Employee Ownership and Effect on Attitude - Essay Example

? Employee Ownership and Effect On Attitude This paper seeks to evaluate the effects of employee share ownership on the attitude of employees. The employee ownership initiative in the U.S. was developed in 1974 as part of a pension plan (Kruse, 2002). According to Keef (1998), employee ownership has been a subject of major concern for most firm owners. In this respect, the main point of interest has been the impending improved performance accrued to employee share ownership. This is through the underlying the enhanced commitment as well as motivation from workers, who will regard themselves as direct bearers of the firm’s stake. Majority believe that employees sharing ownership tend to be hard workers who subsequently pay more attention to the quality of the work that they deliver compared to their non-owner counterparts. Moreover, Keef (1998) further asserts that employ owners are also highly inclined to vote their shares for the interest of an organization. Klein (1987) also recognizes certain sociological effects of employee share ownership within an organization. He posits that allowing employees to some ownership of a company is a form of wealth distribution among workers and consequently enhance the wide and equitable distribution of the products of economic success. Consequently, this also serves to reduce possible management or labour-related conflicts. Some proponents of the employee ownership have also approached the issue from a political stance and have viewed the strategy as a symbol of economic democracy within an organization. Nevertheless, there have been a number of concerns that have been raised by the opponents of employee ownership. Most have argued that by allowing employees to own a stake in an organization, they are likely to be exposed to unwarranted risks. In addition, there will also be a likelihood of an increase of management and labour-related conflicts. Most studies that have been conducted to establish the relationship between employee ownership and performance have mainly focused on employee attitudes and behaviour, the performance of the firm as well as the stability and growth of employment of a firm. Kruse (2002) conducted a study that was aimed at establishing the magnitude of the employee ownership practice among U.S. companies. Employee ownership can take place in a number of ways. The process is usually multidimensional in its approach. When talking about employee ownership, there are four major aspects that normally come in mind. To begin with, the first dimension of employee ownership is the determination of the percentage of workers who will actively participate in ownership of the firm. Another aspect to be taken into account when making decision pertaining to employee ownership is the percentage of ownership to be held by employees within an organization. Similarly, prior to allowing employees to have the legal ownership of a company’s shares, the rights and privileges employees will have as result of owning a stake in the company will also be determined. The rights and privileges held by the employees are usually determined by the manner in which the employees own the company’s shares (Trewhitt, 2000). Employees can assume either direct or indirect ownership of a company. In indirect ownership of a company, the employees own the company’s stocks through a workers trust, whereas for direct ownership, employees can willingly purchase or sale a company’s stocks. Kruse (2002) affirms that nearly 7.7% percent of all workers in the private sector in the U.S. own shares in their companies either directly or indirectly, a figure that translates to nearly 20 million workers. According to Vuaghan (1995) employee ownership may have a positive effect on behaviour and attitude of employees on the condition that such employees regard the value of their ownership as a means for greater income and job security. On the contrary, it may pose very little or no effect on their attitude and behaviour or even have a negative influence on the same if the employees regard the company’s decision to offer them some of the company’s stock as an additional risk to their income. Similarly, allowing workers to own some company shares may lead to frustrations among workers especially if they had extremely high expectations that are not being fulfilled (French, 1987). Kruse (2002) conducted a study to establish whether there is a difference between the employee owners and non-owners behaviour and attitude from 31 companies. To develop a comprehensive analysis, Kruse (2002) studies the behaviour and attitude of the employees prior to and after the adoption and subsequent implementation or termination of the plan. He also looked into the behavior of employee owner groups to establish the relation between their attitudes and employee characteristics. Kaarsemaker, Pendleton and Poutsma (2009) presents a landmark study conducted by Klein in 1987 that revealed three main ways in which employee ownership can affect the attitude and behavior of the workers. They posit that the first way entails intrinsic satisfaction where the sense of ownership presented by such opportunities is sufficient enough to trigger some behavioral and attitudinal change within an individual. Moreover, ownership can lead to extrinsic satisfaction. Owing to the fact that a company shares or stocks can increase with time thereby benefiting an employee owner, it therefore acts as a financial reward that satisfies the employee thereby triggering some change in attitude. On a similar note, allowing employees to own the company shares or stocks can also enhance instrumental satisfaction. Kaarsemaker, Pendleton and Poutsma (2009) explain that ownership can bring about change in attitude and behaviour by facilitating other desirable outcomes like active involvement in decision making. Kaarsemaker, Pendleton and Poutsma (2009) further develop a theory referred to as the psychological ownership that proposes that allowing employees to own part of the company’s stocks tend to lead to a change in a worker’s mindset. Such a mindset in turn triggers a change in an employee attitude and behaviour. They also suggest that the emergence of the psychological ownership acts to satisfy some intrinsic human motives such as self identity, self-efficacy, and sense of belonging. By owning a part of the company, employees tend to develop a feeling of self identity by being able to exert some influence over the company. On the negative side, Trewhitt (2000) presents that the claim that employees seek greater involvement when their company is employee-owned, is based on the premise that ownership us viewed in terms of desire for, and expectations of greater control. Thus, where employees view ownership primarily in terms of an investment, a weakening relationship between formal and psychological ownership would occur. This implies that employees would fail to become infused in the organization. Trewhitt (2000) further argues that based on an earlier study conducted French and Kruse in 1987 and 1981 respectively, shareholding was established to be associated with an actual decline in the desire and attitude of employees to become more involved in decision-making. This was further aggravated by the size of the share that they owned, in which those employees with big shares were more inclined to participate less and allow the company to be ran by managers who were more experienced in running the affairs of the company (French, 1987). By so doing, they though that this would increase the value of their shares. However in cases where there seemed to be a problem that directly affected the employees’ shares, that is when they actively changed their attitude and increased their participation in the running of the firm. According to a research carried out by Long (1980) in three trucking companies to ascertain the effects of employee ownership on their workers attitudes and perception of work, based on the questionnaires answers provided by randomly selected sample, employees reported more conscientious work behaviour and attitude, higher levels of cooperation as well as higher levels of satisfaction. In particular, Long (1980) indicates that workers in the two companies that allowed employee ownership revealed evidence of favourable group attitude and norms in which every individual workers was responsible and accountable for their various duties. Long (1980) posits that this change in attitude in the two companies that allowed their employees own shares can be explained by the attribution theory proposed by Kelly in 1971. According to the attribution theory, Long (1980) explains, the amount of attitude change that follows some action made by an individual depends on whether the individual perceives that action to voluntary or involuntary. Therefore, although participation in all the three trucking companies was apparently voluntary, it may not have been perceived so at the company that did not allow its employees to own shares since alternative source of income would not be readily available should their current firm perish. Therefore less attitude change would be expected. As therefore seen, most organizations often implement employee stock ownership initiatives with the expectation that they will provide an appealing employee benefit that will change their overall attitude of work and thereby improve organizational performance. As most research studies done in this area have revealed, by allowing employees to own company stocks motivates employees to promote their shared financial interests with the organization. It is also apparent that effective employee ownership initiatives result in employees feeling as if they are the owners of the business, an experience that has been termed as psychological ownership, which is quite crucial for sustaining the employees’ attitudes towards various aspects if organizational effectiveness. Moreover, as also seen, some studies have revealed that most employees who have shares in their organizations do not appear to have a strong sense of ownership, and considerable minorities believe that little or nothing has changed in their companies as a result of employee ownership. Equally, large majorities have suggested that they value share ownership and that their attitudes and behaviours have changed. Thus, employee ownership has some effect on attitude to a majority of workers. Additionally, it also seems that most employees with more shares in their organization have also had little involvement in their company due to the conception that if they are to make the most out of their shares, they should leave the running of the company in the capable hands of professional management. Nevertheless, the benefits in terms of change in employee attitude towards work following a company’s initiative to implement employee ownership seem to outweigh the negatives. References Buchko, A. A. (1993). The Effects Of Employee Ownership On Employee Attitudes: An Integrated Causal Model And Path Analysis. Journal of Management Studies , 304 (4), 633-637. French, L. (1987). Employee Perspective on Stock Ownership: Financial Investment or Mechanism of Control. Academy of Management Review , 12 (3), 427-435. Keef, S. (1998). The Causal Association Between Employee Share Ownership and Attitudes: a Study Based on the Long Framework. ritish Journal of Industrial Relations , 31 (8), 73-82. Klein, K. J. (1987). Employee Stock Ownership and Employee Attitudes:. Journal of Applied Psychology , 72, 319-332. Kruse, D. (2002). Research Evidence on Prevalence and Effects of Employee Ownership: 2002 Report by Douglas Kruse, Rutgers University. Retrieved April 13, 2012, from The National Center for Employment Ownership: http://www.nceo.org/articles/research-prevalence-effects-employee-ownership Landau, I., & Mitchell, R. (2002). Employee Share Ownership Project . Melbourne: The University of Melbourne. Long, R. (1980). Job Attitudes and Organizational Performance Under Employee Ownership. Academy of Management Journal , 23 (4), 726-737. Pendleton, A., Wilson, N., & Mike, W. (1998). The Perception and Effects of Share Ownership: Empirical Evidence from Employee Buy-Outs. 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