A Case Study Of Y Company Based On Mutual Trust Mechanism Of Professional Managers And Businessmen

Chinese small and medium-sized private enterprises have been booming in the period of Chinese economic reform. A large number of professional managers joined in, undertaking or assisting business owners to maintain and increase the value of assets during the development of these private enterprises. On the one hand, the professional managers are playing an important role. On the other hand, there are also a lot of conflicts between both sides, which lead to distrust, diverge even result in legal action.Company Y is a private medium-sized chemical enterprise which grew up in the Chinese economic reform. Now is the crucial time for them. Mutual distrust that is seen as a main cause to the frequent conflicts between company’s owner Z and professional manager B has put a stop to the company’s development. Of course, there are some other factors such as social-economic environment, legal system, credit system, backgrounds, values, personalities of both sides, etc., could lead to this crisis of confidence.First of all, the foundation of this paper is our research of trust. We analyzed the root of trust-lacking between private business owners and professional managers on the basis of researches of predecessors. Principal-agent theory, game theory and trust theory are our theory basis. Secondly, based on the implementation of limited rational "complicated man" and insufficient information, the paper built a dynamic trust game model to explore the impact of variation of different factors on the trust between private business owners and professional managers. Finally, the suggestion for setting up trust mechanism was given out.The established trust game model was used to analyze real impact and sensitivity of various factors on trust during the whole process of selection, cooperation, resign and faithless among owner Z of private company Y and professional manager A and professional manager. Then some proposes and measures of building mechanism of mutual trusts are given out from four different points---society, enterprises, business owners and professional managers in three sections. Since company Y has certain representativeness in our private enterprises, it will provide a direction to those small and medium-sized private enterprises which have similar situations.This paper showed that both sides had intentions to cooperate but always did not fully trust with each other in the whole process. In general, maximal gains of both sides will be achieved if the less advantage side (usually professional managers) shows limited trust to business owner at first, then the same limited trust will be returned by business owner. However, the trust game between professional managers B and owner Z of company Y has been pushed to its critical point. In view of this fact, B should learn from professional manager A if continued cooperation is chosen. He not only needs to show loyal and active trust to Z, but also needs to agree Z’s style and culture, otherwise B have to choose a right time to leave.The most important things of building the trust mechanism between Z and B in Y Company is:start the process of trust improving, gradually perfect the enterprise management system, give an impact on business owner Z and finally establish the trust mechanism.For those small and medium-sized private enterprises, cooperative efforts of the whole society, enterprises, business owners and professional managers in building the trust mechanism between professional managers and business owners are badly needed. With a good social atmosphere and a perfect legal system, in such a social background, mutual trusts, mutual benefits and being following contracts between professional managers and business owners become more and more essential for reducing transaction costs, increasing both sides’ total benefits, and more rapid progress of our national economy.