The Role of Leadership in Creation of Organisational Trust

Abstract

Purpose: This research paper introduces with the empirical results of a study exploring the relationships between the concepts of leadership and organizational trust. The sample used in the analysis (N = 215) was selected in Latvian companies, both of Latvian and foreign capital. This paper argues that trust in organizational life is a necessary foundation of working relationship and it can be enhanced due to the leadership behaviour.

Design/methodology/approach: The empirical part of the study shows the relationship between cognitive and emotional components of trust and ethical leadership, which was measured by leader – member exchange (LMX) scale. Statistical analysis (using SPSS 22) based on a survey of employees of 4 different organisations within Latvian business context was applied.
Findings: The results of the study indicate that relationship – oriented leadership, which implies an ethical connotation, has a positive correlation with trust, and organisations as to leadership – trust relationship differ statistically.

Research implications: This study contributes both to the literature on organisational trust, as well as to the emerging theory on leadership and ethical leadership, adding data of Latvian business context.

Practical implications: It is suggested that organisational trust should be addressed as a strategic question for the companies. Moreover, leaders should take responsibility for the quality of the leader-member relationship in order to develop organisational trust.

Originality: This article makes a theoretical contribution by examining the linkages between organisational trust and leadership, and also adds Latvian data to the field of study of interrelationship between the phenomena.