Lecture 12

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Lecture 12

Employee Participation

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Relevance of employee participation

Major changes in work organisation and decision making have looked to the approaches by competitors in different contexts (Applebaum and Batt 1994).

More participative structures have been positively associated with productivity (Levine and Tyson 1990).

Challenge for firms - identify and master new forms of competitive advantage; mobilising the knowledge and problem-solving skills of workers and continuous improvement.

Challenge for employees - recognise that training and education prerequisite for labour market participation; to accept the need to participate more fully in problem-solving and decision making.

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The breakdown of mass production

Traditionally firms learn by moving down the learning curve - this is the most efficient was to produce a standardised item.

Deviating from this approach, either by increasing product variety or quality, brings an end to the cumulative gains in productivity and increasing costs (Appplebaum and Batt 1994).

New production systems - socio-technical production systems, TQM, continuous improvement, team-based production concepts (Aoki 1992).

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Types of employee involvement Levin and Tyson (1990) construct a typology, which

classifies employee participation into three broad categories – consultative, substantive and representative.

Consultative participation gives employees opportunities to give their opinions, but management reserves the right to make the final decisions.

Substantive participation includes direct employee participation such as semi-autonomous work teams – employees are given wide discretion to develop job-design.

Representative participation, which includes joint management-employee consultative committee and employees representation on management boards.

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Types of employee involvement Financial participation - share ownership/ profit sharing Shares may be allocated to employees or a proportion of

company profits may be distributed annually. These schemes allow the employee to share in the

opportunities of the organisation. Managerial support for these schemes rests on the belief

that the interests of employees and the firm will be aligned.

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Ben-ner and Jones (1995) Cannot be viewed as a unitary concept. Classify in terms of directness of participation and the

extent of the influence that employees have over organisational decisions.

A new conceptual framework to define and differentiate among diverse forms of employee ownership is developed.

Two central rights associated with ownership, return and control rights is identified (Ben-ner and Jones 1995).

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Ownership arrangements Ownership of an asset consists of the right to control its

use and to enjoy its returns. In an organisation, control entails the determination of the

objectives of the organisation, the positions that individuals occupy, the functions of these positions, who occupies them and how their occupants are induced to carry out their functions.

Returns include the financial and physical payoff generated from the operation of the organisation: these can be distributed in profits, wages and working conditions.

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The effects of return rights OB: the affect of return rights on individual motivation

should be positive. The argument is that the greater the collective share of

employees in the returns of the firm in which they work, the greater the dependence of their individual well-being on the firms’ well-being.

In economic literature doubts expressed: ‘1/n problem’. Free-rider problem. Will not lead to an increase in motivation.

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The effects of control rights Employees gain more access to information and participate

in decision making that effect the entire organisation. This informational gain improves the basis of agreements

between management and labour. Access to strategic decision making places employees in a

better position to enforce agreements. Full employee control when divorced from return rights is

potentially damaging. Control rights should have a greater effect than return

rights that are solely administered.

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The effects of combining return and control rights

The productivity effects of combing control and return rights is greater than the sum of parts.

‘Emulative ‘ behaviour: each worker emulates in part or in full the behaviour of other workers, thus reducing or eliminating the free-rider problem.

For rational emulative behaviour to emerge employees must:

set work standards determine methods of implementation Establish methods to enforce standards

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The effects of combining return and control rights

Primary enforcement mechanism: mutual monitoring. Employees must be able to share their observations

without fear that they are betraying peers; entails control rights that shield them from management.

Employees should retain benefits of their monitoring and work effort; return rights.

Employees should care about what their co-workers think, internalise norms of behaviour.

Therefore in order to have a significant degree of individual motivation effect, return and control rights must be combined.

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Joint consultation

Joint-consultation is a mechanism for managers and employee representatives to meet on a regular basis in order to exchange views, to utilise members knowledge and expertise, and to deal matters of common interest which are not the subject of collective bargaining (Marchington et al 1992).

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Extent of employee participation Marchington observed that the most common forms of

participation involve direct personal communications – daily ‘walk-arounds’ by management (82 per cent of workplaces), followed by meetings between senior management, middle-management and employees (69 per cent) and newsletters (51 per cent of workplaces). However, representative participation was rare in most Australian firms in the AWIRS 1990 survey – 14 per cent of workplaces had a joint consultative committee and 7 per cent of workplaces had employee representatives on managerial boards.

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AWIRS 1995 AWIRS 95 a large-scale workplace survey conducted by

the Commonwealth Department of Industrial Relations. The data of AWIRS 1995 were collected in the period from

September 1995 to January 1996. The principal investigator was the Department of Industrial Relations. This cross-sectional data is based on a sample of 2001 workplaces with 20 or more employees covering all major ANZSIC divisions, excluding those in forestry, agriculture, fishing and defense across all states and territories. These 2001 cases represent an estimated total of 37,200 workplaces.

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Outcomes of employee participation

Levine and Tyson (1990) suggests that the research shows that participation usually leads to small, short-run improvements of organisational performance, and sometimes to significant, long-lasting improvements.

Shop-floor job redesign has been shown to be positively related to job satisfaction, commitment, quality and productivity and a reduction in turnover and absenteeism.

Batt and Applebaum (1995) investigated the effects of consultative and substantive forms of participation on a number of individual and organisational outcomes. Consultative participation generated few positive outcomes. It had no effect in terms of quality, job satisfaction or product quality.

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Outcomes of employee participation

Where firms introduced self-managed work teams or re-organised work to provide greater autonomy and variety, the impact was uniformly positive (Batt and Applebaum 1995).

Fernie and Metcalf (1995) most forms of employee participation were associated with economic outcomes. Communication about investment plans and strategic direction were associated with improvements in productivity.Existence of joint consultation made it easier for management to modify existing workplace practices and introduce new technology. Positively related to positive industrial relations climate.Off-line programs such as QC’s and problem solving groups no affect on productivity

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International perspectives on joint consultation

The German experience with joint consultation

The Japanese approach to joint consultation

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Ramsay (1977): Cycles of Control

Ramsay argues that worker participation has evolved out of the humanisation of capitalism, as is usually suggested, but has appeared cyclically. These cycles are traced over more than a century and are shown to correspond to periods where management authority is felt to be facing challenge. Participation is thus best understand as a means of attempting to secure labours’ compliance.

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The logical pattern of industrial democracy

Success - the inducement of cooperation and of legitimating reinforcing managerial authority; incorporation; common interest.

Triviality - schemes may get under way with high expectations and enthusiasm form both sides, but conflicting aspirations for the scheme, and the inability of ‘common interest’ to cover real issues of importance to workers, leads to a loss of interest.

Instability - management may attempt to impose a unitary frame of reference, and refuse de facto recognition of unions and bargaining

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The logical pattern of industrial democracy

Change of committee status - where management do not insist on the rigid application of a unitary framework, but permit the participative machinery to become an effective channel for collective bargaining. This grants the scheme a far better change of survival, but removes from it most of the essential integrative rationale of participation as conceived from a management viewpoint.

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First Waves Allen (1964) analyses the emergence of conciliation and

arbitration procedures in the second half of the 19th century.

He shows that these procedures appeared at times when employers were put under pressure, in particular by tight labour market.

At times of high unemployment management resisted any calls for institutions of collective bargaining as infringements on their sacrosanct authority.

Management of de facto but not formal recognition.

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First Waves Beginning of the 1860’s it is possible to trace waves of

participation, especially in the form of profit-sharing. Example: Henry Briggs, Son and Co. in the 1860’s through

the WW1. In the face of worsening labour relations, Briggs attempted to change his image as an exploiter and repressor, by means of a new and more subtle form of exploitation and repression.

The declared aim of Briggs was to detach workers from their unions.

Profits pay-outs. The initial success was short lived as in the ensuing boom

Briggs failed to increase the share-out in line with growth.

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Labour unrest and profit schemes Ramsay (1977:484): ‘If one examines the subsequent

history of profit-sharing down to WW1 it is possible to identify a direct relationship between the introduction of profit-sharing with a high level of employment or labour unrest’.

Participation schemes were not philanthropic, but to combat labour organisation, improve labour organisation and overcome resistance to change.

Participation was unitary. It was offered to give feelings of involvement, whilst actually intended to provide a means for management to get its definitions of the situation accepted

The cycles are tied into the conditions which make this challenge to management authority periodic.

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Joint Consultation Post WWII employers approached participation from the

view point of creating an ‘enterprise culture’. This epitomized the human relations views of Elton Mayo. The natural solidarity of work groups was to be channeled, as it had been during the was through JPC, to the benefit of all.

Employers made sure that their voice took precedence: final decisions should rest with them.

In late 1940’s 545 out of 751 firms had joint consultation. Yet by 1950 as economic conditions improved the popularity of joint consultation faded

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Quote: Worker’s view of consultation.

….is suspicious. He ‘knew what management was like before the war’, and believes that ‘the leopard will not change its spots’. If while full time employment lasts the manager has to prefer the ‘carrot’ to the ‘stick’, then it is for the worker to make the best of it while he can, for if conditions change there will be little heard of joint consultations’ Ramsay (1977:492)

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Major issues

Employee Training Actual say The extent to which employees actually

want to participate The requirement of a legal framework