Problems involved in identifying the impact of employee participation schemes on the performance of a company
In the recent past there has been a growth on the studies of the need to introduce participation schemes in organizations so as to enhance performance. These studies have revealed that the willingness to form larger participation schemes is stronger in bigger organizations that have larger establishments. In addition the involvement schemes are common in recently started workplaces and in areas using advanced technology (Sengupta, 2008). Studies have also shown an increase in the development of new types of work organization. Organizations are introducing these systems in order to gain competitive advantage in the constantly changing product markets. There is need for organizations to shift from work organizations that focus on mass production to those that are based on high value addition. This is in line to match with new markets whose attention is more on product quality and attention to changing demands (Sengupta, 2008). This paper will analyze the problems involved in identifying the impact of employee participation schemes on the performance of a company.
Some of the problems that scholars face when analyzing the impacts of workers involvement schemes to the overall performance of firms are attributed to other overlying factors. Part of this problem can be attributed to difficulties in isolating effects of involvement schemes with the broad range of other mediating factors that bring about organizational performance (Pullen, 2013). For example, improvements in the performance of a company that has adopted these schemes could also be attributed to change in behaviour and attitudes. Consequently, fear and insecurity could also play a great role ion change of behaviour in organizations. Several ambiguities surround the whole idea and scholars are finding it hard to explain and validate the effects of employee participation in firms (Morgan, 2011).
The big question is whether participation works. Most studies agree that employee involvement schemes enhance companies’ performance. However, not all scholars agree with the universal positive effects of employee participation. Some argue that the schemes may have negative effects on organizational performance (Sengupta, 2008). There is also a lack of consistency in the results achieved through involvement schemes and the basic argument is that these projects are subject to external political, economic, and social environment effects (Sengupta, 2008).
A study by Jackson and Morgan (2011), shows that effects of worker’s participation on performance varies between industrial sectors. According to the findings participation had an overall positive result but not in the footwear and slightly for the clothing industries. Jackson and Morgan (2011), argues that Performance was also dependent on the type of participation. For example, effects of cooperation were more in converted companies than in those founded as cooperatives. However, there have been diverse outcomes for the different forms of involvement. Labour managed companies demonstrated little rise in productivity and no considerable effect in capitalist firms. This implies that the increase in worker influence and participation is a key contributing factor in participation schemes.
According to Jackson and Morgan (2011), government policy encourages employee participation seen as a way of enhancing company performance especially where it involves changing the attitude of the employee and improving of working conditions. Studies have shown that participation could significantly enhance a companies’ financial performance, some scholars are however, of a different view. Jackson and Morgan (2011), notes that a different school of thought argue that participation and attitude change are determined to a great extent, by level of influence given to employees under the participation measures. Low levels of perceived influence are not likely to produce positive results. This brings about a challenge since middle level management tends to resist participation initiates they deem reduce their authority, becoming an obstacle to the success of involvement programmes.
Cooke (1994), postulates that low levels of involvement with little employee autonomy are also a source of poor results in participatory measures. By introducing participation, the expectations of the workers are raised and if there are no substantial improvements in employee influence then they are likely to express dissatisfaction and resentment. Cooke (1994), argues that when participation is from up down, workers will feel they are not being listened to whereas when it from down up they will feel that the management is using their ideas without returns. On the other hand, high levels of participation present some problems as well. Employees may not make hard decisions and will opt for outcomes that maximize income and not profit. Consequently employees may not be able to oversee and discipline their co-workers. In this case decision making becomes a long process and reduces competitiveness (Cooke, 1994).
According to Cooke (1994), employees do not all react the same to participation initiatives, some will respond better to work related while others prefer the financial initiatives. Therefore, an initiative that would work best would be one consisting of a combination of the work related and the financial or as direct and representative participation. Cooke (1994), points out that a combination of the initiatives would increase high trust relations in the work place and also allow workers with different motivations to reap the fruits of their participation. Studies show that applying representative participation in isolation would not have effects on attitude change.
Jackson and Morgan (2011), postulates that past surveys have failed to explain substantially the effects of participation in Small and Medium Enterprises (SMEs). Participation is less in small enterprises as compared to large firms. In addition, most studies that analysis the effects of participation do not compare the companies’ performance before and after they introduce the mechanisms. Rather, they compare firms that have employed and those have not employed the mechanisms. For instance, findings have shown that financial participation has a zero or positive effects on overall productivity. However, Jackson and Morgan (2011), notes that there are concerns that firms with financial participation have higher productivity than those without since they are better managed. Likewise, most firms that have been studied are those that adopted the schemes voluntarily. In such cases no negative effects are likely to be observed because firms that encountered losses in adopting the schemes have already abandoned them.
Studies in France have revealed that in cases where the management and employees agreed on the existence of a scheme were more likely to have a mechanism that enhanced communication between the two entities. There are complementarities between financial and control participation (Jackson and Morgan, 2011). This implies that in situations where workers also have some influence in decision making effects of financial participatory on productivity are enhanced. Information helps the workers to understand the incentives and to trust performance figures while the voice acts to guard the risks related to financial participation (Jackson and Morgan, 2011).
According to Bova (2013), research in Japan shows that firms here regard financial participation as part of an involvement package. This participatory environment forms the basis of employee stock ownership plans that are stronger than those in the US and Europe. Conversely, recent findings on transition countries have also shown little evidence relating employee share ownership to productivity. In these countries share ownership can be associated with little employee control. Among the Western European countries, UK, France, Germany, and Italy, diversities observed in levels of productivity effects of profit sharing have been associated with differences in participatory practices.
Bova (2013), argues that the choice of technology and organizational change has also been associated with the way participation effects organizational productivity and performance. Share schemes have fewer returns when combined with work and small scale production. The effects of financial participation are greater on productivity in labour-managed firms as compared to participatory conventional firms.
According to Pérotin and Robinson (2004), some organizations make assumptions that involvement measures affect all their employees similarly, regardless of their age, race, gender, and contractual status. This could bring about social disadvantage to special groups such as the disabled and the older workers who have restricted voice at work. Pérotin and Robinson (2004), study which examined the consequences of adopting family-friendly employment policies in businesses found benefits in doing so.
When it comes to work-life balance the employees have no voice in most firms. They tend to have weak bargaining voice especially in larger organizations. In smaller organizations, individuals are in some cases able to negotiate for flexible working arrangements. This school of thought, therefore, argue that a combination of employee participation and such welfare measures as family friendly policies and equal opportunities would work better in enhancing the performance of the organization (Pérotin and Robinson, 2004). In addition, policy support is supposed to be directed towards union recognition within a framework of human rights. This will to a great extent influence employee’s attitude towards organizational goals (Pérotin and Robinson, 2004).
Pérotin and Robinson (2004), argues that Participatory measures as such may not bring about the improvements in performance. For instance, measures such as high involvement work and team working may have fewer positive outcomes to the employee and social well-being. Positive performance changes may occur as a result of attitude change. Attitude change, on the other hand, could be brought about by increased participation. Lowitzsch (2009), notes that behaviour and performance changes could be a result of insecurity, fear, and intensified work environment as opposed to attitude changes. This is a basis for contradictory results in evaluating the impacts of participatory measures. According to Pérotin and Robinson (2004), this situation can be attributed to the fact that participatory schemes in some instances started as part of a restructuring package. Employees faced with insecure working environments may be compelled to comply with the expense of the attitude change. The resultant behaviour change in such a case is, therefore, not of the order expected.
Transferability of participation schemes between large and small firms is another issue surrounded by uncertainty. It is not very clear if participation schemes in use in larger firms will bring about positive results if they were to be used in smaller companies (Lowitzsch, 2009). Again, it is not proven if participation measures can be transferred from one industrial sector to another or from one national condition to another. For instance, the success of Japanese involvement techniques such as the profit-sharing culture which are based on mutual employee and employer obligations (Lowitzsch, 2009).
Pullen (2013), notes that Neo-classical economic theory indicates a negative relationship between economic performance and trade unions. However, critics of this idea are of the view that unions are intermediaries by providing channels for employee grievances as well as collective participation to positive organizational performance. Empirical evidence indicates varied outcomes on the effects of unions on performance of firms. However, most companies that have adopted partnership based work frameworks have reported enhanced business performance.
Team working is seen as having a positive impact on workers and is crucial in conflict resolutions and in changing employee behaviour especially in improved relations. In addition it helps in improving communications and in building trust. The assumption is that the employees will be motivated to work harder and better once their values are in line with those of the organizational and management objectives resulting to enhanced overall organizational performance (Pullen, 2013).
In general it is hard to conclude that any stand-alone employee participation scheme have any substantial effects either positive or negative on a companies’ performance. Part of this problem can be attributed to difficulties in isolating effects of involvement schemes with the broad range of other mediating factors (Pullen, 2013). It is important to note that the social and economic contexts in which the schemes are introduced determine to a great extent the effects they have on organizational performance. In addition changes in legislation in relation to participation and union recognition also are key contributing factors. However, studies have shown that a combination of work related and financial schemes and individualized and collective participation schemes are likely to create positive impacts (Pullen, 2013).
Changes in economies in recent decades have compelled employers to develop more flexible and efficient means of production. Privatization and Deregulation have also, to a great extent, changed the UK’s industrial climate, with the current decline in influence and membership of trade unions. Mirroring this has been the basis for growth in ‘new’ types of work-related involvement by employees. This is been done under the banner of associated programmes, human resource management, and strategies for partnership (Lowitzsch, 2009).
In conclusion, combinations of participation schemes and welfare measures like family -friendly policies would be instrumental in enhancing both company’s performance as well as the quality of working life. In addition, Policy support should be focused on the recognition of unions and mandates within an effective human rights framework. This would in turn influence employer behaviour toward the employees and employees’ behaviour positively towards the organizational goals. More studies are, however, required on this field so as to demystify the many underlying factors that are coined to the issue of participation (Pullen, 2013).
Findings from studies recommend that policy-makers should be concerned about the policy implications for involvement in terms of excluded groups. Lowitzsch (2009), notes that
this is especially the case since small firms employ a considerably high population of women and ethnic minorities. Therefore, ignorance of such discrepancies within the workforce could result to participation schemes that demoralize equality of opportunity in the workplace.
Bibliography
Bova, F 2013, ‘Thinking’, Financial Management (14719185), 42(4), 14.
Cooke, WN 1994, ‘Employee participation programs, group-based incentives, and company performance: A..’, Industrial & Labor Relations Review, 47(4 ), 594.
Jackson, C, & Morgan, G 2011, ‘Employee participation in UK Sharesave schemes: a firm-level analysis’, International Journal Of Human Resource Management, 22(8), 1788-1802.
Kalmi, P, Pendleton, A, & Poutsma, E 2005, ‘Financial participation and performance in Europe’, Human Resource Management Journal, 15(4), 54-67.
Lowitzsch, J 2009, Financial Participation Of Employees In The EU-27, Basingstoke: Palgrave Macmillan.
Pérotin, V, & Robinson, A 2004, Employee Participation, Firm Performance And Survival, Amsterdam: Elsevier JAI.
Pullen, J 2013, ‘The bottom line’, Entrepreneur, 41(6), 64.
Sengupta, S 2008, ‘The impact of employee-share-ownership schemes on performance in unionised and non-unionised workplaces’, Industrial Relations Journal, 39(3), 170-190.
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