Building an enduring trust is arguably a leader’s most delicate and complicated task. And task is more important. Unlikely as it seems, the example of how trust was created between an economist and entrepreneurs earning pennies a day can teach today’s business leaders how to build a lasting trust in their multinational corporations.

When Dr. Muhammad Yunus, a professor of economics in Bangladesh, provided 856 taka, or (U.S.)$27.00, in uncollateralized loans to 42 people in the small village of Jobra in 1976, he did not know that he was on the path toward building a sustainable model for micro-credit, an initiative that would earn him the Nobel Peace Prize thirty years later. Instead, while conducting routine fieldwork with a group of students, Yunus observed the contradiction between the economic theory he had embraced and the experience of poor entrepreneurs in his community. He sought to understand this disconnect through active research. What he found led to the creation of Grameen Bank, a “bank for the unbankable.” Since its inception in 1983, the bank has provided (U.S.)$7.97 billion dollars in uncollateralized loans to people living on less than two dollars a day, with a default rate of less than 2 percent (Grameen, 2009). In his book, Banker to the Poor: Micro-lending and the battle against world poverty, Yunus states that he set out to establish a bank that was “…built on human trust, not meaningless paper contracts” (Yunus, 2007, p. 70), a goal that appears out of step in a world where public trust is on the decline. It is through the lens of this paradox that this article will approach the question of trust and examine how business leaders might learn from Yunus and his clients, entrepreneurs earning less than $2 a day.

Trust on the decline

In response to global political, economic and social unrest, the World Economic Forum began in January 2001 to track levels of public trust in institutions such as governments, non-government organizations and corporations worldwide. The results of these polls were alarming. The data show that, with rare exception, public trust in organizations and institutions has steadily declined since data had started to be collected (World Economic Forum, 2009). While a detailed examination of these statistics and their implications is beyond the scope of this article, the following chart illustrates this trend across countries and cultures for global companies.

World leaders were so troubled by this data that public trust was highlighted as a main topic of discussion at the 2003 World Economic Forum. But just what are the implications of this ongoing decline in public trust for the global business community? Put another way, why does trust matter? The following exchange between the founder of Grameen Bank and one of his first micro-credit loan recipients provides an anecdotal context for the importance of this question as it relates to people and organizations along the entire economic spectrum – from the poorest of the world’s poor to the largest multinational corporations.

From bamboo stools to a worldwide bank

In 1976, in the midst of a nation-wide famine in his native Bangladesh, Dr. Yunus and his students visited the poorest households in Jobra to learn how their work might provide insight and assistance to their neighbors living in extreme poverty. While conducting these interviews, they encountered Sufiya Begum, a 21-year -old mother of three, who made two cents a day constructing bamboo stools in the mud hut where she lived with her family. Upon learning where she bought her materials, how she funded the purchases and how she sold the final product, Yunus was convinced that fair credit, as opposed to gouging by local moneylenders, had the potential to elevate this woman from defacto indentured servant hood to an established entrepreneur (Yunus, 2007, p. 46). This interview led to further research and the identification of 42 individuals in similar circumstances: hard-working craftsman making pennies a day for their labours, due to unreasonable relationships with local moneylenders and those extending resources on credit.

The 42 people identified in this stage of Yunus’ research were the now-famous recipients of the initial micro-credit loans. While this story has been told frequently in the academic and popular literature about the creation of Grameen Bank, I would like to focus on the seemingly simple exchange that transpired between Sufiya Begum and Muhammad Yunus and highlight it as a powerful example of potential currency represented by mutual trust. More measurable examples of the currency of trust will also be discussed.

A closer look

This young mother had little reason to trust Dr. Yunus and his female associate when they arrived on her doorstep that day in 1976. Yunus describes the encounter in detail (2007), making clear that he was determined to gain this woman’s trust in order to learn what he might do to help her. This challenge was compounded by cultural concerns, as the woman was a Muslim practicing the custom of purdah, which made it highly inappropriate for her as a married woman to speak with any stranger, especially a male. And yet, with all of these potential barriers to trust in place, Sufiya proceeded to answer the questions. Unable to convince the local bank to extend loans to the 42 people, Yunus eventually extended personal loans to Sufiya and 41 others in similar circumstances. These were loans with no collateral and no paperwork to legally bind the recipients to repay them. Put simply, this demonstration of trust between Yunus and Begum required a leap of faith on the part of both parties. It was a leap of faith that, while it represented a risk for both parties, led to significant reward in the birth of a new system of banking that has helped and continues to help the poor break free from the grip of extreme poverty.

While the barriers to trust that exist in organizations are dramatically different than those faced by Yunus and Begum, for example inconsistent messages, inconsistent standards, misplaced benevolence, false feedback, personal issues, and a host of other challenges, they too can become “enemies of trust” that prevent trustworthy leaders from creating and maintaining environments of trust in their organizations (Galford & Drapeau, 2003). Research has shown that the cost to organizations for this lack of trust can be high.

Trust defined

In order to better understand what transpired between Yunus and Begum, and to extrapolate further meaning from the exchange, a working definition of trust is required. The development of a working definition of trust has been widely discussed in the academic literature. A turning point came in 1995 when, in their pursuit of an integrated, multi-disciplinary model of trust, Mayer, Davis and Schoorman pursued trust as a matter of relationship rather than as an individual tendency or characteristic that remained constant regardless of circumstances, as it had been described in previous studies (Mayer et al, 1995). This model, a seminal work that has been cited in the literature more than 2900 times (Google Scholar, 2009) was developed based upon an examination of existing literature in the areas of management, psychology, philosophy and economics. The work of Mayer and his colleagues helped pave the way for an explosion of research on trust that expanded the literature beyond “the relative scarcity of research in the mainstream management literature focusing directly on trust” (Schoorman, Mayer & Davis, 2007), and will provide the theoretical foundation upon which we will build this discussion of trust.

Trust as a relationship

While many clarifications and extensions of the model populate the literature, researchers that have followed and tested this model have widely accepted the broad premise that trust is based in relationship (Schoorman et al, 2007). This view led to a definition of 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 important to the trustor, irrespective of the ability to monitor or control that other party” (Mayer et al, 1995), a definition they later stated more simply as “a willingness to be vulnerable to another party” (Schoorman et al, 2007). This simple definition represents the challenge that Yunus and Begun overcame at the outset of the micro-credit experiment and illustrates the daily challenge faced by executives and their subordinates in boardrooms and offices across the globe.

The cost of mistrust

Harvard Business Review columnist Don Moyer provides the following analysis in the April 2009 issue, which was dedicated to the question of trust. In it he writes.

“Certainly, the current economic crisis is evidence of just how fragile trust is. Before the crisis, there was a surplus of people who trusted too easily. Then their investments disappeared, their counselors didn’t know what to do, and their respected advisers turned out to be crooks. The chain of trust broke. Now there is a trust deficit. The whole economy is holding its breath waiting for confidence to return.” (Moyer, 2009)

Conversely, research shows that operating with a trust surplus bears tangible and measurable fruit. For instance, a 2002 survey of more than 6500 employees at 76 U.S. and Canadian hotels showed that “hotels where employees strongly believed that their managers followed through on their promises and demonstrated the values they preached were substantially more profitable that those whose managers scored average or lower” (Simons, 2002). How much more profitable? The study showed that “a one-eighth point improvement in a hotel’s score on the five point scale could be expected to increase the hotel’s profitability by 2.5 percent of revenues,” or $250,000 per year per hotel. In another instance, research showed that trust in leadership in a restaurant setting “significantly predicted subsequent sales, profits, and employee turnover” (Davis, Schoorman, Mayer & Tan, 2000, p. 347) in the observed organizations.

If a lack of trust can stall a world economy and a small act of trust can be the catalyst for the creation of a worldwide bank that is helping to eradicate extreme poverty, leaders who ignore trust as an organizational factor run the risk of incurring a significant cost for the oversight. It is clear that an organization must find out where it falls on a continuum anchored by the mistrust that pervades the current economic environment at one end and the full, unqualified trust that sparked the creation of the Grameen Bank at the other end. This is especially true in light of the aforementioned research indicating that even small moves in the direction of increased trust in an organization can lead to significant improvements in an organization’s bottom line.

Measuring trust

If trust is defined as a “willingness to be vulnerable,” the difficulty of measuring such an abstract concept might appear prohibitive, especially when many companies are not in a position, due to budget and human resources constraints, to conduct formalized organization-wide research to determine where their organization might fall on this trust continuum. And yet the questions linger: Is yours a high-trust organization? A low-trust organization? Somewhere in the middle? Would your answers to these questions be the same as those of your employees? Your middle managers? How might one take the temperature of the organization to determine if research or action on this is warranted?

In what may be the most promising measure to date, Schoorman and Ballinger developed seven “trust items” that were tested with notable validity (Schoorman et al, 2007 source). For leaders interested in testing the trust waters in their organization, these seven questions provide a useful framework or litmus test to determine whether there is a need for further examination of the extent to which trust is present or absent in an organization. On a scale of one to five, with one being “strongly agree” and five being “strongly disagree,” estimate or even find out how subordinates in your organization would answer the following questions about middle and executive management in your firm.

  1. My supervisor keeps my interests in mind when making decisions?
  2. I would be willing to let my supervisor have complete control over my future in this company.
  3. If my supervisor asked why a problem occurred, I would speak freely even if I were partly to blame.
  4. I feel comfortable being creative because my supervisor understands that sometimes creative solutions do not work.
  5. It is important for me to have a good way to keep an eye on my supervisor
  6. Increasing my vulnerability to criticism by my supervisor would be a mistake.
  7. If I had my way, I wouldn’t let my supervisor have any influence over decisions that are important to me.

If this rhetorical examination of these “trust tests” leads you to pause, your organization may be in need of a more thorough examination of trust among the ranks. It is clear from the research and the experience of Sufiya Begum and Grameen Bank that taking that first step can lead to surprising and wonderful benefits.


Galford, R., & Drapeau, A. 2003. The enemies of trust. Harvard Business Review, 81(2), 88-95. Retrieved June 2, 2009, from Business Source Complete database.

Google Scholar (2009). Retrieved June 7, 2009, from Google Scholar Website.

Grameen Bank (2009). Retrieved June 2, 2009, from Grameen Bank Website

Mayer, R. C., Davis, J. H., & Schoorman, F.D. 1995 An integrative model of organizational trust. Academy of Management Review, 20: 709-734.

Moyer, D. 2009. Broken trust. Harvard Business Review, 87: 120.

Schoorman, F. D., Mayer, R. C., & Davis, J. H. 2007. An integrative model of organizational trust: past, present and future. Academy of Management Review, 32: 344-354.

Simons, T. 2002. The high cost of lost trust. Harvard Business Review, 80(9), 18-19. Retrieved June 2, 2009, from Business Source Complete database.

World Economic Forum. (2005). Retrieved June 5, 2009, from World Economic Forum: Official Website

Yunus, M. 2007. Banker to the Poor: Micro-lending and the battle against world poverty. New York: PublicAffairs