it. This shows that the
group believes that direct experience will be dominant over second-hand sources of evidence
when assessing trustworthiness. This view is supported by the literature. For example, Uzzi
(1997) states that when an adequate knowledge is not available individuals will set their
expectation based on their established relationship with others. McEvily et al. (2003, p.94)
further add that “trust in the third-party serves as proxy for trust in the unknown counterpart”
which almost exactly supports the focus-group’s ‘trust by proxy’ argument.
Transfer of trust (word-of-mouth effect)
The group argued that when an individual use the opinions of trusted others, media or general
society, the strength and power of the trust relationship between the individual and the
second-hand source (i.e. interpersonal trust or individual trust in the media) will influence
whether, and the degree to which, the second-hand source's opinion is adopted. The group’s
view on the transfer of trust is supported in the literature. The concept of trust transfer
(McEvily et al., 2003) highlights the role of wortof-mouth in the dissemination of
perception on trustworthiness. Lewis and Weigert (1985, p.970) introduce the “cognitive
leap’; explaining the basis for trust transfer, i.e. that “each trusts on the assumption that
others trust” which provides useful insight regarding the focus-group suggestion that
individuals may go along with general societal perceptions regarding organisational
trustworthiness.
Same factors are used to assess ability and deeper character dimensions
The group did not differentiate between which factors influenced which dimensions of
trustworthiness. The group argued that the primary set of key factors (direct experience,
media-portrayal, friends and family opinion, PT and PB&K) all collectively informed
assessment of ability dimension. If ability is shown to be impaired these same factors will be
reappraised or re-framed to consider the deeper character dimension of the private-sector in
addition to evaluating the organisational reaction to the problem. Therefore, rather than
different factors influencing different dimensions, the group argued it should be considered in
terms of two evaluation cycles. The literature is scarce on this topic, highlighting the need for
further research.
4. Conceptual Model
The causal loop diagrams from each focus group participant pair and a transcription were
collected for post analysis and used to produce a complete causal loop diagram. We discuss
the causal loop diagram in this section.
4.1 Ability Trustworthiness Evaluation Process
Figure 1 illustrates the process for the evaluation of the organisational ability, highlighting
the sources of evidence drawn on to form ability perception and the outcome of this in terms
of updating trustworthiness evaluation.
U Second Hand Known Second Hand
Sources
Sources [M edia/General i ‘a
Society] [Friends/Family]
a #
A sources f
Evidence Bottom Line
Expected Ability Inherent Trust
# 4,
Perception of
"Abiity Desired Level of (wf
A
bility
Lo
= +
Unmet Desired
Level of Abilit
Figure 1 Ability Evaluation Process
The model shows the two aggregate evidence sources: direct experience and second-hand
sources. The second-hand sources are divided into those known and unknown; referring to
the importance of the level of trust an individual has in their second-hand source. To maintain
simplicity, the model does not explicitly show how the potential relative weightings of each
source may differ in different situations. However, the perception of ability should be
considered as the combination of direct experience multiplied by its relative weighting plus
second-hand sources multiplied by its relative weighting. Such characterisation of the
perception-formation process resembles “social judgement theory” whereby different
weightings are applied to different information cues and in accumulation aid the formation of
a judgement on a situation and therefore a resultant action (Martinez-Moyano and Samsa
2008).
The model shows that the resultant action following perception is driven by a discrepancy
between the perceived and expected ability. If the perceived ability exceeds the
ability, a positive gap occurs, driving the action of an increase in inherent trust which
subsequently feeds back to form future evidence of direct experience. This process is
illustrated by R1. B1 illustrates an additional feedback mechanism whereby based on the
outcome of previous evaluation cycles, an individual will update their expectation levels.
4.2 Character Trustworthiness Evaluation Process
Figure 2 illustrates the process for the evaluation of organisational character. Importantly,
this process is only initiated if ability trustworthiness is impaired; a negative gap occurs
between perceived and expected ability.
Known Second Hand
sources ,
1. a] Bottom Line
Unknown Second Hand /Fr#ends/Family] Expected Character
Sources [Media/General .
Society] Organisational
* Response to Ability Desired Level of mc)
Violation Character
a = Desired
Level of Character
Personal Background and
: Pereeption of eee Knowled and a Personally
haracter
Second Hand Experience +
jources + Memory
Reappraisal of Evidence +
for Perception of +" Sources of
haracter Evidence
+
Expected Ability Inherent Trust
+
‘
Perception of
Ability Desired Level of
Ability
F al
Unmet Desired
NK Level of Abit
Organisation's target
level of ability
Figure 2 Character Evaluation Process
The model shows that the gap on organisation’ s target level of ability triggers organisational
action. In acknowledging their shortfall, the organisation will initiate an organisational
response - attempting to correct the impaimment. This simultaneous action by the organisation
illustrates how the interaction process is dynamic; involving two parties both of whom act
and react in driving trustworthiness perceptions. The organisation response serves as an
additional source of evidence for the evaluation of organisational character. This process is
shown in B2. The model shows that the original sources, plus the organisational response are
reframed to forma perception of organisational character.
As in Figure 1, the subsequent public action is driven by the disparity between perception and
expectation; this time related to character perception and expectation. If the perceived
character exceeds the expected character, a positive gap occurs, driving the action of an
increase in inherent trust which subsequently feeds back to form future evidence of direct
experience. If the perceived character is lower than expected character, a negative gap occurs,
however, in difference to the ability evaluation, this will result in a direct reduction in
8
inherent trust which will feed back and form future evidence of direct experience. These
feedback processes are implicit in loop R2. B3 illustrates an additional feedback mechanism
whereby based on the outcome of previous evaluation cycles, an individual will update their
expectation levels.
Known Second Hand
4 Somes Bottom Line (up
Unknown Second Hand _/Ftiends/Family) Expected Character
Sources [Media/General .
Societyl Organisational
> Response to Ability Desied Level of mp
Violation
ek Desired
Level of Character
Personal Background and
= Bereention of. a Knowledge and Personality
Traits
tz)
Second Hand Experience +
. , Sources # Momay,
Reappraisal of Evidence =
for Perception of +" Sources of
haracter Evidence Bottom Line 3
45) Expected Ability Inherent Trust
a e
4,
Perception of Gs
"Aili Desired Level of
Ability
L@
Unmet Desired
NK Level of Abilit
Organisation's target
level of ability
Figure 3 Character Evaluation Process
4.3 Complete Tiered Evaluation Process of Trustworthiness
Figure 3 introduces some additional details based on the literature analysis and focus-group
findings to complete the model. The model shows the mediating impact of PB&K and PT on
perveption-formation characterised. PB&kK is a potential influencer on the relative weightings
of the different evidence sources. The model introduces ‘memory’ as a variable, showing that
the outcomes of experiences, rather than directly becoming a source of evidence feeding in to
future evaluations, are stored in the memory of the individual (which represents a repository
of accumulated experiences) and then recalled. Researchers have argued that it is memories
of past outcomes which are influential in deciding future actions (Giusta, 2008) and trust are
developed through the accumulation of repeated encounters (Dasgupta, 1988). The focus
group overlooked the role of memory. Although further work is needed in this area and such
Strategic Resources Investment Planning for Growth and Development:
An executive training model
Rogerio Domenge Jorge Humberto Mejia
ITAM HEC Montreal, CA
Instituto Tecnologico Autonomo de México
Abstract
A lack of Resource Based View (RBV) effective understanding in strategy courses and a quick
feedback learning style of the new generation of Business Administration students demand more
than a traditional lecture teaching strategy. Based on two educator research questions: How could
my students achieve an effective understanding of the RBV concepts? How could my students
experiment quick financial impacts of their strategic decisions? and one student question: How
could I develop strategic resources in order to achieve the maximum Cash Flow?, an Interactive
Learning Environment (ILE) is proposed with the following learning objectives: understand the
RBV concepts, identify relationships between strategic resources and financial performance and
experiment the financial impacts of several resource development strategies, as an iterative
process. The proposed ILE is tested based on a laboratory experiment that was conducted with
the participation of graduate and undergraduate students to evaluate some key performance
measures differences due to student investment strategy profiles between these two groups. The
experiment results suggest that graduate students were more aggressive, getting worst results at
the beginning but, at the end they achieve better results with some less aggressive strategy plus
assigning more resources to productivity versus capacity than undergraduate students did.
Keywords: Strategic resource investment, Growth & Development, Interactive Leaming
Environment, Laboratory experiment
Introduction
Organization growth and development policies are based on combinations of capacity expansion
and productivity gain, as a function of the absolute and relative strategic resources levels, their
development, combination and exploiting strategies (Warren, 2008). The convenient
combination of these resources for a specific firm depends on the firm’s strategy, industry
structure, timing and available resources and capabilities.
Following Hambrick & Fredrickson (2005), vehicles are one of the five critical elements of
the strategy (the other four are arenas, differentiators, staging and economic logic). Vehicles are
the means of reaching the target market. How the firm is going to accomplish their growth and
development strategic objectives? It could be via internal resource development, joint ventures,
acquisition, outsourcing, etc. These decisions are based on an efficient and strategic resouce
development management.
Sometimes managers don’t have the knowledge, skills, time, ability or sensibility to effective
allocate investment in order to develop these strategic resources because, among several causes,
this allocation problem behaves as a complex dynamic system with feedbacks, time delays and
nonlinearities that could be misperceived (Sterman, 1989; Forrester, 1995; Cronin, et al., 2009;
Moxnes, 2004) as a result of their bounded rationality and limited mental models (Simon, 1979;
1
investigation lies out of the scope of this paper, it appears necessary to at least acknowledge
the variable in the model. Although this is a simplistic inclusion, its inclusion introduces an
additional level of complexity in that it suggests a possibility that certain memories are:
recalled more readily than others (selective retention), forgotten and/or distorted (selective
distortion). This complexity alludes to Dasgupta’s ‘repeated encounters’ concept indicating
that a single one-off experience may not be as significant as a series of reinforcing
interactions in driving trust (ibid). Aligned with this, the outcomes of experience have also
been shown to update the second-hand sources (R3 and R4) showing the diffusion trust-
relevant information via gossip (Kramer, 1999).
5. Conclusions
A causal loop diagram illustrating the perception of business consultants from a focus group
on the public trust in a business organisation has been presented. The map shows a bicyclic
evaluation process whereby the public assess both the ability (competence) and the
underlying character of business when evaluating its trustworthiness. Positive evaluations
increase inherent trust whilst negative evaluations reduce inherent trust. Perceptions of ability
and character are shown to be derived from two main sources; direct experience or third
patties (i.e. media and friends and family) supplemented by the trustor’s personal background
and knowledge and personality traits which mediate the evidence. A causal mapping allows
the currently mental models of public trust in business to be extemalised in a tangible form
which enables analysis, discussion and use. As research into public trust in business is in its
infancy, simple diagrammatic illustration of the feedback processes involved can assist
management thinking and organisational leaming.
Although our findings are useful because they reflect the reality of the consultants
participating in this study and the consultants have worked on projects from various business
sectors, the limited mumber of participants from the same profession limits the
generalizability of the findings. Hence, research investigating the perception of different
stakeholders such as the public, business organisations, goveming bodies and media are
needed to gain better understanding on the dynamics of public trust in a business
organisation. The causal mapping presented in this paper can be used as a precursor for
simulation modelling whereby the initial conceptual model is tumed into a stock-flow
diagram from which simulation equations are generated and input into a computer to provide
asimulation model. This will require further empirical data collection.
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Appendix: Focus-group Agenda
Time Session Title/Description
11:30-11:40 | Welcome and Introduction
Definition of Main Problem: Presentation Task
- Topic Introduction [What is Trust, Key Definitions, Referent Dyad]
- Outline Session Objectives and Agenda
11:40-12:30 | Section 1 - Concept and Variable Elicitation
Which dimensions of trustworthiness are relevant to public trust in business?
11:40-11:45 | - Introduce meaning of ‘dimensions of trustworthiness’ : presentation task
- Provide stimulus list of potential trustworthiness dimensions
11:45-12:00 |- Ask group to discuss and identify [first in pairs and then in a plenary - round-
robin - session] which are relevant/not relevant to public trust in business.
Ensure they clarify what they understand by the dimension: divergent task
12:00-12:05 |- Doavoting exercise to reach a final group consensus: evaluative task
What factors/variables drive and affect public trust in business?
12:05-12:10 |- Introduce meaning of ‘trust drivers’: presentation task
- Provide stimulus list of questions
12:10- 12:25 |- Brainstorm about variables/factor [first in pairs and then in a plenary -round-
robin - session]: divergent task
12:25-12:30 |- Do a voting exercise to prioritisation of the most essential variables:
evaluative task
BREAK
12:35-13:20 Section 2 - Conceptual Model Formation
Discuss and debate the dynamics and behaviours of the variables/factors
identified and how they influence public trust in business
Introduce conceptual modelling, causal-loop diagrams and modelling basics:
presentation task
12:35-12:45
12
- Provide stimulus list of questions
Brainstorm about variable behaviours, causal relations and feedback loops
[first in pairs and then in a plenary -round-robin - session]: divergent task
13:05-13.20 |- Buildcausal loop diagram [first in pairs and then in a plenary -round-robin -
session]: convergent task
13:20-13:30 | Synthesis and Wrap up
12:45-13:05
13
Sterman, 2000; Richie-Dunham & Puente, 2008). A mental model “is a conceptual
representation of the structure of an external system used by people to describe, explain and
predict s system’s behavior” (Johnson-Laird, 2005; Capelo & Ferreira, 2009; Groesser &
Schaffernicht, 2012). It seems that many times managers use intuition that follows heuristic rules
in their decision-making process (Bakken, 2008), based on their mental models.
In order to improve the intuitive manager resource investment decision-making process, this
paper proposes an Interactive Learning Environment (ILE) based on a System Dynamics model.
The ILE allows executive sensitivity improvement in the effects or implications of several
resource investment policies, considering capacity growth and productivity development in a
firm.
The model
Model Structure
Model structure was inspired on Bamey & Pedercini (2003), Pedercini, et al. (2007) and
Kopainsky, et al. (2009) system dynamics based simulation models. The goal of the model is to
be a practical executive learning tool that incorporates organization growth strategic decisions on
capacity and productivity investment. The model generates scenarios showing the effects of
several proposed strategies, in order to achieve net earnings growth and strategic resource
development.
Model learning objectives:
e Perform a productivity versus capacity tradeoff resources growth strategy analysis
e Develop a feedback loops and decision-performance or response delays “participant
sense”
e Assess the relative resource equilibrium development principle
e Improve the participants’ learning and decision making in dynamic systems
The model has three subsystems: strategic resources, finance performance and strategy
decisions, as illustrated in Figure 1. The goal is the determination of a resource development
investment strategy that maximize the cash flow net present value (NPV) in certain time period.
Resources Finance
~ Capacity - Cash Flow (NPV)
- Productivity [1 - Debt
= Knowledge
=R&D
Strategy Decisions
- Desired Strategic Investment policy
- Capacity versus productivity policy
- Knowledge versus R&D policy
Fig. 1. Block Diagram of the Strategic Resources Investment Planning Model
The dynamic hypothesis is illustrated in Figure 2. The causal loop diagram (CLD) has three
feedback loops: one reinforcing loop for the firm growth, that considers the investment in the
capacity resource; one reinforcing loop for the firm development, that invest in (two)
productivity resources and one balancing loop for financing the budget. There are three policy
variables: the desired strategic investment (amount), the strategic growth policy (investment
proportion in capacity versus productivity) and the strategic development or productivity
resources allocation (R&D versus knowledge) policy.
P
‘Production
we ~
/ Th
4. Capacity wl *\
¥
Poe 2
(® / Kb) de —
Debt
Investment in
_ Productivity Productivity Resources =
Capacity é ‘ ‘¥_Alllocation Policy is
a Disponsable
Se SGiaveiiined Investment Budget ——w Debt
——__— Allocation *
i Desired Strategic
Strategic Growth
Paliew Investment
Fig. 2. Strategic Resources Investment Planning Model high level CLD
Conclusions
A management simulation model is proposed in this paper. The model simulation can be seen as
a mean to develop executive skills in strategic resource investment allocation decision making,
by proposing and tasting several growth and development firm strategies. The model is based on
the System Dynamics methodology.
Based on an experiment, results suggest that participants achieve the following learning
points:
e The resource investment allocation and the build-up of capacity and productivity
resources are crucial decisions for the dynamic growth process of a firm that should be
seen and understand as a cause-effect relationship
e The resources must develop in an equilibrate perspective, considering their relative levels
at each period of time
e The extreme values not always are the best ones I strategic decision making
e It should be taking in account the strategic resources’ building time in the investment
allocation decision making processes and their delayed impacts.
The proposed model could be used to “experiment” stock-flow relationship under the
Resource-Based View of the firm in Strategy courses. The proposed ILE could be an effective
mean to improve management ability to understand non-linear cause effects relationships,
resource building timing, lagged responses and results sensitivity as a function of policy
variables in business systems.
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