Trust and Trustworthiness

Abstract

In this chapter, we discuss when, how, and why trust and trustworthiness arise to support cooperation within and across organizations. To do so, we first define trust and trustworthiness, discuss how they can be quantified and determine key components of trusting and trustworthy behavior. In addition, we identify building blocks of trust and trustworthiness and offer tangible insights about how to establish trusting and cooperative business/inter-organizational relationships, based on both academic research and case studies from across industries. 14.1 Are There Any Business Case Studies Where Trust and Trustworthiness Matter? Consider the classic case of Barilla, an Italian pasta maker, and Cortese, an independent Italian distributor of groceries from suppliers to retail stores (Hammond 1994). Barilla had worked with Cortese for years to distribute its products across Italy and Europe. Yet, when Barilla wanted to implement Vendor Managed Inventory (VMI), a supply chain management initiative, it faced substantial resistance, both internally from its own salespeople and also externally from Cortese. VMI required Cortese to relinquish control of its inventory to Barilla who would decide when and how much to replenish their pasta inventory at Cortese's distribution centers. The premise was that if Barilla were to observe point of sales data and demand across different locations and distributors (which were unavailable to Cortese), then Barilla could better manage the pasta inventory. This improvement would be possible due to having greater visibility to end consumer demand, enabling better production planning, and also possibly moving inventories across different distribution centers. These changes altogether would result in fewer stock outs and higher sales for both Cortese and Barilla. However, Cortese did not trust Barilla and was reluctant to hand over its inventory decisions (control), fearing that Barilla's objective was not fully aligned with its own. Cortese worried that Barilla would push more products than necessary, establish better relations with retailers, and eventually cut the middleman out of business and sell to retailers and consumers directly. Even Barilla's own salespeople did not trust Barilla's top management for fear of losing their bonuses. Eventually Barilla was able to convince Cortese through establishing trust and trustworthiness by addressing vulnerabilities and uncertainties VMI posed on its own sales force as well as on Cortese (as we will discuss in our concluding remarks). As in many other VMI initiatives, such as that adopted by Wal-Mart and Procter & Gamble, successful implementation is often built upon tremendous trust between the companies. Consider, for another example, the interaction between IBM Global Storage Technologies (GST), 2 a supplier of hard disk drives, and Apple, the designer and distributor of portable electronic devices and in particular, the innovator of iPod that revolutionized both the consumer electronics industry and several others such as the music and telec...

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