Employee Participation Schemes - Problems of Identifying Impact on Company Performance - Literature review Example

Employee participation schemes: problems of identifying impact on company performance Introduction There has been considerable unprecedented changes in world economies brought about by various factors, most notably the increased adoption of information technology, deregulation of the markets by most governments, shifts in industrial operations, and global competition. These changes have necessitated that companies correspondingly change the composition and activities of the workforce as part of response strategies. Some of the notable shifts in the workforce dynamics include decline in union membership, rise in the number of qualified employees, rise in the proportion of women in paid labour market, and a greater level of diversified workforce (Wolf, 2002). In light of these changes and shifts in the workforce composition and activities, the human resource management function of most organizations is increasingly emphasizing on employee commitment as opposed to control. Most importantly, these changing economic conditions have shifted the concern of employers, policymakers and employees alike to the need to safeguard and promote their interests. Companies are, therefore, forced to seek a balance between the new needs brought about by a competitive economy with the overall wellbeing and competence of their employees. Companies are also seeking productive efficiencies and recognizing that the way to achieving this is through constant engagement of the workforce. Another realization becoming known to organizations is that there is need to engage employees in decision-making as this has a direct impact on the productivity of employees and overall company performance. The employees are at the same increasingly seeking subtle objectives of job satisfaction and employments that enhance their career lives. Therefore, employee participation serves as an umbrella under which a variety of activities can be developed to enhance employee participation so that company performance can be improved. Some of the employee participation and employee involvement schemes that can be developed by companies include a wide range of practices such as employee share schemes, cooperatives, collective bargaining among others (Doyle and Nathan, 2001). Enhancing employee participation and wide-ranging industrial democracy gives greater independence to employees in making decisions on policies that govern them. However, due to the varying interpretations that are given to employee participation, outcomes associated with employee participation and involvement at the workplace is varied, which creates challenges in identifying the impacts of such schemes (Summers and Hyman, 2005). This paper analyses the challenges associated with assessing the impact of employee participation and involvement schemes on the overall performance of the organization. However, in order to give a competent analysis, it is important to first discuss employee participation and involvement schemes that are aimed at having a positive impact on company performance. This discussion is crucial in providing a basis of analysing the problems that may arise when identifying the impact of initiatives taken to enhance employee participation on company performance. Employee Participation and Involvement The schemes that adopted by the management function of companies to enhance employee participation and involvement operate under three core elements of influence, interaction and information sharing. According to Marchington et al (1992), definitions of employee participation are varied but can be broadly divided into three primary categories including those that define to the concept as employees participating or having a voice or sharing in decision making while not attempting to quantify their impact on the process. The other category of definition of participation the author states includes those that refer to the process as concerning the extent of influence employees hold on decisions made by the management function. The last category refers to those that hold that employee participation and control over decision-making are closely linked. Employee participation schemes can be divided into two main groups including those that are work related and financial contribution. Financial participation schemes take two main important aspects with the first approach involving distribution of shares to employees so that the employees are form part of the ownership of the company (Summers and Hyman, 2005). The premise of this approach is the assumption that allowing employees to become part owners of the company encourages constructive response in attitude and behaviour. These changes in attitudinal and behavioural responses also encourage positive impacts on the company performance. The second dimensions of financial participation schemes are concerned with flexibility of pay, where some aspect of remuneration is directly tied to profitability or other relevant performance measures (Summers and Hyman, 2005). Work-related participation schemes on the other hand can take different forms including individualistic or collective, and direct or indirect participation schemes. Summers and Hyman (2005) mention that the above schemes can be operationally divided into two primary categories. The first category encompasses the traditional collective participation schemes that aim for higher equitability in distribution of power. The second category the authors identify consists of the ‘new’ forms of participation schemes that take a more direct and individual approach aimed at securing employee commitment to company objectives. In the category of traditional collective employee participation schemes, the most definite example is the cooperatives that incorporate both ownership and control elements in employee participation (Pencavel, 2001). However, the number of employees working in cooperatives is relatively minimal whereas a majority of the companies that might need to monitor company performance through the impacts of employee participation schemes are the more conventionally organized firms. A clear-cut example of the ‘new’ forms of employee participation and involvement schemes are mostly direct and individualized such as briefings. A majority of these schemes are generally termed as an employee involvement and can be incorporated into human resource management strategies (Summers and Hyman, 2005). These types of participation schemes are increasingly becoming important for management functions of companies seeking to achieve voluntary commitment from employees to company objectives, which consequently translates to improved company performance. Employee participation and Improved company performance Employee participation and involvement schemes are adopted by organizations with the aim of improving overall company performance with a long-term goal of improved productivity and profitability. The premise of this aim is on the assumption that these participation schemes induce employees to work harder due to greater organizational commitment. The increased level of commitment to company objectives in turn encourages greater flexibility of the workers in their operations and quality of output. Furthermore, the enhanced organizational commitment presents the company with an opportunity to exploit employee knowledge and experience. Greater levels of employee participation ensures that the employees constantly remain aware of the most efficient methods of organizing work, which results in improved productivity and overall company performance (Cooke, 1994). The managerial function of the company also benefits from the addition of useful information regarding work-related tasks, and the ease of accessing employee talents in decision-making (Bryson and Millward, 1997). Financial participation schemes stemming from the management of companies may have positive impacts on the performance of the company without posing any significant threats to the management. In sum, the overall impact of these changes brought about by employee participation and involvement is improved employee productivity and flexibility, and as a result in overall organizational performance. Despite the several positive impacts associated with employee participation and involvement schemes on company performance, there is a considerable body of literature suggesting that there is no relation, or a negative relation between participation and organizational performance (Ben-Ner and Jones, 1995). The reason given by most proponents of this line of thought is the generalization of the impacts of employee participation schemes. those who hold this line of thought claim that a participation scheme may work in one industry might fail, or worse have significant negative impacts on another industry. These contradictory evidences therefore bring forth the need to interrogate the reasons leading to a type of participation adopted affecting company performance differently. The existence of these contradicting lines of thought is not surprising though given that a lot of emphasis is not put on examining the mechanisms by which employee participation and involvement impacts on company performance. Another possible reason for this variance in opinion is the assumptions made about causality, and how to link improved involvement to employee attitudinal and behavioural change, and to overall company performance. The process of employee participation and involvement schemes are often shrouded in uncertain assumptions concerning the nature of the workplace and the underlying impacts of involvement schemes. The assumption that improved employee participation and involvement leads to greater employee commitment to the company objectives is of particular concern. Proving this assumption fragile casts uncertainty on the assumed positive relation between employee participation and company performance. The assumptions therefore present considerable problems to efforts to identify the impact of employee participation and involvement schemes on overall organizational performance. Different studies have also shown that there exist uncertainties in assessing participation outcomes. The bulk of the problems involved in identification of impacts of participation schemes, however, arise from the methodological assumptions made in linking employee participation to performance. Some of the problems involving identification of impacts of participation on company performance arise from the fact that studies conducted on the subject use a mix of qualitative and quantitative methods. The different types of methods used present varied pictures of participation and the impacts within business ventures, which in turn make comparisons tricky at best. While studies employing quantitative methods concentrate on the existence of employee participation schemes, qualitative studies on the other hand not only focus on the existence but also indicate the degree and scope of use of employee participation schemes. Moreover, the studies relying on quantitative methods might exaggerate or play down the satisfaction levels, as this is usually determined relative to what is supposed to be feasible (Ramsay et al., 1998). Clearly, the feasibility test is subject to different perceptions and varies from one employee to another. The subjectivity of a large number of measures of participation renders comparison between organizations problematic, as this also means that feasibility between enterprises will definitely differ according to their internal structures and cultures. Moreover, the subjectivity in judging the impacts of participation schemes on company performance also creates problems in identifying these impacts due to occurrence of errors. It is also important to note at this point that the varying definitions given to the constitution of participation may also present problems in identifying the effects of participation and involvement schemes (Kochan and Osterman, 1994). Another noteworthy problem associated with identifying impacts of employee participation on performance is the obscured causality of the reasons for developing an employee participation scheme (Ben-Ner and jones, 1995). The authors give the example where the reasons for establishing an employee participation scheme and in consequence the direction of causation can be wrongly assumed. This has the potential of having negative impacts on the overall performance of the company, which if happens, creates many challenges in identifying the impacts of specific employee participation schemes established by an enterprise. Analysis of the outcomes of employee participation on performance generally tests for just a single measure of participation while studies have shown that higher levels of company performance is brought about by the collective effects of different forms of participation (Ramsay et al., 1998). The omission of some measures of participation and failure to appreciate how combination of organizational strategies interrelates with participation schemes makes conclusion on the relation between employee participation and company performance susceptible to inaccuracy. A final problem that creates challenges to identification of the impacts of participation schemes on company performance is the generalization of participation schemes across enterprises and industries. Given the varying industry-level and company-level dynamics such as workforce diversity, different organizational structures and cultures, and the size and objectives of companies, it is highly unlikely that a participation scheme established in one organization will elicit the same results on another organization. Therefore, success in one organization may not necessarily translate to success in a different one. This creates a challenge in identifying the true impacts of specific employee participation schemes established on company performance. Conclusion Companies are increasingly forced to adopt and incorporate employee participation and involvement schemes in their human resource management due to changed economic conditions. Employee participation and involvement at the workforce may take many forms, the most notable schemes usually at play being cooperatives, teamwork initiatives, employee share schemes, among others. The growing need for greater worker participation is founded on the assumption that improved employee participation would translate to corresponding improvement in the performance of companies. Indeed, there is documented evidence that improved employee participation and involvement lead to greater employment commitment to company objectives. Moreover, when the workforce is involved in decision making especially on matters relating to their relations, there are likely to have a change in attitude and behavior, which in turn leads to improved productivity. Employee participation and involvement schemes are also intended to induce better relations with the management values, which also leads to improvement in employment relations within the organization. These outcomes associated with employee participation and involvement schemes are intended to improve the productivity of workers, which consequently improves the overall performance, and profitability of the company. However, there are various problems involving identification of the impacts of these schemes on organizational performance. Some of the problems emanate from the assumptions made by the studies that assess the effect of employee participation on performance. Firstly, the methods used by the studies are not comparable as they use different methods, making comparison tricky. Problems associated with obscured causality, generalization and incomparability of participation schemes render some of the greatest problems to identifying the impact of employee participation and involvement schemes on company performance. References Ben-Ner, A. and Jones, D.C. 1995. ‘Employee participation, ownership and productivity: a theoretical framework’, Industrial Relations, Vol. 34, No. 4, pp. 532–54 Bryson, A. and Millward, N. 1997. Employee Involvement in Small Firms. London: Policy Studies Institute Cooke, W. 1994. ‘Employee participation programmes, group based incentives and company performance: a union–non union comparison’, Industrial and Labour Relations Review, Vol. 47, No. 4, pp. 594–609 Doyle, J. and Nathan, M. 2001. Wherever Next? Work in a Mobile World. London: Work `Foundation Kochan, T. and Osterman, P. 1994. The Mutual Gains Enterprise. Cambridge, MA: Harvard Business School Press Marchington, M., Ggodman, J., Wilkinson, A. & Ackers, P. 1992. New developments in Employee Involvement. Employment Department research series No. 2. Manchester: Manchester School of Management. Pencavel, J. 2001. Worker Participation. New York: Russell Sage Foundation Ramsay, H., Parry, S., Paton, A. and Hyman, J. 1998. ‘The big sell: employee participation and gender in retail’, paper for 14th World Congress of Sociology, 26 July–1 August Summers, J. & Hyman J. 2005. Employee participation and company performance: A review of the literature. Joseph Rowntree Foundation Wolf, A. 2002. Does Education Matter? London: Penguin Read More