Employee Participation and Performance. A Cross- National Study

Employee Participation and Performance. A Cross- National Study

Erik Poutsma [email protected] for Management Research,

Radboud University Nijmegen, NLPrepared for the Seminar at the Centre for Work, Organization and Wellbeing, Griffith University – August 13, 2009

WOW, Griffith, 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

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!



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??)


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


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


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

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.


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


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

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?

11WOW, Griffith, August 13 2009


Broadening the partnership agenda? Complementarity of FP and DP on

performanceBryson & 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

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


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


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



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) ?

Different targets; different institutional design; different

positions of actors

Income and wealth redistribution

Corporate objectives

Individual allocation

Collective fund

UKNL

F

AU

G

USA ESOP

17WOW, Griffith, August 13 2009

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 defenseWOW, Griffith, August 13 2009 18

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



ESO PSCountry Exp(B)* Exp(B)*

Australia 0.73 0.77 France 0.32*** 25.92***Germany 0.17*** 8.01***Netherlands 0.37*** 4.38***(refcat)

Size 1.42*** 1.17***Industry

Construction 0.67 2.28**Transportation 0.95 0.8 Banking and Finance 1.6* 1.2 Chemicals 2.03** 0.73 Other Industries 1.12 0.78 Manufacturing (refcat)

Multinationals 1.3* 0.95 Trend 2003-1999 0.84 1.13 Stocklisting 5.36*** 1.01 Unionisation 1 1 Availability PS 2.14***Availability ESO 2.41***National or regional broad-based Bargaining 1.01 0.95 Company or site broad-based Bargaining 1.04 1.07*No broad-based Bargaining 1.09* 1

Research 2 Broadening the partnership agenda? FP in different economies Paul Ligthart & Erik Poutsma Institute for

Management Research, Radboud University Nijmegen, NL

Chris Brewster, Henley Business School, University of Reading, UK


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



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)


Model & Hypotheses

Institutionalised Participation• Market Economies (LME <=> CME)• Representative Participation (JWC / recognition TU)• Collective Bargaining (national, corporate level)

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)

Corporate Characteristics• Industry• Size• MNC• Stocks listing• Unionization degree


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


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

Research 3 Employee Participation and Performance: a cross-national study Erik Poutsma, 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


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


Theoretical background

Complementarity of FP and DP on performance

Bryson & Freeman, 2007 and forthcomingDube & 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



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)

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



Determinants

general perform-ance

operational perform-ance

financial perform-ance

Direct Participation

Strategy bb Briefings 1.031 1.069 1.009

(0.0274) (0.0404) (0.0255)Financial Performance bb Briefings 0.983 0.972 0.996

(0.0289) (0.0422) (0.0518)Organisation of Work bb Briefings 1.047 1.072* 1.065

(0.0264) (0.0365) (0.0416)


Representative Participation

no JWC and drecTUCB (refcat)

General Perform-ance

Operati-onal perform-ance

Financial perform-ance

only JWC or drecTUCB 0.810* 0.789* 0.758*

(0.0822) (0.0737) (0.0886)

both JWC and drecTUCB 0.781* 0.820 0.717*

(0.0885) (0.109) (0.110)


Financial_Participation General

Operati-onal Financial

Employee Share Options Schemes no ESOS (refcat)

narrow_based ESOS 0.883 0.840 0.939

(0.0857) (0.141) (0.0969)

broad_based ESOS 1.007 0.938 1.106

(0.0849) (0.0940) (0.107)Profit Sharing Schemes no PS (refcat)

narrow_based PS 1.315* 1.488* 1.370*

(0.142) (0.234) (0.205)

broad_based PS 1.273** 1.303** 1.395**

(0.0993) (0.129) (0.170)

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


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!


Documents

Employee Participation and Performance. A Cross- National Study