How Monitoring Influences Trust: A Tale of Two Faces
Posted: 24 Jul 2012
Date Written: July 24, 2012
Organizations operate more effectively when managers trust their employees. In many cases, however, managers and their employees have divergent interests. One common managerial approach to address the problem of misaligned incentives involves monitoring employee behavior. In this paper, we investigate how monitoring changes the behavior of both those who are monitored and those who monitor others. We paired participants in a repeated trust game with a stochastic ending in which we manipulated both the frequency of monitoring and whether or not monitoring was anticipated. When trustees who were monitored could anticipate monitoring, they engaged in strategic behavior; trustees chose self-interested actions when they anticipated that they would not be monitored, but chose altruistic actions when they anticipated that they would be monitored. Trustors, however, failed to appreciate how strategically their counterparts would act. Though trustors were more trusting when they could monitor their counterpart than when they could not, they were still much too trusting when their inability to monitor their counterpart was anticipated. We discuss managerial implications of these results for designing and using monitoring systems.
Keywords: trust, monitoring
JEL Classification: C7, C9
Suggested Citation: Suggested Citation