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Employee Participation and Performance. A Cross- National Study

Employee Participation and Performance. A Cross- National Study. Erik Poutsma e.poutsma@fm.ru.nl Institute for Management Research, Radboud University Nijmegen, NL Prepared for the Seminar at the Centre for Work, Organization and Wellbeing, Griffith University – August 13, 2009. Topics.

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Employee Participation and Performance. A Cross- National Study

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  1. Employee Participation and Performance. A Cross- National Study Erik Poutsma e.poutsma@fm.ru.nl Institute for Management Research, Radboud University Nijmegen, NL Prepared for the Seminar at the Centre for Work, Organization and Wellbeing, Griffith University – August 13, 2009

  2. Topics • Main objective is to disentangle employee voice, its multiple channels and its influence on performance • Using the concept of local flexicurity • Specific focus on the role of financial Participation (FP) • Embeddedness and Relationship between different forms of participation in different economies • Results of research program WOW, Griffith, August 13 2009

  3. What do we learn from this? • The different configurations of voice mechanisms in different economies differently related to performance? No. • Unique universal contribution of DP and PS to performance. • Unions not (wanted to be) involved. • Management targets for flexibility wins over security. • It is time to be involved to reach flexicurity! WOW, Griffith, August 13 2009

  4. Financial participation • Basically two forms; return and control rights • Profit sharing schemes (PS) • Past performance • Incentive – productivity – collective performance • Share related schemes (incl. Stocks Options) (ESO) • Future performance • Ownership – commitment – identification – alignment (voice??) WOW, Griffith, August 13 2009

  5. The debates (1) • Multiple channels of voice and the possibility of substituting or crowding out; Direct (DP) versus representative participation (RP); what role plays financial participation (FP)? • FP as part of HPWS bundles? including diverse forms of participation (DP and RP) • Social embeddedness of DP,RP and FP within different varieties of capitalism and varieties of industrial relations WOW, Griffith, August 13 2009

  6. Debates (2) RP • Multiple channels of representative participation (RP) • Different bargaining levels; Trade union; discretion developments • Company level representation; union – non union developments • Works councils – Joint consultation committees; (in)dependence developments WOW, Griffith, August 13 2009

  7. Debates (3) RP – DP • Representative participation (RP) and direct participation (DP) • Efficiency arguments for DP; ineffective RP • Recent more balanced approach adopting the language of ‘partnership’ Guest & Peccei, 1998; Ackers, Wilkinson et al., 2006 • Added value of both forms of participation; acceptance and quality of decisions; improve employee management relations Gollan & Markey, 2001; Marsden, 2007 • ‘local flexicurity’: collective regulation (RP) safeguarding flexibility (DP) and security Haagen & Trystadt, 2008 WOW, Griffith, August 13 2009

  8. Local flexicurity • Freedom = Flexibility ; Equity = Security • Multi-levelled model of employment relations in which various interests are mediated at various levels. • Collective agreements and participation at the workplace are complementary. • Direct participation = responsible individual autonomy: positive performance outcomes due to more flexibility. • However, negative outcomes due to a possibility of exploiting individual employees to unhealthy levels. • Individual flexibility in working conditions and labour terms appears rather costly to organise.

  9. Debate (4) FP and DP • Financial participation and DP preventing free rider problem Kruse, Freeman, Blasi, 2004; • Pay off for direct participation Levine & Tyson, 1990 • Return on investment in human and social capital made by employees Kochan & Blair, 2000 WOW, Griffith, August 13 2009

  10. RP and Financial participation • Bargaining level related to FP; more decentralised more possibility of flexibility in pay and wages • FP considered as tool to circumvent collective bargaining • Unions oppose FP; however mixed results (country dependent) Pendleton 1997; De Varo & Kurtulus, 2006 • Works councils positively related to FP Heywood & Jirjahn, 2006 (for Germany) • Possibility of insider coalition “management – RP” Gregory Jackson, 2004 WOW, Griffith, August 13 2009

  11. Unions, FP and DP • Negative relationship • Confuses identity of employees • Undermining employee representation • Unions in contradictory position of representing both capital and labour • Use of FP and DP for union avoidance • FP and DP used to decentralise bargaining Consequence: Unions ignore DP and FP Is that the right attitude? WOW, Griffith, August 13 2009

  12. Broadening the partnership agenda? • Complementarity of FP and DP on performance Bryson & Freeman, 2007 and forthcoming Dube & Freeman, forthcoming • Some research do not support the complementarity of FP and other Participation Robinson and Zhang, 2005 (UK data) Kalmi, Pendleton & Poutsma (2005) (6 countries data) • Suggest an independent role of FP in its impact on performance WOW, Griffith, August 13 2009

  13. Research 1 FP and Institutional Change in F, G, NL, UK & AUS • Erik Poutsma, Institute for Management Research, Radboud University Nijmegen, Netherlands • Ulke Veersma, The Business School, University of Greenwich, UK • Paul Ligthart, Institute for Management Research, Radboud University Nijmegen, Netherlands WOW, Griffith, August 13 2009

  14. Research 1 • Comparative research FP and Institutional Change in France, Germany, NL, UK and Australia • Qualitative and Quantitative • Interviews with main actors: governments, trade unions, employer federations • Cranet data analysis WOW, Griffith, August 13 2009

  15. Theoretical debate • Neo-institutional; path dependency and change • Convergence or persistent divergence • Issue of power in shaping institutions • Role of IR Actors: governments, trade unions, employers • Role of MNCs WOW, Griffith, August 13 2009

  16. Embeddedness • Policy and Statutory differences between countries may promote co-existence • UK and France as examples • Varieties of capitalism: weaker role of union voice in LME – room to implement FP ? • CME – stronger role employee voice – chance to regulate FP (especially PS) ? WOW, Griffith, August 13 2009

  17. Different targets; different institutional design; different positions of actors Individual allocation AU UK NL Corporate objectives G USA ESOP Income and wealth redistribution F Collective fund WOW, Griffith, August 13 2009

  18. Results • Governments differ in positions and attitudes • Employers go for the flexibility • Unions go for the security but are not involved in DP and FP development • FP develops apart from Agreements; seldom loosely coupled • Alignment argument for FP • No insider coalitions “Management – RP” in using FP; seldom take-over defense WOW, Griffith, August 13 2009

  19. Data and methods • CRANET data • Broad-based Financial Participation (ESO, PS) • Across the five countries; N = 3196 • 1999 and 2004 • Business units with > 100 employees WOW, Griffith, August 13 2009

  20. WOW, Griffith, August 13 2009

  21. Research 2 Broadening the partnership agenda? FP in different economies • Paul Ligthart & Erik PoutsmaInstitute for Management Research, Radboud University Nijmegen, NL • Chris Brewster, Henley Business School, University of Reading, UK WOW, Griffith, August 13 2009

  22. Research 2 • Main objective is to disentangle employee voice, its multiple channels and its influence on performance • Specific focus on the role of financial Participation (FP) • Embeddedness and Relationship between different forms of participation WOW, Griffith, August 13 2009

  23. Database & Methodology • Dataset: CRANET, wave 2004 • HRM-survey since 1989 using LSE (+200 employees) • Using private companies (LSE), • 32 countries from 5 continents, • and 6 industries; N=3766 companies • using multi-level analysis; STATA, Gllamm (Rabe-Hesketh & Skrondal, 2004); model controlled for country (level 2) WOW, Griffith, August 13 2009

  24. Institutionalised Participation • Market Economies(LME <=> CME) • Representative Participation(JWC / recognition TU) • Collective Bargaining(national, corporate level) • Corporate Characteristics • Industry • Size • MNC • Stocks listing • Unionization degree • Direct Participation in company • Business Strategy briefings • Financial Performance briefings • Organisation of Work briefings • Financial Participation • Employee Share Options(narrowly, broadly based) • Profit Sharing Schemes(narrowly, broadly based) Model & Hypotheses WOW, Griffith, August 13 2009

  25. Results 1 • FP much more determined by country and type market economy as well as corporate characteristics than DP • CMEs promote PS while LMEs promote ESO WOW, Griffith, August 13 2009

  26. Results 2 Controlled for country, market economy and other corporate features: • Direct participation and representative participation are not substitutes • Financial participation is linked to DP • No link between (Institutional) voice and financial participation • Financial participation is a phenomenon on its own • However, partnership arrangements do not exclude financial participation WOW, Griffith, August 13 2009

  27. Research 3 Employee Participation and Performance: a cross-national study • ErikPoutsma, Institute for Management Research, Radboud University Nijmegen, Netherlands • Chris Brewster, Henley Business School, University of Reading, UK • Paul Ligthart, Institute for Management Research, Radboud University Nijmegen WOW, Griffith, August 13 2009

  28. Theoretical background • Financial participation and DP preventing free rider problem Kruse, Freeman, Blasi, 2004; • Pay off for direct participation Levine & Tyson, 1990 • Return on investment in human and social capital made by employees Kochan & Blair, 2000 WOW, Griffith, August 13 2009

  29. Theoretical background • Complementarity of FP and DP on performance Bryson & Freeman, 2007 and forthcoming Dube & Freeman, forthcoming • Some research do not support the complementarity of FP and other Participation Robinson and Zhang, 2005 (UK data) Kalmi, Pendleton & Poutsma (2005) (6 countries data) • Suggest an independent role of FP in its impact on performance WOW, Griffith, August 13 2009

  30. Database & Methodology • Dataset: CRANET, wave 2004 • Using private companies (LSE), • 32 countries from 5 continents, • and 6 industries; N=2986 companies • using multi-level analysis; STATA, Gllamm (Rabe-Hesketh & Skrondal, 2004); model controlled for country (level 2) WOW, Griffith, August 13 2009

  31. Data and Methods • Perceived performance relative to the average in the sector • 6 indicators: General performance • Operational performance: service, productivity, innovativeness • Financial performance: profitability, stock market, gross revenue WOW, Griffith, August 13 2009

  32. WOW, Griffith, August 13 2009

  33. WOW, Griffith, August 13 2009

  34. WOW, Griffith, August 13 2009

  35. Results • Country and type of economy makes no differences • DP related to operational performance • Profit sharing related to all performance measures; ESO: no relationships • RP slight negative relationships with performance; Level of bargaining: no effect • Unionization slightly negative related to gross revenue • Interaction effect DP *PS positive while generic effects remain WOW, Griffith, August 13 2009

  36. What do we learn from this? • The different configurations of voice mechanisms in different economies differently related to performance? No. • Unique universal contribution of DP and PS to performance. • Unions not (wanted to be) involved. • Management targets for flexibility wins over security. • It is time to be involved to reach flexicurity! WOW, Griffith, August 13 2009

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