Lost trust and dissolved guanxi circles: A case study of a collective resignation event at Tianyuan Tea Company

Abstract

The mainstream explanation for employee turnover is either cause–effect factor analysis or interaction analysis. The former is effective in identifying causal relations between factors and the latter in revealing the dynamics of interpersonal relationships. Combining the benefits of both methods, this study applies guanxi circle theory to studying employee turnover. It places various turnover factors under the framework of interpersonal interactions and uses the social network structure as an analytic point from which to examine the dynamic evolution of trust within the organization. The study finds that in the case of the Tianyuan Tea Company, the collective resignation was largely caused by the collapse of trust within the guanxi circles that informally operated within the company social network centered on the management authority who had the power of hiring, firing, and promotion. Five conclusions are proposed: (a) the formal hierarchical structure of power can either coincide with or be separate from the informal guanxi circles – when the two are in accordance, resignations rarely happen, while discordance between the two is often an indicator of potential resignations; (b) organizational changes are most likely to cause guanxi circles outsiders to resign; (c) members of the inner guanxi circle in the organization do not resign because of discordant relationships with lower level managers, but rather, they get relocated with promotion; (d) the collapse of ‘bridges’ between guanxi circles can cause collective resignations; (e) those who survive organizational shakeups are members of the inner guanxi circle in the organization and the ‘bridges’ of guanxi circles. This study contributes to the research on employee turnover by introducing a new perspective of guanxi circle theory as well as drawing attention to the important function of the ‘bridge’ in coordinating between circles, and by offering theoretical understanding and practical guidance for social governance.