HRM, Trust in Employer and Organizational Performance

Abstract

This paper draws upon social exchange theory to examine the explanatory power of employees' trust in their employer as the mediating variable between an organization's human resources (HR) management interventions and performance outcomes at individual, work unit and organizational levels. We utilize two large‐scale survey studies in two different organizations, from the forestry and information and communications technology (ICT) industries in Finland: a forest company (411 respondents) and an ICT company (304 respondents) were analysed with confirmatory factor analysis and structural equation modelling. The results for the two studies validated all our hypotheses including the mediating role of trust in employer. The results do suggest that if HR management can be designed specifically to enhance employees' trust in their organization, its effect on performance is positive. In a practical point of view, our findings provide new insights into the nature of organizational trust, and particularly the impersonal dimension for practitioners, especially those in HR. The evidence from two studies is that HR policies can enhance employees' trust towards their employer and, through this, the performance of the organization.