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
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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!
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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??)
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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
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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)
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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
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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
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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
WOW, Griffith, August 13 2009 38
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 39
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
WOW, Griffith, August 13 2009 40
WOW, Griffith, August 13 2009 41
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
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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)
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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)
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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
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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 47